COURT FILE NOS:. CV-19-612874 CV-19-612876 CV-19-612877 CV-19-612879

DATE: 20200908

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ENTERPRISE RENT-A-CAR CANADA COMPANY

Appellant

– and –

THE MINISTER OF FINANCE

Respondent

Mark Tonkovich and Zvi Halpern-Shavim, for Enterprise Rent-A-Car Canada Company

James Vlasis, for the Minister of Finance

HEARD: September 1, 2020

F.L. MYERS J.

Background

[1] There are four appeals of four assessments all of which raise the same issue for a single taxpayer. On consent the four appeal files are consolidated with the surviving court file being CV-19-612874.

[2] Enterprise appeals being assessed liable to pay approximately $1.5 million for Ontario retail sales tax (“RST”) that it “collected” from customers but failed to remit to the Minister. The liability relates to an audit period from August 1, 2011 to July 31, 2015.

[3] During the audit period, the Minister says that RST at 8% was due on insurance premiums paid to Enterprise by its car rental customers. Enterprise collected 8% tax on the insurance premiums paid by the customers to whom it sold insurance. But Enterprise denies that it collected RST. It says it collected federal Harmonized Sales Tax (HST) that it remitted to the Canada Revenue Agency (CRA) under s. 165 of the Excise Tax Act (Canada). It might have collected the wrong tax. But it says that, as a matter of fact, it did not collect RST so it cannot be liable for breaching its obligations to remit RST collected on behalf of the Province.

[4] Although this is an appeal, it is a hearing de novo. It is not a review of the four assessments on a particular appellate standard. Rather the appeals are proceeding as an action in which the merits are before the court for determination afresh.

[5] Enterprise moves for summary judgment to allow the appeals. It says there is no serious issue requiring a trial. Its evidence is that it collected HST during the audit period in fact and that ends the matter. Both counsel agree that a single finding of fact – which tax did Enterprise collect - determines the outcome of the appeals either way.

Outcome

[6] For the reasons below, I confirm the assessments and dismiss the appeals. I find as a fact that during the audit period Enterprise collected RST that it remitted to the CRA instead of the Minister. Therefore, as agreed by the parties, I grant boomerang summary judgment in favour of the Minister.

Two Alternative Arguments

[7] I will quickly dispose of an alternative argument that is unnecessary in light of my principal finding. The Minister argued that if I find that Enterprise in fact collected HST, then it should be liable for failing to collect RST that was due and payable by customers during the audit period. However, the Minister missed the four-year limitation period for making this claim under s. 20 (3) of the provincial statute. It is not just alternative relief on the facts claimed. It is a different cause of action or fact pattern altogether under a different section of the statute. It is one thing to allege that a trustee collected trust funds and failed to pay them to the beneficiary as required by the statutory terms of the trust. It is the opposite thing to allege that the person failed to collect funds that she was obliged to collect. See: Continental Bank of Canada v. Canada, 1998 795 (SCC), [1998] 2 S.C.R. 358 at para. 10.

[8] As more than four years have passed since the end of the audit period, it is too late for the Minister to amend or to assess on a new basis now.

[9] Enterprise argues that if I find that it collected RST and mistakenly paid the funds to the CRA instead of the Minister, I should nevertheless vary or vacate the assessments because Ontario might have received something like 8/13ths of the amounts that were wrongly paid to the CRA in any event. It says it was a tax collector rather than a taxpayer; it proceeded in good faith; and I should therefore exercise the Minster’s discretion to reduce the assessment period to effectively reduce the amount it is required to pay.

[10] There is no firsthand evidence of what the CRA does when it receives payments that are properly due to a province or what, if anything, happened in this case. There is no admissible evidence before me as to how much, if any, of the RST remitted by Enterprise has been paid to Ontario. Moreover, the taxing statutes have remedies for customers and tax collectors like Enterprise who mistakenly pay the wrong tax. There is no evidence of any such remedies being sought if available in this case. There is no basis in evidence to moderate Enterprise’s liability (assuming I have authority to do so) based on what Ontario might have already received from the CRA.

[11] It also strikes me as highly artificial to redress perceived unfairness or to reward good faith by reducing the assessment period as a mechanism to reduce tax otherwise payable. That is doing indirectly what the statute does not contemplate being done directly. In any event, while I accept Enterprise’s good faith from 2011-2015, its conduct of these appeals would not lead me to consider exercising extraordinary discretion in its favour even if I thought I could.

