Citation: 2008 TCC 526
Date: 20080917
Docket: 2005-2259(IT)G
BETWEEN:
SUSUMU GEORGE MOCHIZUKI,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Miller J.
[1]
The Respondent’s motion
is for an Order striking the Notice of Appeal under paragraph 58(1)(b)
and section 53 of the Tax Court of Canada Rules (General Procedure)
(“the Rules”) or, in the alternative, for an Order dismissing the
Appellant’s appeal for the 2001 taxation year under sections 7 and 64 and
subsection 125(7) of the Rules. The only issues in this appeal are
whether:
(a) The Minister of
National Revenue (“the Minister”) properly included a taxable dividend of
$498,583 into the Appellant’s income for the 2001 taxation year under section 3
and subsection 82(1) of the Income Tax Act, that resulted
from the deemed dividend of $398,866.88 under subsection 84(3) of the Act,
as a result of Cariboo Western Lumber Ltd.’s redemption of the Appellant’s
shares in that year; and
(b) The Minister
properly determined that in 2001 the Appellant was entitled to a shareholder
loan repayment deduction in the amount of $164,056 under paragraph 20(1)(j) of
the Act.
[2]
The dividend and
shareholder loan repayment arise from an Order of Justice Blair of the
Supreme Court of British Columbia dated July 13, 2001 in litigation amongst the
Appellant, his brother Kiyo Mochizuki and Cariboo Western Lumber Ltd. (the
“Company”). Justice Blair effectively ordered that the Company repurchase
the Appellant’s shares for $398,916.88, but that from that amount, the amount
of $205,552 was to be deducted as a repayment of shareholder loan by Mr. Mochizuki
to the company. Justice Blair’s Order was filed on July 13, 2001. His reasons
indicate the hearing was held on July 6, 2001.
[3]
The Appellant’s appeal
appears to be that Justice Blair’s Order is not valid as it is dated July 13,
2001 and no hearing took place that day, and further, that his brother and his
brother’s lawyers lied to Justice Blair leading to false conclusions by the
Judge. The Appellant appealed Justice Blair’s Order but eventually dropped that
appeal. The Appellant also seems to suggest, though it is far from clear,
that the shareholder loan repayment amount, which the Respondent allowed,
is inaccurate again due to his brother’s lies. The Appellant’s Notice of
Appeal, his attempt at a list of documents and his attempts at explaining
his position are unfortunately rambling to the point of being incomprehensible.
It is clear he has some serious concerns with his brother’s handling of the
affairs of the Company, but it is not at all clear how those concerns relate to
the dividend and shareholder loan repayments specifically addressed by Justice
Blair. According to the Respondent, this was not clarified by the Appellant at
his discovery, nor did he provide any further explanation in answer to his
undertakings on discovery to do so. Instead, the Appellant provided a package
of documents, mainly in the form of his own notes and a repeat of what he had
previously given to the Respondent in attempting to provide his list of
documents. His list is a jumble of notes, many undated, with little listing of
documents that are readily identifiable and that would appear to have any
bearing whatsoever on the issues.
[4]
Frankly, I have seen no
greater example of the perils of an Appellant representing himself. Mr.
Mochizuki has simply been unable to clearly set forth his position. While this
is unfortunate, it is not for this Court, nor for the Respondent, to guess at
the Appellant’s case nor to attempt to make the case for him. I have been left
with the impression that the Respondent has been helpful and patient, but
remains frustrated with the complete lack of clarity, resulting in this
application.
[5]
I will deal with the
Respondent’s motion in the order presented.
(i) The Notice of
Appeal should be struck pursuant to Rule 53 or Rule 58(1)(b) of the General
Procedure Rules
[6]
As a preliminary
matter, although Mr. Mochizuki did not raise the fresh step rule, the
Respondent quite properly addressed the procedural hurdle presented by Rule 8,
which reads:
8. A
motion to attack a proceeding or a step, document or direction in a proceeding
for irregularity shall not be made,
(a) after the expiry of
a reasonable time after the moving party knows or ought reasonably to have known
of the irregularity, or
(b) if the moving party
has taken any further step in the proceeding after obtaining knowledge of the
irregularity,
except with leave of the Court.
[7]
The Court has
discretion to allow a motion to strike where there have been subsequent steps.
