Citation: 2014 TCC 111
Date: 20140409
Docket: 2012-2215(IT)G
BETWEEN:
LORRAINE MCINTYRE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Docket: 2012-2216(IT)G
AND BETWEEN:
SIDNEY G. MCINTYRE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Dockets: 2012-2217(IT)G
2012-2223(GST)G
AND BETWEEN:
900214 ALBERTA LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Campbell J.
[1]
The Appellants brought
a motion pursuant to Rule 58 of the Tax Court of Canada Rules (General
Procedure) (the “Rules”) for the determination of a question, which
the Appellants contend will dispose of all or substantially all of the
proceedings, substantially shorten the hearing of these appeals, or substantially
reduce costs. The Appellants have also requested leave of this Court to
introduce evidence if I find that the question is suitable for a determination
under Rule 58.
[2]
The question is whether
the Respondent is bound by an Agreed Statement of Facts (the “Agreed Facts”), entered
into as part of a plea bargain, in a prior criminal proceeding. The Appellants’
argument is that the principles of issue estoppel, res judicata and
abuse of process apply in these circumstances to prevent the Respondent from
assuming facts in issuing the reassessments that are inconsistent with the Agreed
Facts.
The Facts
[3]
900214 Alberta Ltd.
(the “Corporation”) conducts business as an oilfield contractor and consultant.
Sidney Grant McIntyre (“Grant”) and Lorraine McIntyre (“Lorraine”) are the directors
of the Corporation and each are 50 percent shareholders. Grant works for the
Corporation as an oilfield contractor and consultant. Lorraine is the
Corporation’s bookkeeper.
[4]
On June 16, 2009, the
Minister of National Revenue (the “Minister”) issued reassessments (the “First Reassessments”)
in respect of the Appellants to which they filed Notices of Objection. Prior to
this, the Appellants had been selected for audit and, subsequently, the
Minister commenced a criminal investigation. This resulted in criminal
proceedings against the Appellants for tax evasion pursuant to the Income
Tax Act (“the ITA”) in respect of the 2002 to 2007 taxation years. Lorraine and the Corporation agreed to a disposition of the criminal proceedings by
entering guilty pleas based upon the Agreed Facts. On March 25, 2011, Lorraine and the Corporation applied to change their pleas to guilty. The Court accepted
the Agreed Facts and imposed sentences accordingly. The Information respecting
Grant was withdrawn and he was never convicted.
[5]
On February 8, 2012,
the Minister issued a Notice of Confirmation in respect of the Corporation’s First
Reassessments issued under the Excise Tax Act for its reporting periods
October 1, 2002 to September 30, 2007. On March 2, 2012, the Minister issued a
second reassessment in respect of the Corporation’s income tax issues for the
2003 to 2007 taxation years with year ending September 30. The Minister
also issued further reassessments on March 22, 2012 in respect of Lorraine and Grant for their 2002 to 2007 taxation years under the ITA.
[6]
In issuing the
confirmation and these further reassessments, which were for amounts greater
than those established in the Agreed Facts, the Minister refused to be bound by
those Agreed Facts.
[7]
In their Notices of
Appeal, the Appellants argued that any reassessments must be consistent with
the Agreed Facts because, otherwise, it would offend the doctrines of issue
estoppel, res judicata and abuse of process.
The Questions
[8]
The Appellants posed
the following questions for determination:
a. Do the principles of issue estoppel, res judicata, and
abuse of process apply to prevent the Minister from assuming facts inconsistent
with the Agreed Facts?
b. Are the Respondent and Appellants bound by the Agreed
Facts for the purposes of these Tax Court of Canada appeals, in particular, but
not limited to:
i) The Calculation of Lorraine’s capital gain associated
with the disposition of the Mabel Lake Lot, referred to in paragraphs 8 to 12
of the Agreed Facts;
ii) Whether $61,995.91 received by 900Co from Progress
Energy Ltd. and advanced to Grant and Lorraine constitute a shareholder debt
under subsection 15(2) of the Income Tax Act, as referred to in
paragraphs 13 to 19 of the Agreed Facts;
(iii) Whether 900Co’s net income (loss) for tax purposes is
conclusively determined by virtue of paragraph 32 of the Agreed Facts; and,
iv) Whether Grant and Lorraine’s shareholder benefits
assessed under subsection 15(1) of the Income Tax Act is conclusively
determined by virtue of paragraphs 33 to 36 of the Agreed Facts.