The Main Appeal – the Parties’ Approach

[12] In their respective factums and at the outset of the hearing, both counsel advised me that their clients want the court to deal with the matter summarily. All the relevant evidence is before the court. Both sides have put their “best foot forward”. Full cross-examinations were conducted out of court. The witnesses are pinned to their testimony so further cross-examinations cannot be expected to change their evidence. Both parties agreed that a trial or minitrial should not be ordered.

[13] The parties also agree that the question of whether a particular tax was collected is a question of fact. It requires a determination of what Enterprise intended to do and actually did. In Canada v. Gastown Actors' Studio Ltd., 2000 16656 (FCA), the Federal Court of Appeal agreed:

We agree with the Crown that a taxpayer who has in fact collected GST, whether for services that are taxable or for services that are later determined to be exempt supplies, must remit those amounts and is liable to be assessed if they are not remitted. In this case, however, the question of whether the respondent collected GST, and if so how much, are questions of fact that we are not prepared to determine on the record before us.

[14] It seemed to me initially that to determine whether Enterprise collected RST or HST, it might be relevant to conduct a legal analysis to determine which tax it properly ought to have been collecting during the audit period. But both parties strongly dissuaded me from doing so. They argue that the provincial statute in many sections differentiates a tax being “collectible” from the tax actually “collected”. The statute also contemplates the wrong tax being collected in error. This leads the parties to agree that regardless of which tax was legally due or “collectible,” the question of fact as to which tax was actually “collected” is a different question. For example, the Minister agreed with Enterprise’s assertion that if a vendor was collecting RST, even where only HST was collectible, the Minister would expect and require the RST collected to be remitted to it under the provincial statute. The Federal Court of Appeal said the same thing from the federal perspective in Gastown above.

[15] My task, therefore, is to determine, whether Enterprise collected RST as found in the assessments if I am able to do so on the record before the court. Put another way, in order to obtain summary judgment, Enterprise must show that there is no serious issue to be tried about whether it collected RST during the audit period.

The Taxes – the Two Alternatives

[16] The audit period concerns the time just after the Federal Government harmonized GST with provincial sales taxes across the country. It is a common misconception to think that under harmonization, the Federal Government collects provincial sales taxes on behalf of the various provinces. Legally, that is not the case. In fact, federal HST is made up of two components. There is 5% tax levied on all applicable sales of goods and services. This replaced the GST that was set at 7% prior to harmonization. The second component of HST is a further amount that differs by province. In Ontario, the rate is 8% which equals the rate of Provincial Sales Tax (PST) that used to be charged by Ontario prior to harmonization.

[17] The Federal Government and the Province of Ontario have entered into an agreement as to how the funds collected by the CRA as federal HST will be shared to provide tax revenue to Ontario in lieu of PST. PST (and its replacement RST) are not charged or collected as HST. When HST applies in Ontario, the full 13% is a federal tax made up of the two components set out in the Excise Tax Act as described.

[18] However, there are still some sales of goods and services to which only provincial retail sale tax applies. HST is not charged on all the sales of all goods and services. For example, generally speaking, HST is not charged on insurance premiums paid by purchasers of insurance.[^1] When HST does not apply, the Province may continue to levy its own retail sales tax. For example, in this case, Enterprise accepts that as a result of the audit in 2015, it now collects RST at 8% on sales of insurance and it remits to the Minister the 8% tax it charges on the insurance premiums that it receives from customers on behalf of insurers.

[19] So, the question for determination is whether during the audit period, Enterprise was collecting the federal 8% component of the HST in Ontario or was it collecting RST and remitting it to the CRA as if it was HST?

The Evidence

[20] The evidence of which tax Enterprise in fact collected can only come from Enterprise. Its lead witness, Mr. Kent Chancellor, is the retired Vice President, Business Management, Canadian Operations of Enterprise. He was responsible for sales tax administration for all of Canada. He submitted a detailed affidavit on which he was thoroughly cross-examined.

[21] Prior to harmonization, Enterprise charged 8% PST on its insurance sales. After harmonization, it continued to charge the same 8%. Its invoices read, “Harmonized Sales Tax”, showed Enterprise’s GST number. It remitted the amounts collected to the CRA. It did not register an account with the Minister for RST.