See, for example, Hawkes v. R.
and Imperial Oil Ltd. v. R.
The Respondent has persistently attempted to obtain from Mr. Mochizuki
a clear explanation of his case. This has been done through requests for
documents, requests at examinations for discoveries and correspondence
generally. I have no difficulty in exercising my discretion, even at this late
stage, to hear a motion to strike, especially where, as here, it is not a
matter of minor irregularities but such serious deficiencies that it would
wreak havoc at trial. This position is supported by comments in Gould v. R., Imperial Oil
and Gee v. R.
[8]
Rules 53 and 58(1)(b)
state:
53 The Court may strike out or
expunge all or part of a pleading or other document, with or without leave to
amend, on the ground that the pleading or other document,
(a) may prejudice or
delay the fair hearing of the action,
(b) is scandalous,
frivolous or vexatious, or
(c) is an abuse of the
process of the Court.
…
58(1) A party
may apply to the Court,
(a) …
(b) to strike out a
pleading because it discloses no reasonable grounds for appeal or for opposing
the appeal,
and the Court may grant judgment accordingly.
[9]
The test developed by
the Courts for applying Rule 58(1)(b) is whether it is plain and obvious
that the action cannot succeed even if the facts alleged in the appeal are true.
See Satin Finish Hardwood Flooring (Ontario) Ltd. v. Canada. The first obstacle in applying this test
is discerning what the facts are in Mr. Mochizuki’s appeal. I believe he
is claiming that Justice Blair’s Order is invalid:
(i) because there was no hearing on
July 13, 2001; and
(ii) because it was
based on falsehoods presented to Justice Blair by Mr. Mochizuki’s brother.
[10]
It remains a fact,
however, that Justice Blair’s Order of July 13, 2001 arose from a hearing on
July 6, 2001: there is no basis for finding the Order invalid due to timing.
With respect to the Appellant’s allegation that Justice Blair was deceived,
that would be a matter properly dealt with by an appeal of Justice Blair’s
Order. While Mr. Mochizuki started such an appeal, he did not proceed with it.
The Order is valid and states what it states, which confirms the dividend and
shareholder loan repayment. Mr. Mochizuki has provided nothing further in the
form of documents or explanation before me to cast any doubt on Justice Blair’s
Order. There are no grounds for appeal that I can ascertain, let alone
reasonable grounds. Mr. Mochizuki may have been wronged by his brother in
any number of ways, but if he cannot demonstrate in his pleadings (and
subsequently in the production of documents and on examination) how that
relates to the tax issue surrounding the dividend and loan repayment, it is not
material to this case. He has been unable to draw any cohesive connection. I
would strike the Notice of Appeal on the basis that it is plain and obvious it
cannot be successful.
[11]
For purposes of
completeness, I will also address the Respondent’s submissions regarding Rule
53.
[12]
The Respondent presented
three propositions as to what Courts have found to be scandalous, frivolous or
vexatious:
(i) The failure to
state any material facts upon which a cause of action can be brought that is
within the jurisdiction of the Tax Court is vexatious. See the case of Miller
v. Her Majesty the Queen.
(ii) A pleading can be
found to be frivolous and vexatious where it is so clearly futile that it does
not have the slightest chance of success. A pleading that has no rational
basis and does not provide evidence is frivolous. See the case of Nelson v. Canada (Customs and Revenue Agency).
(iii) A Statement of
Claim which does not sufficiently reveal the facts on which the Plaintiff bases
his cause of action to make it possible for the Defendant to answer it or for
the Court to regulate the proceedings is vexatious, as would be a Statement of
Claim which contains a number of irrelevant assertions. See the case of O’Neil
v. Minister of National Revenue.
[13]
Although I may take
some exception to the terms scandalous or frivolous (I have no doubt Mr.
Mochizuki does not consider this matter either), I can readily apply vexatious
to Mr. Mochizuki’s litigation efforts: he has failed to state any material
facts upon which a cause of action can be brought in the Tax Court of Canada.
The Appellant does not clearly or concisely set out the facts: his pleading
is illogical and barely coherent. The Respondent can only have the vaguest
notion of what Mr. Mochizuki’s case is, as it contains no rational basis.
