Date: 20031027
Docket: T-493-00
Citation: 2003 FC 1253
Ottawa, Ontario, this 27th day of October, 2003
Present: THE HONOURABLE MADAM JUSTICE HENEGHAN
BETWEEN:
CAPITAL VISION, INC.,
CVI ART MANAGEMENT INC.,
CVI MANAGEMENT INC.,
THE CAPITAL VISION GROUP INC.,
BDO DUNWOODY LLP, 671514 ONTARIO LTD.,
1271724 ONTARIO INC., GREG COLEMAN,
RALPH T. NEVILLE, GERRY JOHN HOGENHOUT
and PAUL BAIN
Applicants
- and -
MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER AND ORDER
INTRODUCTION
[1] Capital Vision, Inc., CVI Art Management Inc., CVI Management Inc., The Capital Vision Group Inc., BDO Dunwoody LLP, 671514 Ontario Ltd., 1271724 Ontario Inc., Greg Coleman, Ralph T. Neville, Gerry John Hogenhout and Paul Bain (the "Applicants") seek an Order pursuant to the Federal Court Rules, 1998 (the "Rules") for their costs upon their applications for judicial review filed relative to the issuance of certain letters by the Minister of National Revenue (the "Minister"), requiring the Applicants to provide information and documents to the Minister. The Minister served the requirement letters (the "new requirements") on the Applicants on February 15, 2000, pursuant to section 231.2 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the "Act").
FACTS
[2] The requirement letters issued and served in February 2000 are called the "new requirements" to distinguish them from the requirements issued by the Minister in November 1999 (the "old requirements"). In November 1999, the Minister had sought judicial authorization to serve those old requirements pursuant to section 231.2(3) of the Act. An order was issued by Justice Reed on November 22, 1999, authorizing the service of the old requirements.
[3] The Applicants then filed a motion seeking review of the order, pursuant to section 231.2(5) of the Act. The parties, that is the Applicants, and the Respondent agreed that the motion seeking review of the November 22, 1999 order would be heard during the week of February 14, 2000, subject to the availability of Justice Reed. Then, on February 9, 2000, the Minister advised through his counsel that he would not be seeking to enforce the old requirements but would issue new requirements. The Minister did issue new requirements without seeking prior judicial authorization. The issuance of the new requirements without judicial authorization, following the unilateral abandonment by the Minister of the old requirements, is the fact underpinning this present application and motion for costs in excess of the usual scale.
[4] The Applicants filed individual applications for judicial review. By Order dated May 18, 2000, Associate Senior Prothonotary Giles ordered that the seven individual applications for judicial review would be consolidated into one proceeding, that is cause number T-493-00, that one application record would be filed in respect of all the applications and that one record would be filed by the Minister.
[5] The consolidated application for judicial review was heard on June 25, 2001. By Reasons for Order and Order issued on December 19, 2002, the application was allowed, with costs. The Applicants filed a notice of motion on February 4, 2003, seeking the following:
1. An Order fixing the costs awarded to the Applicants on a solicitor and client basis;
2. In the alternative, an Order fixing the costs awarded to the Applicants in a lump sum in excess of the amounts set out in Tariff B;
3. In the further alternative, an Order directing the assessment officer to assess the Applicants' costs on a solicitor and client basis;
4. In the further alternative, an Order directing the assessment officer to fix the Applicants' costs in a lump sum in excess of the amounts set out in Tariff B;
5. An Order granting the Applicants their costs of this motion on a solicitor and client basis;
6. An Order directing that any costs awarded be paid to the Applicants' solicitors in trust; and
7. Such further and other relief as this Court may deem just.
APPLICANT'S SUBMISSIONS
[6] The Applicants raised several grounds in support of this notice of motion. As well, they rely on the factors set out in Rule 400(3) in asking the Court to award costs higher than those provided for in Tariff B. They seek first an award of solicitor-and-client costs, either by a fixed award of such costs or an assessed award. Alternatively, they request an order fixing their costs in a lump sum in excess of the amounts set out in Tariff B or an order directing the assessment of such higher costs by an assessment officer.
