St-Germain Transport Ltée v. Minister of National Revenue, [1993] 2 CTC 2882, 93 DTC 806

Garon T.C.C.J.:— In my reasons for judgment dated November 7, 1991 relating to the appeals filed both by the appellant and by Mr. Roger Coderre and Mrs. Madeleine Coderre, I indicated that the Court would like to have the submissions of the parties as to whether or not the appellant corporation was entitled to costs.

It will be recalled that the hearing of these appeals to which the appellant was a party dealt with the respondent's assessments for the 1980 to 1984 taxation years, inclusively. The appellant's appeals were heard at the same time and on the same evidence as the appeals from the six assessments for the 1980 to 1985 taxation years by Mr. Roger Coderre, the president of the appellant, and the six appeals by Mrs. Madeleine Coderre, the wife of Mr. Roger Coderre, from the assessments for the 1980 to 1985 taxation years. There was also added to this evidence, by agreement between the parties to this appeal and with the approval of the Court, the evidence introduced at the hearing of four appeals in which the appellants were Messrs. Daniel Marcoux, Pierre Daneau, Denis Coderre and Raymond Brisson, and in which the respondent was the Minister of National Revenue. These four taxpayers had been employed by the appellant as truck drivers during the 1980 to 1983 taxation years.

At the outset, it should be recalled that the hearing of the appeals to which I referred earlier, which were brought by the appellant, Mr. Roger Coderre and Mrs. Madeleine Coderre, lasted 18 full days, and during that hearing 113 exhibits, some of which consisted of books several pages long, were filed by the parties.

I must consider the question of awarding costs in the light of the Rules of this Court, entitled the Tax Court of Canada Rules of Practice and Procedure for the award of costs (Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act")). These Rules apply to appeals brought under section 169 of the Income Tax Act before January 1, 1991. The issue of whether or not the appellant is entitled to costs in respect of the above-mentioned appeals, to which it was a party, results from the application of section 5 of those Rules. Section 5 reads as follows:

5(1) Costs may only be awarded to an appellant who has substantially succeeded in the appeal.

(2) A judge may direct the payment of a fixed sum in lieu of taxed costs.

(3) In exercising his discretion respecting costs, a judge shall to such extent, if any, as may be appropriate in the circumstances take into account

(a) any unnecessary or improper act or omission by or on behalf of the appellant or the respondent;

(b) the amount of tax, interest or penalties in issue in the appeal;

(c) the complexity of the appeal;

(d) the importance of the issues; and

(e) any other matter relevant to the question of costs.

(4) Without limiting the generality of subsection (3), a judge shall, for the purpose of that subsection, have regard in particular to the following matters:

(a) the omission to do anything the doing of which would have been calculated to save costs;

(b) the doing of anything calculated to occasion, or in a manner or at a time calculated to occasion, unnecessary costs; and

(c) any unnecessary delay in the proceedings.

It would seem appropriate to indicate that the appellant succeeded in the appeal in respect of two points raised in the appeals. The first point is discussed at page 12 of the reasons for judgment. At that time I noted that the respondent had admitted during the hearing of these appeals that the additional income attributed to the appellant in the assessments which were appealed for the 1980, 1981 and 1982 taxation years should be reduced by $29,315 for 1980, $27,863 for 1981 and $9,615 for 1982. The second point is discussed on page 23 of my reasons. Thus I allowed a deduction of $20,547.92 in computing the appellant's income for 1980. This amount represented accounts receivable which the respondent should not have taken into account in computing the appellant's income for 1980.

First, with respect to the appeal from the assessment for the appellant's 1984 taxation year, counsel for the appellant acknowledged that the appellant could not be entitled to costs. This conclusion appears to me to be indisputable, since no evidence was presented by the parties and no argument was submitted at the hearing of these appeals. The part of the assessment which was in issue for the 1984 taxation year related to the small business deduction provided by section 125 of the Income Tax Act. As I indicated in my reasons for judgment of November 7, 1991, it seems that “the appellant corporation appealed from the assessment of February 1, 1989 in order to safeguard its rights in a possible review of that assessment on the assumption that this Court's decision for the 1980, 1981 and 1982 taxation years of the corporation could influence the validity of the assessment for 1984” [translation]. As a matter of fact, this Court ordered on February 25, 1992 that the appeal from the assessment for the 1984 taxation year be allowed and that a reassessment be made on the basis of an agreement between the parties dealing with the wording of the judgment to be rendered concerning this appeal with respect to the appellant's 1984 taxation year. That judgment took into account the judgment which had been rendered earlier with respect to the appellant's appeals from the assessments for the 1980 to 1983 taxation years.

As for the appellants appeal for its 1983 taxation year, it was dismissed in its entirety. There can be no question of costs with respect to that appeal, particularly in view of the provisions of subsection 5(1) of the Rules of this Court.

I shall now consider the appeals from the assessments concerning the appellant for its 1980, 1981 and 1962 taxation years.

