Federal Court Decisions

Date: 20060206

Docket: T-927-04

Citation: 2006 FC 130

Ottawa, Ontario, February 6, 2006

PRESENT:      THE HONOURABLE MADAM JUSTICE DAWSON

BETWEEN:

JOHN ALFRED SIMMONDS

Applicant

and

MINISTER OF NATIONAL REVENUE

Respondent

REASONS FOR ORDER AND ORDER

[1]         On October 22, 2001 Mr. Simmonds, the applicant, submitted what is known as a "fairness request" under paragraph 152(4.2)(c) of the Income Tax Act, R.S.C. 1985, c. 1 (5^th Supp.) ("Act"). That request sought reassessment of Mr. Simmonds' 1993 taxation year so as to permit him to claim an allowable business investment loss ("ABIL") in the amount of $323,333 in respect of shares Mr. Simmonds owned on December 31, 1993 in Perfection Group Limited ("PGL"). Mr. Simmonds' initial request was denied, as was a subsequent second-level request. Mr. Simmonds now brings this application for judicial review of the negative second-level decision. For the reasons that follow, I have determined that the application should be allowed.

FACTS

[2]         Paragraph 152(4.2)(c) of the Act permits reassessment of an otherwise statute-barred taxation year where a taxpayer requests the reassessment for the purpose of determining a reduction of the amount of tax paid by the taxpayer in respect of that statute-barred year.

[3]         The relevant provision of the Act in respect of Mr. Simmonds' claim for an ABIL is subparagraph 50(1)(b)(iii) of the Act which, at the relevant time, provided that:

[4]         Enclosed with Mr. Simmonds' fairness request was an election in respect of the ABIL, as required by the revelant provision of the Act.

[5]         The facts relied upon by Mr. Simmonds in support of his application were set out in his request and were, verbatim, as follows:

•         The business losses claimed by Mr. Simmonds arose due to the collapse of a family business of long standing. The foundation business was a dairy operation owned by Perfection Foods Limited ("PFL"). This business was commenced by Mr. Simmonds' grandfather in the 1920s. By 1990 PFL and its related operations and companies ("the Perfection corporate group") employed approximately 350 persons throughout Atlantic Canada, and exported to Africa and the Caribbean.

•            Thereafter, difficulties arose with the P.E.I. government of the day respecting financing of PFL. This ultimately led to receiverships and bankruptcies amongst the Perfection corporate group, which in turn caused grievous financial losses to shareholders and creditors including Mr. Simmonds, in the early 1990s. The circumstances of the collapse of the Perfection corporate group are detailed in the statement of claim filed in the P.E.I. Supreme Court in 1996 against the P.E.I. government in respect of the adverse events referred to above. The action is presently continuing.

•            PGL was a company within the Perfection corporate group. In 1987 and 1988 Mr. Simmonds acquired and held all the issued and outstanding common shares of PGL, a CBCA body corporate, incorporated in 1987. At that time PGL was Mr. Simmonds' personal holding company. Mr. Simmonds held one hundred percent of the equity of PGL at all times. During this period PGL also became involved in dairy, milk hauling and property businesses.

•            Also, PGL owned a one third interest in Perfection Dairy Group Limited ("PDGL"). At all material times PDGL was a CBCA body corporate, of which the remaining two thirds of issued voting shares were held by Mr. Simmonds' father. It is PDGL that owned PFL which was the dairy operating company that was the mainstay of the Perfection corporate group.

•            PGL was a "capital based company". Due to the events involving the PEI government as referred to above, by 1991 PGL had no capital base. It was decimated. It remained active through to 1993 by generating a small amount of interest revenue and revenue from consulting fees.

•            By June 1993 PGL consulting had slowed down due to other demands on Mr. Simmonds, including trying to recover losses of PGL. In August and September 1993, as PDGL was also involved in business consulting, a consolidation of consulting activities with PDGL was considered so as to simplify the structure.

•            Accordingly, in September 1993 the consulting practice of PGL, with any incidental activities, was allocated over to "Perfection Consulting Group" which, newly formed, commenced operations under the auspices of PDGL. This rendered PGL dormant effective September, 1993.

•            Also, PGL was out of the management services businesses in 1991 with the ruination of the aforesaid dairy, milk hauling and property businesses. There were absolutely no management fee contracts entered into or fees received, prospecting or promotion done in 1992 or thereafter. There was no hope of resurrecting any part of the management services revenue which had been derived from the Perfection corporate group. By 1993 the management services had ceased and could not be brought back into existence in the foreseeable future.

