T-1216-99
Judy Chua (Applicant)
v.
The Minister of National Revenue (Respondent)
Indexed as: Chuav. M.N.R. (T.D.)
Trial Division, McKeown J.--Vancouver, June 1; Ottawa, November 6, 2000.
Income Tax -- Foreign tax debts -- M.N.R. arguing for two-year suspension of declaration of invalidity of Canada-United States Tax Convention, Art. 21, para. 3 to allow Parliament time to bring legislation in line with Charter -- Invalidating impugned provision would result in Convention citizens, individuals, companies, estates, trusts being immune from collection assistance provisions -- Suspension necessary to give Parliament time to remedy unconstitutionality, to negotiate proposed changes with U.S.A. -- Parliament given two years to enact new legislation, otherwise impugned provision declared invalid.
Constitutional law -- Charter of Rights -- Enforcement -- Applicant not entitled to damages under Charter, s. 24(1) in respect of declaratory action for invalidity under Constitution Act, 1982, s. 52 -- Applicant's claim for damages resting solely on bare allegation of unconstitutionality -- Damages rarely awarded as result of effects of legislation subsequently declared invalid.
Practice -- Costs -- Applicant seeking solicitor-client costs -- Solicitor-client costs exceptional, generally awarded only when reprehensible, scandalous, outrageous conduct -- Applicant's arguments for award of solicitor-client costs not compelling -- Test cases not per se entitling successful litigant to increased costs award -- Applicant's costs reduced by 25% as oral Charter argument totally changed from that set out in notice of application, memorandum of fact and law.
| statutes and regulations judicially considered |
| An Act to amend the Canada-United States Tax Convention Act, 1984, S.C. 1995, c. 34, s. 3, Sch. IV, Art. 21. |
| Canadian Charter of Rights and Freedoms, being Part I of the Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44], s. 24(1). |
| Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44], s. 52. |
| Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, being Schedule I of the Canada-United States Tax Convention Act, 1984, S.C. 1984, c. 20, Art. XXXI. |
| Federal Court Act, R.S.C., 1985, c. F-7, s. 18.1 (as enacted by S.C. 1990, c. 8, s. 5). |
| Federal Court Rules, 1998, SOR/98-106, Tariff B. |
| cases judicially considered |
| applied: |
| Guimond v. Quebec (Attorney General), [1996] 3 S.C.R. 347; (1996), 138 D.L.R. (4th) 647; 43 Admin. L.R. (2d) 44; 110 C.C.C. (3d) 223; 3 C.P.C. (4th) 1; 22 M.V.R. (3d) 251; 201 N.R. 380. |
| referred to: |
| Rice v. New Brunswick (1999), 181 D.L.R. (4th) 643; 39 C.P.C. (4th) 195 (N.B.C.A.); Mackin v. New Brunswick (Minister of Finance) (1999), 40 C.P.C. (4th) 107 (N.B.C.A.). |
ORDER made following submissions on remedies by parties, preparation of draft order by applicant and response by respondent as to its form and substance.
| appearances: |
| Leslie M. Little, Q.C., Thomas J. Clearwater and Christopher Harvey, Q.C., for applicant. |
| Linda L. Bell and Robert Carvalho for respondent. |
| solicitors of record: |
| Thorsteinssons, Vancouver, and Fasken Martineau DuMoulin LLP, Vancouver, for applicant. |
| Deputy Attorney General of Canada for respondent. |
The following are the reasons for order rendered in English by
[1]McKeown J.: Both parties agree with paragraphs (b) and (c) of the order. The respondent agreed with paragraph (a) as proposed by the applicant except that it proposed that there should be a suspension of the declaration for a period of two years in order to give Parliament an opportunity to bring the legislation in line with the Charter [Canadian Charter of Rights and Freedoms, being Part I of the Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44]]. In my view since the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital [being Schedule I of the Canada-United States Tax Convention Act, 1984, S.C. 1984, c. 20], (the Convention) is a negotiated agreement between two sovereign countries obviously the parties to the agreement, U.S. and Canada, would want to revisit the agreement in light of the fact that one term has been rendered of no force and effect.
[2]Under Article XXXI, paragraph 3, of the Convention, Canada and the U.S. have agreed to consult to try and resolve issues where there has been a significant change in the tax laws of one of the Contracting States which should be accommodated by a modification to the Convention. If the Contracting States cannot satisfactorily resolve the issue, the State seeking the modification may terminate the Convention in accordance with the procedures set out in the Convention. A finding that paragraph 3 of Article 21 of the Third Protocol [S.C. 1995, c. 34, s. 3] violates the Charter may fall into this category and obviously negotiations would take place between Canada and the U.S. as a result of such a finding.