[22] As I will set out below in greater detail, Enterprise says it believed it had to charge HST at 8% on sales of insurance and it did not charge RST. I find that it is more probable that during the audit period it charged RST just as it had charged PST before. Enterprise’s mistake was that it remitted the RST collected to the CRA instead of remitting it to the Minister. It did not charge the wrong tax. It charged the correct tax, but it was confused as to how harmonization was supposed to work and it remitted the RST it collected to the wrong tax collector.

[23] I make this finding principally because Mr. Chancellor admitted that this was what was happening in a contemporaneous exchange with a provincial tax auditor and again while under cross-examination.

[24] On May 28, 2015, a provincial tax auditor contacted Mr. Chancellor out of the blue. The auditor advised Mr. Chancellor that he had been unable to locate Enterprise’s account with the Minister for the collection of RST. He wrote,

Your company has been collecting RST on behalf of insurers and you were obligated to remit it to the Ministry.

[25] The auditor notes that this was a common occurrence and steps are available to remedy the situation.

[26] Mr. Chancellor responded in an email the next morning, May 29, 2015, as follows,

I believe we have in fact been remitting the ORST (Premium Tax), in our HST (CRA) returns. You mention below there is a remedy, can you advise.

[27] Everything that follows is Enterprise’s effort to avoid the fact that it admitted to the tax auditor it had been collecting RST that it was remitting to the CRA.

[28] Mr. Chancellor discusses his response to the auditor starting at para. 24 of his affidavit:

…However, to be perfectly clear: my referring to the tax in question as "ORST" in my response email (and in any subsequent emails or communications I had with the MOF on this issue) does not reflect a belief that the tax amounts in question were actually collected as or on account of ORST rather than Canadian federal sales tax. I had no such belief at that time, or at any time through to the present. Instead, my references to ORST in such communications was a function of my responding to the MOF personnel using the terminology the MOF personnel had been using in communicating with me. My primary goal at all times was to resolve the MOF audit as efficiently as possible while minimizing any negative tax consequences for Enterprise.

25. In making the statements contained in my May 29, 2015 email response to Krishna Ramlal (and in any subsequent emails or communications I had with the MOF auditor on this issue), I was not taking a firm position on whether Enterprise was collecting ORST in respect of the Supplies during the Audit Period up to that date. On the contrary, my response was made after only a very brief consideration of the issue, and it was made in an attempt to quickly and efficiently deal with any perceived or purported failings in Enterprise's tax practices.

26. More specifically, before responding to Krishna Ramlal's May 28, 2015 email, I had not conducted an independent review or investigation of the assertions that the auditor made in the initial email, including whether the amounts the auditor referred to were actually being collected as or on account of ORST. On the contrary, given what I perceived to be a helpful "tone" to the auditor's initial email and the reference to a "remedy" for such a situation (if it truly existed), I had immediately adopted a conciliatory approach in my response. In so doing, I anticipated that, if there truly was any issue in respect of Enterprise's sales tax practices (which was, as yet, unknown to me), such issue could be most effectively and efficiently remedied by my adopting that type of conciliatory approach with the auditor.

[Emphasis added.]

[29] Summarizing Mr. Chancellor’s responses:

a. He did not and does not believe that Enterprise collected RST;

b. He responded in the terms used by the auditor to promote resolution;

c. He was not taking a firm position. Rather he responded after a brief consideration to deal with any perceived failings in Enterprise’s tax practices;

d. He had not conducted an independent review or investigation to determine if Enterprise was collecting RST; and

e. He responded with a helpful tone to promote the remedy referred to by the auditor.

Was Mr. Chancellor Lying to the Auditor?

[30] In (a) Mr. Chancellor now swears that he did not believe that Enterprise was collecting Ontario RST when he wrote, “I believe we have in fact been remitting the ORST.” He told the auditor his belief and he now says he did not actually believe it at the time. This evidence has a significant impact on the assessment of Mr. Chancellor’s credibility as a witness in this proceeding below.

Was Mr. Chancellor Just Being Conciliatory?

[31] Points (b) and (e) are the same. Mr. Chancellor says that to promote settlement he admitted the auditor’s allegations. It was not necessary to admit guilt to make a conciliatory statement looking for the consensual remedy. I am unable to accord much weight to this evidence. It reflects a rather mercenary approach at best.

Did Mr. Chancellor take a Firm Position?

[32] As to the first sentence of para. 29 (c), Mr. Chancellor says he was not taking a “firm position.” I don’t know what can be firmer than a simple declarative admission of fact. It was not conditional or uncertain in the least.

