Citation: 2008 TCC 469
Date: 20080912
Dockets: 2007-3627(GST)G; 2007-3628(GST)G;
2007-3629(GST)G; 2007-3630(GST)G;
2007-3631(GST)G
BETWEEN:
STANLEY J. TESSMER LAW CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Campbell J.
[1]
I have several motions
before me. The Respondent seeks an order to strike portions of the Notices of
Appeal under Rule 53 of the Tax Court of Canada Rules, or,
alternatively, an order referring the determination of a question respecting
the Appellant’s standing pursuant to Rule 58(1)(a) of the Rules.
The Appellant seeks an order also referring the determination of a question
pursuant to Rule 58(1)(a) but the Appellant’s question is not the same as the
question which the Respondent seeks to have referred for determination. The
Appellant’s question concerns the constitutional issue.
[2]
Let me first deal with
the Respondent’s motion to strike portions of the Notices of Appeal. The
Respondent’s application is brought on the basis that the principles of issue
estoppel and abuse of process should apply to preclude the Appellant from re‑litigating
the same constitutional challenge raised in its appeal in 1999. The
Respondent’s argument is that the main issues raised in the present appeals
have already been made by the Appellant and dealt with by this Court in an
earlier appeal. Therefore only the issue of gross negligence penalties and the
issue of whether the assessment is statute barred in one year remain.
[3]
By way of background,
the Appellant’s business involves the provision of legal services. The
Appellant’s principal, Stanley Tessmer, specializes in criminal defence law.
The Appellant appealed an earlier GST assessment, asserting that the
application of GST to its legal bills for criminal defence services infringed
the Charter rights of its clients to retain and instruct counsel as
protected by section 10(b) of the Charter of Rights and Freedoms.
On June 7, 1999, J. McArthur dismissed the Appellant’s appeal on the basis
that “the Charter does not absolve an accused who pays for legal
services, from GST” and that the Charter did not provide a
“constitutional duty to subsidize the funding of defence lawyers regardless of
the accused’s financial resources.” (Stanley J. Tessmer Law Corporation v.
Canada, [1999] G.S.T.C. 41, at paragraph 10.)
[4]
The present five
appeals arise from assessments of the Appellant’s GST reporting periods between
1999-07-01 and 2005-09-30 and for four additional reporting periods based on
three month intervals between 2005-10-01 and 2006‑12‑31, for
failing to collect GST with respect to the supply of legal services. Based on
its response to a Demand for Particulars issued on November 5, 2007, the
Appellant’s position is based on the alleged breaches of the Charter rights
of its clients, who retain the Appellant to provide criminal defence services. It
challenges the constitutional validity of the Excise Tax Act in its
application of GST to these services with the resulting interference to a
defendant’s right to counsel of choice.
[5]
At paragraph 17 of its
Written Submissions, the Respondent sets out its position on this issue as
follows:
(a)
the Appellant is barred by the principles of
issue estoppel and abuse of process from relitigating the following matters
determined in its 1999 Appeal:
(i)
that the Appellant has standing to raise and
rely on any of the alleged breaches of the Charter rights of its clients
to challenge the validity of the Excise Tax Act; and
(ii)
that the Appellant has no obligation to collect
GST in relation to criminal defence services based on the substantive Charter
arguments raised in the Appeals.
[6]
Rule 53 reads as
follows:
Striking out a
Pleading or other Document
RULE 53
53. The Court may
strike out or expunge all or part of a pleading or other document, with or
without leave to amend, on the ground that the pleading or other document,
(a) may prejudice or delay the fair
hearing of the action,
(b) is scandalous, frivolous or
vexatious, or
(c) is an abuse of the process of the
Court.
[7]
The Appellant’s
arguments against the Respondent’s motion to strike are based primarily on
significant factual differences which the Appellant alleges exist between the
present appeals and those facts that were before J. McArthur in 1999. In
addition, the Appellant contends that “the substantive law regarding
constitutional rights and the rights of an accused person to counsel has been
further refined and clarified by the Supreme Court of Canada in Christie”
(Applicant’s Argument re Respondent’s Motion, paragraph 41).
[8]
As a general principle,
supported by a great deal of caselaw, a motion to strike portions of a pleading
can succeed only where it is clearly evident that the portions sought to be
struck will be prejudicial to a fair hearing, are scandalous, vexatious or
frivolous or an abuse of the Court’s process. The question is whether, as the
Respondent contends, the principles of issue estoppel and abuse of process
apply to prevent the Appellant from arguing the constitutional issues raised in
these appeals.
