BETWEEN:
and
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Motion heard on October 5, 2006 at Vancouver, British Columbia
Before: The Honourable Justice G. Sheridan
Appearances:
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ORDER
Upon motion by the Appellant for an order setting aside the Judgment of Little, J. dated August 22, 2006;
And upon having heard what was alleged by the parties and having read the materials filed;
IT IS ORDERED THAT:
1. The Appellant's motion is dismissed in respect of the 1999, 2000 and 2001 taxation years;
2. In respect of the 2002 appeal, the motion is granted and the Judgment of Little, J. dated August 22, 2006 is varied to allow the appeal, without costs, on the basis that the Appellant had unreported business income of $202,264; and
3. Each party shall bear its own costs of this motion,
in accordance with the attached Reasons for Order.
Signed at Ottawa, Canada, this 26th day of October, 2006.
BETWEEN:
AMETHYST GREENHOUSES LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Sheridan, J.
[1] The Appellant, Amethyst Greenhouses Ltd., seeks to set aside the Judgment of Little. J. dated August 22, 2006 dismissing its appeals from assessments by the Minister of National Revenue for the 1999, 2000, 2001 and 2002 taxation years.
[2] The Appellant filed its notice of appeal on September 14, 2004. The Respondent filed its reply on October 20, 2004. Following the elapse of some 14 months, the parties were ordered to appear[1] and did appear before a judge of this Court on December 14, 2005 to show cause why the appeals should not be dismissed for delay. Following the hearing, Beaubier, J. ordered[2] dates for the filing and serving of lists of documents, the completion of examinations for discovery and the completion of undertakings. In addition, the Court directed Mr. Houweling to file a motion for leave to represent the Appellant.
[3] By an order of this Court dated January 25, 2006, Mr. Houweling was appointed the agent of the Appellant and, upon the consent of the parties, the appeals were set down for hearing in Vancouver, British Columbia on August 14 and 15, 2006. From time to time between January and August 2001, the Appellant and counsel for the Respondent were in communication with each other in respect of this matter and Mr. Houweling's personal tax appeals.
[4] At the time set for the hearing on August 14, 2006, the Appellant failed to appear. The Respondent moved to have the appeals dismissed. By order dated August 22, 2006, Little, J. dismissed the appeals "on the basis that the Appellant failed to prosecute the appeals". The Appellant now seeks to have that order set aside under subsection 140(2) of the Tax Court of Canada Rules (General Procedure):
140. (1) If at a hearing, either party fails to appear, the Court may allow the appeal, dismiss the appeal or give such other direction as is just.
(2) The Court may set aside or vary, on such terms as are just, a judgment or order obtained against a party who failed to attend a hearing, a status hearing or a pre-hearing conference on the application of the party if the application is made within thirty days after the pronouncement of the judgment or order.
Analysis
[5] The Appellant filed a document of some 411 pages, described as an "affidavit", in support of its motion. Given that the Appellant did not have the benefit of legal representation and that its irregular form was not challenged by the Respondent, I accepted the document as filed, even though much of it is not directly relevant to this motion. I took the precaution of having Mr. Houweling sworn as his submissions in support of the Appellant's motion tended to include both evidence and legal argument.
[6] The hurdle the Appellant faces in this motion is to show that its appeals disclose an arguable case on the merits and that the circumstances in which its failure to appear arose justify the setting aside of the default judgment[3].
[7] The circumstances surrounding the Appellant's failure to appear are these: Mr. Houweling does not dispute that the Appellant consented to the hearing dates or that it received the January 25, 2006 Order setting them down for hearing on August 14 and 15, 2006. The Appellant's reason for missing the hearing was Mr. Houweling simply forgot about it. He explained that for several years he and the Appellant have been waging a bitter legal battle against his brother, a former shareholder of the Appellant. This has resulted in litigation in various courts, including appearances in the Tax Court of Canada in both his personal capacity and as the agent of the Appellant. In August 2006, he was experiencing the personal and financial havoc that typically follows prolonged (and generally unsuccessful) litigation. He testified that he and his family had been evicted from their residence and some of the Appellant's papers had been scattered - although I could not determine from his submissions exactly when these events occurred or whether the papers in question had anything to do with the August 14 appeals. He also seemed to feel that this motion and the Appellant's failure to appear could have been avoided if only counsel for the Respondent or the Canada Revenue Agency officials had taken the time to remind him of the impending court date.
