Date: 20011003
Docket: 98-2519-IT-G
BETWEEN:
KENNETH WAYNE JAMES,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Order
Bowman, A.C.J.
[1]
This is a review sought by the respondent of a taxation of costs
made by the taxing officer in Vancouver, Mr. Reeve.
[2]
The appeal was heard in Victoria, British Columbia. The sole
issue was the correctness of the inclusion in the appellant's
income of $78,581 as a taxable dividend, subject to a dividend
tax credit of $10,477. The taxable dividend of $78,581 was based
on a deemed dividend of $62,865, regarded by the Minister as an
amount distributed to the appellant on the winding up of the
appellant's company's business under
subsection 84(2) of the Income Tax Act.
[3]
The appellant appealed to this court. He did not elect the
informal procedure and so the appeal was heard under the Tax
Court of Canada Rules (General Procedure). He paid a filing
fee of $400 on the basis that the appeal was a class B
proceeding.
[4]
Tariff A of Schedule II to the Rules reads in
part:
TARIFF OF FEES
Classes Of Proceedings
1.
Subject to section 1.1, for purposes of this Tariff and
Tariff B, there are three classes of proceedings as
follows:
(a)
Class A proceedings which include
(i)
appeals in which the aggregate of all amounts in issue is less
than $50,000, and
(ii)
appeals in which a loss has been determined under subsection
152(1.1) of the Income Tax Act and the amount that is in
issue is less than $100,000; and
(b)
Class B proceedings which include
(i)
appeals in which the aggregate of all amounts in issue is $50,000
or more but less than $150,000,
(ii)
appeals in which a loss has been determined under subsection
152(1.1) of the Income Tax Act and the amount that is in
issue is $100,000 or more but less than $300,000,
(iii) a
reference under section 173 or 174 of the Income Tax Act,
and
(iv) any
proceeding not otherwise specifically provided for under this
section; and
(c)
Class C proceedings which include
(i)
appeals in which the aggregate of all amounts in issue is
$150,000, or more, and
(ii)
appeals in which a loss has been determined under subsection
152(1.1) of the Income Tax Act and the amount that is in
issue is $300,000 or more.
...
Court Fees
2. (1) The following fees
shall be paid to the Registry by the party who commences a
proceeding, at the time of commencement of the proceeding:
(a)
in the case of a Class A proceeding — $250;
(b)
in the case of a Class B proceeding — $400; and
(c)
in the case of a Class C proceeding — $550.
[5]
Section 2.1 of the Tax Court of Canada Act reads:
2.1
For the purposes of this Act, "the aggregate of all
amounts" means the total of all amounts assessed or
determined by the Minister of National Revenue under the
Income Tax Act, but does not include any amount of
interest or any amount of loss determined by that Minister.
[6]
Sections 15 and 16 of the Interpretation Act
read:
15.(1) Definitions or rules of
interpretation in an enactment apply to all of the provisions of
the enactment, including the provisions that contain those
definitions or rules of interpretation.
(2)
Where an enactment contains an interpretation section or
provision, it shall be read and construed
(a)
as being applicable only if a contrary intention does not appear;
and
(b)
as being applicable to all other enactments relating to the same
subject-matter unless a contrary intention appears.
16.
Where an enactment confers power to make regulations, expressions
used in the regulations have the same respective meanings as in
the enactment conferring the power.
[7]
"Enactment" is defined in section 2(1) of the
Interpretation Act as
"enactment" means an Act or regulation or any
portion of an Act or regulation.
[8]
It is obvious that the words in Tariff A "the aggregate
of all amounts in issue" have the same meaning as in
section 2.1 of the Tax Court of Canada Act i.e. the
tax and penalties, but not the interest and not the income upon
which the tax is based. The Minister assesses tax, not income.
This is consistent with the view expressed by
Christie A.C.J. in H. Dekker v. Canada, [1993]
2 C.T.C. 3115. In looking at the English version of the
section, I thought the matter was clear. However, the waters are
muddied by the French version, which reads:
2.1 Pour l'application de la présente loi,
" total de tous les montants " s'entend
du total de tous les montants déterminés par le
ministre du Revenu national en vertu de la Loi de
l'impôt sur le revenu ou à
l'égard desquels il a établi une cotisation,
à l'exception toutefois des intérêts ou
des pertes déterminés par ce ministre.
[9]
"Les montants déterminés par le ministre
..." could well refer to the income. The words "ou
à l'égard desquels il a établi une
cotisation ..." may refer to the income. It is very arguable
that the Minister issues an assessment of tax "à
l'égard d'un montant de revenu ..." (in
respect of an amount of income). Nonetheless, the result that is
more consistent with the object of the provision is that the
phrase means the tax assessed, not the income. This conclusion is
justified by the reference to interest, which would be
meaningless if "amount" meant income.
