McPherson v. R., [1998] 3 CTC 2278, 98 DTC 1715

Beaubier T.C.J.:

Upon the motion of the solicitor for the Appellant for an Order that the Respondent’s representative answer certain questions on discovery, and upon hearing counsel for the Appellant, Clifford L. Rand, and upon hearing counsel for the Respondent, Audie Schwartz,

And upon reviewing this file:

The last paragraph of my Judgment dated September 29, 1997 in this matter reads as follows:

Success is divided. The parties have asked that they be allowed to submit further argument in respect to costs. The Registrar will contact counsel for the parties within seven days from the date of this judgment for the purpose of fixing a time for a telephone conference so that procedures respecting the argument can be arranged.

On October 28, 1997 the Court ordered that there be a hearing respecting the award of costs.

On November 14, 1997, the Appellant’s counsel filed “Appellant’s Pleadings re Costs”. Paragraph 11 of those pleadings described the issue as follows:

The issue to be determined is the award of costs, if any, in respect of this appeal and, in particular, whether the Appellant is entitled to solicitor and client costs in respect of the appeal.

In paragraph 12, the Appellant pleads section 147 of the Tax Court of Canada Rules (General Procedure). Paragraph 14 sets out the Appellant’s reasons, and reads:

An award of costs to a party on a solicitor and client basis may be made in unusual and exceptional circumstances. It is respectfully submitted that unusual and exceptional circumstances justifying an award of costs to the Appellant on a solicitor and client basis exist in respect of this appeal. In the Appellant’s respectful submission, because her appeal had much greater economic significance to the Respondent than it did to the Appellant or to the Group, the Appellant and the Group were required to incur costs far in excess of those that would normally be incurred in prosecuting an appeal of this nature.

The Respondent’s Reply is dated December 5, 1997. The reasons in Reply are, in essence, that solicitor/client costs should not be awarded because more than one party has an interest in the action (paragraph 14), are awarded in rare cases or where there has been misconduct on the part of the party against whom costs were awarded (paragraph 15), or where there was reprehensible conduct by the Crown (paragraph 16), and further, that to recover costs the Appellant must be liable to pay them to her solicitor whereas here she admits that the costs have been shared by all members of the Group (paragraph 18).

It is agreed by both parties that, to quote the first two sentences of paragraph 4 of the Appellant’s pleadings relating to costs:

The Appellant is part of a group of approximately ninety taxpayers (the “Group”) who have been reassessed in connection with losses deducted in connection with the ownership and sale of condominium units that were acquired from the Reemark Group of Companies (“Reemark”) in the late 1980s and early 19905. In each case, the taxpayer’s acquisition of a condominium unit was similarly structured, involving a nominal downpayment and a high level of financing....

Paragraph 9 of the Appellant’s pleadings is also agreed to. It reads:

Following protracted discussions, counsel for the Appellant and counsel for the Respondent agreed to select four representative cases from the Group, including the Appellant’s case. The Respondent would not agree to be bound by the results of these representative cases in respect of the other taxpayers in the Group.

In paragraphs 5 and 6 of the Appellant’s pleadings re costs, the Appellant alleges that many hundreds or thousands of taxpayers have been reassessed for losses on a basis similar to the reassessment of the Appellant. The Respondent’s Reply states that it is not at liberty to disclose tax information on individuals involved with the Reemark Group (from which Mrs. McPherson purchased) and therefore denies these allegations of fact.

The Appellant’s motion is for the Court to direct the Respondent’s representative to attend at a continuation of the examination for discovery to answer previous questions and any proper questions that may arise from those answers. In paragraphs 3 and 4 of the Affidavit of Susan Thomson dated February 25, 1998 and filed in support of the motion, it is alleged in essence that Glenda McPherson’s appeal had much greater economic significance to the Respondent than it did to the Applicant or to the group of taxpayers of which she was a member and that many other taxpayers are affected by Glenda McPherson’s appeal.

