506913 N.B. LTD. v. CAMBRIDGE, 2011 FCA 327

Federal Court of Appeal Cour d'appel fédérale Federal Court of Appeal Cour d'appel fédérale Date: 20111123 Docket: A-152-11 Citation: 2011 FCA 327 CORAM: NOËL J.A. TRUDEL J.A. MAINVILLE J.A. BETWEEN: 506913 N.B. LTD. and CAMBRIDGE LEASING LTD. Appellants and HER MAJESTY THE QUEEN Respondent Heard at Fredericton, New Brunswick , on November 15, 2011. Judgment delivered at Ottawa, Ontario , on November 23, 2011. REASONS FOR JUDGMENT BY: NOËL J.A. CONCURRED IN BY: TRUDEL J.A. MAINVILLE J.A. Date: 20111123 Docket: A-152-11 Citation: 2011 FCA 327 CORAM: NOËL J.A. TRUDEL J.A. MAINVILLE J.A. BETWEEN: 506913 N.B. LTD. and CAMBRIDGE LEASING LTD. Appellants

and HER MAJESTY THE QUEEN Respondent REASONS FOR JUDGMENT NOËL J.A. [ 1 ] This is an appeal by 506913 N.B.

Ltd. and Cambridge Leasing Ltd. (the appellants) from an interlocutory order of the Tax Court of Canada wherein D’Arcy J., in dealing with pre-trial issues, ordered that a motion filed by the appellants be withdrawn and issued a number of directions. [ 2 ] The appellants seek to vacate the order and ask that D’Arcy J. be disqualified from participating in any further proceedings on the ground that he has demonstrated bias against them. [ 3 ] For the reasons which follow, I am of the view that the appeal should be dismissed.

BACKGROUND [ 4 ] Before turning to the issues raised on appeal, it is useful to set out the procedural steps which have led to the disputed order. They arise in the broader context of an appeal from GST/HST reassessments issued pursuant to the Excise Tax Act , R.S.C. 1985, c. E-15 (the Act). [ 5 ] In November 2009, the appellants brought a motion to amend their notices of appeal, seeking to add reference to sections 7 , 8 and 11 of the Canadian Charter of Rights and Freedoms ,

Schedule B to the Canada Act 1982 , (U.K.) 1982, c. 11 (the Charter) (transcripts of proceedings of the motion, appeal book, pp. 146-149). These amendments were opposed by the respondent who sought to strike certain paragraphs of the notices of appeal (appeal book, tab 5).

The respondent’s opposition stemmed in part from the fact that the appellants, being corporations, could not rely on the Charter as though they were individuals. [ 6 ] Upon hearing the submissions of the parties, Associate Chief Justice Rossiter of the Tax Court of Canada (Rossiter A.C.J.) issued an initial order on November 9, 2009 (appeal book, tab 7). He dismissed the appellants’ motion to amend, ordered that the examinations for discovery be completed by February 15, 2010 and that the undertakings be completed by March 31, 2010.

Finally, he adjourned the respondent’s motion to strike sine die and awarded costs in the amount of $1,500 in favour of the respondent. No appeal was taken from this order. [ 7 ] Subsequently, D’Arcy J., as the judge charged with the conduct of the appeal, assumed the task of settling the outstanding pre-trial issues. A pre-trial conference call was held before him on January 28, 2011 (appeal book, tab 11).

On February 7, 2011, he issued an order (the First Order), setting out the procedure and relevant time table for the appellants’ proposed motion to challenge the admissibility of certain documents (appeal book, tab 12). The transcript of the pre-trial conference makes it clear that the issue of the admissibility of evidence was going to be addressed as the first preliminary matter. [ 8 ] On February 28, 2011, the appellants filed their notice of motion on the admissibility of evidence.

This motion also contained a notice of constitutional question in which the appellants challenged the constitutional validity of paragraph 296(1) (

b) of the Act (appeal book, tab 13). Notably, the notice of motion listed as grounds sections 7 , 11 and 15 of the Charter . [ 9 ] The respondent took issue with the appellants’ notice of motion and requested that another teleconference be held (appeal book, tab 14). It argued that the notice of motion failed to provide specifications as to the evidence which was sought excluded as directed by the First Order, but rather sought blanket exclusion, in contravention of it. [ 10 ] The appellants responded to the issues raised by the respondent by letter dated March 8, 2011 (appeal book, tab 15). A further teleconference was held on March 21, 2011 (transcripts, appeal book, tab 16).