Was there a Diligent Consideration and Analysis of which Tax Applied after Harmonization?

[33] The rest of points (c) and (d) require analysis. Mr. Chancellor says he only gave brief consideration to the question and did no independent investigation of the question of which tax was being collected. The following recitation is from the factum delivered by Enterprise’s counsel (notes omitted).

(i) At all relevant times, Enterprise's tax team/Canadian controllers worked carefully and in good faith to facilitate Enterprise's compliance with all tax collection, reporting, and remittance obligations under Canadian federal and provincial tax laws.

(ii) Prior to the harmonization of the (former) Ontario RST regime with the Canadian federal sales tax regime on July 1, 2010 ("Harmonization"), Enterprise duly charged its customers the Ontario RST applicable to its sales in Ontario. Enterprise explicitly identified Ontario RST on its invoices in respect of the Supplies prior to Harmonization.

(iii) Enterprise's inhouse tax team/Canadian controllers specifically considered how Harmonization would affect Enterprise's operations. Based on their analysis of the issue, they determined that the only sales tax that Enterprise was required to charge and collect on the Supplies following Harmonization was 8% Federal HST (on the Supplies of POM and PAI/PEC) and 13% Federal HST (on Supplies of PAI Inclusive coverage). Further, they determined that Enterprise was required to then remit to the (federal) Canada Revenue Agency ("CRA") the amount of Federal HST charged on the Supplies. Such Federal HST was in addition to the 13% Federal HST applicable to other components of Enterprise's rentals.

(iv) None of Enterprise's inhouse tax team/Canadian controllers or other personnel sought to have Enterprise collect, or caused Enterprise to collect, sales tax on the Supplies as or on account of Ontario RST. This was the case throughout the Audit Period, up to June 2015

[34] To try to show that Enterprise was collecting HST, counsel laid out the steps showing the care and diligence demonstrated by Mr. Chancellor and his team of tax advisors to implement harmonization. They explicitly studied the question of how sales tax was to be charged on insurance products post-harmonization and their analysis led them to conclude that only HST was to be charged. They changed their invoices to show HST and remitted to the CRA accordingly.

[35] As I summarized above in para. 29 (c) and (d) above, Mr. Chancellor says that when he confirmed to the auditor that Enterprise was remitting RST to the CRA, he responded quickly and had no time to investigate. That does not fit with his careful team of diligent tax practitioners having already expressly studied and analyzed the issue and unanimously concluded that only HST was due.

[36] Mr. Chancellor was not having a causal conversation among friends. He was the senior tax official of a significant multinational enterprise responding to an allegation made by a tax auditor. He essentially confessed. Unless he was lying to the auditor, it is inconceivable that he made the admission on a quick and unstudied basis if his team had actually, carefully, and diligently studied the matter previously and made a deliberate determination after fulsome analysis.

[37] It is possible that Mr. Chancellor simply lied to the auditor to try to curry favour. He says as much in his affidavit as summarized in para. 29 (a) above.

[38] But at question 330 of his cross-examination, Mr. Chancellor testified:

330 Q. At the time when you wrote the email to [the auditor], were you telling [him] the truth?

A. Well, yes, I was responding and that is how I felt at the time, and that was the truth as I believed it when I sent it, sure.

[39] This evidence is inconsistent with his affidavit in which he says he always believed that Enterprise collected HST throughout even when he told the auditor the opposite. But I do not believe that Mr. Chancellor lied to the auditor in 2015 however. There were many other ways to be conciliatory and curry a favourable resolution without making an untruthful confession.

[40] I believe Mr. Chancellor told the truth in 2015 as he said at Q. 330 and that the story is being re-spun now.

Counsel Intervenes on Cross-Examination to Prevent Inconsistent Spin from being Exposed

[41] The following exchange during Mr. Chancellor’s cross-examination is instructive:

168 Q. Yeah, always, no? Before too, yes?

A. Yes, before, prior to harmonization, we had taxed at 8 percent PST, and based on our research subsequent to harmonization, we did the research, changed our internal accounting systems to tax at the 8 percent however, adjusted our internal accounting to have that remitted to the CRA.

169 Q. Okay, and the 8 percent retail sales tax was applied prior to harmonization on invoices, 8 percent retail sales tax, right, PST,8 as you said?

