Res Judicata

Two months after their marriage, the taxpayer received (on January 8, 1993) from her husband (“CC”) the transfer of a property valued in excess of his subsequently assessed tax liabilities for various taxation years including his 1988 and 1989 years (as a result of losses from a partnership investment being denied). After the Minister assessed the taxpayer under s. 160, the taxpayer challenged the validity of waivers that CRA had received respecting those two taxation years.

Owen J found (based on Gaucher) that she was not precluded from disputing the validity of the assessments of her under s. 160(2) on the grounds that the waivers proffered by CRA were invalid, even though this issue had not been raised in the unsuccessful group appeal by CC and others of the denial of the partnership losses. He similarly found that there was no abuse of process in her doing so, and that res judicata did not apply, given inter alia that the appeal of her husband was regarding a different issue (i.e., that of another taxpayer) than her own appeal of her s. 160(2) assessment, notwithstanding her representative status as executrix during the continuance of his appeal by his estate.

After President's Choice Bank (the “2009 Decision”) determined that services supplied by a subsidiary of Loblaw (“PC Bank”) to another bank (“CIBC”) were exempt arranging-for “financial services” under para. (l) of the ETA definition. The definition was then retroactively amended (through the addition of paras. (r.4) and (r.5)) to narrow its scope. CIBC nonetheless applied for a refund of GST that PC Bank had commenced charging to it on the basis that the supplies made continued to be exempt. In connection with its appeal of the denial of its rebate claims (and PC Bank’s appeal of assessments of other periods for its failure to charge GST on such supplies) CIBC brought this motion that its appeal be allowed on the basis that the substance of the supply was already determined in the 2009 Decision (or an order precluding the Respondent from introducing evidence inconsistent with the 2009 Decision regarding the substance of the supply).

Before dismissing the motion, Hogan J first found (at para. 19) that cause of action estoppel could not apply as:

[C]ause of action estoppel does not apply to an appeal of a tax assessment arising from two different taxation years even if the facts, parties and issues are substantially the same.

Regarding application of the three-part test under Angle for determining whether issue estoppel applied, the third requirement of “mutuality of the parties and their privies” was established as CIBC was a privy of PC Bank given that PC Bank had been reassessed for failure to collect GST from the CIBC and remit it on CIBC’s behalf (para. 33).

Furthermore, the “same issue” test was not satisfied since the scope of the exemption had “been narrowed by virtue of these new exclusions” in paras. (r.4) and (r.5). Hogan J stated (at para. 49):

I fail to see how the doctrine of res judicata can apply when the provision of the law previously considered in an earlier decision no longer applies.

He further stated (at paras. 64, 66):

[T]he doctrines of issue estoppel and abuse of process will rarely find application with respect to transactions or arrangements carried out in different taxation years. This is particularly true when a provision of the law has been amended in an attempt to nullify the impact of a precedent which the government has taken issue with. Income and value added taxes are imposed in respect of a tax period. The circumstances surrounding the parties’ agreement often change when key agreements have been amended.

… I [also] do not believe it is in the public interest that I decide on an issue without hearing evidence that is relevant to the determination as to whether or not the exclusions apply. While some may view retroactive legislation as being manifestly unfair, it is not the court’s role to limit Parliament’s legislative authority to adopt retroactive legislation that is validly enacted.

The taxpayer argued that he was not bound by a consent judgment divorce settlement because he had not signed the underlying minutes of settlement, nor authorized his counsel to do the same. Masse DJ stated (at paras. 17-18):

This is not the first time Mr. Yourkin has been before this Court on this very same issue. He unsuccessfully challenged his assessments for his 2001, 2002, 2003, 2005, 2006 and 2009 taxation years. In all these prior appeals, the parties were the same, the issues were exactly the same, and the facts relied upon were the same except for the taxation years and perhaps the amount in dispute. ...

Whether one looks at this situation through the lens of res judicata or issue estoppel, the result is the same. ... The matter has been finally decided.

