Myers’ Humane Information Systems v. R., [1997] 2 CTC 2161, 97 DTC 911

Hamlyn T.C.J.:

From the filed material, the Appellants’ original appeals to the Tax Court of Canada were heard together by way of common evidence in November of 1995. Judgment was rendered orally from the bench by Judge Bowman on November 16th, 1995. Judgment was signed by Judge Bowman on December 1st, 1995 and the transcript of the judgment was filed on December 14th, 1995.

A Notice of Appeal was filed by the Appellant Myers Humane Information Systems on January 16th, 1996 with the Federal Court of Appeal for the general procedure case, and on January 26th, 1996, Notices of Motion for judicial review were filed for the two informal procedure cases (Patricia Agnes Myers and Carlyle Valentine Myers).

On May 29th, 1996, the Federal Court of Appeal issued an Order quashing the Appellant’s (Myers Humane Information Systems) appeal for the general procedure case. On February 27th, 1996, the Federal Court of Appeal issued an Order quashing the Appellant’s motion for judicial review with respect to the Patricia Agnes Myers’ case as Carlyle Valentine Myers is not someone who is eligible to represent Patricia Agnes Myers (Carlyle Valentine Myers is Patricia Agnes’ spouse). On August 8th, 1996 the Federal Court of Appeal issued an Order dismissing the Appellant’s application for judicial review with respect to Carlyle Valentine Myers’ case because of undue delay pursuant to Rule 1617 of the Federal Court Rules, C.R.C. 1978, c. 663.

The Motion

The Appellants bring a motion to this Court asking for an extension of time to appeal all matters to the Federal Court of Canada.

The Minister’s Position

The Minister of National Revenue’s (the “Minister”) position is that the Tax Court is without jurisdiction to grant an extension of time to appeal to the Federal Court of Appeal with respect to the informal procedure cases. With respect to the general procedure case, the Minister stated that the Appellant does not meet the requirements as set out in the case law for an extension of time to appeal to the Federal Court of Appeal.

The Appellants’ Position

The Appellants’ position as argued was that on November 28th, 1995 Carlyle Valentine Myers (the Appellants’ representative) contacted the Federal Court of Canada by letter and indicated that he intended to pursue the appeals as soon as possible. He stated that natural justice demands the appeals not be ended prematurely. He further argued throughout that he had a bona fide intention to appeal and that problems with the appeal process were as a result of economic constraints and time constraints. In terms of Judge Bowman’s decision, Carlyle Valentine Myers argued that Judge Bowman’s decision was wrong, that Judge Bowman misunderstood the concepts and context of the subject matter of the appeals and specifically that in the opinion of the Appellants, the subject matter of the appeals was a manufacturing system, the product was information and as such the subject matter was property and, accordingly, the Appellants were entitled to relief under the Income Tax Act (i.e. the property was a manufacturing system within Class 29 of Schedule II of the Income Tax Regulations (the “Regulations”)). Lastly, Carlyle Valentine Myers disputed the trial judge’s findings in relation to evidence about himself and his family and whether he or his wife or the company was carrying on business.

Analysis

Informal Procedure Appeals

In relation to the informal procedure cases, I will deal with those first. Section 18 of the Tax Court of Canada Act, R.S.C. 1985, c. T-2 applied to the appeal to the Tax Court of Canada for both informal cases, which means that section 27 of the Federal Court Act, R.S.C. 1985, c. F-7 is not applicable. The Appellant’s application for judicial review in relation to Carlyle Valentine Myers’ case was dismissed by the Federal Court of Appeal pursuant to Rule 1617(1) because of his failure to file an application record within 60 days of filing his Notice of Motion as required by Rule 1606(1). The Federal Court of Appeal did so because apparently from the record, the Appellant failed to demonstrate any reasonable excuse for the delay. The Order was made by the Federal Court of Appeal pursuant to their rules; the Tax Court of Canada has no jurisdiction to interfere with that Order.

Similarly, the application for judicial review in the Patricia Agnes Myers’ case was quashed pursuant to Rule 300 of the Federal Court Rules which states that an individual may act in person or be represented by a solicitor in any proceeding in the Court. A solicitor is defined in Rule 2 as an officer of the Court under subsection 11(3) of the Federal Court Act which essentially is any Canadian lawyer. (The Federal Court of Appeal concluded Carlyle Valentine Myers is not someone eligible to represent Patricia Agnes Myers.) The Tax Court of Canada has no jurisdiction to interfere with this Order.