A. PST, yes.

170 Q. 8 percent. Post-harmonization, 11 still 8 percent?

A. The percentage didn't change, correct.

171 Q. 8 percent retail sales tax to the CRA, is that what you --

MR. TONKOVICH: Mr. Vlasis, I object. I don't think that was the witness's testimony. I'm sure that you didn't mean anything by it, but I don't recall Mr. Chancellor saying 8 percent retail sales tax to the CRA at any point.

BY MR. VLASIS:

172 Q. Okay, so you said 8 percent to the CRA. Was the 8 percent not retail sales tax then?

A. As I mentioned earlier, based on our process and review at the time, our understanding was that the 8 percent went to the CRA.

[Emphasis added.]

[42] I take two points of significance form this exchange. First, Mr. Chancellor did not say that RST was not being collected. Rather, in the bolded phrases above, he said twice that they adjusted their process for remittance. The tax collected “went to CRA”. When Mr. Vlasis tried to put to the witness that after harmonization, he was collecting RST, the witness’s counsel intervened. Without doubt later in the examination, Mr. Chancellor said that Enterprise collected HST. But, prior to his counsel intervening, Mr. Chancellor expressed the decision of Enterprise to remit tax to the CRA. This is precisely what he said in his letter to the auditor. They decided after harmonization that they had to remit to the CRA.

[43] The invoices become quite ambiguous when viewed with that position in mind. Were they changed because Enterprise decided to collect the second component of HST, or did Enterprise think that it was still collecting RST but just remitting to CRA in the HST environment? The invoices do not help with that nuance.

[44] The second point of significance in this exchange relates to the intervention of counsel for the witness that I discuss more fully below. This was but the first time that counsel intervened while his client’s evidence was being challenged on the key issue in the case.

[45] Later, Mr. Vlasis was cross-examining Mr. Chancellor on his evidence that he believed Enterprise was collecting HST until the auditor told him otherwise and Enterprise changed its position. Mr. Vlasis was trying to undermine the credibility of the evidence that Enterprise had actually decided to collect HST on the introduction of harmonization. The speed by which one sentence in auditor’s email led to a complete change of corporate position raises at least an issue about the existence of the prior, deliberate, and studied analysis now claimed. Why did they change their view so fast if it was the result of careful, studied analysis? The following exchange occurred:

350 Q. Okay, thank you. So now with respect to throughout the time period, throughout the -- after HST -- sorry, after harmonization, before hearing from [the auditor] at all, before the audit, you genuinely felt that HST was being correctly charged from the customers and submitted correctly, remitted correctly to the CRA, right?

A. Correct, yeah, during the five years subsequent to harmonization, we had received no feedback from any consumers, customers, companies, the MOF, nobody, that we were incorrect.

351 Q. Okay, now, and then that correctness you say in your mind -- okay, in your mind you questioned the correctness, and eventually it became clear that you were incorrect in terms of collecting HST, no? At some point you became aware of that?

MR. TONKOVICH: Objection. I have several concerns with that question, Mr. Vlasis.

MR. VLASIS: Yes.

MR. TONKOVICH: To streamline this, I am going to start with relevance. I believe it is the same concern we had before as far as the legal position on whether or not HST ought to have been collected. To my mind, that question is irrelevant for purposes of this motion. This motion looks to obtain summary judgment on the basis that HST was in fact collected and that RST was not collected. Are you able to help me out with that concern on relevance and perhaps we can find a way to move forward with this line of questioning, if appropriate?

[46] A few minutes later, Mr. Vlasis was trying to undermine the credibility of Mr. Chancellor’s evidence that Enterprise thought it was paying HST before the audit. He was trying to establish that if Enterprise realized it had collected the wrong tax, it would have made sense to tell its customers who could find themselves with a tax problem. The customers ultimately owed the tax and seemingly had not paid it for five years. But, by contrast, if Enterprise knew that it had been collecting RST all along and was just remitting it to the wrong government, that would be more consistent with its decision not to tell its customers. The following exchange occurred:

MR. VLASIS:

421 Q. …

Let me break that up. It will be easier, I think, if I divide it up. All along during from the customers for these insurance products, right, during the the Audit Period, during the Audit Period you thought -- sorry, you collected HST Audit Period, HST?

A. Correct.

422 Q. HST was collected from the customer on the insurance products, yes?

A. Yes.

423 Q. Okay. And through the Audit Period, you and your team thought that was correct, right, that it was the correct thing to do?

A. Yes.

424 Q. And later the perspective changes and you realize that that was the incorrect thing to do, later after the Audit Period finished?