First, the Minister of National Revenue in these assessments added the following amounts to the appellant's income for the 1980 to 1982 taxation years:

The issue in the appeal was the respondent's addition of the above amounts to the appellant's income. On this point, I concluded as follows in my reasons for judgment concerning those assessments for the years set out above:

For these reasons:

1. The appeals of the appellant corporation are allowed for its 1980, 1981 and 1982 taxation years, and the assessments are referred back to the respondent for reconsideration and reassessment on the basis indicated below for each of those years:

(a) for 1980, the revenue of the appellant corporation shall be reduced by the total of the following amounts:

(i) $29,315, deduction of which was allowed by the respondent during hearing of these appeals;

(ii) $20,547.92, representing accounts receivable, deduction of which is authorized by these reasons for judgment;

(b) for 1981 and 1982, the revenue of the appellant corporation shall be reduced by $27,863 and $9,615 respectively in accordance with the position taken by the respondent during the hearing of these appeals;

(c) for 1980, 1981 and 1982, the part of each assessment concerning penalties shall be amended to give effect to the assessment adjustments ordered by this judgment concerning the tax element.

[Translation.]

I have concluded that the appellant is not entitled to costs in respect of the appeals from the assessments for its 1980, 1981 and 1962 taxation years, having regard to the following considerations:

1. If we consider each of these appeals in isolation, and if we measure the appellants success in light of the tests set out in subsection 5(1) of the Rules of this Court, it must be observed that the appellant's income was reduced by between 25 per cent and 30 per cent for 1980 and 1981 and by about 17 per cent for 1982. Subsection 5(1) of the Rules establishes the basic requirement for entitlement to costs: that the appellant should have"substantially succeeded in the appeal". Although, in my view, this subsection does not necessarily require the appellant to succeed on at least 50 per cent of the appeal, in cases where it is possible to express the success achieved in mathematical terms, I am of the opinion that the appellant did not substantially succeed in its appeals for the 1980 to 1983 taxation years. In reaching this conclusion, I have taken into account the English version in construing subsection 5(1), which appears to me to place a lesser burden on the taxpayer than does the French version.

2. If we measure the appellant's overall success with respect to the reduction of income obtained in the judgment in issue here, we must then observe that on the one hand, according to the assessments in issue, the appellant's unreported income, according to the Minister of National Revenue, was $425,000 for the 1980 to 1983 taxation years, and on the other hand, the effect of the judgment was to reduce the additional income of $425,000 by about $87,000, or about 20 per cent. This overall approach seems to me to provide a more realistic picture than does the approach taken in paragraph 1 above, given that the four assessments for the appellant's 1980 to 1983 taxation years were the subject of common evidence the main elements of which were substantially the same from one year to the next. The same testimonies and the same type of documentary evidence applied to the appeals for these four taxation years, with one exception: the appeal from the assessment for the 1980 taxation year, in which one of the two issues was the subject of evidence and argument which was only slightly related to the second issue in the appeal relating to that assessment. That second issue, however, was similar in nature to the issue involved in the appeals from the assessments for the 1981 and 1982 taxation years.

3. If we consider the appellant's success in terms of all of the appeals which were heard at the same time on common evidence, and on this point I am referring also to the appeals from six assessments concerning Mr. Roger Coderre for the 1980 to 1985 taxation years, we find, having regard to all of the issues at the joint hearing, that the appellant succeeded to an even lesser extent because we must then take into account the fact that the appeals from the six assessments concerning Mr. Roger Coderre were all dismissed. It is true, however, that the portion of the evidence which may be attributed specifically to Mr. Roger Coderre's appeals accounted for three or four days of hearing time at the most. A decision concerning the appellant's appeals with respect to its unreported income in the years in question might have had an impact on the outcome of Mr. Roger Coderre's appeals. However, this was not the case. In passing, I take no account, in evaluating the appellant's success in all of the appeals which were heard on common evidence, of Mrs. Madeleine Coderre's appeals from the assessments for the 1980 to 1985 taxation years, given that the portion of the hearing which was devoted to those appeals was absolutely minimal and accordingly this aspect, relating to Mrs. Madeleine Coderre's appeals, is negligible.

4. Finally, I should add that I rejected the general argument relating to the application of the Canadian Charter of Rights and Freedoms which was raised not only by the appellant, but also on behalf of Mr. Roger Coderre, Mrs. Madeleine Coderre and the four truck drivers referred to above. This general argument concerned the invalidity of the assessments on the ground that they were based on information obtained by an "oppressive, irregular, illegal and invalid search" [translation]. I should however mention that the time spent on this issue during the hearing of the appeals from the assessments of the appellant and the appeals of Mr. Roger Coderre and Mrs. Madeleine Coderre was relatively unimportant, unlike what happened during the appeals of the truck drivers referred to above.

5. Finally, I wish to deal with the argument by counsel for the appellant that I should take into account the fact that the respondent should have admitted at the very start of the hearing of these appeals that the appellant's additional income, as added by the respondent's assessments for the 1980, 1981 and 1982 taxation years, should be reduced by some $63,000. The respondent's auditor subsequently acknowledged that this reduction was correct, during his testimony on cross-examination, after I had ruled in favour of the appellant on questions in respect of objections to the evidence made on behalf of the respondent.

I am of the opinion that even if counsel for the respondent had taken the approach suggested by counsel for the appellant there would have been practically no reduction in the time spent on the evidence — on this point, counsel for the appellant suggested a half-day. Taking into account the evidence as a whole as it was presented during the hearing of these appeals, I conclude that this factor, relating to the evidence of these expenses of some $63,000, is negligible.

I must also add that considering the various factors referred to in subsection 5(3) of the Rules cited above, I have not lost sight of the basic rule set out in subsection 5(1) of the Rules, under which costs may only be awarded to an appellant who has substantially succeeded in the appeal. For these reasons, I am therefore of the opinion that the appellant is not entitled to costs in any of the five appeals in issue here.

Costs denied.