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Date:
20030115
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Docket:
2000-3214-IT-G
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BETWEEN:
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PAUL
SOLOMONS,
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Appellant,
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and
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HER MAJESTY THE
QUEEN,
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Respondent.
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Reasons
for Judgment
Bowie
J.
[1]
Mr. Solomons brings these appeals from his assessments for income
tax for the years 1992 and 1993. He claims to be entitled, in
computing his income under section 3 of the Income Tax Act
(the Act), to deduct from his income a loss sustained in
respect of a residential property that he purchased in 1989 and
sold in 1993. It became clear during the evidence that he led
from his accountant that he had delivered notices of objection
for both 1992 and 1993, but had later withdrawn the objection for
1992. He therefore has no right of appeal from the assessment for
1992, and so the appeal for that year should be
quashed.
[2]
Before I deal with the substance of the appeal
for 1993, I wish to say a few words about the request for an
adjournment that the Appellant made at the opening of the trial.
The appeal was begun on July 19, 2000, when the Appellant filed a
Notice of Appeal that he had prepared and signed, apparently
without the benefit of professional help. The Respondent filed a
Reply on September 20, 2000, and later a List of Documents.
Nothing else appears to have happened until July 23, 2002, when
Associate Chief Judge Bowman, following a status hearing, made an
Order fixing the dates by which production and discovery were to
be completed, and fixed Tuesday, January 7, 2003 as the trial
date. On the afternoon of Monday January 6, 2003, the Court
Registry in Ottawa received the following letter by fax from a
Toronto lawyer.
We are to
be retained today by the Appellant in connection with the above
matter, which is set down for hearing in Toronto on January 7,
2003 at 9:30 a.m. The Appellant did not fully understand the
nature of the proceedings in this matter and did not realize
until very recently that his interests would be prejudiced
without having the presence of counsel at the hearing.
Accordingly, he contacted our firm as soon as possible
thereafter, with a view to retaining us to represent
him.
Accordingly, we respectfully request, on behalf of the
Appellant, a brief adjournment of the hearing in this matter, to
allow us to have a reasonable amount of time to adequately
prepare the Appellant's case. I have spoken with counsel for
the Respondent ... who has advised that he does not oppose our
request for the adjournment. I would suggest an adjournment to
sometime in early May, 2003, if possible.
I
appreciate your assistance in this matter and look forward to
your response.
Later that afternoon,
at about 4:55 p.m., counsel for the Respondent faxed a letter to
the Registry, as follows:
Further
to my telephone conversation with you, I will consent to the
adjournment as requested by [counsel] if the costs of preparing
the case are allowed, and if I have to appear tomorrow then the
costs of appearance as well.
[3]
In the meantime, counsel had been advised that
the request for an adjournment should be made to the presiding
judge on Tuesday morning at 9:30 a.m., the time fixed for
the trial to begin. On Tuesday morning the Appellant appeared,
without counsel, and requested that the trial be adjourned. In
response to my inquiry as to what had changed since the Associate
Chief Judge had fixed the trial date, he replied only that he had
been unable to negotiate a settlement of his appeal.
[4]
I declined to grant the requested adjournment,
notwithstanding the position expressed by counsel for the
Respondent in his letter of Monday afternoon. Consent of opposing
counsel is certainly a factor to be considered in dealing with an
adjournment application, but it is by no means determinative of
the issue. Among the other factors
that I considered are the facts that counsel had not actually
been retained, according to his letter, that the trial date had
been fixed almost six months previous, that there had been no
intervening event that had impeded the Appellant from preparing
and presenting his case, and that the Appellant had waited until
the afternoon before the trial date to first raise the question
of retaining counsel and seeking an adjournment. The resources of
this Court, like most others, are both scarce and costly. They
are paid for by the public. As Hugessen J.A. said in a different
context in Adams v. RCMP:
... The day has
passed when courts could allow to litigants the luxury of being
at their beck and call. Courts are public institutions for the
resolution of disputes and cost substantial public money. Court
congestion and delay is a serious public concern. Parties who
launch proceedings at any level with the intention of putting
them in a "holding pattern" for their own private purposes may be
called to account for their waste and abuse of a public resource.
They also risk having those proceedings dismissed.
