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Citation: 2004TCC3
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Date: 20040206
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Docket: 2000-4164(GST)G
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BETWEEN:
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ROGER OBONSAWIN,
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Applicant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR ORDER
Miller J.
[1] The Appellant, Mr. Roger
Obonsawin, brings a motion for an Order amending the Notice of
Appeal and temporarily staying the appeal pending the final
disposition of the Ontario Superior Court of Justice action with
Court File No. 03-CV-246581-CM3 ("OSCJ action"). The
Respondent brings a motion for an Order striking out portions of
the Appellant's amended Notice of Appeal. The conundrum in
these applications arises as a result of the Appellant, by
necessity, seeking different remedies in different courts.
[2] Mr. Obonsawin commenced two
actions: this Tax Court of Canada matter filed September 28, 2000
appealing from a goods and services tax assessment (the "GST
Assessment"); the OSJC action, first commenced June 21, 2000
as part of a class action, and subsequently pursued as an
independent action filed April 3, 2003, raising claims by Mr.
Obonsawin against the Government of Canada, Government Ministers
and Government officials. It is useful to identify the relief
sought by Mr. Obonsawin in the OSJC action:[1]
CLAIM
1. The
Plaintiff claims the following relief:
(a) Damages for breach
of fiduciary obligations;
(b) A declaration,
pursuant to s. 52(1) of the Constitution Act, 1982 and s.
24(1) of the Charter of Rights and Freedoms, that some or
all of the Defendants have violated the constitutional rights of
the Plaintiff guaranteed by s. 35 of the Constitution;
(c) Damages for
breach of constitutional rights pursuant to the Charter of
Rights and Freedoms, s. 24(1);
(d) Damages for
abuse of power in the exercise of statutory powers and
duties;
(e) An interim and
permanent injunction enjoining the Defendants from breaching the
Test Case agreement;
(f) An interim
and permanent mandatory injunction requiring the Defendants to
honour and perform the Test Case agreement;
(g) An interim and
permanent injunction enjoining the Defendants from discriminating
against the Plaintiff with respect to the tax exemption rights of
the employees of the plaintiff;
(h) A declaration
that the GST Assessment against the plaintiff that is described,
and defined, at sub-paragraph 59(a) below, is null and void, and
of no force or effect;
(i) Punitive,
aggravated and/or exemplary damages;
(j) Costs on a
substantial indemnity scale; and
(k) Such further and
other relief as to this Honourable Court may seem meet and
just.
[3] Counsel for Mr. Obonsawin, Mr.
Wortzman, argues that the Tax Court of Canada has no jurisdiction
to adjudicate the tort of abuse of power or abuse of process and
certainly cannot make any award of damages in that regard. But,
he goes on, the OSCJ cannot only make a finding on the tort of
abuse of power or abuse of process, but can grant the Appellant a
declaration that the GST Assessment is null and void.
However, states Mr. Wortzman, it would then be necessary for the
Appellant to return to the Tax Court of Canada armed with the
OSCJ's findings, and get the Tax Court of Canada to vacate
the assessment, as only the Tax Court of Canada has the
jurisdiction to provide that remedy. If the Tax Court of Canada
went ahead prior to the OSCJ findings and simply heard the
substantive tax issues, and found that the assessment was
correct, the Appellant would then be faced with collection
actions from Canada Customs and Revenue Agency (CCRA) on an
approximate $7 million GST liability. This would effectively
bankrupt the Appellant, according to Mr. Wortzman. This is the
possible prejudice Mr. Wortzman maintains Mr. Obonsawin
faces, if I do not grant the stay.
[4] Mr. Obonsawin also wishes to amend
the pleadings to set up this stay application and to leave the
door open for obtaining the Tax Court of Canada's vacating of
the assessment in the event the OSCJ finds an abuse of power and
makes a declaration the assessment is null and void. Most of the
amendments therefore go to the background of the Government's
alleged egregious behaviour.
[5] The Respondent opposes the stay
application. Mr. Bourgard initially argued that the Tax Court of
Canada is the proper forum to hear the issue of abuse of process,
which he distinguishes from the tort of abuse of power.
Mr. Bourgard relied on the recent decision in Dwyer v.
The Queen[2] to suggest that the Tax Court of Canada can
vacate a GST Assessment on the basis of an abuse of process.