[10] The
taxing officer concluded that he did not need to consider whether
he had the authority to change the class of the proceeding
because the amount in issue was $78,581.
[11] At
paragraph [14] of the reasons the taxing officer stated:
The class of an appeal instituted in the Tax Court is not
determined by the amount of tax assessed but rather the aggregate
of all amounts that were in issue in the Minister's
assessment. From an examination of the Notice of Appeal, the
Reply and the Agreement as to Certain Facts, the Minister, in
assessing the Appellant's 1993 income, included a taxable
amount of $78,581 and this is an amount that was in issue. The
aggregate of all amounts in issue placed it within the class as
filed. Since the aggregate of all amounts in issue was over
$50,000 and the appeal was instituted under a Class B, there is
no need to decide whether I have the authority to change the
class of the proceeding.
[12] With
respect, I think the amount in issue for the purposes of
Tariff A of Schedule II of the Rules is the tax
(and penalties if any) assessed, but excluding interest.
[13] This does
not however end the matter. I think the appellant erroneously
filed the appeal as a class B proceeding. It should have
been class A. The appellant knows how much tax is in issue,
as does the Minister. The registry of the court does not at the
time of filing know the amount in issue and the matter may not be
clear from the notice of appeal. Indeed, unless the assessment is
put in evidence neither does the judge hearing the case.
[14] According
to the Federal Court of Appeal in Gernhart v. The Queen,
99 DTC 5749, the assessment and other documents cannot
be transmitted to the court because to do so is an
"unreasonable seizure". Accordingly there is no way
that a registry officer of this court can determine what amount
is in issue. In any events even if subsection 176(1) of the
Income Tax Act had not been struck down as contrary to
section 8 of the Charter the documents would not be
in the registry of the court at the time of filing. It is
therefore unrealistic to expect a registry officer to determine
the amount of tax in issue from the notice of appeal.
[15] The
question that remains is whether at the time costs are taxed the
taxing officer can change the class of proceeding. The appellant
relies upon the decision of the Federal Court of Appeal in The
Queen v. The Capitol Life Insurance Co. (No. 1), [1988]
2 C.T.C. 101. That was an appeal from the Trial
Division of the Federal Court which upheld a classification by
the taxing officer of a proceeding as a class III rather
than a class II action. Lacombe J. in the Federal Court
of Appeal said at pages 104-105:
Classes of actions must be determined at the outset when
proceedings are instituted, since fees are required to be paid to
the Registry, under subsection 2(1)(a) of Tariff A by the party
who commences a proceeding in the Trial Division at the time of
commencement. The fees vary according to the class of the
proceedings. This cannot be left to conjectures but must be
readily ascertained from the pleadings themselves whether it be
the statement of claim, a counter-claim, a cross-demand or a
third party notice, and not from an exhibit and any other
document requiring to be ruled upon by the court. To exclude the
application of paragraph 1(3)(b), it suffices that some monetary
relief for a precise amount be prayed for in the pleadings. On
the other hand, if there is no prayer for any monetary relief,
the proceeding cannot be classified otherwise than as a Class II
action. The expression: "in which there is an amount
involved on the face of the proceedings", found in paragraph
1(3)(a) and (c) must therefore be meant to read: "in which
judgment is sought for payment of an amount that is less than
$5,000 (paragraph (a)) or that is $5,000 or more and less than
$50,000 (paragraph (c))". Paragraph 1(3)(d) is a basket
clause for cases not otherwise provided for like those
"involving" $50,000 or more.
[16] This
statement must be read in the context of the Federal Court tariff
which differed significantly from that of this court.
Subsection 1(3) of Tariff A of the Federal Court
Rules read at the time of this decision (it has since been
modified):
1.(3) Unless the
Court otherwise directs in respect of a particular step in a
proceeding, or in respect of all steps in a particular
proceeding,
(a)
where a step is a step in a proceeding other than a proceeding to
which paragraph (b) applies in which there is an amount involved
on the face of the proceedings that is less than $5,000, it shall
be classified as a Class I step;
(b)
where a step is a step in a proceeding that is, or was in its
inception, an appeal to the Trial Division or any other
proceeding in the Trial Division where no judgment is being
sought for payment of an ascertained amount, it shall be
classified as a Class II step;
(c)
where a step is a step in a proceeding in which there is an
amount involved on the face of the proceedings that is $5,000 or
more and less than $50,000, it shall be classified as a Class II
step;
(d)
where a step is a step in a proceeding not otherwise covered by
this paragraph, it shall be classified as a Class III step.