•            As of September 24, 1993 PGL went out of the consulting business as noted above. It then had nothing left. Everything was consolidated within PDGL including law suits, consulting and any miscellaneous activities. The consulting in PDGL was done under the name of Perfection Consulting Group as noted above.

•            PGL was engaged in no law suits in 1993 and was only named as an incidental party to the law suit primarily driven by PDGL in 1996 against the P.E.I. government as referred to above. This participation was "incidental" in the sense that in the ninety-seven paragraph statement of claim, only paragraph 92 addresses any claim on behalf of PGL.

•            By December 31, 1993 PGL's accounting records showed a deficit of $801,961, operating capital of zero and a demand debt of $22,136. Not only was PGL at that point insolvent but it had no business base with which to generate solvency and was vulnerable to an involuntary bankruptcy by third party action.

[6]         The facts asserted by Mr. Simmonds were not disputed or rejected to any significant extent by the representatives of the Canada Customs and Revenue Agency ("CCRA") who, reviewed his application.

THE INITIAL DECISION

[7]         By letter dated February 7, 2003 an Assistant Director of the Verification and Enforcement Division of the CCRA advised Mr. Simmonds that his request was rejected for two reasons. First, it was determined not to be appropriate to accept the late-filed election because Mr. Simmonds had not exercised a reasonable amount of care in respect of his 1993 tax return. Second, with respect to subsection 50(1) of the Act, it was concluded "that it would not have been reasonable (as at December 31, 1993) to expect that [PGL] would be 'dissolved or wound up'. Mr. Simmonds' shares of PGL did not meet this requirement in 1993".

[8]         Given the amount of time taken to process Mr. Simmonds' request, a portion of the interest accruing on his account was cancelled.

[9]         The February 7, 2003 letter also advised Mr. Simmonds of his right to have the Director of the Charlottetown Tax Services Office review the initial decision. Mr. Simmonds availed himself of this opportunity, although it developed that the second-level review was conducted by the Director of the Halifax Tax Services Office ("Director"). On September 14, 2003 Mr. Simmonds' counsel submitted a letter that addressed the two points that had been raised as impediments to the 1993 ABIL claim in the initial decision.

THE SECOND LEVEL DECISION

[10]       By a lengthy letter dated April 13, 2004 the Director advised Mr. Simmonds that he was unable to accede to Mr. Simmonds' request for an ABIL. The rationale for this decision was expressed to be as follows:

I have denied your request as your PGL shares have failed to meet the legislative requirements of subsection 50(1) of the Income Tax Act (ITA) as it read on December 31, 1993. In particular, it is my opinion that it was not reasonable to expect that PGL will be dissolved or wound up and will not begin to carry on business as of December 31, 1993 as required by clause 50(1)(b)(iii)(A).

[11]       The letter went on to explain that the following 10 factors were taken into consideration in arriving at the above decision:

            1.          No formal process was taken in 1993, or subsequently, to formally dissolve or wind up PGL. In 1994, PGL remedied a default in the filing of its 1993 annual return, and subsequently all annual returns were filed and fees paid. This was said to be "an indication of a lack of intent for PGL to be dissolved or wound up".

            2.          PGL was incorporated in 1987 to be a holding company, and at the end of 1993 it continued to hold its primary investment (that is, one-third of the outstanding shares of PDGL). It would not be reasonable to expect PGL to be wound up or dissolved as long as it continued to serve its primary purpose and thereby benefit from PDGL's consulting business or litigation.

            3.          With respect to the transfer of PGL's consulting business to PDGL, it would have been more reasonable for Mr. Simmonds to continue to use PGL as the home of his consulting business, since he owned 100% of PGL, but only indirectly owned one-third of PDGL. As well, there would have been no risk of PDGL's creditors gaining access to the consulting income.

            4.          A Notice of Intent dated April 25, 1991, served notice that legal proceedings would be commenced against the government of Prince Edward Island on behalf of Mr. Simmonds, his father and PDGL. When the suit was ultimately filed on September 10, 1996 PGL was one of the plaintiffs. The notes to financial statements for PGL as at December 31, 1993 (prepared after the commencement of the suit in 1996) disclosed that it was a party to the lawsuit and disclosed fees paid to the law firm that prepared the lawsuit. This was said to evidence PGL's 1993 participation in the preparation of the lawsuit.

