Docket: A-358-13
Citation: 2014 FCA 184
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CORAM:
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SHARLOW J.A.
WEBB J.A.
SCOTT J.A.
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BETWEEN:
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DAVID TUCCARO
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Appellant
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and
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HER MAJESTY THE QUEEN
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Respondent
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REASONS FOR
JUDGMENT
WEBB J.A.
[1]
Both Mr. Tuccaro and the Crown have appealed the
order of Bocock, J. (Tax Court Judge) dated September 23, 2013 (2013 TCC 300).
The Crown had brought a motion to strike certain parts of Mr. Tuccaro’s Notice
of Appeal and the Tax Court Judge:
(a)
allowed the motion in part and struck the parts
related to Mr. Tuccaro’s claim that he is exempt from tax as a result of Treaty
8 (which is a Treaty between the Crown and certain Aboriginal peoples signed in
1899) and the paragraphs related to the historical background to the signing of
this Treaty;
(b)
ordered Mr. Tuccaro to redraft paragraph 43
which only provided that:
[t]he status Indian employees of Neegan
were treated as tax-exempt
(Neegan is Neegan Development Corporation Ltd.. Mr. Tuccaro, in his
Notice of Appeal, stated that he was the sole shareholder of this company
during the taxation years under appeal); and
(c)
dismissed the Crown’s motion to strike the
paragraphs related to the Indian Act Exemption for Employment Income
Guidelines published by the Canada Revenue Agency and the honour of the Crown.
[2]
Mr. Tuccaro has appealed the decision to strike
the paragraphs related to Treaty 8. The Crown has cross-appealed the decision
to order Mr. Tuccaro to redraft paragraph 43 on the basis that the statement
related to the tax treatment of another taxpayer is not relevant in the appeal
of Mr. Tuccaro to the Tax Court. The Crown also has appealed the decision not
to strike the paragraphs related to the Guidelines and the honour of the Crown
on the basis that the Tax Court Judge erred in not finding that it was plain
and obvious that Mr. Tuccaro could not succeed in relation to these claims.
[3]
For the reasons that follow I would allow the
appeal of Mr. Tuccaro and I would dismiss the cross-appeal of the Crown.
I.
Standard of Review
[4]
In Canadian Imperial Bank of Commerce v. The
Queen, 2013 FCA 122, [2013] 4 C.T.C. 218, this Court noted that:
5 The
decision of a judge to grant or refuse a motion to strike is discretionary.
This Court will defer to such a decision on appeal in the absence of an error
of law, a misapprehension of the facts, a failure to give appropriate weight to
all relevant factors, or an obvious injustice: Apotex Inc. v. Canada (Governor in Council), 2007 FCA 374,
Collins v. Canada, 2011 FCA 140.
II.
Test For Striking Pleadings
[5]
Iacobucci, J., writing on behalf of the Supreme
Court of Canada in Odhavji v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R.
263, set out the test for striking pleadings:
15 An
excellent statement of the test for striking out a claim under such provisions
is that set out by Wilson J. in Hunt v. Carey Canada Inc.,
[1990] 2 S.C.R. 959, at p. 980:
... assuming that the facts as stated in
the statement of claim can be proved, is it "plain and obvious" that
the plaintiff's statement of claim discloses no reasonable cause of action? As
in England, if there is a chance that the plaintiff might succeed, then the
plaintiff should not be "driven from the judgment seat". Neither the
length and complexity of the issues, the novelty of the cause of action, nor
the potential for the defendant to present a strong defence should prevent the
plaintiff from proceeding with his or her case. Only if the action is certain
to fail because it contains a radical defect ... should the relevant portions
of a plaintiff's statement of claim be struck out ... .
The test is a stringent one. The facts are to
be taken as pleaded. When so taken, the question that must then be determined
is whether there it is "plain and obvious" that the action must fail.
It is only if the statement of claim is certain to fail because it contains a
"radical defect" that the plaintiff should be driven from the judgment.
See also Attorney
General of Canada v. Inuit Tapirisat of Canada,
[1980] 2 S.C.R. 735.
III.
Treaty 8
[6]
Mr. Tuccaro is appealing certain reassessments issued
under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.). In “Part II – Statement of Facts” of his original Notice of
Appeal Mr. Tuccaro stated that:
8. …The income earned by the Appellant
during the Relevant Years was the personal property of a status Indian situated
on a reserve, within the meaning of s. 87 of the Indian Act, and is
exempt from taxation pursuant to Treaty 8 of 1899 and by operation of s. 35 of
the Constitution Act, 1982.
