November 24 2013 Toronto

Present

Tax Court of Canada (TCC)

The Honourable Gerald J. Rip Chief Justice ("CJ")
The Honourable Eugene Rossiter Associate Chief Justice ("ACJ")
Daniel Gosselin Chief Administrator, Courts Administration Service (CAS)
Cristina Damiani Executive Director and General Counsel
Geneviève Salvas Legal Counsel

Department of Justice (Canada) ("DOJ")

Micheline Van-Erum ("MVE") Assistant Deputy Attorney General
Sandra Phillips ("SP") Associate Assistant Deputy Attorney General

Canadian Bar Association (CBA)

Guy Du Pont, Ad.E. (“GDP”) Davies Ward Phillips & Vineberg LLP
Carman R. McNary (“CRM”) Dentons Canada LLP
David D. Robertson, Esq. (“DDR”) Couzin Taylor LLP
Dennis A. Wyslobicky, Esq. (“DAW”)
Max Weder, Esq. (“MW”) Davis LLP
Tamra L.Thomson CBA

The meeting commenced at 9:00 a.m. The CJ welcomed the attendees. DAW was welcomed to the Committee. Outgoing David Spiro was thanked for his faithful and devoted service to the Committee.

I. What’s new at the TCC

A. Minutes approved

The minutes of the previous meeting of the Tax Court of Canada Bench and Bar Committee (“B&B”) of 30 May 2013 were approved.

B. Appointments and vacancies

Kathleen Lyons, formerly with the DoJ, was appointed to the TCC to replace Webb J., now Webb JA in the Federal Court of Appeal. One new vacancy in October 2013 with the retirement of Justice Francois Angers. No indication as to when the next appointment will be made.

C. Statistics and trends

The ACJ reported:

After an 18.4% increase in overall appeals from 2011 to 2012, the increase has stabilized and the appeals have remained about the same for 2013, so far.
The CJ ordered an increased number of sittings and two Deputy Judges were hired to deal with a backlog in Québec. The CJ informs the participants that a 1 to 2 day General Procedure case can normally be scheduled within 10 weeks nationally and an Informal Procedure case can be scheduled within 8 weeks (10 weeks in Québec).
In Québec, a few lawyers, citing workload, are currently asking for sittings for the end of 2015, which are being granted on consent. At the CJ’s direction, the TCC now double books hearings at times as a result, in accordance with inventory pressures.
68% of TCC cases are in the four cities of Vancouver, Toronto, Montréal and Halifax (there has been a drop off in cases in Halifax).
The TCC has seen an increase in “Freedom of the Lands”, “Fiscal Arbitrators” or “Natural persons” type of cases, which involve Appellants who believe they are not subject to tax.

D. Pro bono project

The CJ reported that there are now many different universities/groups pursuing pro bono projects and that each group has the same basic goal – to have students gain experience while providing taxpayers with free TCC litigation support;
The CJ indicated that the TCC’s main challenge is to define its role in these projects. The various universities have different requirements and expectations as to what support they wish to get from the TCC (scheduling, administrative support, photocopying of files, etc.). The TCC encourages pro bono while needing to ensure its involvement remains neutral and fair and takes into account the limited resources it has;
CRM noted that it could be worthwhile reaching out to the Council of Canadian Law Deans to note the need to put administration of the pro bono projects on the program;
There was much discussion as to the respective possible roles of the TCC, the universities, the B&B, the CBA, provincial and student pro bono organizations, the Council of Canadian Law Deans and provincial Law Societies;
It was ultimately decided that (1) the pro bono students initiative needs continued discussion by the B&B and (2) that CRM will put together a draft position of the B&B and/or correspondence.

II. Report from the CAS

The CAS did not receive any additional funding in the last Budget. Following discussions with the Minister’s office, CAS funding request have been scaled down to $47M over 5 years, including $18M for security and the remaining $29M for IT (e-docket and court and registry management and infrastructure). If the $47M is provided in the next Budget Speech, it is felt that the IT requirements can be delivered over a 5 year period;
In the absence of the full funding, the CAS is still moving forward with various initiatives of its security agenda;
CAS has requested funding of $29M over the next five years for technology. About $13M is needed for restorative issues. Another $16M is needed for court and registry management issues. $1M has been secured for this year to deal with the most urgent issues, partly funded by failing to fill vacant positions;
The CJ explained that the TCC is basically functioning with very outdated computers and IT systems that have been kept operational by “patchwork” fixes. There has been no investment in the system for years and it is in desperate need of upgrading;
The TCC registry services function has also undergone an internal review over the last year. Overall the results of the review were positive.