[9]
The Supreme Court of
Canada in Angle v. Canada (Minister of National Revenue – M.N.R.), [1975] 2 S.C.R. 248, set out the three
preconditions to be met for issue estoppel to apply:
1.
that the same question
that is before the Court was decided by an earlier court decision;
2.
that the earlier
decision is final; and
3.
that the parties to the
judicial decision, or their privies, are the same as the parties in the present
appeals.
[10]
J. Boyle in Golden
et al. v. Canada, 2008 DTC 3363, at paragraph 24, (decision under appeal to
the Federal Court of Appeal) made the following comment on the principle
guiding the application of issue estoppel:
The doctrine of issue estoppel is not to be applied
automatically or inflexibly once the preconditions are established. It remains
for this Court to decide whether, as a matter of discretion, issue estoppel
ought to be applied or if its application would be unfair in these particular circumstances.
[11]
There is no question
that the third precondition to the application of issue estoppel set out in the
preceding paragraph [9], that the parties to the prior and present litigation
are the same, is satisfied.
[12]
With respect to the
second precondition, the finality of the 1999 decision of J. McArthur,
that appeal was heard under the Informal Procedure pursuant to section 18 of
the Tax Court of Canada Act (the “Act”). The Respondent’s position was
that, because the 1999 decision was never appealed, it must be considered to be
a final decision. The question is whether a decision of this Court made
pursuant to the Informal Procedure will be considered a final one in respect to
the application of the issue estoppel.
[13]
Although section 18.28
of the Act dictates that a decision under the Informal Procedure
will not create a precedent, other provisions appear to provide that such a
decision will still be considered a final and conclusive decision in a matter.
Section 18.24 of the Act states:
Final judgment
18.24 An appeal from a judgment of the
Court in a proceeding in respect of which this section applies lies to the
Federal Court of Appeal in accordance with section 27 of the Federal Courts
Act.
Section 2 of the Federal Courts Act
states:
“final judgment" means any judgment
or other decision that determines in whole or in part any substantive right of
any of the parties in controversy in any judicial proceeding;
[14]
These provisions together
with portions of section 27 of the Federal Courts Act imply
that the right to appeal a decision made under the Informal Procedure is more
limited than it is for one rendered under the General Procedure. Nevertheless,
with respect to issue estoppel, I see no reason why a decision rendered under
the Informal Procedure should be any less final and conclusive than a decision
rendered under the General Procedure. It is to some extent simply an
application of common sense that the informal decisions should carry the same
degree of finality and conclusiveness in applying the principle of issue
estoppel.
[15]
The remaining precondition
to the application of the issue estoppel is whether the questions or issues that
were previously decided by this Court in 1999 render that decision conclusive
as it relates to the main issues in the present appeals. The evidence must be
clear and certain that the issues, or questions, to which the Respondent
requests that the issue estoppel apply, were specifically and conclusively settled
by a Court in another separate proceeding. This applies to both issues of fact
and law. Although the Appellant spent considerable time criticizing the 1999
decision, it must be remembered that this is not an appeal of that decision but
instead a motion to strike portions of these present Notices of Appeal. Within
the parameters of this Motion as it relates to the remaining precondition to
issue estoppel, I am not determining the validity of the Appellant’s arguments
concerning these appeals but rather I am focussed on whether these same
arguments have already been decided and disposed of in the 1999 decision. If
they have, then the three preconditions to the application of issue estoppel
have been satisfied.
[16]
The Appellant contends
that there are significant factual differences between these appeals and the
facts in the 1999 decision and that the law has changed since 1999. Although
these changes do not appear to fall within the three preconditions to issue
estoppel, because of the discretionary nature of Rule 53 and because the
Appellant has raised them, I believe that I can consider them.
[17]
According to paragraph
2 of the 1999 decision of J. McArthur, “the Appellant had collected GST
for that period without remitting it to the Minister in order to commence this
appeal. It has now been remitted.” In the present appeals, however, the
Appellant did not collect GST on accounts rendered and did not remit GST.
Consequently, the Appellant was assessed penalties.
[18]
In addition, the
present appeals involve much larger amounts than those involved in the 1999
appeal and the appeals have been instituted under the General Procedure.
There are also different periods in issue between the present appeals and the
1999 appeal. In Leduc v. Canada, [2002] 2 C.T.C. 2735, at paragraph 18, the
Respondent argued that issue estoppel should not apply to different tax years:
Counsel for the respondent also cites a
decision by a common law court with jurisdiction over property tax, in which
that court refused to apply the doctrine of issue estoppel in respect to a
different taxation year. The decision in question was Quintette Coal Ltd. v.