(Appellants’ Notice of Motion, p. 7)
The Appellants’ Position
[9]
The Appellants contend
that the Agreed Facts, accepted by the Provincial Court in the criminal
proceedings, conclusively determine the facts in any subsequent judicial
proceeding involving the same parties. According to the Appellants, issue
estoppel should still apply even though a judgment granted may not have extended
to all issues or where it was granted with the consent of the parties.
Consequently, the Minister’s reassessments must be in accordance with the
Agreed Facts. This will permit finality, consistency and avoid relitigation of
facts determined in the prior criminal proceedings. The Appellants’ Counsel, in
his oral submissions, argued that the Agreed Facts also give rise to issue
estoppel in respect of the Corporation’s GST appeal and Grant’s income tax
appeal. Since the underlying factual determinations and issues are the same in
all of the appeals, they can apply to Grant’s income tax appeal and the
corporate GST appeal, even though they were not directly dealt with in the
criminal proceedings. The Appellants’ Counsel contended that, instead of
hearing the issue estoppel argument at the hearing, it should be resolved under
Rule 58 “…which I think would give us the complete answer. Either the criminal
disposition is binding, or it is not. If it is not, we can forget about it. If
it is, then we don’t have to revisit and relitigate issues …” (Transcript,
p. 10). Almost contrary to that argument, the Appellants’ Counsel clarified
that the Appellants were,
…
not trying to restrict the CRA to only reassessing the amounts that were
covered in the agreed statement of facts in the criminal matter.
As
I said, there were lots of items that were reassessed that weren’t at issue in
the criminal case, and we are not disputing them in the tax case either.
What
we have asked for is for the court to issue an order in a Rule 58 motion that
would require the Crown to give effect in the civil proceeding to the amounts
dealt with in the criminal proceedings.
That is all we’ve asked for. We are not
trying to suggest that this criminal proceeding has anything to do with amounts
that weren’t covered by the agreed statement of facts.
(Transcript, p. 84)
[10]
The Appellants’ Counsel
also seeks to introduce the criminal record as evidence if the question is
appropriate for determination in accordance with Rule 58. Included in this
request were the reassessments that were issued, the Informations that were
sworn and filed, the entire Agreed Facts, the transcript of the hearing, the
sentencing particulars and the Certificates of Conviction.
The Respondent’s Position
[11]
The Respondent argued
that the present question was not a proper one under Rule 58 for several
reasons. First, although issue estoppel may apply to civil tax assessments,
where there is a criminal conviction, the caselaw has established that issue
estoppel does not apply where the prior conviction arises from a plea bargain
as opposed to an actual trial with judicial findings of fact. Consequently, the
Agreed Facts cannot be determinative of facts in the Appellants’ tax appeals
and could not dispose of all or part of the appeals. Second, the Agreed Facts
and plea bargain did not relate to the corporate GST appeal or to Grant’s
income tax appeal. Instead they applied only to amounts of income tax evaded by
the Corporation and Lorraine under the ITA. Therefore, the present tax
appeals are not a relitigation of all of these matters. Third, a prior
conviction will only estop the parties from relitigating or arguing amounts
lower than those established in the criminal conviction. The Minister has
reassessed the Appellants for amounts higher than those established in the plea
bargain and Agreed Facts. In addition, the corporate GST appeal and Grant’s
appeal under the ITA were not included in the plea bargain. The Minister
has also included issues in respect of the appeals of Lorraine and the Corporation,
which are also unrelated to the plea bargain.