III. Social security tribunal (“SST”)

March 2015 is the projected date for jurisdiction to move from TCC to the SST for CPP/EI appeals.

One of the reasons is that CRA had proposed to have matters moved to SST where proceedings take place without lawyers is that it is looking at finding possible cost reduction solutions, including reducing legal fees.

MW asked if there is any coordination where there is overlap between income tax and CPP/EI issues. DoJ members responded that this is still unknown.

The SST has started operating but with only limited jurisdiction at this time. CPP/EI and other matters that overlap with the TCC are awaiting legislation and the transfer of authority.

IV. Common book of authorities – (see appendices 1 and 2)

The B&B reviewed Appendices 1 and 2 to the Agenda which contained possible cases for inclusion in a list of authorities that counsel appearing before the TCC would potentially not be asked to reproduce in their books of authorities. There were no further additions and GDP agreed to merge the two lists to eliminate duplication.

The CJ was to meet with the TCC Judges the following week to discuss the proposed list. [A meeting has since taken place and the Common Book of Authorities was not warmly received. The matter has to be followed up.]

V. TCC website - update

The TCC website is still undergoing minor changes, which are expected to be ready in the upcoming months. The changes will include more information for self-represented litigants.

VI. Pro bono students canada project & pro bono law ontario project – update

See above under “What’s New at the TCC”.

VII. TCC rules committee

With respect to all proposed changes to the Rules, the CJ reported that the Minister has signed off and they are awaiting the Order in Council. The TCC is operating as if the changes have been passed to a large extent since many of the new Rules are already in Practice Notes.

VIII. Timetable orders

The following proposal was put before the Committee by MW and SP:

If a party has missed a timetable deadline and has not followed Practice Note No. 14, then the opposing party may write to alert them and to note that they have to bring a motion to extend the timetable deadline(s). The opposing party may advise that if no motion is brought within 15 days, the TCC will be advised of the missed deadline(s).

If the opposing party does not bring a motion within the 15 days, a letter may be sent to the TCC advising of the missed deadline(s).

Upon receipt of such a letter, the TCC will schedule a status hearing, by conference call if necessary, at which the party who missed the deadline(s) will have to show why the appeal should not be dismissed. The Notice of Status hearing will indicate that if a motion to extend the timetable deadline(s) is filed before the status hearing, the status hearing will be cancelled.

Where appropriate, Orders issued extending timetable deadline(s) will provide that if any extended deadline is missed, the appeal will be dismissed.

Costs, if any, should only be awarded against the party who missed the deadline. In the normal course, no costs should be awarded when both parties agree that a timetable extension is necessary and a request is made prior to the expiration of the timetable deadline.

Discussion: SP raised the concern from the DoJ’s standpoint that the missed deadlines are almost always the taxpayer’s, and are usually unrepresented litigants. SP mentioned that the missed deadlines invariably result in DoJ bringing a motion and the deadlines invariably get extended. In effect, DoJ’s concern is that they end up doing the work for the taxpayer to get an extension. DoJ is seeking to avoid the cost/time of effectively preparing motions for the taxpayer.

SP raised the possibility of a change so that a missed deadline would lead to a “show cause” hearing, with obviously more significant potential consequences. Discussion ensued as to whether the “show cause” hearing was too onerous.

SP and MD will give the matter some thought, work on some of the wording and will then forward it to the ACJ for consideration.

IX. Saving paper – update

(See above Common Book of Authorities)

X. E-service update

SP reported that there are still some technical issues which they hope to iron out in January/February so that the pilot project can proceed. DoJ counsel and taxpayer’s counsel will then receive training. The pilot project will involve 100 files.

GDP, based on experience with the Federal Court of Canada (the “FCC”), suggested that one option would be for both parties to file consents to e-service with the TCC so the requirements for proof of service can be dispensed with. The CJ said that the TCC will follow up with the FCC to see if there are any issues and if this is something the TCC can do. It was noted that there are already many different ways in the Rules to effect service.

XI. Issues raised by email survey

A. From David M. Sherman

In Speciale v. the Queen, 2013 TCC 254 (13 September 2013), Margeson J. wrote:

[112] The Respondent has asked for an increased tariff but the TCC does not find that to be a proper result in this case, but it is close.

[113] The Appellant asks that costs be addressed on another day, but this position is also rejected.

