HER MAJESTY THE QUEEN Appellant v. STANLEY J. TESSMER LAW CORPORATION, 2013 FCA 290

Date: 20131212 Dockets: A-104-09 A-50-13 A-51-13 A-52-13 A-53-13 A-54-13 Citation: 2013 FCA 290 CORAM: DAWSON J.A. TRUDEL J.A. NEAR J.A. Docket: A-104-09 BETWEEN: HER MAJESTY THE QUEEN Appellant and STANLEY J. TESSMER LAW CORPORATION Respondent Dockets: A-50-13 A-51-13 A-52-13 A-53-13 A-54-13 AND BETWEEN: STANLEY J. TESSMER LAW CORPORATION Appellant and HER MAJESTY THE QUEEN Respondent Heard at Vancouver, British Columbia, on December 10, 2013. Judgment delivered at Vancouver, British Columbia, on December 12, 2013.

REASONS FOR JUDGMENT BY: TRUDEL J.A. CONCURRED IN BY: DAWSON J.A. NEAR J.A. Date: 20131212 Dockets: A-104-09 A-50-13 A-51-13 A-52-13 A-53-13 A-54-13 Citation: 2013 FCA 290 CORAM: DAWSON J.A. TRUDEL J.A. NEAR J.A. Docket: A-104-09 BETWEEN: HER MAJESTY THE QUEEN Appellant and STANLEY J. TESSMER LAW CORPORATION Respondent

Dockets: A-50-13 A-51-13 A-52-13 A-53-13 A-54-13 AND BETWEEN: STANLEY J. TESSMER LAW CORPORATION Appellant andHER MAJESTY THE QUEEN Respondent REASONS FOR JUDGMENT TRUDEL J.A. [1] Her Majesty the Queen is appealing the Amended Order of Miller J., dated March 4, 2009, in which she found that Stanley J.Tessmer Law Corporation (Tessmer) had standing “to raise and rely on the alleged breaches of the Charter rights of its clients inchallenging the validity of the Excise Tax Act, [R.S.C. 1985, c.

E-15] [ETA] as it applies to impose Goods and Services Tax (“GST”) onlegal fees charged for criminal defence services supplied by [Tessmer]” (Miller J.’s reasons are indexed as 2009 TCC 104). The Crownargues that Justice Miller erred in finding that Tessmer has standing in accordance with the exception set out in Canadian Egg MarketingAgency v.

Richardson, (SCC), [1998] 3 S.C.R. 157 [CEMA]. [2] By order of this Court dated March 18, 2013, this appeal is being heard at the same time as five consolidated appealscommenced by Tessmer concerning an Order of Paris J. from January 28, 2013, in which he held that the GST imposed by s. 165 of theETA did not infringe and was not inconsistent with the rights of the Appellant’s clients guaranteed by s.10(

b) of the Canadian Charter ofRights and Freedoms, [Part 1 of the Constitution Act, 1982, being

Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11] [the Charter](Paris J.’s reasons for order are indexed as 2013 TCC 27). Paris J. drew his final conclusion after having noted the absence of evidencethat any of Tessmer’s clients were unable to retain counsel as a result of the GST payable on legal services and Tessmer’s concessionthat this type of evidence was available (Paris J.’s reasons at paragraphs 57 and 67). [3] Tessmer maintains that Justice Paris erred in requiring that it adduce evidence to demonstrate that this provision violates itsclients’ constitutional rights.

Tessmer argues that the unconstitutionality of the impugned provision is apparent on its face. As a result, itonly has to show that the tax is inconsistent with the right being exercised under s. 10(

b) of the Charter. On appeal to this Court, Tessmeralso brought a notice of constitutional question, which is expressed as follows: Whether, based on the facts set out in the Agreed Statement of Facts filed herewith, the goods and services tax (GST) imposed by s. 165of the Excise Tax Act infringes or is inconsistent with the rights of the Appellant’s clients guaranteed by s. 7 and ss. 10(

b) of the Charterof Rights and Freedoms such that s. 165 of the Excise Tax Act is, to the extent of any such inconsistency and, subject to s.1 of theCharter, of no force and effect by reason of ss. 52(1) of the Constitution Act (A-50-13 Tessmer Memorandum of Fact and Law atparagraph 1). [4] This same question was originally in front of the Tax Court of Canada. At the hearing of the consolidated appeals, Tessmerwas reminded that Paris J. had amended this question after counsel for Tessmer had advised that he was now only relying on s. 10(b). Itwas agreed that Tessmer would only refer to s. 7 of the Charter as it informed the

interpretation of s. 10(b). Analysis The Issue of Standing [5] With regard to the issue of standing, I agree with Justice Miller that the exception set out in CEMA applies to accord Tessmer

standing. In CEMA, the Supreme Court of Canada held that while typically a party does not have standing to challenge theconstitutionality of a statute where its own Charter rights are not infringed, a corporation may have standing “to attack what it regards asan unconstitutional law when it is involuntarily brought before the courts pursuant to a regulatory regime set up under an impugned law”(CEMA at paragraph 44). [6] Under ss. 221 and 225 of the ETA, Tessmer is an agent of the Crown.

It is required, as a "person who makes a taxablesupply," to collect from its clients the GST payable on legal fees and to remit to Her Majesty in right of Canada the appropriate GST nettax amount. Although Tessmer technically initiated the appeals to the Tax Court of Canada, it did so because, as Miller J. found, "theonus is placed on the taxpayer to show an error in the Minister’s assessment" (Miller J.’s reasons at paragraph 20). This, Justice Millerwrote, is a "nuance of our self-assessing system" (ibidem).