[12]
The Respondent
suggested that, contrary to the Appellants’ argument, the only abuse of process
that could occur would be if the Minister is restricted to the Agreed Facts in
the four civil tax appeals that are before this Court. This unfairness would
occur for several reasons: one, the Minister would be prevented from tendering
evidence in the Tax Court when no findings of fact were made in the criminal
proceedings but instead were negotiated; two, the civil burden of proof, which
is based on a “balance of probabilities”, would be replaced by the criminal
burden of proof, which is based on “beyond a reasonable doubt”; and three, the
burden of proof would effectively be shifted from the Appellants to the
Minister to prove facts not negotiated in the plea bargain.
[13]
Finally, the Respondent
opposed the introduction of evidence because it would amount to arguing the tax
appeals themselves in a Rule 58 motion, which is more appropriately left to a
trial Judge. Portions of the Notices of Appeal contain assertions of fact that
are in dispute in the tax appeals and for which the Respondent is entitled to
conduct examinations and tender evidence at a hearing.
Law and Analysis
[14]
The Appellants bring
this motion pursuant to Rule 58 of the Rules, the relevant portions of
which provide as follows:
58. (1) A party may apply to the Court,
(a)
for the determination, before hearing, of a question of law, a question of fact
or a question of mixed law and fact raised by a pleading in a proceeding where
the determination of the question may dispose of all or part of the proceeding,
substantially shorten the hearing or result in a substantial saving of costs,
or
[…]
(2)
No evidence is admissible on an application,
(a)
under paragraph (1)(a), except with leave of the Court or on consent of
the parties, or
[…]
[15]
The doctrine of res
judicata involves two branches: cause of action estoppel and issue
estoppel. In Angle v M.N.R., [1975] 2 S.C.R. 248 at 254, Dickson J. (as he
was then) explained the distinction as follows:
… The
first, “cause of action estoppel”, precludes a person from bringing an action
against another when that same cause of action has been determined in earlier
proceedings by a court of competent jurisdiction. We are not here concerned
with cause of action estoppel as the Minister’s present claim that Mrs. Angle
is indebted to Transworld in the sum of $34,612.33 is obviously not the cause
of action which came before the Exchequer Court in the s. 8(1)(c) proceedings.
The second species of estoppel per rem judicatam is known as “issue
estoppel”, a phrase coined by Higgins J. of the High Court of Australia in Hoystead
v. Federal Commissioner of Taxation (1921), 29 C.L.R. 537, at p. 561:
I fully recognize the distinction between the doctrine
of res judicata where another action is brought for the same cause of
action as has been the subject of previous adjudication, and the doctrine of
estoppel where, the cause of action being different, some point or issue of
fact has already been decided (I may call it “issue‑estoppel”).
In addition to the two branches of res judicata,
courts may apply the doctrine of abuse of process to prevent relitigation.
[16]
Cause of action
prevents parties from relitigating the same cause of action. Issue estoppel
prevents parties from relitigating questions, facts or rights which have
previously been adjudicated upon.
[17]
In Danyluk v
Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, the legal test
for the operation of issue estoppel was reviewed by Binnie J. as follows:
25
The preconditions to the operation of issue estoppel were set out by Dickson J.
in Angle, supra, at p. 254:
(1)
that the same question has been decided;
(2) that the judicial decision which is said to create the
estoppel was final; and,
(3) that the parties to the judicial decision or their privies
were the same persons as the parties to the proceedings in which the estoppel
is raised or their privies.
These three tests can be summarized briefly as (1) identity
of issues, (2) finality and (3) mutuality/privity. Although the Respondent
referred me to the four-part test laid down by the Federal Court of Appeal in Van
Rooy v M.N.R., 88 DTC 6323, I have relied on the three-part test set down
by the Supreme Court of Canada in Danyluk. I believe the fourth question
in Van Rooy (that is, whether the question out of which the estoppel is
said to arise must have been fundamental to the decision arrived at in earlier
proceedings) is implicit in the three-part test set out in Danyluk.
[18]
Issue estoppel will
only apply to issues that were fundamental to the initial decision in a prior
proceeding and it will not apply in respect of a question that must be inferred
by argument from the judgment.
[19]
Even where a court
determines that the legal test for issue estoppel has been satisfied, the court
must still decide, as a matter of discretion, whether, in the circumstances, issue
estoppel should be applied in any event (Danyluk, para 33). In
exercising this discretion, which originates from the court’s inherent power to
prevent the misuse of its procedures, a court’s main objective will be to
ensure that the application of issue estoppel promotes the orderly
administration of justice but not at the cost of real injustice in a particular
case (Danyluk, para 67).