B.C., etc., [1988] 21
B.C.L.R. (2d) 193 (S.C.), at pages 197-98:
There are a number of very impressive
reasons why res judicata should not apply to successive tax assessment cases,
all of which have been expressed most eloquently in the cases cited. The chief
of these, I suggest, are:
1. An assessor carries out a statutory
duty.
2. An assessment or valuation is
temporary in nature and limited in time.
3. The jurisdiction of a
decision-making tribunal is limited. Its function begins and ends with
determining the assessment of a defined period.
4. The assessment for a new year is not
"eadem quaestio".
5. No real lis is involved since the
assessor has no self-interest.
Leduc is
rendered pursuant to civil law principles while the decision of Quintette Coal
Ltd. v. B.C., etc., [1988] 21 B.C.L.R. (2d) 193 (S.C.), referenced
in the Leduc decision, considered the Assessment Act of British Columbia.
I would not consider either of these cases to be conclusive of this issue
and it appears that issue estoppel may still apply to following taxation
periods.
[19]
At paragraph 6 of the
1999 decision, J. McArthur stated:
The main force of the Appellant's
argument is that subsection 10(b) gives the detainee or accused the privilege
to retain counsel of choice without regard to one's financial resources. …
The Appellant submits that the basis and substance of
its argument has now changed. However the Appellant’s counsel does admit that:
… an accused person has a right to counsel and a right to counsel of
choice but that right is not absolute. Such a right does not entitle an accused
to the most expensive counsel or, for example, to have state funded counsel for
any lawyer the accused might choose. The right is simply to retain counsel
within the means and opportunity available to the accused. (Paragraph 29 of the
Applicant’s Argument Re Respondent’s Motion.)
Nevertheless, it appears that the Appellant is still
alleging that its clients’ right to counsel of choice is impeded by the
imposition of the GST. Furthermore, in the present Appeals, the Appellant now
relies on sections 7 and 11(d) of the Charter in addition to section 10
which was the basis of its argument in the 1999 appeal.
[20]
The Respondent’s
position is that pleading these additional provisions in the present appeals
will not materially change the issue because the questions relating to sections
7 and 11(d) are closely connected with the arguments raised pursuant to section
10(b) in the 1999 appeal and as such require a case by case analysis. In fact the
Appellant admits that sections 7 and 11(d) do not add to its argument and submit
that no contextual facts would be required to support its case.
[21]
Considering all of
these arguments, I am satisfied that there are sufficient circumstances here
that justify the exercise of my discretion to conclude that the elements of
issue estoppel are not satisfied. Even if the preconditions were met, I believe
I must look at the overall circumstances of the particular case before me in
deciding if issue estoppel should apply. It should never be applied
indiscriminately. It is not obvious that portions of the Notices of Appeal
concerning the constitutional grounds are so frivolous, vexatious and an abuse
of process that they should be struck.
[22]
The Appellant contends
that there have been changes in the law regarding the issue of standing before a
Court. The Appellant referred to some of the obiter dictum comments
of Chief Justice McLachlin in Canada v. Ferguson, [2008] S.C.J. No.
6, at paragraph 59, to the effect that:
A claimant who otherwise has standing can generally seek a
declaration of invalidity under s. 52 on the grounds that a law has
unconstitutional effects either in his own case or on third parties …
[23]
This could be
applicable in some situations, where, for example, government requested a
ruling from the Supreme Court on the constitutionality of proposed legislation.
In this regard, the comments of Justice Beetz in Manitoba (Attorney General) v. Metropolitan Stores (MTS)
Ltd., [1987] S.C.J. No. 6,
at paragraph 49 are particularly relevant:
There may be rare cases where the question of
constitutionality will present itself as a simple question of law alone which
can be finally settled by a motion judge. A theoretical example which comes to
mind is one where Parliament or a legislature would purport to pass a law
imposing the beliefs of a state religion. Such a law would violate s. 2(a) of
the Canadian Charter of Rights and Freedoms, could not possibly be saved under
s. 1 of the Charter and might perhaps be struck down right away; see Attorney
General of Quebec v. Quebec Association of Protestant School Boards, [1984]
2 S.C.R. 66, at p. 88. It is trite to say that these cases are exceptional.
However, this is not the type of query that is before
the Court in these appeals. In addition, I see nothing in Ferguson which would point to a change in the law respecting
standing. The other cases which the Appellant referred to were all decided
prior to 1999.
