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A-249-91
Her Majesty the Queen (Applicant)
v.
William Lee (Respondent)
INDEXED AS.' CANADA V. LEE (CA.)
Court of Appeal, Heald, Stone and Linden JJ.A.—Edmonton, October 23; Ottawa, October 31, 1991.
Income tax Practice Application to review and set aside Tax Court decision dismissing application for review of order awarding costs on solicitor and client basis Appeal from reassessment allowed and reasons for judgment awarding costs on solicitor and client basis without giving reason there- for Formal judgment awarding costs on party and party basis Amended judgment issued awarding costs on solicitor and client basis Within Tax Court's jurisdiction to issue amended judgment to accord with reasons Tax Court Judge erred in relying on intrinsic merits of taxpayer's appeal Solicitor and client costs awarded where misconduct connected with litigation, not for intrinsic merit of case.
Practice Costs Tax Court Judge awarding costs on solicitor and client basis Erred in basing award on intrinsic merits of taxpayer's appeal Solicitor and client costs excep tional, awarded where misconduct connected with litigation Appellate court interfering with exercise of judicial discretion where neither supported by reasons nor apparent on record.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Federal Court Act, R.S.C., 1985, c. F-7, s. 28.
Tax Court of Canada Rules of Practice and Procedure for the Award of Costs (Income Tax Act), SOR/85-119, RR. 9, 10, 12.
CASES JUDICIALLY CONSIDERED
APPLIED:
Shairp v. M.N.R., [1989] 1 F.C. 562; [1988] 2 C.T.C. 344; (1988), 88 DTC 6484; 93 N.R. 396 (C.A.); M.N.R. v. Gunnar Mining Ltd., [1970] Ex.C.R. 328; [1970] C.T.C. 152; (1970), 70 DTC 6135; Reading & Bates Construc tion Co. v. Baker Energy Resources Corp. (1986), 8 C.I.P.R. 250; 13 C.P.R. (3d) 410; 2 F.T.R. 241
(F.C.T.D.); Amway Corp. v. The Queen, [1986] 2 C.T.C. 339 (F.C.A.).
COUNSEL:
Helen Turner for applicant. Glenys Godlovitch for respondent.
SOLICITORS:
Deputy Attorney General of Canada for appli
cant.
Godlovitch, Vomberg, Calgary, for respondent.
The following are the reasons for judgment ren dered in English by
HEALD J.A.: This is a section 28 [Federal Court Act, R.S.C., 1985, c. F-7] application to review and set aside the decision herein of Judge J. A. Brûlé, a Judge of the Tax Court of Canada dated March 15, 1991. In that decision Judge Brûlé dismissed an application brought by this applicant pursuant to sec tion 10 of the Tax Court of Canada Rules of Practice and Procedure for the Award of Costs (Income Tax Act) [SOR/85-119] (hereinafter the Rules) 1 for a review of the order made by Chief Judge Couture in which he awarded costs to the respondent on a solici tor and client basis.
On September 21, 1988, the respondent had filed an appeal from an assessment in respect of his income for the 1982 taxation year. On July 18, 1990,
I Rule 10 reads:
10. An application under section 7 or subsection 8(7) or 9(1) shall be made to the Chief Judge within 60 days from
(a) the day judgment is pronounced,
(b) the date of taxation, or
(c) the date of the order or direction or of the taxation of party and party costs giving rise to the question sought to be referred,
respectively, or within such further period of time as may be allowed by a judge on application to the Court made by an appellant or the respondent within those 60 days.
Note: Chief Judge Couture had referred the section 10 applica tion to Judge Brûlé pursuant to Rule 12 which reads:
12. The Chief Judge may designate another judge to deal with any application made to the Chief Judge under these Rules.
Chief Judge Couture of the Tax Court of Canada allowed the respondent's appeal and vacated the 1982 income tax assessment in issue. Although the reasons for judgment of Chief Judge Couture stated that costs were to be awarded on a solicitor and client basis, the judgment of the Court itself, dated July 18, 1990, awarded costs on a party and party basis. On July 27, 1990, an amended judgment was issued in which he affirmed the reasons for judgment dated July 18, 1990 and awarded costs to the appellant on a solicitor and client basis.
The reasons for judgment of Chief Judge Couture did not provide any express reasons for the purported award of costs on a solicitor and client basis. Like wise, it appears that no submissions with respect to costs were made to Chief Judge Couture.