[20]
Courts have sometimes applied
the doctrine of abuse of process to prevent relitigation in cases where the
strict requirements of res judicata are not met. Even where the
privity/mutuality requirement is not met, relitigation should be precluded if
it would violate “such principles as judicial economy, consistency, finality
and the integrity of the administration of justice.” (Toronto (City)
v C.U.P.E., Local 79, 2003 SCC 63, [2003] 2 S.C.R. 77 at para 37).
[21]
Both doctrines, res
judicata and abuse of process, engage the same policy grounds: a concern
for finality in litigation, preservation of the courts’ and the litigants’
resources and a concern for the integrity of the justice system (Toronto v CUPE, at para 38).
[22]
An application for
determination of a question under Rule 58 involves a two‑stage process.
The first stage, which is before me, involves a review of whether the proposed
question is suitable for a determination under Rule 58 (“Stage One”). If it is
determined to be a suitable question, it will proceed to the second stage,
which is a hearing of that question (“Stage Two”).
[23]
To be successful at Stage
One, the following three technical requirements must be met:
(a) there are questions of
law, fact or mixed law and fact;
(b) they are raised by the
pleadings; and
(c) the questions may
dispose of all or part of the proceeding, may substantially shorten the hearing
of the appeal and may result in a substantial savings of costs.
(HSBC Bank Canada v The Queen, 2011 TCC 37)
[24]
In submissions, the
Appellants’ Counsel characterized the question before me as “likely a question
of mixed law and fact” (Transcript, pp. 7-8). The Respondent made no
submissions in this regard. Although I might have characterized it more as a
question of law, it nevertheless satisfies the first requirement set out in HSBC
Bank Canada. The second requirement is also met as the Notices of Appeal
raise the question as an issue. This question, however, does not satisfy the
third requirement. If I had decided to permit this question to go to Stage Two,
there is a potential that it could shorten the hearing and save costs, but that
would be assuming that the parties are bound by the Agreed Facts and limited only
to the quantum of net income for the Corporation and shareholder benefits for Lorraine.
[25]
Beyond the technical
requirements, the Court has the discretion to consider other factors, together
with all the circumstances of the case, in determining whether the question is
appropriate for a Rule 58 determination (Perera v Canada, [1998]
3 FC 381 (Fed CA).
[26]
Rule 58(1)(a)
was amended in 2004 to add the words: “a question of fact or a question of
mixed law and fact”. Prior to that, applications under this Rule were limited
to questions of law. Consequently, much of the jurisprudence, concerning Rule
58, has held that there must be no dispute as to any fact material to the
question of law to be determined (McLarty v Canada, 2002 FCA 206, at
para 7; Webster v Canada, 2002 FCA 205, at para 20). Since the
amendment to this Rule, the existence of factual disputes is no longer an
absolute bar to granting an application but will remain relevant to a question
of whether the determination will substantially shorten the hearing or save
costs (Delso Restoration Ltd. v Canada, 2011 TCC 435 at paras 13-14).
[27]
Despite this amendment,
a Rule 58 determination should never be a substitute for a hearing and there
should never be a dispute as to the material facts underpinning the question of
law. As such, a Rule 58 determination should not be an easily accessible
alternative to a hearing for contentious disputes (Jurchison v The Queen,
2001 FCA 126 at para 8).
[28]
In discussing the
application of issue estoppel in a Rule 58 determination, Justice Boyle in Golden
et al v The Queen, 2008 TCC 173, 2008 DTC 3363, at paragraph 25, made the
following comments:
The
doctrine of issue estoppel should only be applied in a tax appeal in this Court
in respect of a prior criminal tax evasion conviction in clear cases. It should
not be applied indiscriminately once the preconditions are met. The Court
should be satisfied that the issue of quantum in each particular taxation year
was decided in the criminal proceedings.
