Bagha Enterprises Ltd. v. Mangat and Mangat Date:, 2016 BCPC 374

Citation: Bagha Enterprises Ltd. v. Mangat and Mangat Date: 20161201 2016 BCPC 374 File No: S70514, S70515 Registry: Surrey IN THE PROVINCIAL COURT OF BRITISH COLUMBIA Small Claims BETWEEN: BAGHA ENTERPRISES LTD. CLAIMANT AND: JAGMEET SINGH MANGAT AND GUREET KAUR MANGAT DEFENDANTS REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE G. GILL Counsel for the Claimant: I. Sorenson Counsel for the Defendants: J. Bal Place of Hearing: Surrey , B.C. Dates of Hearing: December 27, 2012; October 6, 2016 Date of Judgment: December 1, 2016

[ 1 ] This is a contested application for costs, sought by each of the parties in respect of two related files that they have now substantively resolved by way of a consent order. [ 2 ] Each of the parties seek against the other an award of costs pursuant to Rule 20(5) of the Small Claims Rules, which rule provides for an amount up to 10% of the amount claimed if the claim or reply, as the case may be, had no reasonable basis for success. The claimant also seeks additional, specifically itemized costs. [ 3 ] This raises two issues: the question of costs entitlement, and if established, in what amount.

Background [ 4 ] These proceedings concern the obligation to pay GST on two strata properties sold by the claimant and purchased by the defendants.

At the time of completion of the transaction, the claimant agreed to allow the defendant to assume on behalf of the claimant the responsibility to collect and remit the goods and services tax (GST) on the purchase, and to indemnify the claimant for any payments if incurred by him in the event of the defendants not meeting this obligation. [ 5 ] Although the purchase transaction was completed in March of 2010, the defendants did not then remit the GST monies to the Canada Revenue Agency. The claimant initiated these proceedings on August 11, 2011.

The matter came on for hearing December 7, 2012 and was thereafter adjourned a number of times to facilitate the parties obtaining further documentation. [ 6 ] On September 29, 2016, approximately one week before the continuation date of October 6 th , the defendants remitted the GST monies to the Canada Revenue Agency. A consent order was prepared and entered on October 6 th , admitting the defendants’ sole obligation to remit the taxes owing in connection with the purchases, confirming the said remittance, and acknowledging the defendants’ obligation to pay any re-assessment or penalties if so assessed.

The question of costs entitlement [ 7 ] The defendants submit that upon their assumption of the GST remittance obligation, the claimant had no further interest in the matter, and it was solely a matter between the defendants and the Canada Revenue Agency.

They maintain that the claimant, in bringing these proceedings, sought to improperly insert himself in the role of a tax enforcer, and he should not be entitled to any costs on the consent resolution of proceedings in which they say the claimant has not demonstrated any successful outcome. [ 8 ] The defendants essentially say that once they assumed sole liability to pay the GST on the purchases, the claimant no longer had any enforceable interest, and hence no basis, to bring these proceedings.

In other words, that their assumption of this obligation eliminated the claimant’s obligation in its entirety. [ 9 ] At the time of the completion of the transaction in March of 2010, the defendants, through their solicitors, confirmed their obligation to remit the required taxes to the Canada Revenue Agency on their next reporting period after March of 2010. That agreement is evidenced in a letter signed by them and sent by their solicitor to the solicitor for the claimant, dated March 19, 2010, the relevant portions of which provide as follows: The Purchasers jointly have an active GST number.

Your position is that because the units are residential rental units, the Vendor is required to collect and remit the GST. We and the Purchasers are of a different opinion. In consideration of an indemnity for payment of GST your client has agreed to let the Purchasers self assess and remit the required GST. Jagmeet Singh Mangat and Gurmeet Kaur Mangat jointly and severally promise agree (sic) that they will self assess the GST payable on the two units and remit the net GST owed to Excise Canada on their next reporting period.