General Procedure Appeal

In relation to the general procedure appeal, the Tax Court of Canada has the jurisdiction to consider this matter (see subsections 27(1.1) and 27(2) of the Federal Court Act). Those sections allow (in an appropriate case) the Tax Court of Canada to extend time within which a party to a proceeding may appeal to the Federal Court of Appeal.

In order to qualify for an extension of time there are tests that flow from the jurisprudence. They include that the applicant must show a bona fide intention to appeal when he has the right to appeal, that his failure to appeal within the time must be as a result of special circumstance which serves to excuse or justify that failure and that it must be at least arguable that the judgment appealed from is wrong.

Further, as in all cases, each case must stand on its own facts, and the Court must consider whether or not there would be undue prejudice to the opposing party.

The Judgment

Carlyle Valentine Myers took me through the transcript of the oral judgment of Judge Bowman. The issue in the trial with respect to Myers’ Humane Information Systems was whether the Appellant was entitled under subsection 127(5) of the Income Tax Act to Investment Tax Credits on the basis that it acquired qualified property as defined in subsection 127(9) in the income tax years of 1989 and 1990.

On page seven of the judgment Judge Bowman stated, in order to qualify for Investment Tax Credits, the Appellant must show three things: that it acquired the property in the years in question, the property was qualified property, and that it had a capital cost equal to the amount claimed. Judge Bowman decided in relation to these matters the following: that the disk containing the computer programs being developed by the Appellant was property and the hard copy of the program was property. With respect to the first issue, Judge Bowman stated, there is some doubt that the property was acquired in the years in question, specifically from the judgment, on pages 8 and 9:

There was no agreement of purchase and sale. There is no document transferring the property. It just seems to have happened.

As well, the payment for the property was contingent on the Appellant having enough money to pay for it, and there was no evidence that the payment had been made in the years in question.

With respect to the third point, that is whether the property had a capital cost equal to the amount claimed, Judge Bowman said he did not believe that the property had a capital cost claimed by the Appellant. He stated that the capital cost was derived by multiplying Carlyle Valentine Myers’ hourly rate of $100 to $125 and multiplying that by the number of hours that he and his wife and children spent developing the software system. Judge Bowman stated these figures are inflated to the extent of being fanciful.

With respect to the second criteria, that the property was qualified property, the Appellant argued that the property is qualified property because it falls within Class 8 of Schedule II of the Regulations. Class 8 requires a property to be a structure that is a manufacturing or processing machinery or equipment. Judge Bowman doubted that the disk containing the program or the hard copy could be considered to be a structure.

He stated at pages 10 and 11:

The word structure has a meaning, it’s been set out in many cases and what it means and it certainly does not mean this.

Judge Bowman relied on two Federal Court of Appeal cases which held that the collection of data and the gathering of processing and providing of information did not constitute manufacturing and processing, and as I indicated, Carlyle Valentine Myers took strong exception to this point, but I must go on to review the point by Judge Bowman where he concluded by stating that it was not necessary for him to reach a decision on this point as there are so many other bases upon which the Appellant’s case must fail.

Decision

With respect to this motion, I accept that the Appellant had the requisite intention to appeal throughout. Moreover, the Crown counsel conceded that point. I further find, from everything I have reviewed, there would be no undue prejudice to the Respondent by the extension Order sought by the Appellant.

As to the point of whether there is at least an arguable case that the judgment appealed from was wrong, I have looked at the whole judgment and considered the argument of the Appellant. Judge Bowman’s decision is directly related to the tax issue including the requisites of the Income Tax Act as they relate to claimed Investment Tax Credits. In my opinion, the motion must fail. Judge Bowman’s decision in this case was based almost entirely on his findings of fact, especially his findings in respect of the credibility of the witnesses. Very little interpretation of law is contained in this judgment. Thus, I conclude from that, the Federal Court of Appeal is very unlikely to disturb its judgment. The Appellant has not established that there is an arguable case that the judgment appealed from is wrong, and given that, I must deny the Appellant’s motion.

Conclusion

So, therefore, in summary, in relation to the informal cases, this Court clearly does not have the jurisdiction to review the dismissal of the matters by the Federal Court of Canada. In relation to the general procedure case, as I have reviewed, this Court has considered the criteria, whether to extend time, and I find that the criteria have not been met, and on that basis the request for an extension of time to appeal is dismissed.

Motions dismissed.