Christie
A.C.J.T.C.:
—
This
is
an
application
by
the
Minister
of
National
Revenue
(the
“Minister”)
under
subsection
174(1)
of
the
Income
Tax
Act,
R.S.C.
1985
(5th
Supp.),
c.
1
(the
“Act”).
Subsections
174(1)
and
(2)
of
the
Act
provide:
174(1)
Where
the
Minister
is
of
the
opinion
that
a
question
of
law,
fact
or
mixed
law
and
fact
arising
out
of
one
and
the
same
transaction
or
occurrence
or
series
of
transactions
or
occurrences
is
common
to
assessments
or
proposed
assessments
in
respect
of
two
or
more
taxpayers,
the
Minister
may
apply
to
the
Tax
Court
of
Canada
for
a
determination
of
the
question.
(2)
An
application
under
subsection
(1)
shall
set
forth
(a)
the
question
in
respect
of
which
the
Minister
requests
a
determination,
(b)
the
names
of
the
taxpayers
that
the
Minister
seeks
to
have
bound
by
the
determination
of
the
question,
and
(c)
the
facts
and
reasons
on
which
the
Minister
relies
and
on
which
he
based
or
intends
to
base
assessments
of
tax
payable
by
each
of
the
taxpayers
named
in
the
application,
and
a
copy
of
the
application
shall
be
served
by
the
Minister
on
each
of
the
taxpayers
named
in
the
application
and
on
any
other
persons
who,
in
the
opinion
of
the
Tax
Court
of
Canada,
are
likely
to
be
affected
by
the
determination
of
the
question.
Paragraphs
1
to
5
inclusive
of
the
application,
which
is
dated
June
28,
1995,
read:
1.
The
Minister
of
National
Revenue
is
of
the
opinion
that
questions
of
law,
fact
or
mixed
law
and
fact
arising
out
of
one
and
the
same
transaction
or
occurrence
or
series
of
transactions
or
occurrences,
are
common
to
assessments
or
proposed
assessments
in
respect
of
Count
Sajan
Hassanali
and
Helga
Georg.
2.
The
Minister
of
National
Revenue
(the
‘Minister’)
hereby
applies
to
the
Tax
Court
of
Canada
joining
Helga
Georg
to
the
appeal
of
Count
Sajan
Hassanali
for
the
determination
of
the
question
herein
set
forth.
The
appeal
of
Count
Sajan
Hassanali
was
filed
with
This
Honourable
Court
on
November
29,
1994
as
Appeal
number
94-2924(IT).
A.
STATEMENT
OF
FACTS
3.
The
facts
on
which
the
Minister
relies
on
and
which
he
based
or
intends
to
base
assessments
of
tax
payable
by
each
of
the
taxpayers
named
in
the
Application
are
the
following:
Walsh
J.
of
the
Supreme
Court
of
Ontario,
Family
Division
in
his
judgment
dated
January
30,
1989
in
Helga
Georg
v.
Count
Sajan
Hassanali
decided
as
follows:
(a.)
from
1969
to
1986,
for
the
period
of
at
least
some
15
years,
Count
Sajan
Hassanali
and
Ms.
Georg
cohabitated
together
in
a
very
intimate
relationship;
(b.)
during
the
period
of
the
15
years
of
cohabitation,
Count
Sajan
Hassanali
repeatedly
made
a
promise
to
marry
Ms.
Georg
as
soon
as
Count
Sajan
Hassanali’s
wife,
from
whom
Count
Sajan
Hassanali
was
separated,
died.
(c.)
soon
after
the
death
of
Count
Sajan
Hassanali’s
wife,
Count
Sajan
Hassanali
did
not
marry
Ms.
Georg
but
married
a
Muslim
woman;
(d.)
the
promise
of
Count
Sajan
Hassanali
to
marry
Ms.
Georg
and
her
expectation
of
her
and
Count
Sajan
Hassanali’s
future
together
caused
Ms.
Georg
to
perform
the
many
valuable
services
she
rendered
over
the
years
to
Count
Sajan
Hassanali
both
personally
and
to
his
property
and
Count
Sajan
Hassanali
was
unjustly
enriched
by
these
services;
(e.)
Ms.
Georg’s
case
against
Count
Sajan
Hassanali
had
clearly
met
all
the
tests
for
a
constructive
trust;
(f.)
for
the
unjust
enrichment
of
Count
Sajan
Hassanali,
the
judge
ordered
Count
Sajan
Hassanali
to
pay
$725,000
to
Ms.
Georg;
(g.)
the
judge
arrived
at
the
sum
of
$725,000
by
comparing
the
net
worth
of
Count
Sajan
Hassanali
and
Ms.