            5.          Mr. Simmonds' linkage to the major plaintiffs in the lawsuit (PDGL and PFL) was through his personal holding company, PGL. This represented a sound reason not to wind up or dissolve PGL in 1993. Rather, any dissolution or wind up would be expected to await until either the settlement of the lawsuit or a change in the corporate structure.

            6.          The jurisprudence that Mr. Simmonds relied upon, Jacques St-Onge Inc. v. Her Majesty the Queen, 2003 DTC 153 (T.C.C.), was distinguishable because in that case it was a subsidiary corporation that was threatened with legal action that never materialized. In the present case, PGL is the parent corporation. Moreover, PGL was the plaintiff. Thus, it would not be reasonable to conclude that PGL would be wound up or dissolved because that would preclude it from commencing or continuing with the legal action.

            7.          PGL registered for the goods and services tax ("GST") in April of 1994, with an effective date back to 1991, and filed credit returns for reporting periods from January 1, 1991 to December 31, 1997. Also, PGL maintained a bank account after 1993. Neither fact was consistent with the behavior of an inactive company about to be wound up or dissolved.

            8.          Since the PGL shares were individually owned, and therefore governed by subsection 88(2) of the Act, any non-capital losses it had incurred would not be available to be utilized against future taxable income. As of December 31, 1993 PGL's potential taxable income included a damage award from the lawsuit and management fees earned from PDGL. A reasonable person would consider this as a factor against dissolving or winding up PGL.

            9.          The circumstances of the case were similar to the circumstances before the Court in Fred Turner v. Her Majesty the Queen, 2000 DTC 6442. There, the Federal Court of Appeal found that where a corporation commences a lawsuit, it is not reasonable to conclude that the corporation will be dissolved or wound up until such time as the lawsuit is settled.

            10.        PGL failed to meet all four of the conditions referred to in paragraph 5 of Interpretation Bulletin 126R2. Further, IT-126R2 was published for the purpose of subsections 88(1) and (2) of the Act. The position set out in the bulletin had not been extended to apply for the purpose of subparagraph 50(1)(b)(iii) of the Act.

STANDARD OF REVIEW

[12]       The applicable standard of review to be applied to the Director's decision is to be determined pursuant to the pragmatic and functional analysis. Having considered the nature of the question to be decided by the Director, I find the following factors, discussed by Madam Justice Sharlow in Lanno v. Canada (Customs and Revenue Agency), 2005 FCA 153 at paragraph 6 to be equally apposite:

            1.          The fairness package was enacted because Parliament recognized the need for relief from certain provisions of the Act that can result in undue hardship due to the complexity of the tax laws and procedural issues entailed in challenging tax assessments. Any relief granted is discretionary, and cannot be claimed as of right. Accordingly, this factor points to a standard of review that is more deferential than correctness.

            2.          The fairness decision cannot be appealed, but it is subject to judicial review by this Court. It is not protected by a privative clause. This points to a reasonableness standard.

            3.          The decision under review combines fact-finding with a consideration of the policy of tax administration, and requires a proper interpretation of the relevant provision of the Act. The expertise of the Director is undoubtedly higher than that of the Court in relation to matters of the policy of tax administration. However, the expertise of the Director is not higher than that of the Court in relation to questions of law or findings of fact. This also points to a reasonableness standard of review.

[13]       None of the relevant factors point to a standard of review more deferential than reasonableness. Based on these factors I find the appropriate standard of review to be applied to the decision under review.

[14]       Review on the reasonableness standard requires the Court to determine whether the decision is supported by any reasons that can stand up to a somewhat probing examination (see: Canada (Director of Investigation and Research, Competition Act) v. Southam Inc., [1997] 1 S.C.R. 748 at paragraph 56). A decision will be unreasonable "only if there is no line of analysis within the given reasons that could reasonably lead the tribunal from the evidence before it to the conclusion at which it arrived" (see: Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247 at paragraph 55).

JUDICIAL CONSIDERATION OF SUBPARAGRAPH 50(1)(B)(III) OF THE ACT

[15]       Before turning to review the Director's reasons, it is helpful to consider the jurisprudence which has interpreted and applied the relevant subparagraph of the Act.

[16]       In Turner, cited above, the Federal Court of Appeal determined that the taxpayer was entitled to an ABIL and to claim the loss in question in 1994, and not 1984, because it was not, on the facts before the Court, open to conclude that as of 1984 the company in question would be dissolved and would never carry on business in the future. In so concluding, the Court found it to be an error to look only to when the corporation ceased to do business, because it must also be shown that it was reasonable to expect the corporation to be dissolved and not carry on business in the future. The Court looked to the fact that the corporation in question obtained the return of its commercial air service license in 1985 after appealing the cancellation of the license, and that a lawsuit brought by the taxpayer and the corporation relating to the alleged wrongful revocation of the license was not settled until 1994.