[8] Starting with the last point, the Respondent was under no obligation to ensure that Mr. Houweling made it to Court on the date set for appeals initiated by the Appellant. Having said that, I must acknowledge that counsel for the Respondent has more than fulfilled his obligations as an officer of the Court by being helpful to and patient with Mr. Houweling throughout the progress of these and Mr. Houweling's personal appeals. In any event, as the agent for the Appellant, it was Mr. Houweling's responsibility to do all things necessary to prosecute the appeals in a timely fashion. Having listened at some length to Mr. Houweling's description of his circumstances in August 2006, I have no doubt that his life was in great turmoil. By that time, however, such a sad state of affairs had become the norm. It was no longer the sort of extraordinary event that, otherwise, might justify missing a Court date. Accordingly, I am not convinced that the Appellant has satisfied the first prong of the Farrow test.
[9] The second aspect of the test is that the party seeking to have the judgment set aside must be able to show that there is some merit to its appeals. In the present case, the Appellant is appealing the assessments of its 1999, 2000, 2001 and 2002 taxation years. No returns were filed for any of these years; in 2004, the Minister assessed unreported income of $20,149 in 1999; $479,139 in 2000; $661,747 in 2001 and $762,830 in 2002. The Minister based these assessments on revenues reported in GST returns filed by the Appellant for those periods.
[10] The Notice of Appeal is drafted in the same rambling and incoherent style as the "affidavit" filed on behalf of the Appellant in this motion, making it is difficult, if not impossible, to discern on what basis the Appellant challenges the Minister's assessments. At the hearing of this motion, I invited Mr. Houweling to enlarge upon the material in the Appellant's Notice of Appeal. He admitted that the Appellant did not file any income tax returns during the taxation years in question. The gist of his appeal seems to be that the difficulties with his brother (and perhaps others) made it impossible for the Appellant to furnish the information required in the return and his own personal beliefs prevented him from signing what, if incomplete, he believed would be a "false" document. Further, the Appellant has not kept adequate books and records. He also blamed CRA officials for failing to help him complete his returns, expressing his belief that they were well aware of what was needed, of the difficulties he was having with his brother, of the allegations of fraud and conspiracy and of the negative impact this had on his ability to report the Appellant's income. None of this provides any reasonable basis for an appeal. The Appellant has the onus of proving wrong the Minister's assumptions. Without any supporting documentation and given Mr. Houweling's admitted inability to provide the financial details of the Appellant's business operations, I am unable to conclude that the Notice of Appeal discloses an arguable case in respect of the 1999, 2000 and 2001 appeals.
[11] The 2002 appeal, however, is on a different footing. In its Reply to the Notice of Appeal, the Respondent requested that the appeal be allowed in respect of the 2002 appeal "to correct the error identified in paragraph 8 above"[4] which reads:
8. In reassessing for the Appellant's 2002 taxation year, the Minister's officer misread the amount of business revenue reported by the Appellant for GST purposes in that year. In fact, the Appellant reported business revenue of $252,830 and, applying the assumed 20% reduction for deductible business expenses, had unreported income of $202,264 in 2002.
[12] At the hearing, counsel for the Respondent confirmed that the Respondent was prepared to consent to the amendment of the judgment issued in respect of the 2002 appeal to rectify the calculation error in the Minister's assessment. I am satisfied that, in the interests of justice, the Judgment of Little, J. ought to be varied to allow for the correction of this error.
[13] Accordingly, the Appellant's motion is dismissed in respect of the 1999, 2000 and 2001 taxation years. In respect of the 2002 appeal, the motion is granted and the Judgment of Little, J. dated August 22, 2006 is varied to allow the appeal, without costs, on the basis that the Appellant had unreported business income of $202,264. In view of the mixed success on this motion, each party shall bear its own costs of this motion.
Signed at Ottawa, Canada, this 26th day of October, 2006.
"G. Sheridan"
Sheridan, J.
COURT FILE NO.: 2004-3698(IT)G
STYLE OF CAUSE: AMETHYST GREENHOUSES LTD. AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: October 5, 2006
REASONS FOR ORDER BY: The Honourable Justice G. Sheridan
DATE OF ORDER: October 26, 2006
APPEARANCES:
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Agent for the Appellant: |
Paul Houweling |
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Counsel for the Respondent: |
Ron D. F. Wilhelm |
COUNSEL OF RECORD:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada