Michael Malowitz v. Minister of National Revenue, [1991] 2 CTC 2109, 91 DTC 837

Brulé, T.C.J. [Orally]: —In the matter of Michael Malowitz, applicant, versus the Minister of National Revenue, respondent.

This is a motion made by counsel for the applicant involving an application for extending time within which notices of objection may be served. The original application was heard on January 28, 1991 and was dismissed for want of prosecution. The motion asks that the Order be set aside on the basis that the Order given by the Court was made ex parte.

In delivering these reasons orally, however, I expressly reserve the right to edit and expand on them subsequently, if need be.

When the application for extending time was called for hearing on January 28, 1991, no one was present for the applicant and upon a motion to dismiss the application for want of prosecution, such was granted by Judge Taylor of this Court by Order signed on February 25, 1991.

Counsel for the applicant admitted that a notice of the hearing had been forwarded to him but, through an oversight in his office, this did not come to his attention in time to make an appearance.

It was contended by counsel for the respondent that this Court is without jurisdiction to set aside the judgment. Many cases were referred to the Court, the majority of which dealt with the well-known “slip rule”. There was no slip in this case. The argument of the applicant's counsel is that, where an order has been issued ex parte, this Court has jurisdiction to set it aside.

On February 19, 1991, Associate Chief Judge Christie, in the case of Wendy Ann Eves Curoe v. M.N.R., [1991] 1 C.T.C. 2513 held that there is jurisdiction in the Tax Court to set aside a judgment issued ex parte. He indicated that this conclusion came from the decision of the Federal Court of Appeal in the case of May and Baker Canada Ltd. v. Motor Tanker "Oak", [1979] 1 F.C. 401; 22 N.R. 214.

The common law rule has been codified in Rule 330 of the Federal Court Rules. This rule states that a judge may rescind an ex parte order or any order made in the absence of a party who failed to appear through accident or mistake. I emphasize these words "accident or mistake". While this is a Federal Court Rule, this Court often follows their procedure where none exists in the Tax Court.

Apart from this, in my opinion, there are three reasons to exercise my discretion to set aside the judgment:

First of all, the applicant is not personally to blame for the failure to appear. On this point, the applicant’s counsel cited the following two Supreme Court of Canada decisions; Cité de Pont Viau v. Gauthier Mfg. Ltd., [1978] 2 S.C.R. 516, and Murray Bowen v. City of Montreal, [1979] 1 S.C.R. 511; 29 N.R. 408.

The first case dealt with an extension of time to file an inscription of appeal. There were two issues before the Court: Was it impossible for the appellant to have acted sooner and, second, was this a proper case for the Court to exercise its discretion.

The Court reasoned on the first point that since the appellant himself was blameless, it was relatively impossible for him to act any sooner. The Court said that it was necessary to view the matter from the perspective of the appellant and not from the perspective of the appellants counsel. Having determined that the appellant was entitled to ask for the extension, the Court exercised its discretion in favour of the appellant on the basis that the appeal was not futile or vexatious and that the problems arose through no fault of the appellant.

In the Murray Bowen case, supra, which dealt with the rectification of an omission, the Court enunciated a fundamental principle underlying section 50 of the Supreme Court Act and which lies at the root of the reform of civil procedure in Quebec. At page 519, Mr. Justice Pigeon phrased the principle in these terms:

This principle is that a party must not be deprived of his rights on account of an error of counsel where it is possible to rectify the consequences of such error without injustice to the opposing party.

I am cautious in describing this principle as a general rule of law, as it was applied in the context of the Rules of Civil Procedure; however, the negligence of counsel is certainly a factor which this Court can take into account in exercising its discretion to vacate an ex parte judgment.

Secondly, an order setting aside this judgment would not be prejudicial to the Minister. This is particularly true in the light of the fact that the Minister was aware of the applicant's intent to litigate. Ongoing negotiations were being carried on by the counsel for the applicant and Revenue Canada in order to arrive at an agreed statement of facts. I note that Mr. Justice Pigeon in the Bowen case expressly said that "an error may be corrected if it is not unjust to the opposing party".

My third reason: There are a number of appellants whose rights may be adversely affected if the default judgment is permitted to stand.

The result is that this motion to set aside the Order of Judge Taylor is granted and the Registrar will be directed to reschedule a hearing on this application.

Motion granted.