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.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.