[29]
The doctrine of issue
estoppel may be applied in appeals to this Court where there has been a prior
criminal conviction for tax evasion in respect of the same tax dispute even
though each court has different burdens of proof (Van Rooy). However,
the Court in Van Rooy noted that the converse is not the case, that is,
an acquittal from tax evasion charges cannot serve as evidence that a taxpayer
is not liable for the tax.
[30]
The Respondent argued
that the question posed by the Appellants is inappropriate for a Rule 58
determination because criminal plea bargains do not constitute issue estoppel.
The Respondent’s argument is based on the distinction between criminal
convictions resulting from trials with judicial findings of fact and those
arising from plea bargains resulting from negotiations between counsel with no
judicial findings of fact. The Respondent relied on the decisions in Harris
v The Queen, 2005 TCC 501, 2005 DTC 1179; Pontarini v The Queen,
2009 TCC 395, 2009 DTC 1268 and Lai v The Queen, [2001] GSTC 24 to
support this distinction.
[31]
In Hagon v The Queen,
99 DTC 336, Justice Bowie considered the effects of a conviction from a plea
bargain in criminal proceedings on a subsequent proceeding at paragraphs 9 to
11:
[9]
It is well settled that a conviction under the Income Tax Act may, in
proper circumstances, give rise to an estoppel in later civil proceedings under
the Act: Van Rooy v. M.N.R. In the present case there is no problem of
identity of issue, as there was in Van Rooy; the conviction was as to the
amount of $7,134.51, which is not all, but is an identifiable part, of the income
added by the reassessment under appeal for 1989.
[10]
Nevertheless, it is my view that this is not a proper case in which to permit
an estoppel to be raised. The evidence shows that the conviction arises out of
a plea bargain, a process in which there is necessarily some give and take on
both sides. This is the sort of circumstance that Blair, J.A. had in mind in
the Del Core case, where he said of a conviction in criminal proceedings
that:
... such evidence constitutes prima facie and
not conclusive proof of the fact of guilt in civil proceedings. The prior
conviction must of course be relevant to the subsequent proceedings. Its weight
and significance will depend on the circumstances of each case. ...
He
then went on to point out that the effect of a conviction may be mitigated by
explanation of the circumstances surrounding the conviction.
[11]
In the present case, the fact that the conviction arose out of a guilty plea
which was part of a plea bargain is significant. There may have been very sound
practical reasons other than guilt that motivated the plea. Counsel has not
referred me to any authority dealing with the effect to be given to a bargained
plea of guilty, and absent such authority, I am not inclined to find that the
Appellant is estopped in this case.
[32]
In Harris,
Justice Sheridan held that a prior plea bargain and guilty plea, resulting from
joint submissions, as opposed to judicial findings on the merits, could not
constitute issue estoppel. Consequently, she refused to consider issue estoppel
as a preliminary issue at the outset of the hearing.
[33]
In Pontarini, at
paragraph 23, Justice Boyle concluded that the taxpayer’s guilty plea to tax
evasion was only one factor that should be considered and weighed by the Court.
The Court concluded that it provided “…some possible evidence of his intention
to make the false statements and omissions. It is not incontrovertible evidence
by reason of either issue estoppel or abuse of process because he pleaded
guilty.”
[34]
In Lai, an
informal procedure case, Justice Beaubier noted the different burden of proof
in criminal proceedings as opposed to civil tax proceedings. He concluded that
a charge of tax evasion required the Crown to prove its case beyond a
reasonable doubt while a GST assessment required that the taxpayer bring
forward evidence to dispute the Minister’s assumptions respecting the
assessment.
[35]
I agree with the
Respondent’s analysis of the caselaw. It confirms that prior convictions in
criminal proceedings resulting from plea bargains, although a factor that may
go to weight in a civil tax proceeding, are not determinative of the relevant
facts and issues in a subsequent tax appeal.
[36]
Generally, courts have
been reluctant to apply issue estoppel or abuse of process to relieve taxpayers
from having to prove facts allegedly determined in a prior criminal proceeding.