As a result of its decision not to collect or remit, Tessmer was assessed GST,interest and penalties totalling approximately $360,000. Faced with the five above-mentioned assessments, it could either pay theamounts notwithstanding its belief that collecting GST from its clients violates their constitutional rights, or appeal the assessments to theTax Court of Canada. [7] On this basis, I see no error in Justice Miller’s finding that Tessmer was brought to the Court involuntarily or with the resultthat Tessmer was granted standing based on the exception set out in CEMA.

Having found that Tessmer has standing, I turn now to theappeal on the merits. The Constitutional Challenge [8] First, I note that Tessmer accepts Paris J.’s finding that s. 165(1) of the ETA does not have an invalid purpose. Consequently,Tessmer is left with a challenge of the legislation on the basis of its effect on the rights of its clients pursuant to s. 10(

b) of the Charter. [9] I agree with Justice Paris that Tessmer failed to establish that s.165 of the ETA violates s.10(

b) of the Charter. On thefacts of this case, Tessmer was required to produce evidence to demonstrate the effect of GST on the rights of its clients but did not. TheSupreme Court of Canada has made clear that “Charter decisions should not and must not be made in a factual vacuum” (MacKay v.Manitoba, (SCC), [1989] 2 S.C.R. 357 at page 361). As well, in Danson v.

Ontario (Attorney General) (SCC), [1990] 2 S.C.R. 1086, at p. 1099 [Danson], the Supreme Court of Canada affirms that it has been vigilant "to ensure that a properfactual foundation exists before measuring legislation against the provisions of the Charter, particularly where the effects of impugnedlegislation are the subject of the attack" (my emphasis). [10] As discussed in John Carten Personal Law Corp. v. British Columbia (Attorney General) (1997) (BC CA),40 B.C.L.R. (3d) 181 (BCCA), leave to appeal denied, [1998] S.C.C.A.

No. 205, there are many reasons why the cost of legal services,or a lack of financial means may restrict, hamper or even prevent someone from exercising rights of access to courts or to other legalservices (at paragraph 33). This accords with the Supreme Court of Canada’s decision in British Columbia (Attorney General) v.

Christie2007 SCC 21, [2007] 1 S.C.R. 873 [Christie] in which the Court cited with approval the position of the Attorney General of BritishColumbia who was arguing that "the economics of legal services may be affected by a complex array of factors, suggesting the need forexpert economic evidence to establish that the [provincial] tax [on the purchase price of legal services] will in fact adversely affect accessto justice" (ibidem at paragraph 28).

Once again in Christie, the Supreme Court cautioned against deciding constitutional cases withoutan adequate evidentiary record (at paragraph 28). [11] Here, there is a total lack of evidence and counsel for Tessmer was unable to point to any authority justifying our Court todepart from the teachings of the Supreme Court of Canada in Danson or Christie. On the facts of this case, this complete lack ofevidence is fatal to the constitutional challenge launched by Tessmer. [12] As a result, I need not address Tessmer’s argument regarding the scope of s. 10(

b) of the Charter. My silence, however,should not be interpreted as an endorsement of Paris J.’s reasons on this issue (see in particular paragraphs 61 and ff. of Paris J.’sreasons).

[ 13 ] Consequently, I propose to dismiss the appeal in file A-104-09 with costs. I also propose to dismiss the appeals in files A-50- 13, A-51-13, A-52-13, A-53-13 and A-54-13 with one set of costs. [ 14 ] Finally, I would respond to the constitutional question, as amended by Paris J., as follows: Based on the facts set out in the Agreed Statement of Facts filed by the parties, the goods and services tax (GST) imposed by s. 165 of the Excise Tax Act does not infringe and is not inconsistent with the rights of the Appellant’s clients guaranteed by s. 10(

b) of the Charter of Rights and Freedoms. [ 15 ] A copy of these reasons shall be filed in appeal A-104-09 and in each of the five consolidated appeals. "Johanne Trudel" J.A. “I agree Eleanor R. Dawson J.A.” “I agree D.G.Near J.A.” FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-104-09 STYLE OF CAUSE: HER MAJESTY THE QUEEN v. STANLEY J. TESSMER LAW CORPORATION AND DOCKETS: A-50-13 A-51-13 A-52-13 A-53-13 A- 54-13 STYLE OF CAUSE: STANLEY J. TESSMER LAW CORPORATION v. HER MAJESTY THE QUEEN

PLACE OF HEARING: Vancouver, British Columbia DATE OF HEARING: December 10, 2013 REASONS FOR JUDGMENT BY: TRUDEL J.A. CONCURRED IN BY: DAWSON J.A. NEAR J.A. DATED: December 12, 2013 APPEARANCES : Elizabeth (Lisa) McDonald Darren McLeod For The Appellant HER MAJESTY THE QUEEN Craig C. Sturrock, Q.C. For The Respondent STANLEY J. TESSMER LAW CORPORATION Craig C. Sturrock, Q.C. For The Appellant STANLEY J. TESSMER LAW CORPORATION Elizabeth (Lisa) McDonald Darren McLeod For The Respondent HER MAJESTY THE QUEEN SOLICITORS OF RECORD :

William F. Pentney Deputy Attorney General of Canada Ottawa, Ontario For The Appellant HER MAJESTY THE QUEEN Thorsteinssons LLP, Tax Lawyers Vancouver, British Columbia For The Respondent STANLEY J. TESSMER LAW CORPORATION Thorsteinssons LLP, Tax Lawyers Vancouver, British Columbia For The Appellant STANLEY J. TESSMER LAW CORPORATION William F. Pentney Deputy Attorney General of Canada Ottawa, Ontario For The Respondent HER MAJESTY THE QUEEN