[3]It is also important to note that invalidating paragraph 3 of Article 21 of the Third Protocol would not only result in Convention citizens being immune from the collection assistance provisions, but every individual, company, estate or trust would be so immune (including non-citizens), groups which were not addressed by the parties or the Court in the reasons for the order (companies, estates and trusts) or specifically and repeatedly said were not the subject of this case nor of the reasons for the order (non-citizens). Obviously, the parties to the Convention would want to revisit whether this is appropriate.
[4]The requested suspension of 24 months is necessary because not only would time be required for Parliament to consider the options to remedy the unconstitutionality and pass the resulting legislation, but time must also be given to negotiate with the U.S. on any proposed changes to be made, and time would be required for such legislation to be passed in the U.S., as well as in Canada.
[5]In my view, the applicant is not entitled to damages under subsection 24(1) of the Charter as an accompaniment to a declaratory action for invalidity under section 52 of the Constitution Act, 1982 [Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44]]. Most importantly, it is only in the applicant's submission with respect to remedies that she now seeks damages under subsection 24(1) of the Charter. There was no admissible evidence put forward as part of the judicial review proceeding instituted under section 18.1 [as enacted by S.C. 1990, c. 8, s. 5] of the Federal Court Act [R.S.C., 1985, c. F-7]. The only evidence is part of the applicant's remedies submissions. I agree with the respondent that these documents are inadmissible. Without any evidence the applicant's claim for damages rests solely on a bare allegation of unconstitutionality. In Guimond v. Quebec (Attorney General), [1996] 3 S.C.R. 347 the individual involved makes a claim for damages under subsection 24(1) of the Charter on a bare allegation of the unconstitutionality of the legislation. In concluding that the individual's claim for damages under subsection 24(1) on a bare claim of unconstitutionality did not warrant a departure from the general rule, the Court drew upon the principles arising from civil law, that neither Parliament nor a legislature is liable in damages for enacting legislation that is subsequently found to be invalid. It is only in rare cases where damages will be awarded as a result of the effects of legislation subsequently declared to be invalid. Rice v. New Brunswick (1999), 181 D.L.R. (4th) 643 (N.B.C.A.), leave to appeal to S.C.C. granted, [2000] S.C.C.A. No. 21; and Mackin v. New Brunswick (Minister of Finance) (1999), 40 C.P.C. (4th) 107 (N.B.C.A.), leave to appeal to S.C.C. granted, [2000] S.C.C.A. No. 21.
[6]The applicant sought solicitor-client costs but solicitor-client costs are exceptional and generally are awarded only when there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. There was no misconduct by the respondent alluded to in my reasons and then referred to in the applicant's submissions. I do not find any of the applicant's reasons for an award of solicitor-client costs compelling. Furthermore, the argument that the outcome of the appeal will affect many persons similarly does not support an award of solicitor-client costs. Test cases, whether they are test cases for many appeals or test cases for novel points of law, do not per se entitle the successful litigant to an increased award of costs. It is not the nature of the litigation but how it is conducted which justifies an award of solicitor-client costs.
[7]I am not prepared to award the applicant its full costs in this matter because the applicant's oral Charter argument was totally changed from that which was set out in its notice of application, memorandum of fact and law. The hearing would have been more focussed and shortened had the applicant limited its submissions with respect to the Charter to convention citizens from the start and if they had notified the respondent in advance of the change in their position. Thus I have reduced the applicant's costs by 25% to reflect this.
[8]For the foregoing reasons, the order will read as follows:
(a) I would permit Parliament two years in which to provide new legislation, otherwise paragraph 3 of Article 21 of the Third Protocol to the Convention, enacted as part of Schedule IV to An Act to Amend the Canada-United States Tax Convention Act, 1984, S.C. 1995, c. 34 is unconstitutional and is hereby declared invalid. This decision would, however, apply to any case in which the provision had been challenged and proceedings relating thereto are still on foot;
(b) the registrations of the two certificates the respondent filed in this Court are vacated;
(c) the registrations of the certificates against the title of the applicant's family home in the Land Titles Office are vacated and the respondent will, without delay, obtain their removal from the Land Titles Registry;
(d) the respondent will pay to the applicant three-quarters of the applicant's costs in accordance with column III of the table to Tariff B [Federal Court Rules, 1998, SOR/98-106].