The taxpayers were a corporation and its two 50% shareholders ("Grant and Lorraine"). Following an audit, the Minister laid income tax evasion charges against the taxpayers for their 2002 to 2007 years, resulting in a plea bargain based upon an agreed statement of facts. Lorraine and the corporation were convicted. The taxpayers appealed the Minister's subsequent income tax reassessments, which were for larger amounts than in the agreed facts as well as GST reassessments of the corporation. They moved under Rule 58 for a determination of the question of whether doctrines of issue estoppel and abuse of process applied to prevent the Minister from asserting the larger amounts.

Following Angle, Campbell J treated issue estoppel as a branch of res judicata (para. 15).

Before dismissing the application for a Rule 58 determination in light of the extent of issues that would still need to be resolved at trial, Campbell J found that issue estoppel did not apply. She noted that convictions based on plea bargains are not dispositive in civil proceedings, but are rather prima facie proof (paras. 31, 35), and that there was insufficient identity of issues between the current and prior proceedings – for example, the agreed facts did not deal with Grant's tax matters or the corporation's GST appeal. Campbell J further noted that "amounts dealt with in criminal proceedings are minimum amounts with respect to the civil proceedings" (para. 44).

The appellant was appealing an assessment made by Revenue Quebec on behalf of the (federal) Minister under s. 270(4) of the Excise Tax Act in respect of a debt of a corporation of which she had been a receiver. Angers J noted (at para. 4) that (TaxInterpretations translation):

The issues before me are essentially the same as those put before Justice Lareau of the Court of Quebec and on which he has already pronounced. Only the legislative provisions on which the assessments rest are different….[T]he decision…which dismissed the appeals, is under appeal before the Quebec Court of Appeal….

There was an agreed statement of facts based on the findings of Lareau J.

In finding that the issues before him were not res judicata, and after noting that both cases dealt with a sale of assets without a clearance certificate, Angers J stated (at para. 8):

It is more difficult for me to conclude that the provincial and federal assessments have the same subject. Their amounts and legal basis are different. Finally…there is not an identity of the parties, as the federal and Quebec governments are not the same person.

However, it would constitute an abuse of process to consider the issues in the present appeal given their similarity to those disposed of by Lareau J. A different outcome in this appeal would be viewed as contradictory to the earlier decision (para. 13), whereas the objective instead was that "judgments on the same question be coherent" (para. 16).

The taxpayer had succeeded in an appeal from a prior taxation year, in which the taxpayer's motor vehicle expenses were deductible under s. 8(1)(h.1) in respect of his substitute teaching job. D'Auray J. found that neither the res judicata doctrine nor issue estoppel could block the Minister from denying the taxpayer's s. 8(1)(h.1) deductions in subsequent years. Res judicata cannot apply between appeals involving different taxation years because each taxation year is a different cause of action.

Issue estoppel did not apply because the Minister had new evidence (a witness for the school board). D'Auray J. noted that, "since in income tax appeals we often deal with recurring issues," it would be inappropriate to apply issue estoppel to prevent the Minister (or the taxpayer) from introducing new evidence simply because a deduction was allowed or disallowed previously (para. 80).

The Minister disallowed the deduction by the taxpayer of guarantee fees paid by it to its US parent. The taxpayer appealed, and moved to have parts of the Minister's response struck on the basis that the Court of Appeal had already decided that the same guarantee fees were deductible when paid by one of the taxpayer's three predecessors before amalgamation (see General Electric Canada Company Inc.).

Campbell J. dismissed the motion. The res judicata doctrine did not apply. This was clearly not a case of action estoppel, as the appeal concerned different taxation years than the prior decision. The taxpayer did not discharge its burden to make out issue estoppel either. Issue estoppel requires either that the parties in the present matter be the same parties, or privies of the same parties, in the prior decision. There was insufficient evidence to conclude that the three predecessors were "alter-egos" of one-another (para. 27). Moreover, there was insufficient evidence that the guarantee agreement in the present case was similar enough to the prior guarantee agreement to establish that the same question was being tried.