A. Yeah, we definitely made the change for sure.

425 Q. Okay, I appreciate you made the change, but during that change in perspective, you realized during the Audit Period the wrong tax was being collected from the customer?

A. Yes.

426 Q. And after realizing that, why wouldn't you tell the customer that, that we collected HST from you but we shouldn't have?

A. Like I mentioned earlier, it wasn't a thought at that point in time.

427 Q. Could it be that it was RST anyway and you thought it to be RST during the time it was just going to the wrong government?

A. No, reaching to the customers, I -- yeah, I don't know how those two tie in, but reaching to the customers wasn't a thought.

428 Q. Well, could it be that you didn't reach out to the customer because during the Audit Period you thought it was RST anyway, so there was no need to reach out to the customer because you collected, in your mind, RST during the Audit Period, not HST, in your mind?

MR. TONKOVICH: Objection, Mr. Vlasis. I think that we have, again, given quite a bit of leeway here. I am having real difficulty with this, and I know you don't mean anything by it, but I am seeing the questions coming up as either sarcastic or abusive.

[47] In both of these examples, and at question 171 quoted above, counsel for the witness intervened just as the cross-examination was approaching a conclusion on the credibility of the witness’s testimony on the key issue in the case. At question 171, Mr. Vlasis was trying to push the witness to concede that the 8% tax being collected by Enterprise during the audit period was RST. At question 351, Mr. Vlasis was trying to pin the witness to conceding that if Enterprise truly believed it was charging HST in the audit period, then it made a significant change of position on just being told otherwise by an auditor. This went to the credibility of the claim that a prior, studied analysis had been made. But it was also a key set-up for the last line of questioning quoted above that tried to show that Enterprise did not act as if it had changed its position in how it dealt with its customers. It acted consistent with how one would act if it was charging RST throughout. In each case, counsel intervened to thwart the questioning at a key moment.

Analysis of Summary Judgment

[48] As I noted at the outset, this is a motion for summary judgment. Despite both counsel submitting that I can resolve the issue of fact in the case summarily, I still need to consider whether I can fairly make the finding on the material before me. As is apparent throughout, I cannot do so without making an inference based on the credibility of Mr. Chancellor’s evidence.

[49] Rule 20.04 (2.1)(2) expressly authorizes the court to evaluate the credibility of a deponent of affidavit evidence on a motion for summary judgment. It is one of the expanded powers that can only be used when doing so is not contrary to the interests of justice. See: Hryniak v Mauldin, 2014 SCC 7, at para. 66. As described by the Supreme Court of Canada:

Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[50] In considering the litigation as a whole, I note that this motion will resolve the whole case. There is no risk of a multiplicity of proceedings or inconsistent verdicts.

[51] In Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, Lauwers JA pointed to another concern affecting the analysis of the litigation as a whole:

What happened here illustrates one of the problems that can arise with a staged summary judgment process in an action where credibility is important. Evidence by affidavit, prepared by a party’s legal counsel, which may include voluminous exhibits, can obscure the affiant’s authentic voice. This makes the motion judge’s task of assessing credibility and reliability especially difficult in a summary judgment and mini-trial context. Great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all.

[52] I find that this concern is indeed a factor in this case. When left to his own voice, Mr. Chancellor says in his 2015 email that Enterprise was remitting RST to the CRA as HST. On cross-examination, before counsel intervened, he twice said that they determined to change their processes to remit to CRA. He also said that this was his belief at the time that he wrote the contemporaneous email.

[53] I accept this evidence. I am buoyed in this finding by counsel’s inappropriate interventions during cross-examination. In Chitel et al. v. Rothbart et al., 1982 1956 (ON CA), MacKinnon ACJO discussed the proper role of counsel for a witness during out-of-court cross-examination:

Counsel seemed to have confused, in part at least, the right to limit "fishing expeditions" on examination for discovery with a severe limitation on the extent of proper cross-examination. Counsel at trial would not, on any and every pretext, seek to frustrate proper examination. If he did, he would be quickly corrected by the trial judge. Because a judge is not present does not mean that a counsel, who is an officer of the court, should take a different position. He should not answer some obviously significant question himself before the witness answers, unless it is done by agreement with counsel for the other side, nor lead his witness immediately after the witness has given a damaging answer to explain the answer. Nor should he interrupt and prevent, time after time, questions from being answered although a legitimate ground has been given for their being asked...I have digressed to a certain extent but I think it important that a practice not develop which would debase the value of the right to cross-examine and effectively frustrate its legitimate purpose.