[17]       Turner, however must be read in the context of the facts then before the Court. It does not, in my view, stand for the proposition that the existence of a pending lawsuit will necessarily preclude the conclusion that it is reasonable to expect that the corporate party to the lawsuit will be dissolved or wound up and not begin to carry on business. For example, a lawsuit brought on behalf of an inactive, insolvent corporation to collect a receivable would, in my view, be consistent with a conclusion that it is reasonable to expect the corporation to be dissolved and not begin to carry on business. In Turner, as appears from the facts of the case set out in the decision of the Tax Court of Canada, the damage claim was substantial, including continuing damages for the alleged wrongful shutdown of the business. It may be that until the settlement of the outstanding claim the prospect for the resurrection of the business based upon the claimed damage award was not an unreasonable expectation, so that the ABIL could not have been claimed before 1994 (however, that issue was not before the Court).

[18]       In St-Onge, also cited above, the Tax Court of Canada set forth certain principles that govern the proper application of the predecessor to subparagraph 50(1)(b)(iii). Judge Archambault found that:

            1.          The relevant date for determining the reasonableness of the likelihood of dissolution or wind up is at the end of the taxation year in question. In my view, this interpretation is consistent with the ordinary and grammatical sense of the words used in the legislation.

            2.          No time limit is set for the corporation to be dissolved or wound up. It is sufficient for it to have been reasonable to expect the corporation in question to be dissolved or wound up at some point. This, in my opinion, is consistent with that portion of paragraph 50(1)(b) of the Act which deems the taxpayer to have disposed of a share at the end of the year for proceeds equal to nil and to have reacquired it immediately thereafter at a cost equal to nil. This appears to contemplate the possibility that the corporation may not be formally dissolved, and events may transpire (for example, the successful conclusion of a lawsuit) to cause the shares to acquire value. In that case a capital gain would result on their disposition.

            3.          What in any case is "reasonable" to expect is not based upon the subjective view of a party. Rather, what must be considered is the view of an objective observer with knowledge of all of the pertinent facts.

[19]       St-Onge was subsequently followed by Judge Tardif of the Tax Court of Canada in Roy v. Canada, [2002] T.C.J. No. 134.

[20]       Having set forth the legal principles that were to be applied by the Director, I now turn to consider whether the Director's reasons withstand a somewhat probing examination.

APPLICATION OF THE STANDARD OF REVIEW TO THE DECISION

(1)         The Late Filed Election

[21]       As noted above, the sole basis for the Director's decision as set out in his letter of April 13, 2004 was that it was not reasonable to expect that the business would be dissolved or wound up and would not begin to carry on business as of December 31, 1993. In oral argument, but not in his written submissions, the Minister argued that a second reason that the application failed was because the Director failed to exercise his discretion pursuant to subsection 220(3.2) of the Act to extend the time to make the required election. Reliance was placed upon the Director's affidavit where he swore that: "[i]n my capacity as Director I made the decision not to grant a request to extend the time for making an election to claim an [ABIL]". The Minister argued that either the Director decided not to grant the extension or, (contrary to his affidavit) he overlooked the requirement to grant the extension, in which case the "best case scenario" from the point of view of the taxpayer would be that the matter should be remitted for decision as to whether to allow the election to be filed out of time.

[22]       I respectfully disagree. The Director's decision was lengthy and considered. The initial decision had been based, in part, upon the refusal to allow an extension of time for the filing of the election. Subsequently, submissions were made on that issue and the second-level decision was express that the fairness request was denied only because the requirement of clause 50(1)(b)(iii)(A) was not met. I do not accept that the Director was oblivious to one of the two grounds upon which the application had been previously decided. I observe the transparency in decision-making is not promoted by allowing decision-makers to supplement their reasons after the fact in affidavits.

[23]       Moreover, the Director, when making his decision, received a memorandum prepared by a Review Committee. The Director signed a document in which he stated that he agreed with the recommendation of the Review Committee. In turn, the Review Committee, when dealing with the issue of the late-filed election wrote that "if this were the only hurdle for the taxpayer to overcome to be able to claim the ABIL, I would give him the benefit of the doubt". The Director's acceptance of this recommendation is consistent with the content of his April 13, 2004 letter where the issue of the late-filed election was not raised.