[7] The Applicants submitted three draft bills of costs, the first calculated on the basis of solicitor-and-client costs, the second on the basis of Column V of Tariff B, and the third on the basis of Column III of Tariff B. The last is the "usual" basis for awarding costs and the second is the "high" basis for awarding costs.
[8] The Applicants acknowledge that an award of solicitor-and-client costs is an extraordinary remedy, as discussed in Bland v. National Capital Commission, [1993] 1 F.C. 541 (F.C.A.); Apotex Inc. v. Canada (Min. of Nat. Health & Welfare) (2000), 9 C.P.R. (4th) 289 (F.C.A.). They acknowledge that, as a general rule, such costs are awarded only in the presence of "reprehensible, scandalous, or outrageous conduct on the part of one of the parties", as discussed in Young v. Young, [1993] 4 S.C.R. 3 at 134.
[9] The Applicants, however, point out that solicitor-and-client costs will be awarded to indemnify an innocent litigant when another party puts the former to the expense of commencing proceedings that would otherwise be unnecessary. That situation is discussed in Fraser v. Bank of Nova Scotia (2001), 278 N.R. 154 (F.C.A.).
[10] Although the Applicants do not ascribe scandalous or reprehensible conduct to counsel for the Minister, they say that, in this case, the Minister acted oppressively in issuing the new requirements which underlie this application for judicial review. They say that the Minister did not frankly disclose his motives for issuing the new requirements. They refer to the disposition of the application for judicial review and the following findings:
(a) The Respondent did not proceed in a manner authorized by law when he issued the New Requirement to Capital Vision;
Reasons for Decision, Applicants' Motion Record, Tab 4. P. 106 at para. 59
(b) The Respondent improperly exercised his discretion under section 231.2 of the ITA in issuing the New Requirements on the remaining Applicants;
Reasons for Decision, Applicants' Motion Record, Tab 4, pp. 116-117 at para. 95
(c) By withdrawing the Old Requirements and issuing the New Requirements, the Respondent "short-circuited" or "side-stepped" the process for seeking judicial review of the Authorization Order, including the cross-examination of Mr. Ferguson;
Reasons for Decision, Applicants' Motion Record, Tab 4, p. 107 & 115 at paras. 66, 89 & 90
(d) The Respondent wanted to foreclose the Applicants' recourse to the Court for judicial review of the Authorization Order; and
Reasons for Decision, Applicants' Motion Record, Tab 4, p. 116 at para. 93
(e) The Respondent was "less than forthright" or "misstated" his true purpose in issuing the New Requirements.
Reasons for Decision, Applicants' Motion Record, Tab 4, pp. 111 & 114 at paras. 77 & 86
[11] The Applicants also speak of a lack of co-operation by the Minister in relation to this application for judicial review. The Act imposes time limits on persons who are issued requirements under section 231.2. Failure to comply with these requirements can lead to sanctions. The Respondent did not agree to extend the time limits for compliance and put the Applicants at risk either of being charged with offences under the Act or of losing their right to seek judicial review of the new requirements. In these circumstances, the Applicants were put in the position of bringing a motion to stay the operation of the time limits against them. That motion was granted by Order dated March 15, 2000. Reasons for Order were issued on June 8, 2000, in which Justice Dawson found that serious issues had been raised by the Applicants, specifically whether the new requirements were misleading and whether the new requirements were vitiated by the Minister's failure to identify the taxpayers who were being investigated about the new requirements. Costs of the stay motion were reserved.
[12] The Applicants also note that they were required to bring other interlocutory motions in connection with their application for judicial review. The Respondent refused to produce certain documents and the Applicants were required to bring a motion for production, pursuant to Rule 318 of the Rules. They were successful on that motion and by Order dated August 23, 2000, Prothonotary Lafrenière ordered further disclosure by the Minister. He also ordered that the costs of that motion were reserved to the discretion of the trial judge.
