Date: 19991117
Docket: A-609-99
CORAM: STONE, J.A.
ISAAC, J.A.
SEXTON, J.A.
BETWEEN:
GORDON REZEK
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
Heard at Toronto, Ontario, on Wednesday, November 17, 1999
Judgment Delivered from the Bench at Toronto, Ontario on Wednesday, November 17, 1999
REASONS FOR JUDGMENT OF THE COURT BY: STONE J.A.
Date: 19991117
Docket: A-609-99
CORAM: STONE, J.A.
ISAAC, J.A.
SEXTON, J.A.
BETWEEN:
GORDON REZEK
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto, Ontario
on Wednesday, November 17, 1999)
STONE J.A.
[1] This is an appeal from a judgment of the Tax Court of Canada of September 28, 1999 dismissing with costs the appellant"s appeal to that Court against income tax assessment. Identical judgments were rendered by that Court on the same day in eight additional appeals. All nine appeals had been set down for hearing to commence on October 4, 1999. Appeals from the other judgments were heard today at the same time as this appeal.
[2] The relief granted by the Tax Court judgments was requested in a notice of motion filed by the respondent on September 15, 1999. In that notice it was alleged that the various appellants had agreed to proceed to trial on October 4, 1999 "on the sole condition that all relevant broker"s statement[s] be produced", those statements being "with respect to both sides of each hedging transaction at issue". The respondent also asserted that the appellants had "failed to produce all relevant documents" and "to satisfy undertakings and ... respond to proper questions at the examinations for discovery". The respondent asserted as well that the production of relevant material "at this late stage" would prejudice the respondent in preparing for trial. Finally, the respondent complained that the appellants had "failed to prosecute the Appeals with due dispatch". Explicit reliance was made in the notice of motion on a number of sections of the Tax Court of Canada Rules (General Procedure) including sections 64 and 110.
[3] A second notice of motion was filed with the Tax Court of Canada on September 15, 1999, this time by an appellant in another of the nine appeals. The motion, which was due to be heard on the same day as the respondent"s motions, sought an order directing the respondent to satisfy numerous undertakings and to answer several questions on discovery as well as for other relief that is not directly relevant to the issue before this Court in this and the other eight appeals. The learned Tax Court Judge did not deal with that motion nor give any indication in his reasons for judgment for not doing so. Presumably by allowing the respondent"s motions he saw no reason for considering and disposing of the second motion.
[4] The reasons of the Tax Court Judge for dismissing the nine appeals are identical in each case. They read in part:
| And upon reviewing the Notice of Motion in this matter dated the 15th day of September, 1999 that this appeal be dismissed, the affidavit of Richard Holt, and the file, |
| It is ordered that this appeal is dismissed with costs in favour of the Respondent for the following two reasons: |
| 1. The refusal of the Appellant "to provide all monthly brokerage statements relating to each hedge in issue from the time the hedge was commenced to the time that the hedge was closed." In my view, the position of the Crown requesting this information is based properly on the decision of the Federal Court of Appeal in Schultz. It is something on which the Appellant bears the onus of proof. It is something the Appellant must provide and it is within the Appellant"s ability, knowledge and documents to provide. |
| 2. The refusal of the Appellant to answer questions on examination for discovery as to the basis for claiming losses on income account and gains on capital account. To my mind that concept of "basis" is a concept of fact; what are the facts upon which you base your statement that one is income or the other is capital, as the case may be? |
Such a remedy can only be viewed as drastic. It remains, however, to consider whether the judgments should be interfered with considering that they were made in the exercise of judicial discretion. It will be seen that the respondent"s allegation of delay on the part of each appellant did not figure in the judgments below.
[5] The nine appeals that were dismissed on September 28, 1999 had been selected by the parties at a pre-trial conference of May 10, 1999 to proceed as "lead cases" from among a large number of similar appeals then pending in the Tax Court of Canada, each of which raised a common issue. That issue concerns the proper treatment for income tax purposes of certain hedging transactions and the revenues and expenses arising therefrom. The total amount in issue in all of these appeals, including the nine appeals that were dismissed, is said to be in excess of $160,000,000.00.
[6] While an appellate court is reluctant to interfere with the exercise of discretion by a trial judge, it may do so on proper grounds. The standard of appellate review had been variously expressed by the courts.1 The most recent formulation of the applicable standard was laid down by the Supreme Court of Canada in Reza v. Canada2, where it was stated:
| ... the test for appellate review of the exercise of judicial discretion is whether the judge at first instance gave sufficient weight to all relevant considerations. |
In the earlier decision in Frank v. Alpert et al.3, the Supreme Court of Canada departed from its ordinary practice of not interfering with discretionary orders because, as Hall J. put it, "this appears to me to be a special case in which the interests of justice require the Court to review what was done in the Courts below". Hall J. went on to conclude that a delay on the part of the plaintiff of some three years in moving her action forward to trial, although "substantial", was "not of such a nature as to bar the appellant of having her claim heard on the merits."4
[7] The respondent submits that the exercise of the discretion in the present cases was solidly based on the provisions of section 110(b) of the relevant rules of the Tax Court of Canada5, because there was here a refusal by the appellants to answer "any proper question" and "to produce a document" on their examinations for discovery. Moreover, the respondent argued before the Tax Court Judge and in this Court that the appellants had agreed as a condition of the nine "lead cases" proceeding to trial on October 4, 1999 that the monthly brokerage statements as identified in Items 1 of Schedules B to the respondent"s lists of documents would be produced before trial and that the appellants had reneged on that agreement. The refusal of the appellants to live up to that agreement, says the respondent, became evident for the first time after August 13, 1999 when the appellants forwarded answers to outstanding undertakings given on discovery. The refusal was later reiterated, and it was only after that had occurred that the respondent decided to move for dismissal of the nine appeals in the September 15, 1999 notice of motion. The respondent submits that this aspect of the motion was urged before the Tax Court Judge on September 24, 1999 as a further basis for dismissing the appeals.