Paragraph 113 gives me concern. It's common for an appellant to request, at trial, an opportunity to address costs after the decision is rendered. If the TCC might refuse that request and simply issue an order on costs without accepting submissions, that will force appellants to address costs in their submissions at trial. That requires extra time and expense to address situations that might not apply.

For example, an appellant bringing an appeal that has a public-interest component might wish to submit that no costs be awarded if the appeal fails, due to the public-interest nature. However, the appellant arguably shouldn't need to make that submission unless and until the TCC has advised that the appeal will be dismissed.

Specifically: although the trial judge has the legal authority to refuse a request to address costs after trial, perhaps the TCC can issue a guideline to the judges advising against this practice. Or, if the practice will continue, the TCC could issue an advisory, warning appellants to make any costs submissions at trial (paragraphs 112-113)

Response: The CJ stated that this was an anomaly as the TCC usually allows the parties to address costs on another day.

B. From Dunphy & Bokenfohr Tax Lawyers – Calgary

Adjournments

Is there any guidance on the circumstances under which the TCC will agree to adjourn trial dates several months in advance of trial, where the parties consent? In one case, an unforeseeable conflict arose in February, with respect to a trial set for two days in September. Counsel agreed to adjourn, but the TCC refused the request without providing reasons. The DoJ is the largest law firm in the country, and can transfer files between counsel and various offices, but most firms representing taxpayers have 1 litigator or a very small group of litigators. The TCC’s inflexibility with reasonable consent adjournment requests prejudices the taxpayer. In what circumstances will the TCC entertain consent adjournment requests, and where these are refused will reasons be provided?

Response: The CJ reported that each adjournment request is considered on a case by case basis. In Informal Procedure cases, a request 30 days in advance with reasons is often sufficient. General Procedure cases are more difficult to adjourn since there is a 6 month schedule.There are no hard and fast rules, but providing robust applications and reasons will assist the TCC in reaching its decisions. Again, there are no hard and fast rules or guidelines that can be given. It was noted, however, that the fact that there are ongoing settlement discussions or newly arising conflicts with other courts are not normally considered significant.

Settlement Conferences

The current procedures for settlement conferences pose obstacles to meaningful settlement discussions. If the settlement conference rules were less restrictive we believe more files would settle before trial. Furthermore the DoJ routinely advises taxpayer’s counsel that due to workload pressures they cannot engage in settlement discussions at all without some sort of deadline before the TCC, such as a settlement conference date. Will the TCC consider allowing settlement conferences in matters set for 1 or 2 days only?

Response: The CJ stated that the purpose of settlement conferences is to save time. He said that in some cases he will allow a settlement conference if there is a 2 day trial set if he sees that there appears to be a clear settlement route. Otherwise, settlement conferences in matters set for 1 or 2 day hearings does not make sense because no time is saved by the TCC (TCC judges spend a lot of time preparing for settlement conferences). The DoJ added that settlement conferences take a lot of preparation time for them and they believe the 2 day limit is appropriate. Having said that, there was much discussion that settlement should be actively pursued by both parties wherever possible.

Settlement with the DoJ

We are concerned that it is taking too long to settle files that have reached the TCC that, on the facts and evidence, could clearly be settled at an earlier point in the process. It is our experience that the DoJ is unable to look at files until the eve of trial, when the Appellant’s preparation must already be substantially complete. We believe it would save time and money for both parties if there was a method of identifying and triaging files that could be settled before trial.

Response: It was noted that the DoJ remains open to settlement discussions (on an issue basis), while some noted that it seems that the relative success for settlement was in some cases “counsel specific” (both from the taxpayer’s and Justices’ perspective). If counsel believes strongly that a matter should settle and are not receiving a response from Justice, they should consider escalating the matter within DoJ. SP noted that the CRA has been undertaking a more detailed review of Informal Procedure appeals before Replies are being filed to see whether settlement may be possible, where circumstances warrant.

C. From Guy Du Pont

Appeals protocol
Highlights from the Toronto Centre CRA & professionals Group Breakfast Seminar (Objection and Appeals) - 6 November 2013

The Appeals Branch has initiated a pilot project in British Columbia under which appeals officers will be empowered to consider relief from interest and penalties at the same time they are considering the substantive tax issues on objection. The Appeals Branch is still considering how this process may work, due to the different processes by which these decisions may be appealed by the taxpayer (i.e., appeal to the TCC for tax assessments, and judicial review of decisions regarding interest and penalty relief).