Georg;
(h.)
the
judge
awarded
the
amount
of
$725,000
in
lieu
of
the
constructive
trust
in
the
Kennedy
Towers;
(i.)
the
judge
imposed
a
trust
or
proprietary
interest
in
the
amount
of
$725,000
against
the
Kennedy
Towers.
(j.)
in
computing
his
income
for
the
1989
taxation
year,
Count
Sajan
Hassanali
deducted
the
amount
of
$725,000
referred
to
in
subparagraph
(f)
and
the
amount
of
legal
fees
to
the
extent
of
$111,584
as
business
expenses.
(k.)
Helga
Georg
did
not
include
the
payment
to
her
the
amount
of
$725,000
referred
in
subparagraph
(j)
in
her
income
for
the
taxation
year
1989.
(1.)
by
Notice
of
Reassessment
dated
February
28,
1994,
the
Minister
reduced
by
$836,584
the
expenses
of
Count
Sajan
Hassanali
for
the
1989
taxation
year.
(m.)
Count
Sajan
Hassanali
filed
a
Notice
of
Objection
dated
May
12,
1994
in
respect
of
the
Notice
of
Reassessment
dated
February
28,1994.
(n.)
on
October
19,
1994,
the
Minister
confirmed
the
reassessment.
(o.)
Count
Sajan
Hassanali
filed
a
Notice
of
Appeal
in
This
Honourable
Court
on
November
29,1994
on
the
grounds
that:
(i.)
the
$725,000
paid
in
1989
to
Ms.
Georg
for
compensation
for
past
services
was
an
expenditure
made
or
incurred
by
him
for
the
purpose
of
gaining
or
producing
income
from
a
business
or
property.
(ii.)
the
$111,584.15
paid
for
legal
fees
relating
to
the
Action
was
an
expenditure
made
or
incurred
by
him
for
the
purpose
of
gaining
or
producing
income
from
a
business
or
property.
(p.)
a
Reply
to
the
Notice
of
Appeal
referred
to
in
subparagraph
(o)
was
filed
by
the
Deputy
Attorney
General
in
This
Honourable
Court
on
January
30,
1995.
(q.)
in
making
a
substantial
contribution
in
physical
labour
towards
the
improvement,
maintenance
and
management
of
the
Kennedy
Towers
culminating
in
the
tremendous
increase
in
its
value,
Ms.
Georg
had
established
a
right
to
an
interest
in
the
Kennedy
Towers
and
this
interest
was
acknowledged
by
Judge
Walsh
by
way
of
a
constructive
trust
and
awarded
a
monetary
award
of
$725,000
in
lieu
of
such
trust.
The
reasoning
is
supported
by
the
fact
that
the
judge
established
the
award
by
comparing
the
net
worth
of
Ms.
Georg
and
Count
Sajan
Hassanali,
and
not
ascertaining
the
actual
amount
of
labour
Ms.
Georg
has
put
in
and
the
actual
market
value
of
such
labour.
(r.)
the
expenditure
of
$725,000
and
the
legal
fees
to
the
extent
of
$111,584
claimed
as
deduction
from
income
for
the
1989
taxation
year
were
not
outlays
or
expenses
incurred
by
Count
Sajan
Hassanali
for
the
purposes
of
gaining
or
producing
income
within
the
meaning
of
sections
18(l)(a),
but
were
personal
or
living
expenses
within
the
meaning
of
sections
18(l)(h)
and
248(1)
of
the
Act.
B.
THE
QUESTIONS
IN
RESPECT
OF
WHICH
THE
MINISTER
OF
NATIONAL
REVENUE
REQUESTS
DETERMINATION:
4.
Whether
the
amount
of
$725,000
paid
by
Count
Sajan
Hassanali
to
Helga
Georg
pursuant
to
the
judgment
of
Walsh
J.
referred
to
in
paragraph
3(i)
to
Helga
Georg
and
disallowed
by
the
Minister
was
not
an
outlay
or
expense
incurred
for
purposes
of
gaining
or
producing
income
from
a
business
or
property
pursuant
to
section
18(l)(a)
of
the
Act
but
was
personal
or
living
expense
within
the
meaning
of
sections
18(l)(h)
and
248(1)
of
the
Act
and
therefore
should
not
be
deducted
in
computing
the
income
of
Count
Sajan
Hassanali
and
should
not
be
included
by
Helga
Georg
in
computation
of
her
income
for
income
tax
purposes.
5.
If
the
amount
referred
to
in
paragraph
4
is
not
to
be
deducted
from
the
income
of
Count
Sajan
Hassanali
for
the
1989
taxation
year,
is
this
amount
to
be
included
in
income
of
Helga
Georg
for
the
1989
taxation
year.
The
application
is
addressed
to
Cassels
Brock
&
Blackwell,
Barristers
and
Solicitors
of
Toronto,
attention
Geoffrey
B.
Shaw,
and
Ms.
Georg.