[7]
Mr. Tuccaro also referred to various events that
occurred prior to the signing of Treaty 8 and also to the contents of the
report of the treaty commissioners. However in the section entitled “Part II [sic] – Issues”, none of the identified issues
related to whether he was exempt from taxation pursuant to Treaty 8. The only
issues identified related to section 87 of the Indian Act and the effect
of the Indian Act Exemption for Employment Income Guidelines produced by
the Canada Revenue Agency and / or Form TD1-IN “Determination
of Exemption of a Status Indian’s Employment Income”.
[8]
The Crown brought a motion to strike various
paragraphs of the Notice of Appeal. The basis for seeking to strike the sentence
of paragraph 8 referred to above is that although this statement was in the “Statement of Facts” section of the Notice of Appeal, it
was not a fact but rather a conclusion of law. The only issue in the part
identified as “Issues” that was related to any
exemption from tax was a claim based on section 87 of the Indian Act.
[9]
With respect to the potential merits of any
claimed exemption under Treaty 8, the Crown stated in paragraph 6 c) of the
Notice of Motion that:
Further, pursuant to s. 53(c) of the Rules,
the sentence should be struck because the Treaty 8 right to be exempt from tax
relied on by the Appellant has been reviewed by the Federal Court of Appeal and
leave to appeal was denied by the Supreme Court of Canada and the Appellant has
raised no new material facts beyond those already considered by the Court of
Appeal…
[10]
Before the motion was heard, Mr. Tuccaro filed a
revised Notice of Appeal which changed several paragraph numbers and which made
it clear that he is alleging that he is exempt from tax as a result of the
provisions of Treaty 8. There is no indication that any changes were made to
the Notice of Motion and therefore the original motion was heard in relation to
the revised Notice of Appeal.
[11]
In his Reasons for Order, the Tax Court Judge
stated, in relation to the motion to strike the paragraphs related to Treaty 8,
that:
2 Generally,
the impugned sections within the draft Amended Notice of Appeal and the Respondent's
(Applicant in the Motion) related grounds for challenge may be described as
follows:
1. a claimed exemption from
taxation by the Appellant by virtue of Treaty 8 of 1899 and the conjunctive
operation of section 35 of the Constitution Act ought to be struck on
the basis of res judicata;
2. the description of various
historical facts and events in paragraphs 10 through 34 is challenged on the
basis that same either advance the alleged Treaty 8 exemption and/or are
irrelevant to the validly pleaded claimed exemption under section 87 of the Indian
Act, RSC 1985, c. I-5;
[12]
The Tax Court Judge identified res judicata
as the basis for the Crown’s motion to strike the paragraphs related to Treaty
8. In Angle v. Minister of National Revenue, [1975] 2 S.C.R. 248,
Dickson J. described res judicata as follows:
3 In earlier times res judicata
in its operation as estoppel was referred to as estoppel by record, that is to
say, estoppel by the written record of a court of record, but now the generic
term more frequently found is estoppel per rem judicatam. This form of
estoppel, as Diplock L.J. said in Thoday v. Thoday, [[1964] P. 181.], at
p. 198, has two species. 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”).
[13]
It is evident from this excerpt that issue
estoppel was initially described by Higgins J. as a distinct and separate
doctrine from res judicata and then later by Diplock L.J. and Dickson J.
as one of the two species of res judicata. In the more recent case of Genpharm
Inc. v. The Minister of Health, Procter & Gamble Pharmaceuticals Canada,
Inc. and the Procter & Gamble Company, 2002 FCA 290, [2003] 1 F.C. 402)
Rothstein J. (as he then was) writing on behalf of this Court also described
issue estoppel as one of the species of res judicata. As noted by the
Alberta Court of Appeal in 420093 B.C. Ltd. v. Bank of Montreal, 1995
ABCA 328, [1995] A.J. No. 862 at paragraph 18, the requirements to establish either
cause of action estoppel or issue estoppel are essentially the same.
[14]
The requirements for issue estoppel to apply are
set out in Angle by Dickson J. (who was quoting from the decision
of Lord Guest in Carl Zeiss Stiftung v. Rayner & Keeler Ltd. (No. 2),
[1967] 1 A.C. 853 at p. 935):
(1) …the same question has been decided;
(2) …the judicial decision which is said to
create the estoppel was final; and,
(3) …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.
[15]
In Danyluk v. Ainsworth Technologies Inc.,
[2001] 2 S.C.R. 460, 2001 SCC 44, Binnie J. also listed these preconditions and
noted in paragraph 24 that “…the estoppel extends to the
material facts and the conclusions of law or of mixed fact and law (‘the
questions’) that were necessarily (even if not explicitly) determined in the
earlier proceedings.”
[16]
Therefore, unless the discretion not to apply issue
estoppel is exercised, a person will be precluded from bringing an action to
determine a question of a material fact or a conclusion of law or mixed fact
and law where that same question was determined in a prior final judicial
decision and the parties (or their privies) to the earlier decision are the
same person as the parties (or their privies) to the subsequent proceeding.