In the event that your client is required by Revenue Canada to have collected and remitted the GST payable on the two units, then Jagmeet Singh Mangat and Gurmeet Kaur Mangat jointly and severally indemnify and save your client harmless for the payment of the GST and any penalties assessed on the failure to pay the GST. [ emphasis added ] [ 10 ] Counsel to the claimant also made submissions regarding certain provisions of the Excise Tax Act, and specifically s. 191 and ss. 221-224.1, which he submitted imposed the primary legal obligation on a vendor in the circumstances of the claimant to remit GST.

The defendants did not contest this point and as such, although neither the provisions themselves nor any case authorities bearing on them were placed before the court I will, for the purposes of adjudicating the costs issue, take the claimant’s primary statutory obligation to remit the GST as uncontested. [ 11 ] The claimant’s liability to pay is further confirmed by a “Requirement to Pay” letter issued by the Canada Revenue Agency, dated April 21, 2016 and exhibited in these proceedings, demanding payment of the GST.

In spite of the defendant’s assumption of this obligation as between the parties, and they having informed the Canada Revenue Agency of same, the demand is nonetheless issued jointly to the defendants and the claimant. [ 12 ] In light of the foregoing, I conclude that the legal obligation by the claimant in these proceedings to remit GST survived regardless of the assumption by the defendants of the sole obligation, as between the parties, to remit on his behalf. [ 13 ] Finally, I would note that if the defendants taking on the remittance obligation entirely erased the claimant’s liability, there would be no need for the indemnity which they also gave to the claimant.

[ 14 ] The defendants failed to remit the required GST on their next reporting period after March of 2010 and indeed failed to do so from 2010 until 2016, despite demand by the claimant that they do so.

The claimant, not having actually remitted the GST but facing demand for payment by the Canada Revenue Agency to do so, sued not on the indemnity, but rather on the defendants’ breach of contractual obligation to pay, including anticipated penalties arising from the delay. [ 15 ] In view of the foregoing, the commencement of these proceedings by the claimant cannot in any way be described as premature or without foundation. [ 16 ] The proceedings have concluded with the defendants having now met their contractual obligation to remit the GST, even if many years later, and also further acknowledging their obligation to pay any penalties arising from their delay, should such be imposed. [ 17 ] It is important to note that the claimant has not established that any penalties have actually been assessed, as originally claimed by him in the Notice of Claim. [ 18 ] I conclude the claimant is in part successful in these proceedings, which have now resulted, even if only at the 11 th hour, in the defendants completing a contractual obligation they agreed to perform over five years ago.

Given the claimant’s continuing liability, and the demands for payment he testified to receiving from the Canada Revenue Agency, the defendants’ permission to “self-assess” and remit GST did not mean they could do so at their leisure.

Querying only whether any penalties had actually been assessed as claimed by the claimant, but admitting they owed the GST itself, the defendants advanced no viable explanation for not remitting the said GST within their next reporting period as had been originally agreed by them. [ 19 ] Rule 20(5) provides for an award of up to 10% of the amount claimed if the claim or reply had no reasonable basis for success. [ 20 ] While the claimant offered no evidence that any of the penalties he was claiming had actually as yet been assessed against him, nor how the claimed penalties had been calculated, he was nonetheless successful regarding the main element of his claim, namely the lapse by the defendant in remitting the GST in a timely fashion.

As such, it cannot be said that his claim had no reasonable prospect of success and therefore the application for Rule 20(5) costs by the defendants is dismissed. [ 21 ] Similarly, while the defendants advanced no explanation for waiting for over five years to pay the GST as required, they have been successful in refuting any obligation to pay any penalties as at the date of this settlement.

As such, it cannot be said their Reply had no reasonable prospect of success and for the same reason the claimant’s application for Rule 20(5) costs is dismissed. [ 22 ] Leaving aside the Rule 20(5) issue on which neither party has been successful, I am satisfied that on balance the claimant is the successful party in these proceedings. [ 23 ] On the basis that the defendants advanced no reasonable excuse for not complying with their contractual obligation to remit the GST owing on the purchase in their next reporting period after March of 2010, and their delay in actually meeting that obligation until September 29, 2016, over five years after they agreed to do it, and only one week before the continuation of these proceedings, the claimant is to that extent successful in his claim and is therefore entitled to reasonable costs in its prosecution.