Cassels
Brock
are
acting
for
the
executrix
and
trustee
of
the
estate.
Paragraph
174(3)(b)
of
the
Act
provides:
174(3)
Where
the
Tax
Court
of
Canada
is
satisfied
that
a
determination
of
the
question
set
forth
in
an
application
under
this
section
will
affect
assessments
or
proposed
assessments
in
respect
of
two
or
more
taxpayers
who
have
been
served
with
a
copy
of
the
application
and
who
are
named
in
an
order
of
the
Tax
Court
of
Canada
pursuant
to
this
subsection,
it
may
(b)
if
one
or
more
of
the
taxpayers
so
named
has
or
have
appealed,
make
such
order
joining
a
party
or
parties
to
that
or
those
appeals
as
it
considers
appropriate
and
proceed
to
determine
the
question.
On
July
26,
1995,
Chief
Judge
Couture
issued
this
order:
Take
notice
that
the
hearing
of
the
application
of
the
respondent
herein
for
an
Order
pursuant
to
paragraph
174(3)(b)
of
the
Income
Tax
Act
joining
Helga
Georg
as
a
party
to
the
appeal
of
Hassanali
Estate
v.
R.,
November
1,
1995,
Doc.
94-2924
(IT)
G,
Christie
A.
C.J.T.C.,
(T.C.C.)
from
an
assessment
of
income
tax
for
the
1989
taxation
year
will
be
held
on
Wednesday
the
13th
day
of
September
1995
at
9:30
o’clock
in
the
forenoon
at
the
Tax
Court
of
Canada,
Merrill
Lynch
Canada
Tower,
200
King
Street
West,
Suite
902,
Toronto,
Ontario.
I
think
this
is
a
proper
case
in
which
to
make
an
order
joining
Ms.
Georg
as
a
party
to
the
appeal
of
Countess
Rozina
Gulamhusein
Ismail
Hassanali,
Executrix
and
Trustee
of
the
Estate
of
Count
Sajan
Hassanali
and
for
the
Court
to
proceed
to
determine
the
questions
asked.
The
parties
have
agreed
on
dates
by
which
lists
of
documents
shall
be
filed
and
served,
examinations
for
discovery
shall
be
held
and
any
undertakings
arising
out
of
those
examinations
shall
be
completed.
Also
dates
for
the
determination
of
the
questions
have
been
agreed
on.
All
of
these
are
incorporated
in
the
formal
order.
This
leaves
two
outstanding
matters.
The
first
is
that
Ms.
Georg
appeared
alone
on
the
hearing
of
this
application.
She
explained
that
she
sought
legal
assistance,
but
did
not
have
the
funds
to
pay
the
amount
stipulated
to
be
paid
on
account.
She
informed
the
Court
that
she
had
paid
a
large
sum
for
legal
fees
regarding
the
litigation
before
the
Ontario
Court,
General
Division,
previously
referred
to.
From
what
I
observed
at
the
hearing
it
is
apparent
that
the
emotional
condition
of
Ms.
Georg
is
such
that
she
cannot
partake
in
the
litigation
to
which
the
Minister
seeks
to
make
her
a
party
in
any
effective
way
without
the
benefit
of
professional
assistance.
I
expressed
this
concern
at
the
hearing
to
which
Mr.
Ghan,
counsel
for
the
Minister,
replied:
“I
am
in
great
sympathy
with
Ms.
Georg
and
if
there
is
some
way
that
she
can
be
helped
I
will
find
out
the
ways.”
Subsections
147(1),
(2)
of
the
Tax
Court
of
Canada
Rules
(General
Procedure)
(“the
Rules”)
were
cited
from
the
bench
and
it
was
suggested
that
they
might
be
invoked
in
favour
of
Helga
Georg.
Mr.
Ghan
replied:
“Your
Honour,
I’m
not
in
a
position
to
say
anything
except
that
I
have
to
consult
the
Minister
of
the
Department
about
your
suggestion.”
An
adjournment
followed
during
which
counsel
for
the
Minister
telephoned
Ottawa
and,
after
the
adjournment,
he
informed
the
Court
as
follows:
“Your
Honour,
I
have
talked
to
the
Assistant
Deputy
Minister
of
Taxation
and
he
advises
me
that
he
has
no
authority
to
agree
to
this,
but
he’s
prepared
to
take
this
matter
up
with
the
Minister.”
On
October
13,
1995,
Mr.
Ghan
wrote
the
Registrar
in
part
as
follows:
The
Associate
Chief
Judge
then
suggested
that
the
Minister
of
National
Revenue
pay
the
costs
of
Ms.
Georg
on
a
solicitor
and
client
basis.
I
indicated
to
the
Court
that
I
had
no
instructions
to
agree
on
behalf
of
the
Minister
to
pay
any
such
costs.