In Wong v The Queen, 2010 TCC 171, 2010 DTC 1129, Justice V. Miller, in
considering whether issue estoppel or abuse of process applied to prevent the
Minister from relitigating issues decided in the criminal trial, was not
convinced that the issues in the tax evasion proceedings were the same as those
in the tax appeal before this Court and, consequently, dismissed the Rule 58
motion.
[37]
In Warawa v The
Queen, 2002 DTC 1264, Justice Mogan dealt with a Rule 58 application
in which the taxpayer alleged that the Minister’s assessments should be vacated
because they were based upon evidence obtained in violation of his Charter
rights. At paragraph 9, the Court noted that the basic problem facing the
taxpayer in that motion related to the significant difference between criminal
and civil litigation. After reviewing relevant caselaw, where other courts,
including the Supreme Court of Canada and the Federal Court of Appeal, have
distinguished civil from criminal proceedings, Justice Mogan concluded that the
rights and expectations of individuals charged criminally are very different
from the rights and expectations of individuals who institute an appeal of an
assessment to this Court. Therefore, he concluded that the motion questions
were best left to the trial Judge.
[38]
In MacIver v The
Queen, 2005 TCC 250, 2005 DTC 654, Justice Hershfield also concluded that a
question is best left to the trial Judge where the motion is merely to estop a
party from contesting certain facts that will not dismiss an entire appeal. As
noted in his reasons, unless such a question can fully dispose of an appeal by
finding that issue estoppel applies, a Rule 58 determination would do little
more than split an appeal and tie the hands of the trial Judge.
[39]
The Appellants’ Counsel
suggested that, if issue estoppel applies and the Agreed Facts are binding on
the parties, the entire dispute in all appeals could be disposed of. That
suggestion is simply wrong. The Agreed Facts deal only with the income tax
appeals of the Corporation and Lorraine. In addition, they relate only to their
2004 and 2007 taxation years. They do not address the 2002 and 2003 taxation
years, which are still at issue in the present appeals. Also, the Agreed Facts
do not deal with the Corporation’s GST appeal or with Grant’s income tax
appeals. The details of the corporate GST assessment are extensive and are
detailed in three Schedules attached to the Minister’s Reply. The Agreed Facts do
not address gross negligence penalties that were assessed in the GST corporate
appeal and against some of the Appellants in the income tax appeals. In fact,
in submissions, the Appellants’ Counsel suggested that the Appellants would “likely”
drop the penalty issue (Transcript, p. 9) if the Agreed Facts are held to be binding.
That supports my conclusion that the Agreed Facts are not dispositive of the
issues before this Court. In these circumstances, it cannot be said that, if
issue estoppel applied, then the Agreed Facts could, in any manner, dispose of
the entire substantive tax matters in these appeals.
[40]
The caselaw suggests
that moving to estop a part of an appeal is not appropriate in an interlocutory
motion pursuant to Rule 58. Instead of splitting an appeal in such
circumstances, the impact of the plea bargain, the Agreed Facts and the weight
to be assigned to these is best left to the trial Judge.
[41]
There is insufficient
identity of issues between the prior criminal proceedings and the present
appeals before this Court. Again, this precludes the application of issue
estoppel. In considering the application of issue estoppel, where civil
proceedings may be affected by the results of a prior criminal proceeding,
Justice McArthur in Belfast Lime Services Ltd. v The Queen, [1997] GSTC
108 stated at paragraph 10:
… it
must be a clear and obvious case that there is sufficient identity of issues
before a taxpayer’s rights become barred from the jurisdiction of this Court. …
The issue estoppel doctrine cannot be partially applied to the period
within the Appellant’s conviction, or within the quantum of net tax convicted
upon, without greater certainty in the trial judge’s adjudication upon the
facts. The Appellant cannot be said to have accepted, implicitly or explicitly,
the Minister’s reassessments for this period when it pleaded guilty. …
(Emphasis added)
In criminal prosecutions, where the burden of proof is
a more onerous one than in civil tax appeals, it may be that only the quantum
of tax that can be fully supported in respect of this higher burden will be
addressed in a plea bargain, contrary to the quantum that may be able to be
supported in issues in civil tax appeals.