[13] The Minister failed to comply with the obligation under the Act to seek judicial authorization prior to issuing requirements seeking information and documents in relation to unnamed persons. Accordingly, the Applicants say they were forced to resort to the Court on more than one occasion to protect their rights, notwithstanding the absence of scandalous or reprehensible behaviour by the Minister. In brief, the Applicants say that their applications raise the important question of ministerial compliance with the law. If the Minister had proceeded with the old requirements for which judicial authorization had been sought and obtained, the Applicants would have had their opportunity to challenge those authorizations in a manner contemplated by the Act, and the present proceeding would not have been required.
MINISTER'S SUBMISSION
[14] The Minister takes the position, in response to this motion for costs, that the applications did not involve a novel question of law, that individual applications for judicial review were unnecessary and that the costs incurred by the Applicants, in T-493-00 and the related applications, would have been incurred in any event if the Applicants had pursued their motion seeking review of the Order of Justice Reed, that is the order authorizing the old requirements.
[15] The Minister opposes the award of costs on any basis higher than the usual basis, that is Tariff B. The Minister acknowledges that the notice of appeal filed against the Order of Justice Dawson was not pursued and that no appeal was filed in respect of the Order dated December 19, 2002, allowing the applications for judicial review.
DISPOSITION
[16] Rule 400(1) grants a broad discretion to the Court in the matter of awarding costs and provides as follows:
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400. (1) Discretionary powers of Court - The Court shall have full discretionary power over the amount and allocation of costs and the determination of by whom they are to be paid.
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400. (1) Pouvoir discrétionnaire de la Cour - La Cour a entière discrétion pour déterminer le montant des dépens, les répartir et désigner les personnes qui doivent les payer.
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[17] As a general rule, costs are awarded to the successful party on a party-and-party basis. An award of costs is not meant to indemnify completely the successful party, unless there exist special circumstances justifying an award of solicitor-and-client costs. In Apotex Inc. and Novopharm Ltd. v. Wellcome Foundation Ltd. (1998), 159 F.T.R. 233, affirmed 270 N.R. 304, Justice Wetston at page 238 made the following statement about the principle underlying the award of costs:
... An important principle underlying costs is that an award of costs represents a compromise between compensating a successful party and not unduly burdening an unsuccessful party.
[18] In the present case, the Applicants are seeking an order for costs in excess of the usual scale, that is Column III of Tariff B. Their first request is for an award of solicitor-and-client costs.
[19] As noted above in Young, supra, such costs are generally awarded in the face of "reprehensible, scandalous or outrageous conduct" by one of the parties. There is no such conduct here and the Applicants acknowledge as much. However, solicitor-and-client costs can also be awarded to indemnify an innocent party. The Applicants submit that the Minister acted oppressively in issuing the new requirements without seeking prior judicial authorization and, by doing so, put the Applicants to the necessary expenses of challenging that decision by way of application for judicial review.
[20] In my opinion, these submissions by the Applicants do not meet the test of showing that an award of solicitor-and-client costs is justified here.
[21] At the same time, I am satisfied that the costs to the Applicants should be higher than those provided for in Tariff B. The record shows that the Applicants were put to the costs of pursuing a proceeding that would have been unnecessary if the Minister had either followed the process initiated by him in November 1999 or, alternatively, sought judicial authorization prior to issuing the new requirements in February 2000. I agree with the submissions of the Applicants on this motion, that the underlying applications for judicial review raise a fundamental and important question, that is, respect for the law.
[22] The record shows that as early as June 2000, this Court recognized that the applications for judicial review raised serious questions about the Minister's actions. In her Reasons for Order dated June 8, 2000, Justice Dawson said the following at paragraphs 72 and 73:
I find that on the wording of the Requirements served upon the applicants other than Capital Vision Inc., a serious issue has been raised as to whether the Requirements were misleading and if so, whether any misleading statement invalidates the Requirements.
For the reasons submitted by counsel for 671514 Ontario Ltd. and Mr. Hogenhout set out previously, I also find that in the circumstances of this case, a serious issue is raised as to whether or not the failure to specifically name the taxpayers under investigation vitiates the Requirements served on these applicants.