The
hearing
was
then
adjourned
to
give
me
time
to
consult
the
appropriate
authorities
in
this
connection.
The
responsible
officials
in
the
Minister
of
National
Revenue
feel
that
in
such
cases,
it
is
not
appropriate
for
them
to
pay
any
costs
that
may
be
incurred
by
Ms.
Georg.
It
will
be
noted
that
paragraph
174(3)(b)
of
the
Act
states
that
the
Court
may
“make
such
order
joining
a
party
or
parties
to
that
or
those
appeals
as
it
considers
appropriate.”
It
strikes
me
that
the
phrase
“as
it
considers
appropriate”
vests
a
discretion
in
the
Court
to
ensure,
in
making
an
individual
party
to
litigation
between
others
at
the
request
of
the
Minister,
that
the
individual
will
be
able
to
defend
herself
with
some
semblance
of
fairness.
I
have,
therefore,
included
a
direction
in
the
order
that
all
reasonable
and
proper
costs
of
Ms.
Georg
be
borne
by
Her
Majesty
in
right
of
Canada.
If
I
am
in
error
regarding
paragraph
174(3)(b)
I
rely
in
the
alternative
on
subsections
147(1)
and
(2)
of
the
Rules.
They
provide:
147(1)
Subject
to
the
provisions
of
the
Act,
the
Court
shall
have
full
discretionary
power
over
payment
of
the
costs
of
all
parties
involved
in
any
proceeding,
the
amount
and
allocation
of
those
costs
and
determining
the
persons
by
whom
they
are
to
be
paid.
(2)
Costs
may
be
awarded
to
or
against
the
Crown.
The
other
outstanding
issue
is
the
matter
of
costs
of
this
application.
On
September
6,
1995,
the
affidavit
of
Stevan
Novoselac
sworn
to
on
the
same
date
was
served
on
counsel
for
the
Minister.
It
reads:
I,
Stevan
Novoselac
of
the
City
of
Etobicoke,
in
the
Municipality
of
Metropolitan
Toronto
make
oath
and
say
as
follows:
1.1
am
a
lawyer
at
Cassels
Brock
&
Blackwell,
the
solicitors
for
the
appellant
herein,
have
worked
extensively
on
this
matter
and
as
such
have
knowledge
of
the
matters
hereinafter
deposed
to.
Unless
otherwise
stated,
where
the
information
contained
in
this
affidavit
is
not
from
my
personal
knowledge,
the
source
of
the
information
is
my
review
of
the
file
and
I
believe
such
information
to
be
true.
2.
The
issue
in
this
appeal
is
whether
a
payment
in
the
amount
of
$725,000
made
by
Count
Sajan
Hassanali
to
Ms.
Helga
Georg
and
associated
legal
fees
incurred
by
Count
Hassanali
in
the
amount
of
$111,854.15
are
deductible
by
him,
either
from
income
or
whether
the
amounts
may
increase
the
adjusted
cost
base
of
certain
property
which
was
owned
by
him.
3.
Mr.
Samuel
Slutsky
Q.C.,
a
lawyer
with
our
firm,
was
involved
in
negotiations
with
Revenue
Canada
on
behalf
of
Count
Hassanali
since
at
least
as
early
as
November,
1992.
Mr.
Slutsky
no
longer
practices
law
with
our
firm.
4.
The
negotiations
included
an
extensive
written
submission
dated
January
28,
1993
prepared
by
Mr.
Slutsky,
a
copy
of
which
is
attached
and
marked
as
Exhibit
‘A’
to
this
affidavit.
5.
Count
Hassanali
was
requested
to
and
did
execute
a
waiver
in
respect
of
the
normal
reassessment
period.
Attached
and
marked
as
Exhibit
‘B’
to
this
affidavit
is
a
copy
of
a
letter
dated
February
19,
1993
from
Ms.
C.
Y.
P.
Shew
of
Revenue
Canada
along
with
the
executed
waiver.
6.
The
negotiations
continued
and
Ms.
Shew
responded
to
Mr.
Slutsky’s
letter
of
January
28,
1993
by
letter
dated
November
17,
1993,
stating,
inter
alia,
that
Revenue
Canada’s
opinion
was
the
amounts
Count
Hassanali
paid
to
Ms.
Georg
were
not
deductible
and
could
not
be
viewed
as
being
laid
out
for
the
purpose
of
gaining
or
producing
income.
Attached
and
marked
as
Exhibit
‘C*
to
this
affidavit
is
a
copy
of
the
letter.
7.
Count
Hassanali’s
health
was
failing
and
Mr.
Slutsky
consequently
sought
Revenue
Canada’s
cooperation
in
expediting
the
resolution
of
the
matter.
8.
Mr.
Slutsky
continued
negotiations
with
Mr.