[42]
In this motion, even if
the Agreed Facts addressed all of the Appellants’ appeals, which they do not, it
is clear that the criminal conviction addresses only a portion of the period of
time in some of the appeals that are before this Court. This again precludes
the application of issue estoppel.
[43]
Although the Agreed
Facts clearly identify the quantum of net income for the Corporation and the
consequent shareholder benefits to Lorraine for the 2004 to 2007 taxation
years, the Minister is not estopped from reassessing the Appellants
subsequently for amounts higher than those established in the Agreed Facts.
That was the issue in Mortensen/Kristensen v The Queen, 2010 TCC 177/178.
There, Justice Little held that a taxpayer was estopped from arguing that he
did not earn income or incur expenses that formed the basis of the criminal
proceedings but was not estopped from arguing that he did not earn other income
or incur additional expenses at issue in the appeal.
[44]
In summary, issue
estoppel may be applied to prevent a party from relitigating an issue when that
same issue has been determined in prior proceedings in another court. The
Agreed Facts address only the tax appeals of the Corporation and Lorraine. Since the Agreed Facts do not involve Grant’s income tax matters or the corporate
GST appeal, there is no relitigation of these two matters and, as a consequence,
the preconditions for issue estoppel are not met. Although the corporate ITA
appeal and Lorraine’s appeal satisfy the mutuality of parties, the remaining
two preconditions for issue estoppel are not met because there were issues in
their tax appeals that were not dealt with in the prior criminal proceedings
and plea bargain. Thus, there can be no finality of issues as required in issue
estoppel. In addition, amounts dealt with in criminal proceedings are minimum
amounts with respect to the civil proceedings. Therefore, the Minister is able to
reassess amounts for income tax purposes in excess of the quantum of tax evaded
and in respect of issues not determined in the criminal proceedings. It is
clearly not a proper question to have it proceed to a Rule 58 determination
under Stage Two where the Minister would be restricted in four tax appeals to a
set of negotiated facts which resulted from a criminal plea bargain. This is
particularly true where two of those four appeals are not addressed in the Agreed
Facts. Caselaw has clearly established that issue estoppel does not apply in
circumstances where the prior criminal conviction arises from a plea bargain. Such
agreed facts arising from a plea bargain cannot be determinative of the facts
in subsequent tax appeals. The distinction, between criminal convictions
arising from evidentiary findings resulting from a hearing and those
convictions arising from plea bargains, is an important one. The latter do not
constitute issue estoppel. As acknowledged by Justice Bowie in Hagon,
the reality of convictions based on plea bargains is that they do not arise as
the result of a trial on the merits with judicial consideration and weighing of
evidence and consequent findings of fact. Instead, they are based on the parties’
negotiations for the purposes of a plea bargain and sentencing. In these
circumstances, there can be no relitigation because there was no litigation of the
initial criminal charges in the first instance and the basis of the plea
bargain may contain considerations beyond the merits of the case.
[45]
For these reasons, this
is not a proper question for a Stage Two inquiry pursuant to Rule 58. The
matter is best left to the trial Judge, including the Appellants’ request to
introduce some of the materials from the criminal proceedings. Even if I had permitted
the question to go to Stage Two, I would be hesitant to grant leave to
introduce that evidence for the purpose of this motion. It would have all the
trappings of splitting the appeals and the motion would have the semblance of a
trial. Caselaw has established that a Rule 58 motion is not a substitute for a
trial nor should it be regarded as an easily accessible alternative to a trial.
[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. My reasoning is
applicable to all four appeals but particularly to the corporate GST appeal and
Grant’s ITA appeal, which were never addressed at all in the prior
proceedings. The negotiated Agreed Facts are not determinative of the issues in
the appeals that are before this Court and to conclude otherwise would
negatively affect the preservation of the integrity and particularly the
effectiveness of the Court. Fairness dictates that the administration of
justice would be best served by dismissing this motion for a determination of a
question pursuant to Rule 58 rather than permitting a Stage Two proceeding to proceed
under this Rule.
[47]
Although neither party
addressed costs, I am ordering costs in the cause or as otherwise directed by
this Court on the disposition of the appeals.
Signed at Ottawa, Canada, this 9th day of April 2014.
“Diane Campbell”
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