[14]
It is easy to have some
sympathy for Mr. Mochizuki, as he has worked many years for the Company and
feels that he has not received what was rightfully his. Yet even his
position as to how he has been wronged has been confusing. He has not been able
to enunciate whether he has not received any payment at all, received too
little from what he is entitled to or received only a loan repayment. It is
impossible to determine from his pleadings. It is truly vexatious.
(ii) Rules 7, 64, 110
and 125 of the General Procedure Rules
[15]
In the alternative, the
Respondent relies on Rules 7, 64, 110 or 125(5) and (7) to seek dismissal of
Mr. Mochizuki’s action. These Rules read:
7 A
failure to comply with these rules is an irregularity and does not render a
proceeding or a step, document or direction in a proceeding a nullity, and the
Court,
(a) may grant all
necessary amendments or other relief, on such terms as are just, to secure the
just determination of the real matters in dispute, or
(b) only where and as
necessary in the interests of justice, may set aside the proceeding or a step,
document or direction in the proceeding in whole or in part.
…
64 The
respondent if not in default under these rules or a judgment of the Court, may
move to have an appeal dismissed for delay where the appellant has failed to
prosecute the appeal with due dispatch.
…
110 Where
a person fails to attend at the time and place fixed for an examination in the
notice to attend or subpoena, or at the time and place agreed on by the
parties, or refuses to take an oath or make an affirmation, to answer any
proper question, to produce a document or thing that that person is required to
produce or to comply with a direction under section 108, the Court may,
(a) where an objection
to a question is held to be improper, direct or permit the person being
examined to reattend at that person’s own expense and answer the question, in
which case the person shall also answer any proper questions arising from the
answer,
(b) where the person is
a party or, on an examination for discovery, a person examined on behalf of or
in place of a party, dismiss the appeal or allow the appeal as the case may be,
(c) strike out all or
part of the person’s evidence, including any affidavit made by the person, and
(d) direct any party or
any other person to pay personally and forthwith costs of the motion, any costs
thrown away and the costs of any continuation of the examination.
…
125(5) At the status hearing,
(a) if a reply has been
filed, the judge may
(i)
set time periods for the
completion of any remaining steps in the appeal,
(ii)
dismiss the appeal for delay, or
(iii) make any order or give any other direction that is
appropriate; and
(b) if a reply has not
been filed, the judge may,
(i)
direct that the appeal be
allowed if the facts alleged in the notice of appeal entitle the appellant to
the judgment sought,
(ii) direct that the appeal be heard on the basis that the facts
alleged in the notice of appeal are presumed to be true and make a direction
regarding the hearing fee, or
(iii) make any order or give any other direction that is
appropriate.
…
125(7) Where a party fails to comply with an order or direction made
under subsection (5), the Court may, on application or of its own motion, allow
the appeal, dismiss the appeal or make such other order as is just.
[16]
Given my finding under
the Respondent’s primary argument, it is unnecessary to decide on the basis of
this alternative position. I would like to comment, however, that in reviewing D’Abbondanza
v. R.
and Lichman v. R.,
cited by the Respondent in support of dismissing Mr. Mochizuki’s case pursuant
to these Rules, I noted that both Justice Hamlyn in D’Abbondanza
and Justice Campbell in Lichman conclude that the
Appellant’s behaviour was such that it constituted deliberate intention to
delay. While Mr. Mochizuki has failed to provide a proper list of documents,
and has failed to comply with an Order of Justice Beaubier of this Court,
I am not convinced that was so much from an intention to delay as it was from a
complete lack of understanding of the Rules of this Court, the jurisdiction
of this Court, the significance of an Order of another Court, and indeed, of
his own position. Mr. Mochizuki cannot be faulted for not responding ‑ the
difficulty is that the responses just do not make any sense. All to say, it is
unnecessary to decide on the basis of the Respondent’s alternative argument,
but the Respondent should appreciate I see a difference between deliberate
delay and intention to thwart the Rules on one hand and, with respect,
incapability on the other.
[17]
By representing
himself, Mr. Mochizuki has come to the end of the road in this Court. I do not
make this decision lightly, as it denies Mr. Mochizuki his day in Court, yet I
have been convinced, based on his own actions, that he does not have a case to
take to Court. Mr. Mochizuki’s appeal for the 2001 taxation year is dismissed.
I am making no award of costs.
Signed at Ottawa, Canada, this 17th day of September 2008.
“Campbell J. Miller”
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