John
Spencer,
the
Section
Head
of
Toronto
Designated
Appeals
on
behalf
of
Revenue
Canada.
Mr.
Spencer
advised
by
letter
dated
April
18,
1994
that
the
most
expeditious
route
to
resolve
the
issue
would
be
to
promptly
file
a
notice
of
objection
on
behalf
of
Count
Hassanali
which
would
allow
the
Scarborough
Appeals
Division
to
initiate
an
application
for
a
section
174
review
by
the
Tax
Court
of
Canada.
Attached
and
marked
as
Exhibit
‘D’
to
this
affidavit
is
a
copy
of
the
letter
dated
April
18,
1994.
9.
Mr.
Geoffrey
B.
Shaw,
the
partner
at
Cassels
Brock
&
Blackwell
with
principal
carriage
of
this
appeal,
filed
a
notice
of
objection
under
cover
of
letter
dated
May
9,
1994.
Attached
and
marked
as
Exhibit
‘E’
to
this
affidavit
is
a
copy
of
the
letter.
10.
I
am
advised
by
Mr.
Shaw
and
believe
that
he
received
a
telephone
call
from
Fidelia
Louie,
from
the
Scarborough
appeals
office
on
behalf
of
Revenue
Canada
on
July
25,
1994,
that
she
stated
that
the
notice
of
objection
had
been
referred
to
her
and
she
was
in
the
process
of
dealing
with
it
and
that
Mr.
Shaw
stated
to
her
that
it
was
contemplated
the
appeal
would
go
forward
pursuant
to
section
174
of
the
Income
Tax
Act
(the
‘Act’)
and
that
Mr.
Shaw
reiterated
the
request
that
the
matter
be
expedited.
11.
Despite
the
repeated
requests
that
the
matter
be
expedited
and
the
urgency
of
the
matter
in
light
of
Count
Hassanali’s
failing
health,
no
application
pursuant
to
section
174
of
the
Act
was
served
at
this
time.
12.
I
am
advised
by
Countess
Rozina
Gulamhusein
Ismail
Hassanali
and
believe
that
Count
Hassanali
passed
away
on
January
16,
1995.
Countess
Hassanali
instructed
us
to
continue
the
appeal
in
her
capacity
as
executrix
and
trustee
of
the
estate
of
Count
Hassanali.
13.
On
April
20,
1995,
almost
nine
months
after
the
date
of
the
telephone
call
from
Fidelia
Louie
on
behalf
of
Revenue
Canada,
I
had
a
telephone
conversation
with
Mr.
Shatru
Ghan,
the
solicitor
at
the
Department
of
Justice
with
the
principal
carriage
of
this
appeal,
during
which
he
stated
that
Revenue
Canada
had
instructed
him
to
commence
an
application
pursuant
to
section
174
of
the
Act
to
deal
with
the
appeal
and
Ms.
Georg
simultaneously.
14.
As
we
had
still
not
been
served
with
the
application
Mr.
Shaw
requested,
by
letter
dated
June
5,
1995,
to
be
advised
how,
given
the
passage
of
time,
Revenue
Canada
would
propose
to
include
Ms.
Georg
in
the
contemplated
section
174
application
as
it
appeared
her
original
assessment
was
statute
barred.
Attached
and
marked
as
Exhibit
‘F’
to
this
affidavit
is
a
copy
of
the
letter.
15.
Finally,
by
letter
dated
June
28,
1995,
well
over
one
year
from
the
date
the
application
was
first
proposed
by
representatives
of
Revenue
Canada,
Mr.
Ghan
advised
that
an
application
had
been
filed
pursuant
to
section
174
of
the
Act.
Attached
and
marked
as
Exhibit
‘G’
to
this
affidavit
is
a
copy
of
the
letter.
16.
By
letter
dated
July
12,
1995,
I
repeated
our
request
to
be
provided
with
details
of
Ms.
Georg’s
assessment
and
the
time
period
in
which
she
may
have
been
assessed.
Attached
and
marked
as
Exhibit
‘H’
to
this
affidavit
is
a
copy
of
the
letter.
16.
Mr.
Ghan
responded
by
letter
dated
July
17,
1995
stating
that
he
could
not
advise
us
whether
Ms.
Georg’s
assessment
was
statute
barred,
nor
could
he
provide
us
with
information
with
respect
to
her
assessment.
Attached
and
marked
as
Exhibit
‘I’
to
this
affidavit
is
a
copy
of
the
letter.
17.
Mr.
Shaw
further
responded
by
letter
dated
September
5,
1995,
a
copy
of
which
is
attached
and
marked
as
Exhibit
‘J’
to
this
affidavit.
18.
This
affidavit
is
made
to
oppose
an
application
pursuant
to
section
174
of
the
Act
to
add
Ms.
Georg
as
a
party
to
this
appeal.