[54] I have cited above three examples of counsel intervening to prevent inconsistencies in the witness’s evidence from being explored. There are others. I find that counsel has frustrated the examination to the extent that I should draw an adverse inference that Mr. Chancellor was about to give testimony in his authentic voice that would not support the narrative weaved by counsel in his affidavit.

[55] In assessing credibility, I rely on the classic statement from Faryna v. Chorny (1951), 1951 252 (BC CA), [1952] 2 D.L.R. 354 at 357 (B.C.C.A.):

… the real test of the truth of the story of a witness … must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions.

[56] How likely is it that the head of tax being told by an auditor that they had been breaching the law for five years would send a quick and unstudied email confessing and saying they believed that under harmonization their RST collections were to be remitted to CRA as HST? How likely is it that the company would alter its studied analysis that only HST was to be charged on just receiving a simple email from an auditor? How likely is it that the head of tax would deliberately lie to an auditor by confessing to something that he did not believe true instead of saying, “No. We studied this and think that only HST is due” at least as an opening position? It could still be said in a conciliatory fashion.

[57] So, while I am concerned that the evidence in Mr. Chancellor’s affidavit, prepared by legal counsel, obscured the affiant’s authentic voice, I find that in this case the witness’s authentic voice can be heard.

[58] While precise bricks have been laid in the affidavit and they have been built up in the detailed and precise recitation in the factum, none of it makes sense compared to the alternative. I find it telling that there is not a single contemporaneous document disclosed in Mr. Chancellor’s affidavit showing either the initial study of harmonization having been undertaken or the outcome of the team’s “analysis” that HST applied. I would expect a diligent team of tax advisors to document such a thorough and careful analysis. What counsel has spun into a studied analysis and a firmly held conviction was probably more like someone looking at the available government pamphlets and believing, like many others, that harmonization meant that the federal government collects provincial sales tax. There is not a single piece of paper produced to support what counsel repeatedly submitted to me was a serious, detailed, and significant analysis.

[59] Moreover, as noted above, if such a serious analysis had occurred, why would Mr. Chancellor write,

I believe we have in fact been remitting the ORST (Premium Tax), in our HST (CRA) returns.

[60] I find that it is in the interests of justice to resolve this matter summarily and that a minitrial is not necessary for me to be able to make credibility findings required to do justice between the parties. The statements and actions of the company are not consistent with it having a studied belief that it was collecting HST. The spin is not consistent with the preponderance of probabilities that a practical business person would find reasonable.

[61] When credibility shines through a transcript, repeating an out-of-court examination in court is not necessary, efficient, or proportional. This is especially the case because the witness’s comportment and appearance are not major factors in credibility analysis. In this case, the contemporaneous documents (and lack thereof) and the cross-examination transcript tell the tale.

[62] Both counsel submitted that a trial was not required as there was nothing more to put before the court. Both parties have put their “best foot forward”. Mr. Chancellor was subjected to a lengthy, thorough, probing cross-examination in which his voice was readily audible when not blocked by his counsel. I find that I can fairly find the facts and apply the law in this case.

[63] There is no serious issue requiring a trial. Enterprise collected RST in fact during the audit period. The assessments are therefore upheld and the appeals are dismissed.

[64] The Minister may file costs submissions by September 14, 2020. Enterprise may deliver its costs submissions by September 21, 2020. The submissions of both parties shall be accompanied by Costs Outlines and copies of any offers to settle on which they rely. The submissions may be no more than three pages long. No case law or statutory material is to be delivered. References to case law or statutory material, if any, shall be made as hyperlinks in the parties’ submissions. All documents shall be delivered as attachments to an email to my Judicial Assistant in OCR searchable PDF format.

F.L. Myers J.

Released: September 08, 2020

COURT FILE NOS: CV-19-612874 CV-19-612876 CV-19-612877 CV-19-612879

DATE: 20200908

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ENTERPRISE RENT-A-CAR CANADA COMPANY

Appellant

– and –

THE MINISTER OF FINANCE

Respondent

REASONS FOR JUDGMENT

F.L. Myers J

Released: September 08, 2020

[^1]: This is not so simple as Enterprise has arguments that at least some of the insurance products that it sold might have been subject to 13% HST in the ordinary course. As I have already noted, I am not determining which tax actually applied as a matter of law as part of the factual analysis in this case.