[ 11 ] Following the second teleconference, D’Arcy J. issued another order on March 23, 2011 (the Second Order) (appeal book, tab 2). He ordered that the appellants’ motion be withdrawn, and that a fresh motion be filed in compliance with his earlier order. It is this Second Order that is the subject matter of the appeal. DECISION OF THE TAX COURT [ 12 ] The order was rendered without reasons. However, the transcript of the second teleconference reveals that D’Arcy J. was mainly concerned with the process (appeal book, tab 16, p. 360).

He recalled that during the first pre-trial conference, the appellants indicated that they would bring a motion challenging the admissibility of certain documents and that he ordered that this motion be filed by February 28, 2011. [ 13 ] However, D’Arcy J. found that the motion filed by the appellants addressed matters beyond the admissibility of evidence. He expressed the view that: “the discussion during the pre-trial conference and my subsequent order were clear: the motion was only to deal with the admissibility of evidence” (appeal book, tab 16, p. 362).

D’Arcy J. also noted that earlier on, Rossiter A.C.J. dismissed a motion by the appellants premised on the same Charter grounds ( sections 7 and 11 ) and that no appeal was taken from that decision. D’Arcy J. found that the appellants were continuing to use the scattered approach that Rossiter A.C.J. initially denounced (appeal book, pp. 370, 371). [ 14 ] Following the teleconference, D’Arcy J. ordered that the appellants’ February 28, 2011 motion be withdrawn and that a fresh motion consistent with his First Order be filed by April 20, 2011.

D’Arcy J. also directed that the new motion be accompanied by submissions identifying the evidence being challenged, the particulars of the purported breach of the appellants’ rights, the time when such rights are said to have been breached, the facts and the law being relied upon. He further ordered the production of a list containing the specific evidence that the appellants seek to exclude with a cross-reference to the respondent’s list of documents. [ 15 ] The order also provided that additional motions could be brought, but only after questions relating to the admissibility of evidence have been settled.

Finally, D’Arcy J. awarded costs in the amount of $4,500 in favour of the respondent. POSITION OF THE APPELLANTS [ 16 ] The appellants submit that the documentary evidence which they were ordered to particularize is in the tens of thousands of pages. Dealing with the issue of admissibility of evidence in the manner requested by D’Arcy J. would be “extremely onerous and unwieldy” (appellants’ memorandum, para. 12). They rather wish to proceed with categories or bundles of evidence based on the manner in which they were seized.

On this point, the appellants contend that they did not have the opportunity to provide submissions on the best method to present the admissibility of evidence issue. [ 17 ] The appellants note that D’Arcy J. proceeded to hold the second teleconference on his own motion. They submit that the telephonic pre-hearing conference did not meet the notice requirements which the principles of natural justice dictate. [ 18 ] The appellants also disagree with D’Arcy J.’s understanding of the First Order.

In their view, it was open to them to raise issues other than those which relate to the admissibility of evidence such as, for instance, issues relating to the burden of proof. [ 19 ] Finally, considering the tone of D’Arcy J., his comments during the teleconference hearing and the punitive aspect of the costs which he awarded, the appellants ask that all further proceedings in the matter take place before a different judge. ANALYSIS AND DECISION [ 20 ] In Sawridge Band v. Canada , 2006 FCA 228 , this Court spoke to the standard of review applicable to discretionary decisions in the context of trial management.

Evans J.A. wrote (paras. 21-24): [21] First, this Court is very reluctant to interfere with decisions made by a judge in the course of managing a matter prior to trial, particularly one as complex, lengthy and difficult as this one. As a result of living with the matter over time, the case management judge will have acquired an overall understanding of it which an appellate court, on the basis of hearing an appeal on a particular issue, cannot possibly match in either depth or breadth. [22] When performing essentially case management functions judges are appropriately given "elbow room" by appellate courts,

so that they can get on with what is often a difficult job, calling for a mix of patience, flexibility, firmness, ingenuity, and an overall sense of fairness to all parties. These qualities are very evident in the way in which both Hugessen and Russell JJ. have performed their tasks in the present matter. [23] In my opinion, the Court should bear the above considerations in mind when both determining and applying the standards of review appropriate to the different aspects of Russell J.'s decision by virtue of Housen v.