In a prior decision, the Tax Court had found that the taxpayer's directors were protected from liability for unremitted source deductions under s. 227.1(1) because they had a due diligence defence under s. 227.1(3). The question in the present case was whether the taxpayer would be liable under s. 227(9)(b). The taxpayer argued that its reassessment should be barred, because the question of source deduction liability on the present facts had already been settled by the prior Tax Court decision.

Bowie J. found that the Minister's reassessment was not barred by issue estoppel. In issue estoppel, the case must involve the same parties and the same issue. The present case engaged a different party (the taxpayer rather than its directors) and a different issue (s. 227(9) liability rather than s. 227.1(1) liability). Neither did the doctrine of res judicata bar the Minister's reassessment - the change in issues and parties meant that the present case could not be construed as a relitigation of the prior decision.

After the Tax Court issued a judgement allowing the taxpayer's appeal in respect of an assessment on him of an s. 15(1) benefit on the basis that the fair market value of the property transfers giving rise to the benefit were lower than assessed, the taxpayer launched a fresh appeal to the Tax Court on the basis that the amount of the benefit to him should be reduced by balances in his shareholder's loan account with the corporation. In finding that the doctrine of res judicata barred this second appeal, McArthur, J. noted (at para. 20) that the taxpayer "could have brought forward the argument offsetting his shareholder loans against the benefit during the first appeal."

The taxpayer was assessed in 2003 to give effect to a judgment of the Federal Court of Appeal finding that he was resident in Canada for the three taxation years in question. After the Ontario Ministry of Finance agreed that the taxpayer was not resident in Ontario, the taxpayer was reassessed in 2006 to give effect to this agreement and to reassess the taxpayer for further interest. The taxpayer filed a Notice of Appeal to the 2006 reassessments.

Rip, C.J. found that cause of action estoppel (and issue estoppel) precluded the taxpayer from re-raising the issue of his residency in the 2006 Notice of Appeal. Although there was discretion in the Court where there was new evidence that was practically conclusive of the matter, the determination by the Ontario Ministry of Finance of the taxpayer's provincial residency was not this type of evidence.

Amounts which Bowman TCJ. would have found on the evidence before him not to be income to the taxpayers, nonetheless were required to be included in their income because of convictions in prior tax evasion proceedings in the Provincial Court. Bowman TCJ., after reviewing various authorities on issue estoppel, stated (at p. 1735):

"On the basis of these authorities, even though on the face of the judgment of the earlier decision it is not obvious that the precise points now put in issue were specifically put to or considered by the judge in the prior proceeding, if they were essential to the determination reached by him a later court cannot retry the issue. I am compelled to conclude that the taxability of the four amounts had to have formed an integral and essential part of the finding of guilt and I am therefore precluded from deciding afresh the issue."

A consent judgment allowing an appeal by the taxpayer from a reassessment of its 1988 taxation year was based on a representation by him that interest on a loan made to him by his employer was paid before the end of January 1989 (with the result that he was not taxable under s. 80.4(1) for that year). The doctrine of estoppel per rem judicatam precluded him from arguing, with respect to an assessment under s. 6 for his 1989 taxation year, that the 1988 interest had not been paid by him until February 4, 1989 (with the result that the 1988 interest was includable in his income pursuant to s. 80.4(1) in his 1988 taxation year, rather than being included in his 1989 taxation year as a result of his employer reimbursing him for such amounts).

Rip TCJ. found (at p. 1266) that "where the parties to the litigation are different there is no res judicata, even when the facts are identical". Accordingly, the taxpayers, who were members of a group that had purchased interests in a resource property were not precluded from raising the same arguments that had been previously rejected by the Tax Court and the Federal Court of Appeal in an appeal by another member of the same purchasing group.