[5]
Some adjournments are necessary in the
interests of justice by reason of factors that cannot be either
predicted or prevented. People become ill; witnesses are
justifiably unavailable; other litigation may prevent parties or
counsel from being available at the time fixed. However, this is
not such a case. I understand that there may have been some
settlement negotiations that continued until late last week. That
often happens, but it is up to litigants, and their counsel, to
be prepared to proceed with cases on the dates that have been
fixed. It is a great convenience to counsel and to the parties
that this Court fixes dates for trial months in advance; they do
not have to be available for trial on short notice, as is the
case in some other Courts. That convenience comes at a price,
however; they must do what is required in order to be ready on
the day fixed. Litigants who decide to conduct their own cases
without counsel, hoping to achieve a settlement before trial, run
the risk that they will have to proceed to trial without counsel.
They cannot expect that the Court will grant them an adjournment,
and thereby waste the resources of the Court for the time that
has been allotted to the matter, because their settlement
discussions have failed. This Court has a significant backlog of
informal appeals that are waiting to have dates fixed for hearing
in Toronto. Three or four of them could be disposed of in every
day that goes to waste. The reason advanced by the Appellant for
seeking an adjournment of this trial does not weigh very heavily
in the balance, compared to the public interest in efficient use
of Court resources, including providing hearings to the
Appellants in the backlog of informal cases. I turn now to the
merits of the appeal.
[6]
Mr. Solomons is a realtor. In May 1989, he
entered into an agreement to purchase a residence at 190
Strathearn Road in Toronto. The transaction was to close on July
14 that year. Between those dates, he realized for the first time
that the residential real estate market in Toronto was about to
collapse. At the time, he was living in a house at 20 Ross
Street, in which he had an ownership interest, along with two
other people. It was his intention to move to and to live in the
house on Strathearn. However, it quickly became apparent to him
that it would be beyond his means to afford, as the collapsing
market would mean fewer sales, and, therefore, reduced income for
him in the foreseeable future. He had no choice but to close the
transaction in July, but he immediately formed the intention to
resell the house. The opportunity to rent the house for a
two-month term arose, and he took advantage of it, but no buyers
appeared. He then decided that the house would not sell unless he
did some renovations, so he moved into it at the beginning of
October 1989 and set about those renovations, letting contracts
to various trades to do the necessary work while he lived in the
house. He chose this alternative to continuing to live at Ross
Street because he was able to find a tenant for his part of the
Ross Street house much more readily than he could hope to do so
for 190 Strathearn Road. Mr. Solomons testified that he
listed the Strathearn house for sale in May 1990 at an asking
price of $588,000; over the next few months he reduced the price
a number of times, until it was down to $499,000. At the end of
1992, he returned to live in the Ross Street house and rented the
Strathearn Road house to a tenant, who remained there until
August 1993. In 1993 he reduced the listing price to $399,000,
and he sold it in October of that year for $390,000.
[7]
In filing his income tax return for 1992, Mr.
Solomons claimed to be entitled to treat the Strathearn Road
house as inventory, and to write it down to the lower of cost and
market value, thereby creating a loss that he would then deduct
in computing his income under section 3 of the Act. In
assessing him for 1992 the Minister disallowed this claimed loss.
As I have said, Mr. Solomons delivered a notice of objection from
that assessment, but later withdrew it. Instead, he claimed to be
entitled to deduct a realized non-capital loss in 1993, computed
on the basis of the difference between his adjusted cost base of
$534,900 in 1989 and the net proceeds of the sale in 1993, which
were $379,233. The Minister disallowed this too, on the basis
that the property was a personal use property until it was rented
in January 1993. Instead, the Minister assessed the Appellant on
the basis that the property had been a personal use property from
the time of its acquisition in 1989 until it was rented in
January 1993, that upon the change in use at that time it had a
fair market value of $402,888, and that the loss should be
allocated between building and land in the ratio 56% to 44%. He,
therefore, allowed the Appellant a terminal loss of $13,247, and a capital loss of
$10,408. The fair market value
as at January 1, 1993 and the proceeds of disposition that were
assumed by the Minister in assessing the Appellant were not
challenged during the trial. Nor was the building-to-land ratio
that he applied.
[8]
The Appellant has stated the issues this way
in part (d) of his Notice of Appeal:
(d)
ISSUES TO BE DECIDED:
(1)
Whether or not 190 Strathearn was a business property.
(2)
Whether or not 190 Strathearn is considered inventory.
(3)
Whether or not the Minister
acted with due dispatch in confirming the 1992 and 1993
assessments.
[9]
I shall deal with the last of these issues first. It is now
settled that when a taxpayer
who has delivered a notice of objection does not receive a notice
of confirmation or a notice of reassessment "with all due
dispatch" then his remedy is not
simply to sit back, suffer as much delay as the Minister may
inflict on him, and then on an appeal claim to win by default.