Nikolaisen , [2002] 2 S.C.R. 235, 2002 SCC 33 . [24] Thus, to the extent that the decision involved an exercise of discretion (as when, for example, the Judge was deciding whether to exclude those who had failed to comply with a Court order), the appellants have a particularly high hurdle to cross. They must establish that the discretion was exercised on the basis of an erroneous view of the law or a misapprehension of the facts, or was otherwise non-judicial.

On the other hand, determining the relevance of evidence is generally a question of law, subject to appellate review on a standard of correctness, as is the judge's analysis of the judicial authorities on subsection 35(1). [ 21 ] In my view, a judge performing pre-trial functions is entitled to the same degree of deference.

Applying this standard, I can detect no basis for intervening with D’Arcy J.’s exercise of discretion in the present case. [ 22 ] I first note that the appellants had the opportunity to make submissions prior to the issuance of the Second Order and did so by their letter of March 8, 2011 as well as during the pre-trial conference. [ 23 ] The transcript of the first teleconference (tab 11) supports the view that issues were to be addressed in sequence and that the first issue to be addressed was that relating to the admissibility of evidence obtained in alleged breach of

section 8 of the Charter . The appellants point to two excerpts from the transcript where D’Arcy J. spoke to other issues (appellants’ memorandum, para. 17). However, this does not detract from the fact that the issue of admissibility had to be addressed before any other issue could be considered. [ 24 ] Beyond this, in apparent disregard for the earlier process and the terms of the Second Order, the appellants chose to raise issues which had been raised and finally disposed of by Rossiter A.C.J.

Counsel for the appellants was unable to advance any form of justification for this behaviour. [ 25 ] Contrary to the submissions of the appellants, they had the opportunity to be heard, both during the first and the second teleconference. It is therefore not open to them to now say that the 70,000 pages of documents make it too onerous and unwieldy to deal with the issue in the manner provided by the Second Order.

In any event, as counsel for the respondent acknowledged during the course of the hearing, nothing prevents the appellants from particularizing their objection by reference to categories of documents if the documents lend themselves to this treatment. [ 26 ] Finally, there is no basis for the request that D’Arcy J. be removed from this case. I fail to detect any bias in the comments which he made during the second teleconference. D’Arcy J. does express dissatisfaction and impatience as a result of the appellants’ disregard for the First Order.

However, his Second Order allows the appellants to file a motion on the admissibility of evidence as had been requested, and leaves the door open for future motions once that issue is settled. The result is not unfair for the appellants. With regards to costs, the amount awarded is certainly indicative of D’Arcy J.’s displeasure, but awarding costs with the view of discouraging improper behaviour is a normal function of cost awards.

It is not a ground for alleging bias. [ 27 ] Otherwise, it has not been shown that D’Arcy J. misapplied his discretion in awarding costs as he did. [ 28 ] I would dismiss the appeal with costs. “Marc Noël” J.A. “I agree. Johanne Trudel J.A.”

“I agree. Robert M. Mainville J.A.” FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-152-11 APPEAL FROM AN ORDER OF THE HONOURABLE MR. JUSTICE D’ARCY DATED MARCH 23, 2011, DOCKET NO. 2003-3382 (GST)G. STYLE OF CAUSE: 506913 N.B. Ltd. and Cambridge Leasing Ltd and Her Majesty the Queen PLACE OF HEARING: Fredericton , New Brunswick DATE OF HEARING: November 15, 2011 REASONS FOR JUDGMENT BY: Noël J.A. CONCURRED IN BY: Trudel J.A. Mainville J.A. DATED: November 23, 2011 APPEARANCES : Kevin C. Toner FOR THE APPELLANTS John P. Bodurtha FOR THE RESPONDENT SOLICITORS OF RECORD :

E.J. Mockler Professional Corporation Fredericton, NB FOR THE APPELLANTS Myles J. Kirvan Deputy Attorney General of Canada FOR THE RESPONDENT