[24]       I find, therefore, that implicit in the Director's decision was that an extension for the filing of election was allowed.

[25]       I now turn to the reasonableness of the Director's decision that at the end of 1993 it was not reasonable to expect that PGL would be dissolved or wound up and not begin to carry on business.

(2)         The Reasonableness of the Director's Decision

[26]       The Director's decision, as stated at page 6 of the decision, turned on his view that "it was not reasonable to expect that PGL would be dissolved or wound up as of December 31, 1993". This view was premised, in largest part, upon the facts that:

            1.          No formal process had been taken to formally dissolve or wind up PGL;

            2.          PGL continued to serve its primary purpose of holding its investment in PDGL and, related to this, as shareholder in PDGL and named plaintiff in the lawsuit it was not reasonable to expect PGL to be dissolved or wound up until the lawsuit was settled or there was a change in the corporate structure;

            3.          The transfer of the consulting business out of PGL was of little moment, because it would "have been more reasonable" to have kept the consulting activity within PGL; and

            4.          PGL registered for the GST on April 1, 1994, filed GST credit returns, and continued to operate a bank account.

[27]       My concerns with the Director's decision and its rationale are as follows.

[28]       First, the wording of subparagraph 50(1)(b)(iii) of the Act reflects Parliament's intent that of concern is not whether the formalities of dissolution or winding up have occurred. Rather, the concern is whether the corporation has ceased to carry on business, and it is reasonable to believe that the corporation will not thereafter begin to carry on business but, in due course, will be dissolved or wound up. This was the view of the Federal Court of Appeal in Turner, cited above. It follows, in my view, that the fact that no formal process to dissolve or wind up the corporation was, or had been, taken could not be determinative of the ultimate expectation as of December 31, 1993 with respect to the formal dissolution or winding up of PGL.

[29]       As for the effect of the facts that PGL continued to file annual returns and pay fees, this is consistent with maintaining the status of PGL until it was dissolved or wound up at the conclusion of the lawsuit. Moreover, until an amendment was made to section 208 of the Canada Business Corporations Act, R.S., 1985, c. C-44, am. 2001, c. 14, s. 101 (made effective November 24, 2001) an insolvent corporation, such as PGL, could not be dissolved because of any failure to file annual returns. Given that the failure to file returns and pay fees would not lead to dissolution, it is difficult, in my view, to infer that the payment of fees and the filing of annual returns were acts done to avoid dissolution.

[30]       Second, without deciding the point, I accept that by virtue of PGL's shareholding in PDGL it may not have been reasonable to expect PGL to be wound up until the determination of the lawsuit or until some corporate reorganization took place. However, by itself, this could not be determinative of the claim to an ABIL as the question to be asked was whether, as of December 31, 1993, it was reasonable to expect that notwithstanding the existence of the lawsuit PGL would be dissolved or wound up and that it would not then begin to carry on business.

[31]       A review of the considerations that led to the decision shows that the Director failed to consider the likelihood that when the lawsuit was resolved PGL would be dissolved and would not commence carrying on business. This would involve consideration of things such as the nature of the claims advanced in the lawsuit, the role of PGL in the lawsuit and what would be the reasonable expectation of PGL's future if the lawsuit succeeded.

[32]       In my view, so long as on December 31, 1993 PGL was insolvent, it was not carrying on business, the fair market value of its shares was nil and it was objectively reasonable to expect that upon resolution of the lawsuit PGL would be dissolved or wound up and that it would not then begin to carry on business, the requirements of clause 50(1)(b)(iii)(A) of the Act would be met. In my opinion, this interpretation of the legislation is consistent with the ordinary and grammatical meaning of the words used by Parliament, with the decisions of the Tax Court of Canada in St-Onge and Roy, and with the decision of the Federal Court of Appeal in Turner. There, as Justice Robertson wrote for the Court, at paragraph 2, "in short, it was not reasonably open to conclude that as of 1984 the taxpayer's company would be dissolved and would never carry on business in future". [Underlining added].

[33]       Third, the transfer of the active consulting business out of PGL was objective evidence consistent with an intent to dissolve or wind up PGL. That evidence, again not determinative, could not, in my view, reasonably be dismissed by the Director on the ground that the taxpayer would have been better advised not to proceed in that fashion.

