CITATION: Compucare v. Ontario (Attorney General), 2015 ONSC 1987

Court File No. CV-14-177-00

SUPERIOR COURT OF JUSTICE

B E T W E E N:

COMPUCARE SYSTEMS LTD. and

DOUG SMITH

Applicants

(Responding Parties)

• and -

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO

Respondent

(Moving Party)

R E A S O N S F O R J U D G M E N T

BEFORE THE HONOURABLE MADAM JUSTICE H. MACLEOD-BELIVEAU

on March 11, 2015, at KINGSTON, Ontario

APPEARANCES:

Frank S. Stopar

Counsel for the Respondent

SUPERIOR COURT OF JUSTICE

ENTERED ON PAGE

Reasons for Judgment

1

Transcript Ordered:

March 11, 2015

Transcript Completed:

March 12, 2015

Ordering Party Notified:

March 12, 2015

WEDNESDAY, MARCH 11, 2015

R E A S O N S F O R J U D G M E N T

MacLeod-Beliveau, H. (Orally):

There are two matters before the Court today, an Application by the Applicants, and a Motion to strike the Application by the Respondent.

The court file is titled, Compucare Systems Ltd. and Doug Smith as the Applicants and “Charles Souza, Ontario Minister of Finance”, as the Respondent. The Respondent is erroneously named in the title of proceedings. I will therefore amend the style of cause today in respect of the Respondent, who shall be correctly named as “Her Majesty the Queen in Right of Ontario” as required in s.9 of the Proceedings Against the Crown Act. The ministry involved is the Ministry of Finance.

The first matter before me is the Application of the Applicants. They ask firstly, in Paragraph 1 (a) of the Application for an order directing re-payment of penalties and interest charged and collected with respect to two Retail Sales Tax Act assessments by the Minister of Finance for Compucare Systems Ltd. The assessments relate to the periods January 15, 1997 to March 31, 2000 and a further period ending December 31, 2005.

Secondly, the Applicants ask for an order in paragraph 1. (b) of the Application directing the Respondent to pay damages to the Applicants in the amount of $4,517,000.00 as a result of the erroneous collection actions of the Respondent.

The second matter before me today is the motion record of the Respondent, Her Majesty the Queen in Right of Ontario. They ask for an order striking Compucare Systems Ltd. as an Applicant and dismissing the Application in its entirety. Alternatively, the Respondent seeks various lesser aspects of relief in relation to striking out parts of the Application as being improper and not in compliance with the Rules of Civil Procedure.

Result:

The Applicants’ request for an adjournment is dismissed. The Respondent’s motion is granted and the Application is dismissed in its entirety.

The Applicants E-Mail request for an Adjournment:

On March 9^th, 2015, as seen in the supplementary motion record of the Respondent, Mr. Smith requested an adjournment of this matter to after June 2015. Mr. Smith did not appear before me today and he was specifically aware of this court date. He was paged three times and failed to appear.

This matter was first returnable on June 5, 2014 before Mister Justice Belch. At that time, Mr. Smith appeared and he requested an adjournment, in light of the motion brought by the Minister to strike, in order to obtain legal advice.

By agreement between Mr. Smith and counsel for the Respondent, the matter was adjourned to September 25, 2014. Subsequently, there was a further consent adjournment of the matter to December 5, 2014 in light of Mr. Smith’s correspondence to counsel for the Respondent that he had initially suffered a stroke and then subsequently, had suffered a heart attack.

As a result of the December 5, 2014 date not going ahead, Mr. Smith and counsel for the Respondent consented to adjourn this matter to March 11, 2015, at 2:00 p.m. which is today.

At the hearing today, counsel for the Respondent filed a supplementary motion record that attaches a series of emails between counsel for the Respondent and Mr. Smith confirming the adjournments. I am satisfied that Mr. Smith, first of all, was well aware of today's date and this hearing. He is also well aware, because of correspondence from Mr. Stopar, that there would be no further consent adjournments by the Respondent without a physician's report confirming Mr. Smith's condition and his inability to appear in court, which has not been provided.

What was sent in by Mr. Smith in an attachment to his e-mail was an appointment notice. I do not accept an appointment notice that Mr. Smith was to attend for diabetes counseling and various other social work and other appointments at Hotel Dieu Hospital on February 9^th and March 9^th, 2015, and attend an exercise class at 11:00 a.m. Mondays and Wednesdays for 1.5 hours as being sufficient evidence of a medical condition that prevents Mr. Smith from attending in court this afternoon. If he is sufficiently well to appear for a social work appointment, diabetes counseling and exercise appointments at the Hotel Dieu Hospital, I find he is sufficiently well enough to appear in court today, at least for the minimal reason of seeking an adjournment and providing a medical letter or a note from his doctor. None of this has been provided.

Mr. Smith's e-mails to the Respondent’s counsel are not sufficient, in my view, to cause the Court to grant an adjournment of this matter before me today. While Mr. Smith may have some medical issues, they are not a basis for an adjournment today. This is the third adjournment and Mr. Smith was well aware the matter was to proceed today. In my view, he failed to take the appropriate steps in relation to any adjournment. The adjournment request via e-mail from Mr. Smith is dismissed.