[23] The manner in which Justice Dawson dealt with the issue of irreparable harm, in the context of the stay motion, is illustrative of the manner in which the Minister acted in relation to the Applicants. Justice Dawson commented on the position adopted by the Minister in responding to the Applicants' request for an extension of time to deal with the new requirements, at paragraphs 78 to 83 of her reasons:
[78] I accept the applicants' submissions that the Minister's position treats the issuance of a criminal charge under the Act as uneventful in the life of a taxpayer. I also agree that it offends common sense for the Minister to say that if the applicants wish their day in court they should simply await the laying of charges.
[79] The mere laying of a criminal charge carries real potential for great prejudice to the applicants and their reputation, even if they are ultimately acquitted.
[80] Irreparable harm refers to the nature of the harm to be suffered. The harm must be of a material nature which cannot adequately be remedied by damages.
[81] In addition to the prejudice inherent in facing a charge under the Act, at least two applicants, BDO Dunwoody and Ralph T. Neville, have indicated that they will, if not successful in obtaining interim relief, comply with the Requirements.
[82] Compliance with the Requirements would render the application for judicial review nugatory and would, contrary to the Minister's submission, not result in the opportunity to take any challenge in the criminal courts.
[83] In these circumstances, I find the applicants have established irreparable harm.
[24] The Applicants argue that the Order and Reasons for Order issued by Justice Dawson clearly put the Minister on notice that the process he was following was questionable. I agree. In my opinion, by June 2000 this Court had warned the Respondent and the Respondent did not alter his approach but, to the contrary, refused to produce certain documents and put the Applicants to the time, effort and expense of obtaining an order for production.
[25] This course of action is relevant to the assessment of costs.
[26] The Respondent argues that the Applicants would have incurred the same costs if the original challenge to the old requirements had been pursued. I do not see any merit in this argument. The Applicant had no control over the original proceeding which was commenced while the Minister sought judicial authorization in 1999 to issue the old requirements. That proceeding was unilaterally terminated by the Minister when he advised, in February 2000, that he was not proceeding on the old requirements but issuing new ones.
[27] There is no way of knowing what steps would have been taken in relation to the old proceeding, the costs incurred or the ultimate disposition. In my opinion, the issue of costs in relation to the original application by the Minister is not relevant to the question of costs in this proceeding.
[28] The Respondent argues that individual applications for judicial review, by all the Applicants, were not necessary. He suggests that the individual applicants did not need individual legal representation and that the award of costs should reflect unnecessary duplication of effort.
[29] I do not agree with this submission. Since individual requirements were issued to the individual Applicants, each requirement would stand as a single "decision" relating to the individual recipients. Rule 302 of the Rules provides that an application for judicial review shall be limited to one decision. In the circumstances prevailing here, the Applicants followed the correct procedure by instituting separate proceedings. They also acted reasonably and expeditiously in seeking consolidation of the seven individual applications.
[30] The Applicants were entitled to have their own counsel. Their interests were related but not identical. It is apparent from the materials filed that counsel for the applicants heeded the letter and spirit of the order of Associate Senior Prothonotary Giles who warned counsel against duplication of argument and representations. The Applicants presented a full but non-repetitive argument.
[31] Rule 400(3) identifies several factors that the Court may consider in assessing costs. In my opinion, Rule 400(3)(a), (c), (g), (h), (l) and (o) are particularly relevant in the present case. The Applicants were successful in their application. The issues raised were important, required substantial work in preparation and engaged the public interest, insofar as the Respondent's manner of proceeding under section 231.2 of the Act is concerned.
[32] The Minister's refusal to consent to an extension of time in the winter of 2000 and refusal to produce documents in the spring of 2000, led to interlocutory motions by the Applicants. In my opinion, those motions were proper and necessary.
[33] The Applicants were each affected by the requirements issued to them as individual legal persons. They properly brought their own applications and were entitled to their own counsel.
[34] In conclusion, I note that the Minister is tasked with the administration of the Act. Section 231.2 allows him to seek information for any purpose related to the administration or enforcement of the Act. He can seek such information from a "third party" about unnamed persons, but section 231.2(3) requires him to apply to a court for judicial authorization before issuing a requirement to a third party relating to an unnamed person. According to the decision of Justice Rothstein (as he then was) in Minister of National Revenue v. Sand Exploration Limited, [1995] 3 F.C. 44 (T.D.) at page 52, the Minister has to meet a high standard in seeking judicial authorization under section 231.2(3).