I
refer
in
particular
to
paragraphs
14,
the
two
paragraphs
numbered
16
and
paragraph
17.
On
June
5,
1995,
Mr.
Geoffrey
B.
Shaw
wrote
Mr.
Shatru
Ghan
as
follows:
This
is
further
to
your
telephone
conversation
on
April
20,
1995,
with
my
colleague
Stevan
Novoselac
during
which
you
stated
that
Revenue
Canada
has
instructed
you
to
commence
an
application
pursuant
to
section
174
of
the
Income
Tax
Act
to
deal
with
the
above
noted
appeal
and
Ms.
Georg
simultaneously.
This
procedure
was
proposed
by
your
client
over
one
year
ago
in
light
of
the
failing
health
of
the
appellant.
We
are
enclosing
a
copy
of
a
letter
dated
April
18,
1994
in
that
regard.
The
application
was
not
pursued
on
a
timely
basis
and
the
appellant
has
been
significantly
and
irrevocably
prejudiced
as
a
result
of
the
delay,
in
that
he
has
passed
away
in
the
interim.
As
we
have
discussed,
we
have
been
retained
by
the
executrix
of
the
appellant’s
estate
to
continue
the
appeal.
Our
client
reserves
all
of
her
rights
in
respect
of
the
prejudice
arising
from
the
delay.
We
presume
Ms.
Georg
must
have
been
assessed
by
Revenue
Canada
in
respect
of
the
year(s)
in
question.
If
this
is
so,
we
are
uncertain
how,
given
the
passage
of
time,
Revenue
Canada
would
propose
to
include
Ms.
Georg
in
the
contemplated
section
174
application.
In
all
likelihood,
her
original
assessment
is
statute
barred.
Please
therefore,
confirm
details
of
her
assessment
and
the
time
period
in
which
she
may
have
been
assessed
so
that
we
may
determine
once
and
for
all,
whether
the
contemplated
section
174
application
can
in
fact
take
place.
You
have
had
over
one
year
given
the
attached
letter
to
make
this
determination
and
it
appears
that
your
effort
has
been
fruitless.
Given
the
extreme
circumstances,
if
we
have
not
heard
from
you
within
ten
days
in
this
regard,
we
are
instructed
to
seek
directions
from
the
Tax
Court
with
respect
to
the
hearing
of
the
late
Count
Hassanali’s
appeal.
The
prejudice
that
my
client
is
under
cannot
continue.
We
look
forward
to
your
early
response.
On
June
28,
1995,
Mr.
Ghan
wrote
Mr.
Shaw
as
follows:
Enclosed
please
find
a
copy
of
the
Application
pursuant
to
section
174
of
the
Income
Tax
Act,
with
respect
to
the
above-noted
Appeal.
Please
be
advised
that
the
Application
was
filed
with
the
Registrar
of
the
Tax
Court
of
Canada
today.
On
July
12,
1995,
Mr.
Novoselac
wrote
Mr.
Ghan
as
follows:
We
acknowledge
receipt
of
your
recent
correspondence
enclosing
the
application
pursuant
to
s.
174
of
the
Income
Tax
Act.
We
remain
uncertain
as
to
how
Ms.
Georg
may
be
included
in
the
application
given
that
her
original
assessment
may
be
statute
barred
and
repeat
our
request
to
be
provided
with
details
of
her
assessment
and
the
time
period
in
which
she
may
have
been
assessed.
On
July
17,
1995,
Mr.
Ghan
wrote
Mr.
Shaw
as
follows:
This
is
with
reference
to
your
letter
dated
July
12,
1995
asking
us
to
provide
you
with
information
with
regard
to
Ms.
Georg’s
assessment.
I
cannot
advise
you
whether
Ms.
Georg’s
assessment
is
statute
barred
nor
can
I
provide
you
with
information
with
respect
to
her
assessment.
Your
concern
should
strictly
be
with
respect
to
the
claim
for
deduction
of
the
amount
paid
to
Ms.
Georg
and
nothing
further.
On
September
5,
1995,
Mr.
Shaw
sent
this
fax
to
Mr.
Ghan:
We
acknowledge
receipt
of
your
letter
dated
July
17,
1995.
With
respect
to
the
respondent’s
application
returnable
September
13,
1995,
the
court
must
be
satisfied
that
the
determination
of
the
questions
set
out
in
the
application
will
affect
assessments
or
proposed
assessments
in
respect
of
both
our
client
and
Ms.
Georg.
As
far
as
we
are
aware,
it
would
appear
that
Ms.
Georg’s
original
assessment
may
be
statute
barred.
The
application
alleges
that
Ms.
Georg
did
not
include
the
payment
in
issue
in
her
income
for
the
1989
taxation
year.
