http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/142533/index.do
Marine Atlantic Inc. v. The Queen (February 16, 2016 – 2016 TCC 46, Lyons J.).
Précis: Marine Atlantic had reached a prior agreement with the Crown to be bound by the results of a Tax Court Appeal being pursued by a competitor ferry operator (the “BCF appeal”). The Tax Court rendered its decision in the BCF appeal but the appellant rejected the decision on the basis that admissions made by the appellant in the BCF appeal would not be made in the appeal of Marine Atlantic. The Crown moved for an order that Marine Atlantic was bound by the prior agreement. The Tax Court held that the admissions at issue in the BCF appeal were such that they left the issue of GST Input Tax Credits unresolved in the Marine Atlantic appeal. As a result it declined to issue the order sought by the Crown. The Court did strike 4 exhibits to Marine Atlantic’s supporting affidavit in the motion (2 on the basis of relevance, 2 on the basis of settlement privilege). The various other claims made by the Crown such as abuse of process and solicitor-client costs were all denied based on the factual record. As a result the Crown’s motion was dismissed. There was no order as to costs.
Decision: The admissions at issue in the BCF appeal were as follows:
[9] In the Agreed Statement of Facts, dated May 22, 2014, BCF made the following factual admissions (the “Admissions”) which are virtually identical to those in the draft Request to Admit #1:
a) Substantially all of the fuel that was consumed on them was for propulsion;
b) BCF is not able to prove on a balance of probabilities that over 10% of the fuel that was consumed on them was consumed directly in the provision of commercial activities; and
c) BCF will not challenge the Minister’s assumption that less than 10% of fuel on any of them was consumed directly in the provision of commercial activities on the vessel.
[Footnote omitted]
Marine Atlantic’s position was that the BCF appeal left issues unresolved in the Marine Atlantic appeal:
[6] Marine made extensive submissions; the key ones are detailed in these reasons. It interprets the Agreement as binding on common issues to both appeals with either party free to pursue a determination on the merits of any issue that was not common to both appeals or left unresolved by the BCF Decision. Specifically, Marine argues that the BCF Decision did not resolve whether fuel is a common input when an unknown percentage, or less than 90%, of the fuel is used in exempt activity (“unresolved issue”). Marine wishes to pursue its claim, as pled, that fuel is a common input when more than 10% of the fuel consumed by the ferries is used in commercial activities, entitling it to Fuel ITCs.
The Court summarized the positions of the parties as follows:
[26] Marine’s submission is that the BCF Decision resolved only part of the Fuel ITCs that remained a common issue to both appeals. Marine asserts that subsequent to the Agreement, the common issue was narrowed due to the Admissions so that the other part of the Fuel ITCs was no longer common to both appeals. Since Marine will not be making the same Admissions, it intends to pursue the unresolved issue as embodied in its pleadings (i.e., whether fuel is a common input to both taxable and exempt supplies). Specifically, Marine wishes to pursue whether fuel - and not necessarily used for propulsion of ferries - is an input common to both taxable and exempt supplies where an unknown percentage or less than 90% of fuel was used in exempt activities.
[27] The respondent contends that Marine’s submission relating to the Admissions is without substance because BCF had argued, despite the Admissions, that fuel was a common input consumed in both taxable and exempt activities and that it was entitled to the Fuel ITCs because certain areas of the ferries were used for commercial or ancillary activities. Since the Court considered and rejected that argument, the Fuel ITCs remained a common issue in both appeals and was fully resolved by the Decision.
The Court accepted Marine Atlantic’s position that the admissions in the BCF appeal resulted in a narrowing of the common issues such that issues in their appeal now remained unresolved:
[34] I accept as plausible Marine’s stance that this means that the other part of the Fuel ITCs was no longer a common issue because of the impact (that is, narrowing of the initial common issue) by the subsequent Admissions on the Agreement, leaving the unresolved issue as I previously defined. In my view, this interpretation is consistent with the breadth of the statement of issue in the pleadings. As such, there is some doubt that the BCF Decision fully resolved the issue respecting Fuel ITCs in Marine’s appeal.
The Court struck four of the exhibits to the affidavit filed by Marine Atlantic on the motions (2 for relevance and 2 on the basis of settlement privilege) but left the rest untouched.
The Crown raised various other arguments, notably abuse of process and a claim for solicitor-client costs. If did not fare well on these:
[48] Based on the record, the respondent has failed to establish the high threshold to show that Marine’s conduct amounts to an abuse of process. Marine’s pursuit of the unresolved issue as pled in its Notice of Appeal does not demonstrate a deliberate failure to cooperate or unwillingness to comply with the rules or orders causing delay and prejudice. Given my previous findings, it appears that Marine did not renege on the Agreement.
[49] I am not satisfied that the abeyance unduly delayed or lengthened the proceedings. The abeyance was designed to narrow the scope of the litigation and resolve three issues, including the Fuel ITCs issue. Necessarily, the appeal had to be placed in abeyance, in any event, pending the resolution of all issues and not just the singular Fuel ITCs issue. It appears that part of the Fuel ITCs was resolved and two other issues were fully resolved.
[50] Marine informed the respondent of its interpretation of and position with respect to the Decision in December 2014. Thereafter and up to May 2015, there were communications between counsel regarding the parties’ views on outstanding matters and suggestions for a timetable to complete the litigation steps. I am not prepared to conclude that Marine unduly delayed or unnecessarily lengthened the proceedings nor was I able to discern a deliberate lack of regard for the Court’s processes. I am not convinced that Marine’s conduct amounts to an abuse of process under Rule 53. I dismiss the respondent’s motion in which she seeks a finding that there was an abuse of process that would justify the striking of pleadings.
…
[66] The respondent claims solicitor-client costs because Marine requested that the appeal be held in abeyance pending the Decision and now attempts to renege on its Agreement because the Decision was unfavourable to its position. She submits that Marine misled the Court and the respondent, amounting to “reprehensible, scandalous and outrageous behaviour.” I disagree. Marine accepted it is bound by the Agreement except for the unresolved issue. Nor do I find it reprehensible to have a different interpretation of the Decision as to whether it is dispositive of the Fuel ITCs issue. In Invesco Canada Ltd. v Canada, 2015 TCC 92, [2015] TCJ No. 78 (QL), the fact that the respondent differed from the appellant in her view of certain documentation did not amount to misconduct or mean that her position was frivolous or vexatious, despite the fact that the Court found this view to be erroneous.
[67] I find that there is nothing on the record nor has the respondent demonstrated Marine’s behaviour is egregious and worthy of censure by solicitor-client costs.
Thus with the exception of striking four exhibits to Marine Atlantic’s affidavit filed on the motion the Crown’s motion was dismissed. There was no order as to costs.