Further, as the substance of this case is Mr. Obonsawin's tax
assessment, it is the Tax Court of Canada that is best equipped
to get at the core matter. Only once the Tax Court of Canada has
ruled on vacating the assessment, and, if not vacating the
assessment, then determining the correctness of the amount of the
assessment, would the OSCJ be in a position to fully rule on the
damages action in the tort of abuse of power or abuse of process.
Mr. Bourgard concedes only those amendments to the Notice of
Appeal which would permit the Appellant to seek a remedy of
vacating the assessment for abuse of process.
[6] Some time after oral argument, Mr.
Bourgard notified the Court of a shift in the Respondent's
position. This arose after the Respondent's review of this
Court's decision in Main Rehabilitation Co. Ltd. v. The
Queen[3]
and Pintendre Autos Inc. v. The Queen[4] and the recent decision of
the Federal Court of Appeal's in Webster v. The
Queen.[5] It is now conceded by the Respondent
that this Court does not have the jurisdiction to vacate a
correct assessment on the basis of abusive government behaviour.
The difference between the Appellant's and the
Respondent's position in this regard is that the Respondent
argues the Tax Court of Canada cannot be directed to vacate an
assessment on the basis of another Court (in this case the OSCJ)
declaring an assessment null and void, due to government abuse of
power. (The Respondent suggests an Ontario Court would be
unlikely to entertain such a declaration in any event.) The
Appellant maintains that, although the Tax Court of Canada cannot
adjudicate the issue of abuse of power, it can, and must, vacate
an assessment, if a Court with the appropriate jurisdiction
declares an assessment null and void.
[7] The change in the Respondent's
argument limits the issue in the Tax Court of Canada, in the
Government's view, to solely that of the correct
determination of the quantum of the assessment. Yet, I did not
receive, presumably because I did not ask for them, any further
submissions from the Government regarding the Appellant's
request to amend the pleadings. I will have more to say on this
shortly.
[8] Clearly the Tax Court of Canada
has exclusive jurisdiction to vacate a GST assessment. Just as
clearly, the OSCJ has jurisdiction to award damages in a tort
action of abuse of power or abuse of process. What is not so
clear is who has jurisdiction to give declaratory relief. It is
helpful to clarify certain concepts in considering this issue,
before proceeding to address the stay application. What is abuse
of power? What is abuse of process?
Abuse of power
[9] Abuse of power is a tort described
in Remedies In Tort[6] as follows:
60.1 The tort has been recognized as
having two branches or forms: (1) where the public official
possesses the legal power or authority to act but intentionally
exercises that power or authority for the predominant and
improper purpose of injuring the plaintiff, commonly referred to
as "targeted malice"; (2) where the public official
acts knowing he has no legal power or authority to do the act
complained of and that the act will probably injure the
plaintiff. The existence of two branches to the tort was
confirmed by the House of Lords in Three Rivers District
Counsel v. Bank of England (No. 3).
60.2 The House of Lords identified the
elements of the tort as follows: (1) the defendant must be a
public officer; (2) there must be an exercise of power as a
public officer; (3) the sate of the mind of the defendant
(relating to one or the other branch of the tort); (4) duty to
the plaintiff; (5) causation; and (6) damages as a result.
Following from that decision, the British Columbia courts have
set out the following ingredients of the tort: (1) the defendant
must be a public officer; (2) there must be exercise of power as
a public officer; (3) there must be a state of mind of the
defendant that is either targeted malice or he must have acted in
the knowledge of, or with reckless indifference to, the legality
of his act and in the knowledge of, or with reckless indifference
to, the probability of causing injury to the plaintiff; (4) there
must be a duty to the plaintiff or sufficient interest in the
plaintiff to found a legal standing to sue; and (5) the exercise
of power must have caused loss to the plaintiff.
The authors go on to indicate that punitive damages are
particularly appropriate in such abuse cases. There is no dispute
that it is the OSCJ, and not the Tax Court of Canada, that is the
appropriate court to hear this aspect of the Appellant's
claim.
Abuse of process
[10] This concept becomes somewhat trickier
as it is used in a number of different contexts.