At the commencement of the argument before us, the Court raised a threshold problem with counsel relating to the jurisdiction of the Tax Court to issue the amended judgment of July 27, 1990, the effect of which was to change the award of costs from a party and party basis to a solicitor and client basis. Counsel for the applicant submitted that the Tax Court had jurisdiction to issue the amended judgment of July 27, 1990, because the amended judgment expressed the manifest intention of the Court as set out in the reasons for judgment referred to supra. Counsel relied on the judgment of this Court in Shairp v. M.N.R. 2 I agree that the Shairp decision supports the submissions of counsel. Applicant's counsel relied further on the decision of the Exchequer Court of Canada in M.N.R. v. Gunnar Mining Ltd., [1970] Ex.C.R. 328, at page 340, per President Jackett, where the Court held that the Tax Appeal Board (which was a court of record), had the inherent power to change the record of a judgment pronounced by it so that it would accurately express the order actually made by the Board even though there was nothing in the statute law or the regulations that expressly per mitted it to do so. I agree that this jurisprudence sup ports the Tax Court's jurisdiction in the circum stances at bar. Accordingly I am satisfied that the Tax Court did have jurisdiction to issue the amended judgment of July 27, 1990.
2 [1989] 1 F.C. 562 (C.A.), per Marceau J.A.
The applicant alleges threefold error in respect of the decision a quo:
(a) That Judge Brûlé was without jurisdiction to deal with this matter since Rule 9(1) requires the Chief Judge to refer applications of this nature to a panel of three judges; 3
(b) That the Tax Court of Canada has no jurisdic tion to award costs on a solicitor and client basis; and
(c) That this was not a proper case for an award of costs on a solicitor and client basis.
I do not think it necessary to consider the jurisdic tional arguments raised in (a) and (b) supra since I agree with the applicant that, on this record the respondent has not established a proper basis for the award of solicitor and client costs. Such an award of costs is "normally ordered in respect of the way in which the case has been conducted, not its intrinsic merit" . 4
Judge Brûlé dealt summarily with the issue before him (case, page 136):
I do not have the record of any comments the trial judge made through the course of the hearing at that time but the written judgment reveals certain findings that assist in the determination of the issue in this Application.
He then proceeded to cite four specific passages from the reasons for judgment of Chief Judge Couture and stated, thereafter (case, page 137):
These passages could easily lead me to the conclusion that the Appellant should never have been forced to appeal to the Court, and accordingly, the trial judge was correct in making an award on a solicitor and client basis.
In my opinion, Judge Brûlé was in error when he relied on the intrinsic merits of the taxpayer's appeal. Such a basis was disapproved of in the Reading &
3 Rule 9(1) reads:
9.(1) Notwithstanding any other provision in these Rules, the Chief Judge may, either on his own motion or on applica tion by an appellant or the respondent if in his opinion special circumstances exist, refer to a panel of three judges designated by him for determination any question arising out of the appli cation of or pertaining to these Rules.
4 Compare: Reading & Bates Construction Co. v. Baker Energy Resources Corp. (1986), 8 C.I.P.R. 250 (F.C.T.D.), at p. 285, per Strayer J.
Bates case supra. The decision of this Court in Amway Corp. v. The Queens is also relevant. In that case, Mr. Justice Mahoney stated:
Costs as between solicitor and client are exceptional and gen erally to be awarded only on the ground of misconduct con nected with the litigation.
He added:
While an appellate court is reluctant to interfere with what is essentially an exercise of judicial discretion, it will necessarily do so when that exercise of discretion is not supported by rea sons or apparent on the record. [Emphasis added.]
I consider the situation at bar to be quite similar to that in Amway, supra. Chief Judge Couture did not support the award of solicitor and client costs with reasons nor is there any support visible on the record. My perusal of the passages of Chief Judge Couture's reasons relied on by Judge Brûlé does not persuade me that those passages contain any support whatso ever for an award of solicitor and client costs. All four passages relate to the merits of the appeal and do not allege, in any way, misconduct connected with the litigation. Furthermore, the Chief Judge, in mak ing the comments in the passages relied on, refers to "documentary evidence"; "financial information" and "financial data". This material which was before him and relied on by him is not a part of the record before this Court. Consequently, it is not possible to draw any conclusions with respect to that evidence.
In any event, as noted supra, it is not the kind of evidence required to support an order for solicitor and client costs. Accordingly, I would allow the sec tion 28 application, set aside the decision of Tax Court Judge J. A. Brûlé and, pursuant to paragraph 52(d) of the Federal Court Act, order that the matter be referred back to the Tax Court of Canada for the taxation of costs on a party and party basis.
STONE J.A.: I agree. LINDEN J.A.: I agree.
5 [1986] 2 C.T.C. 339 (F.C.A.), at pp. 340-341.
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