[24]
A party can, in
exceptional circumstances, use a public interest standing argument and
exceptional prejudice test to bring a question regarding a third party before
the Court. There was nothing in the 1999 decision to indicate that these issues
had been addressed.
[25]
The Appellant
submits that the decision of the Supreme Court in British Columbia
(Attorney General) v. Christie, [2007] 1 S.C.R. 873,
supports the dissident judgment of Justice McEachern in John Carten Personal Law Corp. v.
British Columbia
(Attorney General), 40 B.C.L.R. (3d) 181. The Appellant’s position seems to be that the Courts
have recognized a constitutional right to counsel with respect to criminal
defence matters only. As the Appellant’s practice is restricted to criminal
defence matters, it concludes that this right is protected by the Charter.
It bases this argument on its understanding that the Supreme Court in the case
of Christie held “that there is, in Canada, no over-arching
constitutional right to counsel, save and except with respect to certain
specified limited areas …” (Paragraph 27 of the Applicant’s Argument Re
Respondent’s Motion.)
[26]
The Appellant’s
conclusions here seem exaggerated. At paragraph 26 of Christie, the
Supreme Court stated:
Nor has the rule of law historically been understood to
encompass a general right to have a lawyer in court or tribunal proceedings
affecting rights and obligations. The right to counsel was [page 885]
historically understood to be a limited right that extended only, if at all, to
representation in the criminal context: …
[emphasis added].
The Appellant’s conclusion, that the right to a lawyer
is automatically protected in criminal cases, simply cannot be supported.
Rather, the Court clearly in the following paragraph 27 of Christie states
that “a right to
counsel may be recognized in specific and varied situations.”
[27]
The Appellant also
argues that a consideration of section 1 of the Charter may not be
necessary, as the Respondent contends, and that the submission of facts may not
be essential. Whether this proposition has merit or not should be left to the
trial judge for determination.
[28]
In addition to issue
estoppel, the doctrine of abuse of process may be used to prevent relitigation
of a matter that was previously before the Court. Like issue estoppel it is
also discretionary. At paragraphs 28 and 29 of Golden, J. Boyle
discussed the differences between the application of issue estoppel and abuse
of process:
28 The
principal difference between issue estoppel and abuse of process to prevent
relitigation is with respect to the question of mutuality of parties and
privity. Abuse of process does not require that the preconditions of issue
estoppel be met. Abuse of process can therefore be applied when the parties are
not the same but it would nonetheless be inappropriate to allow litigation on
the same question to proceed in order to preserve the courts' integrity.
29 Abuse of
process is also a doctrine that should only be applied in the Court's
discretion and requires a judicial balancing with a view to deciding a question
of fairness. However, it differs somewhat from a consideration of the possible
application of issue estoppel in that the consideration is focused on
preserving the integrity of the adjudicative process more so than on the
status, motive or rights of the parties.
I believe that there are some differences between the
present appeals and the 1999 decision and enough uncertainties raised by
the Appellant, to warrant my refusal of the Respondent’s motion to apply the
principle of abuse of the judicial process as there is no violation of the
administration of justice in respect to finality, consistency or integrity.
Therefore I believe, after a review of all these arguments, that it is a proper
exercise of my discretion to dismiss the Respondent’s motion to strike portions
of the Notices of Appeal brought pursuant to Rule 53.
[29]
Much of the
Respondent’s arguments, with respect to the pleading of the additional Charter
provisions, sections 7 and 11(b), are based on the inability of the
Appellant’s pleadings to address the specific circumstances, on a case by case
basis, of those individuals whose rights were allegedly breached. The
Respondent contends, at paragraph 52 of its Written Submissions, that:
… the right to counsel outside of a s10(b) context is a
case-specific multi-factored enquiry. In other words, the assertion of a right
to counsel within other sections necessarily involves a consideration of the
individual circumstances of the case. [B.C. (A.G.) v Christie, supra,
para. 25; New Brunswick (Minister of Employment and Immigration) v. G. (J.), [1999] 3 S.C.R. 46, para. 86]
[30]
The Respondent’s
alternative motion was for an order pursuant to section 58(1)(a) of the Rules
to refer for determination the following question:
Does the Appellant have the standing to raise and rely on the
alleged breaches of the Charter rights of its clients in challenging the
validity of the Excise Tax Act as it applies to impose Goods and
Services Tax (“GST”) on legal fees charged for criminal defence services
supplied by the Appellant?