[17]
In this case, there is no discussion by the Tax
Court Judge of the requirements of either “cause of
action estoppel” or “issue estoppel”, which
are the two components of res judicata. Instead, the Tax Court Judge
concluded that the decisions of this Court in Benoit v. Canada, 2003 FCA
236 and Dumont v. Canada, 2008 FCA 32 were binding precedents that he had
to follow. In paragraph 9 he noted that:
9 Benoit and
Dumont are definitive findings of the Federal Court of Appeal. The Tax
Court of Canada is bound by such established law regarding the lack of legal
effect of Treaty 8 in granting tax exempt status to its signatories. In the
words of Justice Sheridan at paragraph 4 in the trial decision of Dumont (2005 TCC 790 at paragraph 4) for these very reasons the "argument that
Treaty 8 shelters ... income from taxation is without merit."
[18]
Although the Tax Court Judge did not refer to stare
decicis, his reference to being “bound by such
established law regarding the legal effect of Treaty 8” as a result of
the previous decisions of this Court indicates that he was applying the
principles of stare decisis. Stare decisis is the principle that
a lower court is bound by particular findings of law made by a higher court to
which decisions of that lower court could be appealed, directly or indirectly. Stare
decisis applies only to questions of law. Res judicata, on the other
hand, applies if a person is attempting to relitigate a particular matter
(whether a question of law, fact or mixed fact and law) that was determined in
a prior proceeding to which that person (or that person’s privy) was a party.
[19]
The appeal before us was argued on the basis
that the Tax Court Judge had decided to strike the paragraphs related to Treaty
8 on the basis of stare decisis. Since the Tax Court Judge relied only
on Benoit and Dumont in striking the paragraphs related to Treaty
8 on the basis that he was bound by the “established law”
arising from these decisions, it is necessary to determine what was
decided in these cases. In Dumont “the Appellant's
only response to Benoit was that he disagreed with it and urged this Court to
reject the decision” (paragraph 4 of the decision of the Tax Court 2005
TCC 790). As a result the focus turns to what was actually decided in Benoit.
[20]
The Federal Court Judge in Benoit (2002
FCT 243, [2002] 4 C.T.C. 295, after finding that “the
Dene and Cree people believed that the Commissioners promised a tax exemption”
(paragraph 319), found that “the Plaintiffs are entitled
to claim the benefits of Treaty No. 8, including the Treaty Right not to have
any tax imposed upon them at any time for any reason” (paragraph (a) of
the Judgment). The Federal Court Judge, therefore, made findings of fact and
law.
[21]
In allowing the appeal, this Court focused on
the factual finding of whether “the Aboriginal
signatories understood that they would be exempted from taxation at any time
for any reason” and, after a detailed review of the record, concluded
that there was “insufficient evidence to support”
this view (paragraph 116). This was a factual finding following a review of the
evidence and reversed the finding of fact that had been made by the Federal
Court Judge. Having made this finding of fact, there was no need to address any
question of law related to Treaty 8. The only finding made by this Court in Benoit
was a finding of fact. Therefore, the principles of stare decisis would
not apply. The question is not whether the Tax Court of Canada is “bound by [the] established law regarding the lack of legal
effect of Treaty 8 in granting tax exempt status to its signatories” (as
stated by the Tax Court Judge), but whether Mr. Tuccaro is bound by the finding
of fact in Benoit. The applicable principles are those related to issue
estoppel (which is a specie of res judicata), not stare decisis.
[22]
It was an error of law for the Tax Court Judge
to rely on the “established law regarding the lack of
legal effect of Treaty 8 in granting tax exempt status to its signatories”
in striking the paragraphs of Mr. Tuccaro’s Notice of Appeal related to Treaty
8. There is no law decided in the Benoit case - only the question of
fact of whether the Aboriginal signatories to this treaty had understood that a
promise of tax emption had been made by the commissioners who negotiated the
Treaty on behalf of the Crown. The failure to identify and address all of the
required elements of issue estoppel – which is a species of res judicata
that was initially identified as the basis for the motion to strike the
paragraphs related to Treaty 8 – was also an error of law.
[23]
To determine whether issue estoppel is
applicable in relation to a particular proceeding, the first matter that must
be determined is whether the question that is raised in the current proceeding
is the same question that was addressed in the previous proceeding. Counsel for
Mr. Tuccaro acknowledged during the appeal that Mr. Tuccaro is raising the same
question that was addressed by this Court in Benoit, i.e. whether
“the Aboriginal signatories understood that they would be
exempted from taxation at any time for any reason”. He also acknowledged
that the decision of this Court in Benoit was a final decision (leave to
appeal the decision of this Court in Benoit to the Supreme Court of
Canada was denied). The only remaining precondition for issue estoppel is
whether Mr. Tuccaro or his privy was a party in Benoit.