What costs may the claimant be awarded? [ 24 ] The claimant seeks costs that he itemized as follows: August 22 Filing Fees & Court Costs 400.00 Photocopying 500.00 Posting and Mailing 300.00 Secretarial / Bookkeeping Costs ($15/hr x 200 hrs) 3,000.00 Faxes 100.00 Travel Expense 150.00 Witness Fees (Calvin Lo) CRA Documents Service 150.00 October 06 Missed office hours/work ($350/hr x 30) 10,500.00 TOTAL 15,100.00 [ 25 ] The claimant did not provide any additional information relating to how or why the itemized costs were incurred in these amounts, but he did, through counsel, reference certain case authorities.

The defendant, other than expressing a general opposition to the awarding of any costs, did not address any of the specific items. [ 26 ] The claimant founds the above itemized costs on the basis that they were necessarily incurred in connection with this lawsuit to compel the defendants to meet their contractual obligation to remit the GST owed, and also on the basis that the excessive delay by the defendants in meeting that obligation resulted in these proceedings to be unnecessarily protracted. [ 27 ] While it is true there have been a number of adjournments of dates set for continuation of this matter, I am not prepared to rest the responsibility for same solely at the feet of the defendants.

I say this for two reasons, firstly because the defendants were legitimately seeking to get further information confirming the penalties aspect of the claim, which as at the date of this settlement remain unproven, and also because the adjournments were at the time by consent of the parties in order to facilitate their gathering of further information addressing same.

[ 28 ] I will now turn to the specifically claimed cost items. [ 29 ] The claim of filing fees and court costs of $400.00 is allowed. [ 30 ] The claim for photocopying does not itemize the number of copies nor the amount claimed per copy. At the allowed rate of $.25 per page, this amount translates to 2000 pages, which seems excessive based on the information provided. I fix the allowable cost for photocopying at $200.00. [ 31 ] The claim for posting and mailing, unsupported by information as to whether or how much of that constitutes courier fees, also seems excessive.

I fix that amount at $150.00. [ 32 ] The claim for bookkeeping expenses is difficult to evaluate on the limited information provided. If any of it is directly related to presentation of the case, for example the tabulation of materials to be presented to the court, it would comprise an allowable cost. However if it represents bookkeeping or accounting time required to generally deal with the failure of the defendants to honour their obligation to remit GST, then it would more properly be claimed as damages to be proven as part of the claim itself, rather than as costs incurred to prosecute the claim.

Here it is important to note the claimant had other, independent GST related obligations relating to the condominium complex, thereby likely incurring related bookkeeping costs that did not involve these defendants. [ 33 ] Recognizing that some bookkeeping time would have been reasonably required in order to present the facts and figures for the case relating to the calculation of GST and/or any potential penalties in this case, I fix the costs in this regard at 15 hours, translating at the claimed rate, to the sum of $225.00. [ 34 ] The claims for faxes and travel expense, at $100.00 and $150.00 respectively, are allowed as fair and reasonable. [ 35 ] Finally, the claimant seeks an award of costs for his own time spent in preparing for the October 6, 2016 hearing.

It appears to be common ground that the defendants did not advise the claimant of their September 29 th GST remittance until October 5 th , only one day before the continuation date. The claimant says this precluded him from completing 30 hours of his own work for which he claims at the rate of $350.00 per hour. [ 36 ] While I agree the defendants could and should have advised the claimant immediately upon the GST payment on September 29 th , I am not satisfied that even had such advice been given, it would have precluded the need for the October 6 th court attendance.

It would appear this date was needed in any event the purpose of concluding the terms of the Consent settlement order, as well as for the purpose of the costs application that is the subject of these reasons. [ 37 ] There is no authority in the Small Claims Act or Rules permitting compensation for time spent personally by the claimant in preparation for the case: Weeks v. Ford Credit Canada Ltd.,

(1994) Vancouver C93-03264, B.C. Provincial Court. [ 38 ] To conclude, and for the reasons noted above, the claimant is entitled to costs in these proceedings in the total sum of $1,225.00. This sum is to be paid by the defendants by not later than two weeks from the date of filing of these Reasons. The Honourable Judge G. Gill Provincial Court of British Columbia