It is clear that, if it is determined that the
Appellant has no standing, it will be barred from raising the constitutional
issue since its outcome is dependent firstly upon the issue of its standing.
[31]
Justice McArthur’s
decision in 1999 at paragraph 12 stated the following concerning the issue of
standing:
Finally, the Respondent submitted that the Appellant
corporation cannot challenge the law on the ground that it violates another
person's Charter right. In this appeal, the Appellant is not claiming that its
subsection 10(b) rights were infringed upon. The Appellant claims that it is
its clients' rights that are infringed. While it is not necessary to deal with
this submission, I agree with the Respondent's position that it must be your
own Charter rights that are at issue if one challenges the validity of a
statute.
[32]
The Appellant’s
position is that J. McArthur’s statements respecting the Appellant’s standing
before the Court is the ratio decidendi of the case while his finding
concerning the constitutional issue was obiter dictum. However, the
phrase “while it is not necessary” precedes J. McArthur’s comments on the
question of standing. This indicates just exactly the opposite of that which the
Appellant contends. Regardless of whether the Appellant got this right or not,
the constitutional issue should not be addressed until a determination is made
respecting the Appellant’s standing before the Court to bring such a question.
[33]
The Appellant’s
application pursuant to Rule 58(1)(a) of the Rules is for a
determination of the following question:
Is section 165 of the Excise Tax Act, R.S.C., 1985, as
amended, inconsistent with sections 7, 10(b) and 11(d) of the Canadian
Charter of Rights and Freedoms in imposing on a criminal defendant who has
a constitutional right to retain and instruct counsel a liability to pay goods
and services tax (“GST”) with respect to a lawyer’s account for criminal
defence services and in requiring the lawyer to collect and remit GST to the
Government of Canada on such accounts and therefore, to that extent, by reason
of section 52(1) of the Constitution Act, 1982, of no force and effect?
This question clearly involves the substantive
constitutional issue. In addition it is clear that the Appellant is not
pleading that its own rights under the Charter have been violated but
that there is a violation of the rights of third parties. If I entertained any
thought of referring this question for a determination, I would simply be
putting the cart before the horse and placing the Appellant in the precarious
position of proceeding to Court in respect to these new assessments, incurring additional
costs and expending additional time to get before the Court with the
possibility of then being informed that it has no standing to bring these appeals
with respect to the constitutional issue. In fact I believe that the Appellant
recognizes the potential hazards of proceeding to a hearing without obtaining a
determination of the question of standing because the Appellant agreed that it
would be advantageous to both parties for the Court to refer this question
pursuant to Rule 58(1)(a). (Transcript pages 6 and 122.)
[34]
A motion pursuant to
Rule 58(1)(a) is a two step process:
1.
a decision whether the
proposed question is an appropriate one for determination under this Rule; and
2.
if it is appropriate,
to set it down to hear argument.
Of course, a determination of the question of standing
may not completely dispose of the appeals but there is a very good chance that
it may shorten the proceedings. Even if it resolves the constitutional issue,
there would remain the issues of penalties and a statute barred year. A factual
framework may be required to resolve this question and, if so, the Court at its
discretion may permit such evidence to be adduced. In light of the generally
held principle that a party cannot rely on the alleged breaches of a third
party’s Charter rights, a preliminary determination of the issue of the
Appellant’s standing to bring these appeals is an absolute prerequisite to the determination
of the constitutional issue. Standing within the litigation process is not
necessarily an automatic right. Deferring a determination on this question of
standing to the hearing date would serve no useful purpose and I believe it
would ultimately be detrimental to both parties’ interests in respect to
expense and time.
[35]
I am therefore allowing
the Respondent’s motion pleaded in the alternative and referring for
determination pursuant to Rule 58(1)(a) the question of the Appellant’s
standing to rely on the breaches of its clients’ Charter rights.
[36]
The Appellant’s motion
to refer the question which it posed would, as the Respondent suggests, split
the Charter issues between two separate proceedings: the first to
determine if there is any breach of Charter rights, and then second to
determine whether or not Section 1 of the Charter would justify any such
breaches. This would mean that at least some of the evidence would necessarily
overlap. I see no justification for splitting the issue and referring this question.
In fact I believe this would add to the expense and time involved. In addition,
the Appellant is seeking to refer a substantive issue in the absence of any
relevant factual content. Consequently, the Appellant’s motion is dismissed.
[37]
The matter of costs in
these motions should be left to the discretion of the trial Judge.
Signed at Charlottetown, Prince Edward Island, this 12th day of September 2008.
“Diane Campbell”
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