After 90 days have elapsed, he may launch an appeal to this Court
and thereby bring the matter to a head: see the Act,
subsection 169(1). If he does not choose to do so, he cannot
complain later about the delay. This ground of appeal has no
merit.
[10] The
other two issues, as expressed by the Notice of Appeal, may be
considered together, as they both require a consideration of the
status of the Strathearn Road house from time to time. The
Appellant's evidence was very clear that he purchased that house
to live in it. There was no suggestion in his evidence that he
bought it with any intention of reselling it at a profit, to rent
it, or for any purpose other than to live in it. By the time the
transaction closed he wanted to resell it, but only because he
had concluded by that time that he would not be able to afford
it. That house was a personal use property, at least from
October 1, 1989 until January 1 1993, when he rented it to a
tenant. Whether it was a personal use property or not during the
two months that it was rented in 1989 is irrelevant to any
consideration of the Appellant's income for either 1992 or
1993. When Mr. Solomons moved out of the house and rented it at
the beginning of 1993, he was deemed to have disposed of it, and
to have immediately reacquired it, for $402,888, which was its
fair market value at that time: see subsection 45(1) of the
Act. Between January 1, 1993 and October 22, 1993 he held
it as capital property. During that period it declined in value.
The building was depreciable property, and so it gave rise to a
terminal loss by reason of subsection 20(16) of the Act.
The land was non-depreciable capital property, and so it gave
rise to a capital loss. The Minister's computation of the
amounts of these is correct.
[11] The
Appellant seems to have assumed that because he wanted to sell
the house from the time he closed the purchase in 1989 until he
was able to sell it in 1993, it must be considered inventory in
his hands during that period. However, he was in exactly the same
position as anyone else who, having bought a house for personal
use, decided that he could not afford it - he was selling a
personal use property. He was never engaged in the business of
buying and selling houses, nor was his purchase of this house an
adventure in the nature of trade. This is not altered by the fact
that he was a realtor.
[12] In
the course of the hearing, the Appellant attempted to raise an
issue with respect to a loss that he may have suffered in
connection with his interest in the Ross Street house. However,
no such issue was pleaded, nor was there any evidentiary basis
upon which any such loss could have been established at the
hearing. No such issue was defined in the pleadings, and no
expert witness affidavit had been filed and served, as required
by Rule 145; nor did the Appellant indicate that he had
any evidence as to the value of his interest in the Ross Street
house available.
[13] For
these reasons, the appeal for 1993 is dismissed. The appeal for
1992 is quashed, as the notice of objection had been withdrawn
before the Notice of Appeal was filed. If it had been a valid
appeal, it would necessarily have failed for the same reasons.
The Respondent is entitled to her costs.
Signed at
Ottawa, Canada, this 15th day of January, 2003.
J.T.C.C.
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COURT FILE
NO.:
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2000-3214(IT)G
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STYLE OF
CAUSE:
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Paul Solomons and
Her Majesty the Queen
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PLACE OF
HEARING
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Toronto,
Ontario
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DATE OF
HEARING
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January 7 and 10,
2003
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REASONS FOR
JUDGMENT BY:
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The Honourable
Judge E.A. Bowie
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DATE OF
JUDGMENT
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January 15,
2003
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Counsel for the
Appellant:
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The Appellant
himself
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Counsel for the
Respondent:
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Shatru
Ghan
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For the
Respondent:
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Morris
Rosenberg
Deputy Attorney
General of Canada
Ottawa,
Canada
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Date:
20030115
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Docket:
2000-3214(IT)G
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BETWEEN:
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PAUL
SOLOMONS,
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Appellant,
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and
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HER MAJESTY THE
QUEEN,
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Respondent.
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_______________________________________________________________
Appeals heard on
January 7, 2003, and judgment delivered orally
on January 10, 2003,
at Toronto, Ontario
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By: The Honourable
Judge E.A Bowie
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Appearances:
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For the
Appellant:
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The Appellant
himself
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Counsel for the
Respondent:
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Shatru
Ghan
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_______________________________________________________________
JUDGMENT
The purported appeal from the assessment of tax made under the
Income Tax Act for the 1992 taxation year is
quashed.
The appeal from the assessment of tax made under the Act
for the 1993 taxation year is dismissed.
The Respondent is entitled to her costs.
Signed at Ottawa, Canada,
this 15th day of January, 2003.
J.T.C.C.
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