Date: 20020418
Docket: 97-521-IT-G
BETWEEN:
MORRIS KAISER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Order
Bell, J.T.C.C.
[1] The Applicant, Morris Kaiser ("Kaiser") made a motion for a direction by this Court, pursuant to section 86, of the Tax Court of Canada Rules (General Procedure) (Rule 86) to Larry Krauss ("Krauss") for the production of the minute book of Morka Holdings Inc. or a certified copy of the contents thereof, on or before April 15, 2002, together with costs of the motion. The affidavit of counsel for the Appellant, Bennett Franklin Shostack, stated that the minute book
might be compelled to be produced at the hearing of the Appellant's appeal to this Court ... to be held on April 22, 2002 as it is listed in the Appellant's Affidavit of Documents filed with the Court in his appeal.
The date has been changed to April 24, 2002.
The affidavit stated that the minute book may be in the hands of Larry Krauss, Barrister & Solicitor. It states further that Shostack had written twice to Krauss requesting the minute book and had not received a response other than a telephone call from his assistant stating that Krauss would respond to the letter in question on return from a trip out of town. It states, additionally, that no response to either of such letters has been made and that the minute book has not been produced and that Krauss has not advised that he is no longer in possession of the minute book.
[2] At the hearing of the motion, Neil Gill ("Gill") representing Kaiser, stated, as set out in the Notice of Appeal herein, that the assessment appealed from described as investment income an amount which had been reported by Kaiser as dividend income. He stated further that the minute book was needed in order to demonstrate, by appropriate resolution, that the amount was, indeed, dividend income, not investment income.
[3] Fred A. Platt ("Platt"), a lawyer representing Krauss, referred to an affidavit made by Krauss in support of opposition to the motion. In that affidavit Krauss stated that he practised as a sole practitioner, as principal of Krauss & Associates, as a partner with Grubner, Krauss and as a partner with Grubner, Krauss & Frankel. The affidavit stated further that substantial sums were owing by Kaiser and Kimore Realty Group, which Kaiser professed to control, to Grubner, Krauss and to Grubner, Krauss & Frankel as legal fees.
[4] The affidavit also set out that computer print-outs listing the outstanding accounts receivable so owing were attached as exhibits to an affidavit sworn by Krauss and filed in another proceeding against him and other respondents, Kaiser being the driving force behind that proceeding. The affidavit referred to attempts, in that other proceeding, to obtain corporate books and records from Krauss. The affidavit referred to, and attached a copy of, the Order of Mr. Justice Pitt of the Ontario Court of Justice (General Division), ordering the delivery to a named law firm,
... or any subsequent firm acting as solicitors of record for the applicants, the originals or copies of all the corporate books and records in their possession belonging to corporations in which Morris Kaiser owns a controlling interest. ...
The Order stated that it was made without prejudice to the rights of the Respondents to their legal or other fees and to their claim for a lien on the items specified therein.
[5] The affidavit referred to a second motion before Mr. Justice Rosenberg of the same Court. It asked for an Order striking the Respondent Krauss' notice of appearance and responding affidavits for failure to comply with the Order of The Honourable Mr. Justice Pitt and, in the alternative, that Krauss deliver up any and all documents, records, files and property with respect to Morris Kaiser or any corporation that he represents, controls or gave instructions about. Mr. Justice Rosenberg ordered that the motion be dismissed. In so doing, he said:
The applicant is asking the Court to sit in appeal from Pitt, J. That cannot be done. The wording of the Order is clear. There is no evidence that any corporate records and files of corporations that Mr. Kaiser controls had not been turned over. The interpretation of the Order which in my view is clear is not new circumstances that entitle the Court to consider the issue and the matter again. Motion dismissed.
[6] Gill submits that the minute book is wanted to assist Kaiser in his appeal to this Court to establish that income described by him on his tax return as dividend income was, in fact, dividend income. He stated that Kaiser would do whatever was necessary to protect the lien.
[7] Platt, on behalf of Krauss, stated that two judges had dismissed Kaiser's motion to have books of Morka delivered.
[8] He referred to Stancer Sidenberg v. Maricic, [1992] O.J. NO. 1540 in which E. MacDonald, J. of the Ontario Court of Justice (General Division) dealt with an application for the delivery of a file from the Stancer law firm to the Zeppieri law firm which replaced the Stancer law firm as representing Maricic. The issue was stated to be whether Stancer could properly assert that he had a lien on the files in his possession in the face of the non-payment of his account by Maricic. The learned Justice took the view that Stancer's delivery of his file would have the impact of making his solicitor's lien meaningless and refused to make such order.
[9] Platt also referred to Re Gladstone, [1972] 2 O.R. 127 where the Ontario Court of Appeal found that a solicitor's lien for unpaid costs could be interfered with by the Court where the interests of third parties were affected. McGillivary, J.A. said:
The common law right of a solicitor to exercise a lien upon documents in his possession where he has been discharged without cause by his client is well recognized subject, however, to certain exceptions. The exception to this rule that a solicitor is ordinarily entitled to exercise a lien under such circumstances is that where third parties are involved the Court may interfere with the exercise of the lien without actually nullifying it. This has been done on more than one occasion and always upon the basis that whereas a solicitor may assert a lien to embarrass his client he should not be entitled to embarrass other parties interested in the proceedings.
Platt's position was that the circumstances of the exception in the Gladstone case do not exist in the present matter.
