Abuse of Process

The appellants were partners of a limited partnership (“TSI”). On March 29, 2006, the Minister issued Notices of Determination pursuant to s. 152(1.4) disallowing losses claimed by TSI for its 2000 and 2001 taxation years, respectively. Both TSI and each partner filed a Notice of Appeal. However, TSI filed a Notice of Discontinuance on May 2, 2016 and the appeal was deemed to be dismissed on June 24, 2016 pursuant to s. 16.2(2) of the Tax Court of Canada Act (the “TCC Act”). The appellants were now arguing that the Notices of Determination had been statute-barred. In allowing the Crown’s motion to strike the Notices of Appeal of the appellants on the basis that it would be an abuse of the Court’s process to allow the appellants to continue with their appeals, D’Auray J stated (at paras 52 - 53):

According to Scarola [2003 FCA 157], barring some vitiating circumstances such as fraud or some statutory authority allowing the decision maker to retain or recapture the lost authority, a dismissal under section 16.2 of the TCC Act carries the same effect as a judgment of dismissal by the Court. As a result, since in this motion, no vitiating circumstances were advanced by the appellants, they are effectively trying to re-argue an issue that is deemed to have been adjudicated and dismissed by the Court at the partnership level. ...

[T]he issue of whether the determinations are statute-barred could have been raised and argued by TSI in its appeal which was to be heard on May 2, 2017, as the statutory bar issue present in the TSI appeal is identical to the issue that the partners would now like to proceed with in their appeals. Instead, TSI chose to discontinue its appeal. It would be an abuse of process if the partners of TSI were now allowed to raise the same issue that TSI itself could have raised but chose not to.

In the federal Construction S.Y.L. Tremblay case, Bédard J found that house-repair invoices, that did not give the house address or describe the precise nature of the work performed (and that were rendered in the name of entities that did not remit the GST), failed to satisfy the requirements of s. 3 of the Input Tax Credit Information (GST/HST) Regulations, so that the appellant’s related input tax credit claims were properly denied. Prior to that decision, the appellant in that case had appealed the denial by the ARQ of the input tax refunds claimed by it for QST on those invoices under the equivalent provisions under the Quebec Sales Tax Act, to the Court of Quebec – and also stated that (at para. 25) “I am convinced that the appellant did not truly acquire the supplies for which it claimed ITCs in its net tax calculation.” After the ARQ then made a motion for the Quebec appeal to be dismissed as an abuse of process, the appellant filed a declaration that it intended to file more numerous documents and produce 19 witnesses in support of its appeal.

Before going on to affirm the finding of the Court of Quebec that allowing this (Quebec) appeal to proceed would constitute an abuse of process, Thibault JCA quoted (at para. 29) with approval statements in Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, paras. 52-53 (extract from para. 53 quoted below):

… There are many circumstances in which the bar against relitigation, either through the doctrine of res judicata or that of abuse of process, would create unfairness. … An inadequate incentive to defend, the discovery of new evidence in appropriate circumstances, or a tainted original process may all overcome the interest in maintaining the finality of the original decision … .

After noting that the Court of Quebec judge had found at that the proposed new evidence of the appellant “will not provide anything new as to the conformity of the invoices to the prescribed [QSTA and Regulation] requirements,” she stated (at para. 39) that this finding was “conclusive” and (at para. 42):

Even with the additional evidence, the appellant cannot demonstrate the validity of the claimed input tax refunds. The appellant’s provision of numerous witnesses cannot remedy this deficiency since those documents do not satisfy the requirements for obtaining input tax refunds.

Two of the taxpayers were convicted based on a plea-bargain. The Minister's subsequent assessments of the taxpayers was based on amounts greater those in the plea bargain. After finding that neither the issue estoppel nor abuse of process doctrines applied to prevent the reassessment (see summary under General Concepts - Res Judicata), Campbell J stated (at para. 46):

Finally, I conclude that to restrict the Minister in the civil tax appeals before this Court to the Agreed Facts, established pursuant to a plea bargain, would constitute an abuse of process. Otherwise, unfairness would result because the parties would effectively be prohibited from tendering evidence in the appeals before this Court when no evidence was tendered or weighed in the prior criminal proceedings and no judicial findings of fact were made.

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 ... .

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, Angers J stated (at para. 8) that it was difficult 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 for judicial comity and that "judgments on the same question be coherent" (para. 16).

In the Federal Court of Appeal (also dealing with an appeal on an ETA s. 325 issue), Blais CJ stated (at (para. 7) that "the decision of Justice Angers applying the principles of judicial comity [courtoisie judiciaire] was quite justified in the particular circumstances" and further noted the the Court of Quebec decision had since been affirmed in the Quebec Court of Appeal.

The taxpayer was granted an extension from the Court of Quebec in its QST appeal on the basis that it was not at fault for its lawyer’s failure to timely file an appeal. Its parallel application in the Tax Court of Canada from a GST assessment, was granted on the basis that the two statutory extension tests were essentially the same, and the doctrine of abuse of process prevented relitigation of an issue already decided in another court. Boyle J stated (at para. 21):

I am satisfied that the matter before this Court has already been addressed by the Cour du Quebec and should not be relitigated before this forum as that might result in a different outcome.

He further found (at para. 22) that “judicial comity” would be further grounds to avoid duplicating the litigation.

Issue estoppel applied to preclude the taxpayer from litigating before the Tax Court the question whether an amount of $34,000 should have been included in his income. Although the finding of a jury that he had committed tax evasion in respect of this amount did not turn on the particular quantum of the amount that he had failed to report, that quantum was part of the sentencing process made by the judge in that criminal proceeding. Furthermore, given that there had been proof of criminal mens rea beyond a reasonable doubt, this satisfied the onus on the Crown respecting the s. 163(2) gross negligence penalty.

It also would have been an abuse of process for the taxpayer's wife to re-litigate whether a $217,000 shareholder loan should be included in her income given that the only alleged unfairness was that, in the criminal proceedings, there had been an agreement that Mr. and Mrs. Golden would be treated as one taxpayer, so that no particular finding was made as to whose income the amount should be included in.