However,
no
facts
are
alleged
to
establish
that
the
non-inclusion
was
a
misrepresentation
attributable
to
neglect
or
carelessness
which
would
allow
her
to
be
assessed
beyond
the
ordinary
time
limit.
Consequently,
in
our
view,
the
application
is
deficient
in
that
insufficient
facts
are
alleged
to
satisfy
the
court
that
a
determination
of
the
questions
will
affect
an
assessment
or
proposed
assessment
in
respect
of
Ms.
Georg.
Your
unwillingness
to
provide
the
information
requested
is
therefore
most
disappointing.
We
are
left
with
no
alternative
but
to
oppose
the
application
on
the
basis
of
this
deficiency
and
seek
costs.
Surely
this
issue
could
be
settled,
one
way
or
the
other,
depending
upon
the
status
of
Ms.
Georg’s
assessment
and
the
time
period
within
which
she
may
have
been
assessed.
I
believe
that
the
requests
for
information
made
by
Messrs.
Shaw
and
Novoselac
were
reasonable
and
proper.
Indeed
I
think
that
what
is
intended
by
the
wording
in
paragraph
174(2)(c)
of
the
Act
is
that
an
application
made
under
subsection
174(1)
shall
set
out
whether
in
fact
there
has
been
an
assessment
by
the
Minister
or
that
it
is
his
intention
to
make
an
assessment.
Further,
section
3
of
the
Rules
makes
them
applicable
to
proceedings
under
section
174
of
the
Act
and
paragraph
21(1)(c)
of
the
Rules
provides:
21(1)
Every
proceeding
to
which
the
general
procedure
in
the
Act
applies
shall
be
instituted
by
filing
in
the
Registry
the
original
and
two
copies
of
a
document
(c)
in
Form
21
(1
)(c)
in
the
case
of
an
application
for
the
determination
of
a
question
under
section
174
of
the
Income
Tax
Act
or
section
311
of
the
Excise
Tax
Act.
Section
2
of
the
Rules
states
that:
‘assessment’
includes
a
determination,
a
redetermination
a
reassessment,
and
an
additional
assessment”.
Paragraph
(b)
of
the
Form
requires
that
the
application:
“Identify
the
assessments
or
proposed
assessments
in
respect
of
which
the
determination
is
sought”.
As
previously
indicated,
paragraph
1
and
the
opening
words
of
paragraph
3
of
the
application
under
section
174
of
the
Act
relevant
to
this
motion
simply
recite
that:
“1.
The
Minister
of
National
Revenue
is
of
the
opinion
that
questions
of
law,
fact
or
mixed
law
and
fact
arising
out
of
one
and
the
same
transaction
or
occurrence
or
series
of
transactions
or
occurrences,
are
common
to
assessments
or
proposed
assessments
in
respect
of
Count
Sajan
Hassanali
and
Helga
Georg”
and
3.
The
facts
on
which
the
Minister
relies
on
and
which
he
based
or
intends
to
base
assessments
of
tax
payable
by
each
of
the
taxpayers
named
in
the
Application
are
the
following.
At
the
hearing
Mr.
Ghan
was
asked
if
Ms.
Georg
had
been
assessed
and
he
answered
yes.
He
was
then
asked
if
she
could
now
be
reassessed
and
he
again
said
yes
and
thereupon
produced
a
waiver
under
subsection
152(4)
of
the
Act
signed
by
her.
This
was
the
first
that
Mr.
Shaw
knew
of
the
existence
of
the
waiver.
If
he
had
known
of
this
previously
he
would
not
have
opposed
the
application
and
the
time
and
effort
spent
on
the
motion
including
the
preparation
of
written
argument,
a
book
of
authorities
and
the
affidavit
of
Stevan
Novoselac
would
have
been
avoided.
He
informed
the
Court
that
he
was
no
longer
opposing
the
application.
When
Mr.
Shaw
requested
costs
of
the
application
and
that
they
be
payable
forthwith,
I
interjected
by
suggesting
that
any
costs
would
be
on
the
basis
of
party
and
party.
I
added:
“You’re
not
asking
for
solicitorclient.
I
do
not
think
there
is
any
basis
for
that.”
Counsel
went
along
with
this.
Unfortunately
that
was
a
precipitate
intervention
by
me
and
on
reflection
I
have
concluded
that
this
is
a
proper
circumstance
in
which
to
order
that
solicitor
and
client
costs
be
paid
to
the
executrix
and
trustee
of
the
estate.
At
the
hearing
Mr.
Ghan
said:
“We
didn’t
want
to
give
him
the
waiver
because
it’s
confidential.
We
can
give
it
to
the
Court.”
Later
he
added:
The
information
regarding
the
waiver,
if
the
Court
requires
us
to
give
the
information,
we
give
the
information.
We
don’t
provide
this
information
to
the
other
parties,
it
is
none
of
their
business.