[34]       Finally, the evidence before the Director was that the CCRA had been informed that PGL continued to make GST credit claims because PGL was the proper company to claim these credits. In my view, claiming GST credits in respect of expenses PGL had paid, as well as continuing to operate a bank account, was equally consistent with the orderly gathering in of assets as part of the winding up process. The Director did not dispute the taxpayer's assertion that PGL had ceased all business activity in 1993.

[35]       It follows that, having subjected the Director's decision to a somewhat probing examination, I conclude that he:

            1.          placed reliance on the failure to formally wind up or dissolve PGL when this is not a requirement of the legislation;

            2.          drew an inference adverse to the taxpayer from the payment of filing fees and the filing of annual returns when the failure to do so would not have led to the dissolution of the corporation;

            3.          failed to consider as of December 31, 1993 whether, after the resolution of the contemplated lawsuit, it was reasonable to expect that PGL would be dissolved or wound up and that it would not carry on business;

            4.          for an irrelevant reason gave no weight to the fact that the consulting business was transferred out of PGL; and

            5.          placed reliance upon the operation of a bank account and the making of GST credit claims when these facts were equally consistent with the orderly winding up of PGL.

[36]       It further follows, in my respectful view, that the Director's reasons do not stand up to a somewhat probing examination and the Director's analysis could not reasonably have led him from the evidence before him to his conclusion. The application for judicial review will, therefore, be allowed and the decision will be set aside.

[37]       Mr. Simmonds also seeks an order directing the Minister's delegate to grant Mr. Simmonds' reassessment request in accordance with the St-Onge decision.

[38]       It is correct that subsection 18.1(3) of the Federal Courts Act, R.S.C. 1985, c. F-7 allows the Court on an application for judicial review to set aside a decision and to refer the matter back for determination in accordance with such directions as the Court considers appropriate. The jurisprudence shows that on occasion the Court has remitted applications back to decision-makers with specific directions that, in effect, direct a specific decision. However, the jurisprudence cautions that this remedy should only be granted in extraordinary circumstances. Madam Justice Reed, in Ali v. Canada (Minister of Employment and Immigration), [1994] 3 F.C. 73, at paragraphs 17 and 18, found the following factors to be relevant to the consideration of whether specific directions respecting a decision should be issued:

-              whether the evidence on the record is so clearly conclusive that there is only one possible conclusion;

-              whether the sole issue to be decided is a pure question of law which will be dispositive of the case;

-              whether such question of law is based on uncontroverted evidence and accepted facts; and

-              whether there is a factual issue which involves conflicting evidence which is central to the claim.

[39]       In the present case, the issue to be determined is not a pure question of law and I am not satisfied that the evidence is so conclusive that there is only one possible result. Equally important, a fairness request requires an exercise of ministerial discretion that should not, absent some exceptional reason, be directed by the Court. I therefore order that the matter be remitted for redetermination by a different decision-maker in accordance with these reasons.

[40]       Mr. Simmonds also seeks costs. There is no reason, in my view, that costs should not follow the event. If not agreed, costs shall be assessed in accordance with the midpoint of column III to Tariff B of the Federal Courts Rules, SOR/2004-283.

ORDER

[41]       THIS COURT ORDERS THAT:

1.        The application for judicial review is allowed and the decision dated April 13, 2004 made by the Director of the Halifax Tax Services Office is hereby set aside.

2.        The matter is remitted for redetermination by a different decision-maker in accordance with these reasons.

3.        The respondent shall pay the costs of this application to the applicant. If not agreed, costs shall be assessed in accordance with the midpoint of column III to Tariff B of the Federal Courts Rules.

"Eleanor R. Dawson"

FEDERAL COURT

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                           T-927-04

STYLE OF CAUSE:                           JOHN ALFRED SIMMONDS

Applicant

                                                            and

                                                            MINISTER OF NATIONAL REVENUE

Respondent

PLACE OF HEARING:                     HALIFAX, NOVA SCOTIA

DATE OF HEARING:                       OCTOBER 6, 2005

REASONS FOR ORDER

   AND ORDER:                                  DAWSON, J.

DATED:                                              FEBRUARY 6, 2006

APPEARANCES:

BRUCE S. RUSSELL                                                               FOR THE APPLICANT

JOHN J. ASHLEY                                                                   FOR THE RESPONDENT

SOLICITORS OF RECORD:

McINNES COOPER                                                   FOR THE APPLICANT

HALIFAX, NOVA SCOTIA

JOHN H. SIMS, Q.C.                                                              FOR THE RESPONDENT

DEPUTY ATTORNEY GENERAL OF CANADA