Federal Court of Appeal Rules That Non-Lawyers Cannot Represent Corporations in Tax Court of CanadaMarch 11, 2021
In a recent Federal Court of Appeal decision, the court ruled that a corporation cannot be represented by a non-lawyer in a general procedure appeal before the Tax Court of Canada.
Individual Shareholder/Director Seeks to Represent Corporation
The corporation brought a motion under Rule 30(2) of the Tax Court of Canada Rules (General Procedure) to have its sole shareholder, director and principal officer, who was not a lawyer, act on behalf of the corporation in front of the Tax Court of Canada. It relied on Rule 30(2), which reads as follows:
30 (2) Where a party to a proceeding is not an individual, that party shall be represented by counsel except with leave of the Court and on any conditions that it may determine.
At issue was the fact that recent Tax Court of Canada orders had determined that Rule 30(2) conflicted with section 17.1 of the Tax Court of Canada Act (the “Act”), which does not allow a corporation to be represented other than by counsel. Subsection 17.1 of the Actreads:
Right to appear
17.1 (1) A party to a proceeding in respect of which this section applies may appear in person or be represented by counsel, but where the party wishes to be represented by counsel, only a person who is referred to in subsection (2) shall represent the party.
Officers of the Court
(2) Every person who may practise as a barrister, advocate, attorney or solicitor in any of the provinces may so practise in the Court and is an officer of the Court.
Specifically, in Masa Sushi Japanese Restaurant Inc. v. The Queen, the court had ruled that a corporation could not appear “in person” in a general procedure matter and had to appear through counsel, stating:
“The words “in person” mean “physically present”. A human can be physically present in court. A corporation, being a creation of law with no physical substance, cannot.”
However, in the present case, the Tax Court of Canada allowed the motion to have the corporation’s individual shareholder/director represent the corporation, stating:
“I believe it remains open for a director or officer or whoever the Court might decide is the appropriate one to appear “in person” for a corporation, not as agent, but as the corporation itself.”
The Government of Canada appealed the decision. It argued that a corporation is a legal fiction that has no physical body; as such it cannot appear in person at the hearing as required by the ordinary meaning of the expression “in person”.
In response, the individual shareholder/director relied on the fact that a corporation is a“person” and a party to the appeal. He argued that because of its grammatical structure, s. 17.1 should be interpreted as enabling the corporation as of right to appear “in person” through its director or sole shareholder.
Federal Court of Appeal Rules That Non-Lawyer Cannot Represent Corporations
The Federal Court of Appeal conducted a thorough analysis of the relevant legislation provisions, stating that the language used must be read in its entire context and in its grammatical and ordinary sense and harmoniously with the scheme of the Act. It also reviewed the provisions in reference to the object and the intention of Parliament.
Ultimately, the court allowed the appeal, stating:
“I have concluded that the legislator did not intend to oust the common law and civil law principle that a corporation, because of its very nature, cannot appear “in person” before a court. It can only be represented by an agent who is a distinct person than the corporation. In my view, the grammatical structure of the provision is not sufficient to reach a different conclusion when one considers the nature of the rights described in the paragraph, the clear statutory scheme and its object. By adopting detailed provisions dealing with representation in the Act, the legislator limited the [Tax Court of Canada]’s implied power to control who may represent the corporation in their courtroom, especially in proceedings subject to the General Procedure.”
As a result, the court ruled that the individual shareholder/director could not act for the corporation.
Mark Feigenbaum brings together many years of litigation experience with a deep knowledge of tax law, corporate law, accounting, finance, and other related practice areas. Mark can help you avoid the biggest risks that may arise in tax disputes.
Prior to founding his law firm, Mark worked in the cross-border tax department of an international Big 4 firm, and held accounting management positions across a variety of sectors in both Canada and the United States.
With tax legislation in constant flux on both sides of the border, Mark takes great care to stay current on all relevant developments in law and policy. He carefully considers all solutions available to craft a response that proactively considers the policies and best practices of a given tax authority.
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