Auditors are empowered to "waive" interest and penalties before assessing, while appeals officers may "cancel" interest and penalties after assessment.

Response: This is a CRA initiative in which the DoJ is not involved. SP said that she would look into the protocol for the next meeting.

XII. Matters of concern to the DOJ

None reported

XIII. Other matters

The B&B extended congratulations to the CJ for his 30 years on the TCC bench.

XIV. Next meeting

The meeting was adjourned at 12:00 p.m. the next meeting will be held on 15 May 2014 in Vancouver.

Appendix 1

List of judicial authorities frequently cited before the TCC

671122 Ontario Ltd^. v. Sagaz Industries Canada Inc., 2001 SCC 59, [2001] 2 S.C.R. 983.
Canada c. Antosko, [1994] 2 S.C.R. 312
Canada v. Craig, 2012 SCC 43
Canada c. McLarty, [2008] S.C.R. 79.
Canada Trustco Mortgage Co. v. The Queen, 2005 SCC 54, [2005] 2 S.C.R. 601.
Canderel Ltd v. The Queen, [1998] 1 S.C.R. 147
Continental Bank Leasing Corp v. Canada, [1998] 2 S.C.R. 298.
Copthorne Holdings Ltd. v. Canada [2011] S.C.R. 63
Duha Printers (Western) Ltd. v. Canada, [1998] S.C.R. 795.
Entreprises Ludco Ltée v. Canada, [2001] 2 S.C.R. 1082.
Hickman Motors Ltd v. The Queen, [1997] 2 S.C.R. 336, 97 DTC 5363 (SCC.).
Johns-Manville Canada v. The Queen, [1985] 2 S.C.R. 46.
Johnston v. MNR, [1948] S.C.R. 486.
MNR v. Pillsbury Holdings Ltd, [1964] C.T.C. 294 (Ex. C.), [1965] 1 Ex. C.R. 676, 64 DTC 5184.
Neuman v. MNR, [1998] 1 S.C.R. 770.
People‘s Department Stores Ltd (1992) Inc. v. Wise, [2004] 3 S.C.R. 461, 2004 SCC 68.
R. v. Addison & Leyen Ltd, 2007 SCC 33, [2007] 2 S.C.R. 793.
R. v. Interior Savings Credit Union, 2007 FCA 151, [2007] 4 C.T.C. 55 (FCA), 2007 DTC 5342 (FCA).
R. v. Jarvis, [2002] 3 S.C.R. 757.
R. v. McKinlay Transport Ltd. [1990] 1 S.C.R. 627
Shell Canada Ltd v. The Queen, [1999] 3 S.C.R. 622.
Snook v. London & West Riding Investments Ltd., [1967] 1 All E.R. 518 (ENG CA).
Stewart v. Canada, 2002 SCC 46, [2002] 2 S.C.R. 645.
Symes v. Canada [1993] 4 S.C.R. 695.
Systematix Technology Consultants Inc. v. The Queen, 2007 FCA 226, 2007 G.T.C. 1541 (FCA).
Tsiaprailis v. Canada, [2005] 1 S.C.R. 113.

Appendix 2

Johns-Manville Canada c. La Reine, [1985] 2 R.C.S. 46.

Dépense de nature capitale.

Labrosse c. Agence du revenu du Québec, 2011 QCCA 1592

Pénalités

Neuman c. M.R.N., [1998] 1 R.C.S. 770.

Imposition des dividendes.

Québec (Revenu) c. Caisse populaire Desjardins de Montmagny, [2009] 3 R.C.S. 286.

TPS/TVQ.

R. c. Jarvis, [2002] 3 R.C.S. 757, 2002 CSC 73

Vérifications vs. Enquêtes; prescription et pénalités.

R. c. McKinlay transport ltd, [1990] 1 RCS 627

Principe d’auto-cotisation et d’auto-déclaration.

Shell Canada Ltée c. Canada, [1999] 3 R.C.S. 622.

Qualification juridique des opérations aux fins fiscales.

Stewart c. Canada, 2002 CSC 46, [2002] 2 R.C.S. 645.

Expectative raisonnable de profit.

St-Georges c. Québec (Sous-ministre du Revenu), 2007 QCCA 1442

Pénalités.

Symes c. Canada, [1993] 4 R.C.S. 695

Description: Dépense d’entreprise vs dépense personnelle, droit à l’égalité.

Tsiaprailis c. Canada, [2005] 1 R.C.S. 113.

Imposition des dommages.

* déposé le 8 juin 2012