[24]
There were three plaintiffs in the Benoit
case (who were also respondents in the appeal) in addition to Mr. Benoit –
Athabasca Tribal Corporation, The Lesser Slave Lake Regional Council and Kee
Tas Kee Now Tribunal Council. Since the appeal in this Court was focused on the
decision of the Tax Court Judge who had determined that the paragraphs should
be struck on the basis that he was bound by the “established
law”, there was no discussion by the Tax Court Judge or by the parties
in this appeal with respect to whether Mr. Tuccaro should be considered to have
been represented by any of the plaintiffs in Benoit or whether any of
those plaintiffs was a privy for Mr. Tuccaro. There was no indication in the
record that either party had presented evidence on this point at the hearing of
the Crown’s motion.
[25]
In Danyluk, Binnie J. made the following
comments in relation to privity:
60 The concept
of "privity" of course is somewhat elastic. The learned editors of J.
Sopinka, S. N. Lederman and A. W. Bryant in The Law of Evidence in Canada (2nd
ed. 1999), at p. 1088 say, somewhat pessimistically, that "[i]t is
impossible to be categorical about the degree of interest which will create
privity" and that determinations must be made on a case-by-case basis.
[26]
Without any submissions from the parties with
respect to whether there is any privity between Mr. Tuccaro and the parties in Benoit,
it is not possible for me to make any finding in this regard. I would also note
that there is no reference in the Notice of Motion filed by the Crown in the
Tax Court to any question of whether any of the parties in Benoit were a
privy for Mr. Tuccaro.
[27]
Even if the requirements of issue estoppel are
satisfied, there is still a discretion to allow a matter to proceed, as noted
by Binnie, J. in Danyluk:
33 The rules
governing issue estoppel should not be mechanically applied. The underlying purpose
is to balance the public interest in the finality of litigation with the public
interest in ensuring that justice is done on the facts of a particular case.
(There are corresponding private interests.) The first step is to determine
whether the moving party (in this case the respondent) has established the
preconditions to the operation of issue estoppel set out by Dickson J. in Angle,
supra. If successful, the court must still determine whether, as a
matter of discretion, issue estoppel ought to be applied: British Columbia
(Minister of Forests) v. Bugbusters Pest Management Inc. (1998), 50
B.C.L.R. (3d) 1 (C.A.), at para. 32; Schweneke v. Ontario (2000), 47
O.R. (3d) 97 (C.A.), at paras. 38-39; Braithwaite v. Nova Scotia Public
Service Long Term Disability Plan Trust Fund (1999), 176 N.S.R. (2d) 173 (C.A.), at para. 56.
[28]
This determination of whether to exercise this
discretion to allow a matter to continue can only be made after a moving party
has established the essential elements for issue estoppel to apply.
[29]
As a result I would allow Mr. Tuccaro’s appeal
in relation to the Order to strike those paragraphs of his Notice of Appeal
that relate to Treaty 8.
IV.
Cross-Appeal
[30]
The Crown has cross-appealed in relation to the
decision of the Tax Court judge to order Mr. Tuccaro to redraft paragraph 43 of
his Notice of Appeal. The argument of the Crown is not that Mr. Tuccaro should
not redraft this paragraph but that the one sentence that was in paragraph 43
(and which is quoted above) should have been struck. It seems to me that since
the Tax Court Judge has ordered Mr. Tuccaro to redraft this paragraph, it is
premature to address the question of whether the single existing sentence of
paragraph 43 should be struck as this sentence may not be in the redrafted
paragraph. I would therefore dismiss the Crown’s cross-appeal in relation to
the existing paragraph 43.
[31]
With respect to the cross-appeal related to the refusal
to strike the paragraphs related to the Guidelines and the honour of the Crown,
I am not persuaded that the Tax Court Judge committed any error in finding that
“the Guidelines Argument, even in the context of the
Honour of the Crown argument, cannot be said to have ‘no chance of success’
when considered in the context of the Appellant's factual history, the sequence
of events in his claim for a section 87 exemption and the fact that a trial
judge has not previously weighed the probative value and weight of the
Guidelines Argument in such a factual context”. I would dismiss the
Crown’s appeal in relation to those paragraphs.
V.
Proposed Disposition
[32]
I would allow Mr. Tuccaro’s appeal and I would dismiss
the Crown’s cross-appeal. As a result, I would delete paragraphs 1 and 2 of the
Order of the Tax Court Judge dated September 23, 2013.
[33]
I would award costs to Mr. Tuccaro.
"Wyman W. Webb"
“I agree,
K.
Sharlow”
“I agree,
A.F.Scott”
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