[17] Quite
apart from the difference in the wording of the tariffs under the
rules of the two courts, I do not read the words in the judgment
of Lacombe J. "Classes of actions must be determined at
the outset when proceedings are instituted ..." to mean
that, at least in this court, such a determination is immutable.
A taxpayer may make a mistake in determining the class and the
mistake may not be obvious to the registry officer who receives
the appeal. While in the ordinary course a registry officer who
sees an obvious misclassification will probably bring the mistake
to an appellant's attention, it is not the responsibility of
the registry of the court to verify the correctness of the class
of proceeding. That is the responsibility of the taxpayer or the
taxpayer's representative. If a mistake is made and the wrong
filing fee paid it does not invalidate the proceeding. If an
excessive fee is paid I doubt that there is any mechanism whereby
the excess can be repaid since that would involve a payment out
of the Consolidated Revenue Fund. If however an appellant is
successful the amount paid can be recovered on the taxation of
costs. If too low a fee is paid, for example if a class A
fee is paid when it should have been a class B fee, the
court could ask for the additional fee.[1] These are, however, details that are
not germane to the point that needs to be decided here, whether
the taxing officer can reclassify, on the taxation of costs, a
misclassified proceeding. There is no reason, as a matter of
principle, logic or common sense why he or she cannot do so.
[18] Counsel
for the respondent also alleged in his written argument that the
taxing officer taxed the wrong bill of costs. Evidently he
reproduced in his reasons a bill for $8,347.32 although the bill
attached to the appointment for taxation was for $7,919.82. The
difference seems to be that counsel for the appellant, before
Mr. Reeve, produced a bill with an additional $375 for
"further examination for discovery" plus some
additional GST and SST on the additional fees. There is no reason
why a party cannot file an amended bill of costs before the
taxing officer. Mr. Reeve taxed off the two items of $375
claimed for considering the notice to admit.
[19]
Mr. Brown argued that there should be a separate tariff item
to compensate someone for considering or preparing a notice to
admit. Unfortunately no existing tariff item does so and I agree
that Mr. Reeve as taxing officer has no discretion to allow
such an amount. Under section 147 of the Rules the
court has a broad discretionary power to award costs and under
that discretionary power I am directing that the fee for
preparation for hearing should be increased by $350.
[20] The
appellant also claimed $20 and $35 for a company office search
and certificate relating to the dissolution of his company. These
disbursements should have been allowed.
[21] The
motion is allowed and the taxation is referred back to the taxing
officer in Vancouver:
(a)
to determine the proper class of proceeding and tax the bill
accordingly;
(b)
to allow the disbursement of $55 in respect of the company's
office search and certificate; and
(c)
to allow an additional $350 under the tariff item relating to
preparation for hearing.
[22] I make no
order for the costs of this motion.
Signed at Ottawa, Canada, this 3rd day of October 2001.
"D.G.H. Bowman"
A.C.J.
COURT FILE
NO.:
98-2519(IT)G
STYLE OF
CAUSE:
Between Kenneth Wayne James and
Her Majesty The Queen
PLACE OF
HEARING:
Conference call
DATE OF
HEARING:
September 5, 2001
REASONS FOR ORDER
BY:
The Honourable D.G.H. Bowman
Associate Chief Judge
DATE OF
ORDER:
October 3, 2001
APPEARANCES:
Counsel for the Appellant: David Brown, Esq.
Counsel for the
Respondent:
Carl Januszczak, Esq.
COUNSEL OF RECORD:
For the
Appellant:
Name:
David Brown, Esq.
Firm:
David Brown
Gabriola, British Columbia
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
98-2519((IT)G
BETWEEN:
KENNETH WAYNE JAMES,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Motion heard by way of telephone conference
call on September 5, 2001, by
The Honourable D.G.H. Bowman
Associate Chief Judge
Appearances
Counsel for the
Appellant: David
Brown, Esq.
Counsel for the Respondent: Carl
Januszczak, Esq.
ORDER
It is
ordered that the respondent's motion for a review of the
taxation of costs be allowed and the taxation be referred back to
the taxing officer in Vancouver:
(a) to determine the proper
class of proceeding and tax the bill accordingly;
(b) to allow the disbursement of $55
in respect of the company's office search and certificate;
and
.../2
(c) to allow an additional $350 under
the tariff item relating to preparation for hearing.
There
will be no order for the costs of this motion.
Signed at Ottawa, Canada, this 3rd day of October 2001.
A.C.J.
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