[8] Assuming that the alleged agreement existed, we are not persuaded that a failure to honour it or to answer disputed questions provided a satisfactory basis for dismissing the appeals and denying trials on the merits. It is true that the trial date was fast approaching and that the respondent might well have felt the real possibility of prejudice in preparing for trial without the answers to the disputed questions and reviewing the disputed documents, or their production so close to the trial date would mean that there would not be sufficient time to prepare adequately for the trial. On the other hand, the appellants" agreement, if it did exist, was to produce "relevant" monthly statements. Moreover, it had only to answer "proper questions". The refusal of the appellants to produce the documents and to answer the questions on the ground of "relevance" placed the respondent in the position of moving the Tax Court for an order that all of the disputed documents be produced and that answers be given to all of the disputed questions as to the basis of claiming losses on income account and gains on capital accounts.
[9] It is also to be remembered that the Tax Court Judge did not consider the second motion that was before him on September 24, 1999, in which it was alleged that the respondent, too, had failed to satisfy undertakings and to answer questions put to the respondent"s witness on discovery. This, it seems to us, was a significant omission. If that motion had been taken up by the Tax Court Judge before disposing of the motions to dismiss the appeals it might well have affected his judgment, for it would have required him to determine not only whether the appellants were in default in the discovery process but also whether the respondent was also in default of that process.
[10] We are satisfied from the foregoing that the Tax Court Judge failed to give sufficient weight to all relevant considerations in exercising his discretion on September 28, 1999, the result of which is that the appellants in these matters will be deprived from having their appeals heard and disposed of on the merits. In our view, having regard to the circumstances, it is not in the interests of justice that the appellants should be deprived of that important right.
[11] This appeal will be allowed with costs, the judgment of the Tax Court of Canada of September 28, 1999 will be set aside and the respondent"s motion of September 15, 1999 will be dismissed. A copy of these reasons for judgment will be filed in each of the eight other Court files (A-601-99, A-602-99, A-603-99, A-604-99, A-605-99, A-606-99, A-607-99 and A-608-99) and upon filing shall become reasons for judgment therein.
"A.J. Stone"
J.A.
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
| COURT NO: A-609-99 |
| STYLE OF CAUSE: GORDON REZEK |
Appellant
| - and - |
| HER MAJESTY THE QUEEN |
Respondent
| DATE OF HEARING: WEDNESDAY, NOVEMBER 17, 1999 |
| PLACE OF HEARING: TORONTO, ONTARIO |
REASONS FOR JUDGMENT
| OF THE COURT: STONE J.A. |
DATED: WEDNESDAY, NOVEMBER 17, 1999
| APPEARANCES: Mr. Timothy Pinos |
| For the Appellant |
| Ms. Katherine Philpott and |
| Mr. Paul Malette |
| For the Respondent |
| SOLICITORS OF RECORD: Cassels Brock & Blackwell |
| Barristers & Solicitors |
| Scotia Plaza, Suite 2100 |
| 40 King Street West |
| Toronto, Ontario |
| M5H 3C2 |
| For the Appellant |
| Morris Rosenberg |
| Deputy Attorney General of Canada |
| For the Respondent |
FEDERAL COURT OF CANADA
Date: 19991117
Docket: A-609-99
Between:
| GORDON REZEK |
Appellant
| - and - |
| HER MAJESTY THE QUEEN |
Respondent
REASONS FOR JUDGMENT
| OF THE COURT |
__________________
1 Visx Inc. v. Nidex Co. (1996), 206 N.R. 342 (F.C.A.); Suresh v. Canada (Minister of Citizenship and Immigration) et al. (1998), 229 N.R. 235 (F.C.A.).
2 [1994] 2 S.C.R. 394, at p. 404.
3 [1971] S.C.R. 637, at p. 640.
5 Section 110(b) reads as follows:
110. Where a person fails to attend at the time and place fixed for an examination in the notice to attend or subpoena, or at the time and place agreed on by the parties, or refuses to take an oath or make an affirmation, to answer any proper question, to produce a document or thing that the person is required to produce or to comply with a direction under section 108, the Court may, ... (b) where the person is a party or, on an examination for discovery, a person examined on behalf of or in place of a party, dismiss the appeal or allow the appeal as the case may be, ...