In dealing with the questions which are the subject of the motion, the Court’s Order is based upon the record before the Court, that the Appellant and her counsel and the Respondent and the Respondent’s counsel agreed that she was one of a group of ninety and that her case was one of four that would be tried relating to that group. They also agreed that Rule 82 of the Rules of General Procedure would apply to their case. The argument on behalf of the Appellant that hundreds or perhaps thousands of taxpayers might be affected by her case could also be made in respect to many other cases that come before courts from time to time. Some are initially recognized as precedent setting. Others are only understood to be so after the decision has been rendered. A common example before the Tax Court of Canada is a case relating to a disability tax credit of which hundreds, and perhaps thousands, have already been heard by the Court and more will be heard, in part because each case stands on its own facts.

Glenda McPherson’s case is not a class action or a “common fund” action or a “common benefit” action since, on the pleadings, neither the Respondent nor any of the group of ninety agreed that it would bind them. The group of ninety merely agreed to fund her case. The Court is prepared to assume that hundreds or thousands of taxpayers have been reassessed by the Respondent in connection with the ownership or sale of condominium units. But the Court will deal with the questions to be answered on the basis of Glenda McPherson’s case and the Reasons for Judgment alone. That is the scope within which the questions and answers belong.

The List of Refusals contained in Exhibit “A” to the Affidavit of Susan Thomson dated February 25, 1998 follow. The Court will deal with them as listed:

1. Question No. 14, Transcript pages 5-10, commencing at page 5 line 13:

Refused to say approximately how many cases Mr. Berini is dealing with that involve the denial of losses associated with condominium unit ownership in the late 1980’s and early 1990’s based on reasonable expectation of profit. (Pages 5- 10.)

2. Question No. 15, Transcript page 10 commencing at line 9:

Refused to say how many such cases are being held in abeyance by Revenue Canada. (Page 10.)

Neither of these questions need be answered. They are neither related to, nor relevant to, Glenda McPherson’s case.

3. Questions No. 19, 20, and 21, Transcript pages 11-12, commencing at page 11 line 20, and Question No. 24, Transcript page 13 commencing at line 20:

Refused to provide information concerning instructions issued by Head Office, Appeals to the field offices in connection with the disallowance of rental losses. (Pages 11-13.)

4. Question No. 22, Transcript pages 12-13, commencing at page 12 line 9:

Refused to answer whether there were memoranda or correspondence with the field offices relating the organization of these cases. (Pages 12-13.)

5. Question No. 25, Transcript page 14 commencing at line 6:

Refused to answer whether any memoranda resulted from a meeting with Mr. Beith. (Page 14.)

These questions need not be answered. Items 3 and 4 are general. They are neither related to, nor relevant to, the Notice of Appeal and Judgment. Item 5 need not be answered because there is no allegation of abusive behaviour either by Mr. Berini or by Mr. Beith.

6. Question No. 30, Transcript page 15 commencing at line 1 and Question No. 32, Transcript page 15 commencing at line 13:

Refused to answer questions relating to the use of Rule 82. (Page 15.)

This need not be answered because Rule 82 was adopted by agreement of both the Appellant’s and Respondent’s counsel. The reason why each agreed to its use is privileged to that litigant.

7. Question No. 35, Transcript page 17 commencing at line 8:

Refused to answer whether he participated in discussions relating to the transfer of the Appellant’s file to the Ottawa office. (Page 17.)

This need not be answered because it does relate to solicitor-client privilege since it occurred in the course of the litigation itself and, in addition, the transfer of the file from the Toronto to the Ottawa offices of the Department of Justice on behalf of the Respondent is no different than the transfer of a file from one barrister to another in the course of litigation for reasons that are privileged to the litigator.

8. Question No. 37, Transcript pages 17-18, commencing at page 17 line 24:

Refused to answer whether he would have been involved in discussions relating to decisions to delay certain cases involving reasonable expectation of profit. (Pages 17-18.)

This question need not be answered. It is not relevant to, or related to, Glenda McPherson’s issues.

The motion is dismissed. The Respondent is awarded party and party costs respecting this motion.

Motion dismissed.