Here
it
says
either
assessed
or
proposes
to
assess
and
that
should
be
enough
for
the
Appellant
here.
And
he
has
made
so
much
out
of
this
small
thing.
I
have
made
several
applications
and
I
have
never
encountered
that
argument
before.
So
the
question
of
costs
is
just,
in
my
view,
shouldn’t
be
allowed,
Your
Honour.
In
reply
Mr.
Shaw
said:
So
it
was
contemplated
by
the
taxpayer
at
the
time
that
174
would
be
the
way
to
get
this
resolved
as
soon
as
possible,
and
yet
we
are
now
two
years
down
the
road.
Mr.
Ghan
didn’t
need
this
special
—
it
was
already
there
on
the
material.
We
are
two
years
down
the
road,
the
question
of
can
she
come
in
rises
in
my
mind.
I
then
make
queries,
legitimate
ones,
to
satisfy
when
she
is
assessable
and
I’m
stonewalled.
To
hear
today
that
it
is
none
of
my
business
makes
me
want
to
change
my
mind
in
respect
of
party-and-party
or
solicitor-
and-client
costs,
but
I’ll
leave
my
submissions
as
they
are.
Mr.
Shaw
was
entitled
to
know
that,
in
fact,
Ms.
Georg
was
potentially
liable
for
tax
and,
in
my
opinion,
there
was
a
legal
obligation
on
Mr.
Ghan
to
inform
him
that
she
had
been
assessed
and
that
she
could
be
reassessed
by
the
Minister
because
of
the
existence
of
the
waiver.
That
information
was
necessary
to
enable
Mr.
Shaw
to
determine
the
position
he
should
take
on
behalf
of
his
client
in
relation
to
the
application
under
subsection
174(1)
of
the
Act.
In
the
circumstances
I
regard
Mr.
Ghan’s
conduct
as
reprehensible.
Although
my
decision
to
award
solicitor-and-client
costs
does
not
turn
on
this,
I
observe
that
the
arrogant
impertinence
and
professional
discourtesy
with
which
Mr.
Ghan
treated
a
perfectly
appropriate
request
for
information
is
inconsistent
with
the
civility
expected
of
members
of
the
bar
who
conduct
litigation
before
this
Court.
Young
v.
Young,
[1993]
4
S.C.R.
3,
160
N.R.
1,
is
an
appeal
from
the
British
Columbia
Court
of
Appeal
with
reference
to
a
matrimonial
dispute.
McLachlin
J.
said
at
pages
134-5:
The
trial
judge
ordered
solicitor-client
costs
against
the
respondent.
This
award
was
made
on
the
basis
that
the
custody
claim
had
‘little
merit’,
that
the
respondent
attempted
to
mislead
the
court,
that
the
respondent
was
recalcitrant
on
matters
of
custody
and
maintenance
and,
finally,
on
the
basis
that
unnecessary
proceedings
had
resulted.
The
trial
judge
also
referred
to
the
fact
that
someone
else
was
promoting
and
paying
for
the
legal
action
and
that
repetitive
and
irrelevant
evidence
was
tendered.
The
Court
of
Appeal,
per
Cumming
J.A.,
upheld
the
imposition
of
solicitorclient
costs
for
four
days
of
the
trial
and
for
four
days
of
the
interlocutory
proceedings
concerned
with
financial
issues,
on
the
basis
of
the
husband’s
non-disclosure
of
financial
information.
Otherwise,
costs
against
the
respondent
were
reduced
to
party-and-party
costs.
The
Court
of
Appeal’s
order
was
based
on
the
following
principles,
with
which
I
agree.
Solicitor-client
costs
are
generally
awarded
only
where
there
has
been
reprehensible,
scandalous
or
outrageous
conduct
on
the
part
of
one
of
the
parties.
Accordingly,
the
fact
that
an
application
has
little
merit
is
no
basis
for
awarding
solicitor-client
costs;
nor
is
the
fact
that
part
of
the
cost
of
the
litigation
may
have
been
paid
for
by
others.
The
Court
of
Appeal
meticulously
considered
all
the
proceedings
in
the
light
of
these
principles
to
arrive
at
its
conclusion
that
only
partial
solicitor-client
costs
were
justified.
See
also
Amway
Corp.
v.
R.,
[1986]
2
C.T.C.
339,
2
F.C.
312
(F.C.
A.);
Lee
v.
Minister
of
National
Revenue,
[1991]
2
C.T.C.
344,
91
D.T.C.
5596
(F.C.A.);
Bruhm
v.
R.
(sub
nom.
Bruhm
v.
The
Queen),
[1994]
1
C.T.C.
2551,
94
D.T.C.
1400
(T.C.C.).
The
application
is
granted
in
accordance
with
the
conditions
specified
in
the
order.
Application
granted.
Email this Content