[35] In my opinion, he has to meet at least an equally high standard in deciding to issue third party requirements for information about unnamed persons without judicial authorization and in a doubtful case, he should seek such authorization. That is a factor that raises concern about respect for the law, as that law is set out in the Act. That concern has implications for the pubic interest, in the due administration of the Act.
[36] For the foregoing reasons, and having regard to the guidance provided in the jurisprudence covering the exercise of discretion in awarding costs beyond Tariff B, including Canadian Pacific Forest Products Ltd. et al. v. Termar Navigation Co. et al. (1998), 146 F.T.R. 72, Apotex Inc. and Novopharm Ltd., supra and Wihksne v. Canada (Attorney General) (2002), 299 N.R. 211 (F.C.A.), I am satisfied that in the present case there are "special considerations" which justify an award of costs in excess of Tariff B.
[37] I direct, in the exercise of my discretion, that the costs of the Applicants be assessed by an assessment officer, on a lump sum basis in excess of the amounts set out in Tariff B, in addition to reasonable disbursements and applicable GST.
[38] The Applicants seek the costs of the present motion on a solicitor-and-client basis. I am not satisfied that they have shown that such an order should be made. There is no evidence of special factors that could bring this motion outside the usual rules for assessing costs and the costs of the motion will be assessed against the Minister, by an assessment officer, in the usual way.
ORDER
In the exercise of my discretion, I order that the Applicants shall have their costs on the application for judicial review on a lump sum basis in excess of the amounts set out in Tariff B, to be assessed by an assessment officer, in addition to reasonable disbursements and GST.
"E. Heneghan"
J.F.C.
FEDERAL COURT
Names of Counsel and Solicitors of Record
DOCKET: T-493-00
STYLE OF CAUSE: CAPITAL VISION INC. et al
Applicant
- and -
MINISTER OF NATIONAL REVENUE
Respondent
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: WEDNESDAY APRIL 30, 2003
REASONS FOR ORDER
AND ORDER BY: HENEGHAN, J.
DATED: OCTOBER 27, 2003
APPEARANCES BY: Mr. Clifford L. Rand / Mr. David Muha
For the Applicants: Capital Vision Inc.,
CVI Art Mgmt Inc. & CVI Mgmt Inc.
Mr. Tom Friedland
For the Applicants: The Capital Vision Group Inc.,
& Greg Coleman
Mr. David S. Morritt/ Mr. Allan Coleman
For the Applicants: Paul Bain & 1271724 Ontario Inc.
Mr. Peter A. Vita, Q.C. / Ms. Joselin Espejo-Clark
For the Respondent
- 2 -
SOLICITORS OF RECORD: Mr. Clifford L. Rand / Mr. David Muha
Wildeboer Rand Thomson APPS & Dellelce, LLP
Barristers & Solicitors
Suite 810, P.O. Box 4
1 First Canadian Place
Toronto, ON M5X 1A9
For the Applicants: Capital Vision Inc.,
CVI Art Mgmt Inc. & CVI Mgmt Inc.
Mr. Tom Friedland
Goodmans LLP
Barristers & Solicitors
250 Yonge Street, Suite 2400
Toronto, ON M5B 2M6
For the Applicants: The Capital Vision Group Inc.,
& Greg Coleman
Mr. David S. Morritt / Mr. Allan Coleman
Osler, Hoskin & Harcourt LLP
Barristers & Solicitors
P.O. Box 50
1 First Canadian Place
Toronto, ON M5X 1B8
For the Applicants: Paul Bain & 1271724 Ontario Inc.
Morris Rosenberg
Deputy Attorney General of Canada
For the Respondent
FEDERAL COURT
Date: 20031027
Docket: T-493-00
BETWEEN:
CAPITAL VISION INC. et al
Applicant
- and -
MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
AND ORDER