[10] Platt referred also to Monarch Trustco (liquidator of) v. 792266 Ontario Ltd., [1999] O.J. No. 553, file no. 97-CU-120798 where the Ontario Court of Justice (General Division) referred to a collateral attack as an attack made in proceedings other than the proceeding in which the order or judgment was made, with the object of reversing, varying or nullifying the order or judgment attacked. Sanderson, J., Ontario Court of Justice (General Division) said that in three motions brought before him it was necessary to decide whether questions relating to the liquidator making an improvident sale of property were relevant given that that sale had been specifically authorized by an Order of Houlden, J. He drew an adverse inference from the failure of any of the guarantors filing affidavit material setting out that they had no knowledge or notice of the proceedings to approve the sale or the Order of Houlden, J. The learned justice said:
... I find that counsel for the guarantors may not ask questions or conduct an examination relating to the issue of improvident realization in this litigation. I adopt the reasoning of Ground, J. in Nash v. CIBC Trust Corp. (1996), 7 C.P.C. (4th) 263 at 275, [affirmed on other grounds [1997] O.J. No. 1001] where he found that a receivership order could not be challenged by persons who had notice of the receivership proceedings and failed to participate during the receivership hearing and who failed to appeal from an order made in those proceedings.
Further, parties in a subsequent proceeding may not relitigate the same issue where they had a privity in interest with a party to the first proceeding, even if they were not parties in the first proceeding.
The learned justice concluded that the issue as to the providence of the sale of the property was decided by Houlden, J. and that any attempt to ask questions concerning the appropriateness of the sale amounted to a collateral attack on Houlden, J.'s order. Therefore, counsel for the guarantors was estopped from asking such question.
ANALYSIS AND CONCLUSION:
[11] Rule 86(1) reads as follows:
86. (1) When a document is in the possession of a person not a party to the appeal and production of such document at a hearing might be compelled, the Court may at the instance of any party, on notice to such person, direct the production of a certified copy which may be used for all purposes in lieu of the original
[12] This is not a situation in which a firm of solicitors has been replaced by another firm that is seeking a file or files from the former firm. Presumably, in those cases, the reason for wanting such files is to continue work for the client who replaced the first solicitors. Further, in this appeal, the position of the Respondent, Her Majesty the Queen, may be affected by the document or documents sought.
[13] This motion seeks delivery of the minute book for the purpose of assisting the Appellant in establishing the character of income declared by him in his income tax return. The Orders of Pitt, J. and Rosenberg, J. referred to above were in another proceeding, not in the present income tax appeal. It was stated by Platt, in response to a question by the Court, that Krauss would not give up the requested document because he wanted to be paid his fees or some part thereof. Platt suggested that this Court could make an order for delivery of the minute book conditional upon the payment of some amount to Krauss. I will make no such order, it being both arbitrary and, probably, beyond my power so to do.
[14] It is fundamental to a just determination of Kaiser's appeal that he have evidence, if it exists, supporting his characterization of income. No evidence of any other purpose for delivery of the minute book was presented to the Court. Further, no suggestion was made that the motion was brought for any other purpose. It is open, of course, to a party to serve a subpoena requiring the production of the minute book at the hearing of the appeal. Accordingly, production of the minute book "might be compelled" as set forth in Rule 86(1).
[15] I do not agree in these circumstances with Platt's submission that the issue of a direction under section 86 would render Krauss' solicitor's lien meaningless. Although no evidence was presented to the Court on how many documents, presumably constituting the basis of a solicitor's lien, are in the possession of Krauss, the number of corporations named, together with Kaiser, as applicants in the other matter where motions were brought, fills three pages. The information contained in the minute book may support or otherwise affect the position of either or both of Kaiser and Her Majesty the Queen in this appeal. Accordingly, an Order will issue directing Krauss to deliver to Kaiser's counsel, on or before April 22, 2002, a certified copy of the contents of the minute book of Morka.
Signed at Ottawa, Canada this 18th day of April, 2002.
"R.D. Bell"
J.T.C.C.
COURT FILE NO.: 97-521(IT)G
STYLE OF CAUSE: Morris Kaiser v. Her Majesty the Queen
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: April 10, 2002
REASONS FOR ORDER BY: The Honourable Judge R.D. Bell
DATE OF ORDER: April 18, 2002
APPEARANCES:
Counsel for the Appellant: Neil Gill and B. Franklin Shostack
Counsel for the Respondent: Marilyn Vardy
Counsel for Larry Krauss: Fred A. Platt
COUNSEL OF RECORD:
For the Appellant:
Name: Neil Gill
Firm: Black Sutherland & Crabbe LLP
Toronto, Ontario
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
97-521(IT)G
BETWEEN:
MORRIS KAISER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Motion heard on April 10, 2002 at Toronto, Ontario, by
the Honourable Judge R.D. Bell
Appearances
Counsel for the Appellant: Neil Gill and
B. Franklin Shostack
Counsel for the Respondent: Marilyn Vardy
Counsel for Larry Krauss: Fred A. Platt
ORDER
Upon motion by the Appellant for a direction pursuant to section 86 of the Tax Court of Canada Rules (General Procedure) (Rule 86) to Larry Krauss ("Krauss") for the production of the minute book of Morka Holdings Inc. or a certified copy of the contents thereof;
And upon reading filed affidavits and hearing counsel for the parties;
In accordance with the attached Reasons for Order, Larry Krauss, Barrister & Solicitor, having an office at Suite 1540, 5140 Yonge Street, Toronto, Ontario M2N 6L7, is hereby directed, pursuant to the provisions of section 86 of the Tax Court of Canada Rules (General Procedure) to deliver to counsel for the Appellant, on or before April 22, 2002, a certified copy of the entire contents of the Morka Holdings Inc. minute book at the following address:
Black Sutherland, LLP
Barristers & Solicitors
Suite 2700, 401 Bay Street
Toronto, ON M5H 2Y4
Attention : B. Franklin Shostack
No costs are awarded.
Signed at Ottawa, Canada this 18th day of April, 2002.
|
"R.D. Bell" |
J.T.C.C.