Paquette v. R., [1999] 2 CTC 2620

Tanasychuk T. 0.:

This taxation came on for hearing on March 3, 1999 by means of a telephone conference call. It follows a Judgment of the Honourable Judge Mogan dated May 27, 1997, in which he allowed the appeal made under the Income Tax Act with respect to the 1993 taxation year, with full costs. Mr. Alan R. Yeates, C.A., represented the Appellant and Ms. Sandra Dickinson, as agent, represented the Respondent.

The Bill of Costs as submitted by the Appellant is as follows:

Bill of Costs

This is my bill of costs in the above appeal.

A. For services of counsel I claim the following:

Accompanying the bill of costs were two invoices from an accountant, Bill Gillies, who represented the Appellant at the hearing of the appeal. The first invoice no. 512793 in the amount of $500.00 was dated July 23, 1996 and contained the following description of services:

RE: examine files & working papers to determine validity of Revenue Canada assessment. Fee In All - $500.00.

The second invoice no. 512796 in the amount of $2,100.00 was dated August 14, 1996 and contained the following description of services:

RE: To complete a review of Revenue Canada’s assessment. To examining books of Tom’s Insulation. To appeal notice of assessment and counsel to conclusion. Fee in All - $2,100.00.

Mr. Yeates’ submissions concerning the Appellant’s bill of costs were brief. It was his position that this matter should never have proceeded to Court. In that it did and the Appellant was successful and awarded costs, the Appellant’s costs should be paid. It is his position that the Rules of the Tax Court of Canada regarding the payment of costs “make no sense at all”.

Ms. Dickinson’s submissions were considerably more lengthy. The first issue she dealt with concerned the wording of the Judgment of The Honourable Judge Mogan wherein he stated:

The appellant is entitled to full costs in this appeal;

Ms. Dickinson referred to the case of the Munro v. R. (unreported), F.C.A., A-570-97, July 3, 1998, [reported (1998), 98 D.T.C. 6443 (Fed. C.A.)] which she stated was similar to the situation in which the Appellant finds himself today. In that case, an accountant represented the Appellant at trial. Ms. Munro was successful in her appeals and in his judgment, The Honourable Judge Garon held that she was:

[...] entitled to be reimbursed any expenses she may have incurred in connection with her appeals.

Ms. Munro’s costs were taxed by the Registrar of the Tax Court of Canada who disallowed the accountant’s fees. Upon a review of that decision by The Honourable Judge Bowman, the accountant’s fees were allowed. The Crown brought a judicial review application. The Federal Court of Appeal set aside the decision of The Honourable Judge Bowman. Paragraph 14 of that decision is as follows:

Costs permissible under the Informal Procedure Rules are of two kinds: an award of a fixed sum, in lieu of any taxed costs (rule 10(2)); or an award of taxed costs, which are payable by one party to another. These taxed costs are classified, for all practical purposes, under two headings: costs as between party and party and costs as between solicitor and client.[...]

It is Ms. Dickinson’s position that an award of “full costs” cannot be equated with costs in a fixed sum nor equated with costs as between solicitor and client, as Mr. Paquette was not represented by a solicitor. As such, she submitted that the order as to costs in this matter must therefore be equated with an order for costs on a party and party basis. Following that reasoning, one must then refer to the Tax Court of Canada Rules (Informal Procedure) (hereinafter the "Rules"). Section 11 of the Rules sets out the fees that may be allowed for the services of counsel. As counsel did not represent Mr. Paquette, no amounts can be allowed under that section. Ms. Dickinson referred to the cases of Edgar v. R., [1994] 1 C.T.C. 2562 (T.C.C.) and Burstow v. R., [1998] 2 C.T.C. 2746 (T.C.C.) in support of this proposition.

Ms. Dickinson further stated that Rule 12(3) is the section under which the costs at issue in this matter have been claimed, which reads as follows:

Such other disbursements may be allowed as were essential for the conduct of the appeal, if it is established that the disbursements were made or that the party is liable for them.

It is her position that the costs claimed cannot be allowed under Rule 12(3). Ms. Dickinson read the following passage of Bowman, J. from the Munro decision:

The informal procedure set out in the Act specifically contemplates in section 18.4 representation by an agent; yet the Rules Committee has expressly restricted the taxable fees to those relating to “services of counsel’’. It does violence to the very clear intent in rule l 1 of restricting fees to services of counsel to suggest that the words “such other disbursements’’ in rule 12(3) can be interpreted in such a way as to include fees for services of agents and furthermore to allow such agents the right to claim whatever they want beyond and above what counsel are allowed to claim. Agents should not be allowed to claim indirectly under rule 12(3) what has been directly denied to them in rule 11.

Lastly, Ms. Dickinson questioned the dates of the invoices from Mr. Gillies and the description of the services provided by him. Mr. Dickinson summarized Mr. Gillies’ involvement in representing the Appellant. That involvement appeared to commence on or about August 10, 1995, which was approximately one month after the date of the issuance of the notice of re-assessment which was the subject of this appeal. It is her position that the services rendered relate to services rendered prior to the commencement of this litigation in the Tax Court of Canada on January 21, 1997. As such, it is her position that, costs incurred prior to the commencement of the litigation are not recoverable. She referred to the cases of Acton v. R. 93-2739(IT)I (unreported) [reported (1994), 95 D.T.C. 107 (T.C.C.)] and Veldman v. Minister of National Revenue (1992), 92 D.T.C. 1334 (T.C.C.).

Mr. Yeates did not respond to the items raised by Ms. Dickinson in detail. He stated that he agreed with her submissions and reiterated that the Rules of the Tax Court of Canada “are not fair”. Notwithstanding the statement that he agreed with Ms. Dickinson’s submissions, he stated that he was not withdrawing the Appellant’s bill of costs.

Costs are awarded pursuant to section 18.26( 1 ) of the Tax Court of Canada Act, R.S.C. 1985, c. T-2, as amended (“The Act’), as follows:

Where an appeal referred to in section 18 is allowed and the judgment reduces the aggregate of all amounts in issue or the amount of interest in issue, or increases the amount of loss in issue, as the case may be, by more than one-half, the Court may award costs to the appellant in accordance with the rules of Court.

Regardless of the wording of the judgment awarding “full costs”, only those costs permissible under the Rules are recoverable.

The issue of accountant’s fees is one that has arisen on numerous occasions. There is no doubt that when claimed as a fee under section 11, accountant’s fees are not recoverable. This has been confirmed by (then) Associate Chief Judge Christie of this Court in Edgar (supra).

The invoices submitted in support of the amount claimed on the bill of costs pre-dated the date of filing of the notice of appeal in the Tax Court of Canada. An award of costs is for the costs associated with litigating the matter in the Tax Court of Canada. Costs incurred prior to the filing of a notice of appeal are not recoverable. If the invoices had been issued after the date of the filing of the notice of appeal, the result would have been the same. Fees paid to an agent are not recoverable as counsel fees under Rule 11 and cannot be re-characterized as a disbursement and recovered under Rule 12(3). I will accordingly tax off the full amount claimed as a disbursement in the amount of $2,600.00.

The Bill of Costs of the Appellant in the amount of $2,600.00 is taxed and no amount is allowed. A certificate will be issued.

Order accordingly.