I will now consider the Respondent's motion.

The Respondent’s Motion to Dismiss the Application In Its Entirety:

There are three main grounds on which the Respondent relies to dismiss this Application in its entirety. They are:

(1) Compucare Systems Ltd. does not exist;

(2) The Application violates an express prohibition found in the Retail Sales Tax Act, R.S.O. 1990, c. R.31; and

(3) The Application alleges a claim against the Crown for damages, but does not comply with the requirements of the Proceedings Against the Crown Act, R.S.O. 1990, c. P.27.

The first ground is that the corporation, Compucare Systems Ltd. does not exist. Mr. Stopar has provided documentary evidence of a corporate record report that confirms to this Court that the corporate charter of Compucare Systems Ltd. was cancelled on February 11, 2012 therefore dissolving the corporation and that Compucare Systems Ltd. has not been revived. This corporation has no legal right to commence any court proceedings by way of an Application or any action whatsoever or bring any matter before the Court. Compucare Systems Ltd. does not exist. In simple terms, Compucare Systems Ltd. cannot sue anyone.

In relation to the claim of the Applicant Doug Smith personally, the only claim ever advanced by the Minister is as against the corporation of Compucare Systems Ltd. In paragraph 8 of the affidavit of Angie Kerr in Tab 2 of the Respondent’s motion record, she deposes that Mr. Smith was not ever assessed by Minister under the Retail Sales Tax Act. I quote:

"No lien or warrant has ever been issued against Mr. Smith personally by the Ministry and no property owned by Mr. Smith personally has been seized by the Ministry".

Therefore, Mr. Smith has no legal right to bring any Application on behalf of Compucare Systems Ltd. in his personal capacity for the re-payment of any sums assessed under the Retail Sales Tax Act by the Respondent. Further, since more than two years have passed since Compucare Systems Ltd. was dissolved, Mr. Smith has ceased to be a director of that corporation on its dissolution and the Minister cannot assess Mr. Smith personally for director’s liability, pursuant to s. 43 of the Retail Sales Tax Act.

In the result, neither the corporation Compucare Systems Ltd. nor Doug Smith, I find, have any legal standing to bring this Application as it relates to the relief claimed in paragraph 1. (a) of the Application.

The second ground is that s. 29.1 of the Retail Sales Tax Act explicitly prohibits the bringing of an Application of this nature under Rule 14.05 (3) in respect of any matter arising under the Retail Sales Tax Act. The collection and assessment of tax is clearly a matter that arises under the Act.

Specifically, s. 29.1 prohibits Applications of this nature and provides in subsection (5) as follows:

No person other than the Minister may bring an application under sub-rule 14.05(3) of the Rules of Civil Procedure on or after the day this section comes into force in respect of any matter arising out of this Act.

This came in force in 2006. I find that it is clear and obvious that this Application falls squarely within this prohibition and cannot proceed.

Counsel for the Respondent further submits that even if there was not a specific prohibition in the Act, the issue in this case pertains to an assessment of tax, and seeking a refund of tax, which can only be dealt with in an appeal under the Retail Sales Tax Act. (See Danzo-Coffey v. Ontario (2010), 2010 ONCA 171, 99 O.R. (3d) 401 (OCA))

Mr. Smith already has filed two appeals under the Retail Sales Tax Act in the Superior Court of Justice concerning these assessments which he could pursue subject to certain conditions. The principal condition is that he must revive the corporate status of Compucare Systems Ltd. in order to proceed on these appeals. Revival of the corporation would however expose Mr. Smith to potential director's liability for sums owed under the Act.

There is no valid Applicant before the Court in relation to paragraph 1(a) of the Application. The Application is barred by s. 29.1(5) of the Retail Sales Tax Act. Paragraph 1(a) cannot succeed and is dismissed.

The third ground relied upon by the Respondent for dismissal is in relation to paragraph 1(b) of the Application and the claim for damages of $4,517,000.00 as against the Crown, caused by the erroneous collection actions of the Respondent.

The Respondent’s counsel submits that this claim can only be construed as a claim for damages as against the Crown. I agree. In that case, the Proceedings Against the Crown Act must be followed. A claim for damages against the Crown must be commenced by an Action, not an Application. Proper notice must be given as provided for in s. 7 (1) of the Act. In this case, no notice has been given, and no action has been commenced. Therefore the claim for damages is not properly before the Court and cannot succeed, and must be struck as a nullity. (See Toronto (City) v. Longbranch Child Care, 2011 ONSC 548, [2011] O.J. No. 738 paras 33 to 38)

Giving the broadest interpretation that I can to the facts before me, this Application has no merit. The Application is fundamentally flawed, as to the parties named, the type of proceeding, and the relief sought. It is incapable of success before the Court. I find that the Respondent is entitled to the order that it seeks based on all three grounds relied upon.

The Application is dismissed in its entirety.