(i) Tort. Again relying
on comments in Remedies In Tort,[7] Mr. Lewis Klar and Justice Linden
summarized this tort as originating in Grainger v. Hill[8] as
follows:
4. ... It is an action for abusing the process of law, by
employing it to extort property to which the Defendants had no
right: that is of itself a sufficient cause of action, without
alleging that there was no reasonable or probable cause for the
suit itself" (per Vaughan J.). "This is not an action
for a malicious arrest or prosecution, or for maliciously doing
that which the law allows to be done: the process was enforced
for an ulterior purpose; to obtain property by duress to which
the Defendants had no right. The action is not for maliciously
putting process in force, but for maliciously abusing the process
of the Court" (per Bosanquet J.).
...
14. To establish abuse of process, the plaintiff must prove
that the defendant resorted to a legal process against him solely
for a purpose other than that which it was designed to serve. In
other words, the proceedings were "merely a stalking-horse
to coerce the defendant in some way entirely outside the ambit of
the legal claim upon which the court is asked to
adjudicate". It is immaterial to the action whether the
process is well founded if it was taken for an improper purpose
collateral to the ostensible purpose of the proceeding. The
collateral advantage sought, to be improper, must be one not
reasonably related to the litigation and but for which the
defendant would not have commenced the action.
Damages for this tort liability also are not within the
purview of the Tax Court of Canada.
(ii) Court's inherent
jurisdiction over its own process. The Tax Court of Canada is
no different from other Superior Courts in having an inherent
power to prevent abuse of its own process. The Tax Court of
Canada rules are full of examples, the clearest perhaps
represented in Rule 53, which allows the Court to strike out all
of a pleading on the grounds that it is an abuse of process of
the Court.
[11] This, however, is not the abuse of
process at issue in this case, as the abuse of process, if any,
was not an abuse of the Court's own procedure, but of the
assessment procedure and the assessment itself.
(iii) Abuse of process in the
administrative or public law context of a breach of principles of
natural justice.
[12] This appears to be the abuse Mr.
Bourgard was referring to when he first suggested the Court
could vacate an assessment if there is something about the
Minister's assessing actions that shocks the conscience of
the community. Although dealing with a delay issue, the Supreme
Court of Canada in Blencoe v. British Columbia (Human Rights
Commission)[9] discussed this concept of abuse of process
in some detail. Justice Bastarache indicated at paragraph
105:
It is trite law that there is a general duty of fairness
resting on all public decision-makers. ... Perhaps the best
illustration of the traditional meaning of this duty of fairness
in administrative law can be discerned from the following words
of Dickson J. in Martineau,[10] at page 631:
In the final analysis, the simple question to be answered is
this: Did the tribunal on the facts of the particular case act
fairly toward the person claiming to be aggrieved? It seems to me
that this is the underlying question which the courts have sought
to answer in all the cases dealing with natural justice and with
fairness.
These comments were in the context of the Court exercising its
supervisory function over a tribunal, the B.C. Human Rights
Commission, though I see no reason why it cannot similarly
pertain to any government official. Justice Bastarache went
on to say at paragraph 120:
In order to find an abuse of process, the court must be satisfied
that, "the damage to the public interest in the fairness of
the administrative process should the proceeding go ahead would
exceed the harm to the public interest in the enforcement of the
legislation if the proceedings were halted". According to
L'Heureux-Dubé J. in Power,[11] supra, at p. 616,
"abuse of process has been characterized in the
jurisprudence as a process tainted to such a degree that it
amounts to one of the clearest of cases. In my opinion, this
would apply equally to abuse of process in administrative
proceedings. For there to be abuse of process, the proceedings
must, in the words of L'Heureux-Dubé J. be
"unfair to the point that they are contrary to the interests
of justice" (p. 616). "Cases of this nature will be
extremely rare" (Power, supra, at p. 616). In the
administrative context, there may be abuse of process where
conduct is equally oppressive.
[13] Does this concept, although in large
measure derived from criminal proceedings, have application to
public servants in the government department whose role it is to
assess quantum of a taxpayer's tax liability? A duty of
fairness surely extends to a Minister determining an assessment.
As described in Judicial Review of Administrative Action in
Canada[12] by Donald J.M. Brown and John M. Evans,
the duty of fairness attaches to every public authority making an
administrative decision not of a legislative nature which effects
the rights, privileges or interest of an individual. The
parties agree, however, that this Court has no authority or
jurisdiction to hear representations with respect to this form of
abuse of process and to provide an appropriate remedy. That
certainly appears to be the common thinking supported by the
cases of Webster, Main Rehabilitation and
Pintendre cited earlier. They appear to have shut the
jurisdictional door left slightly ajar by the recent Federal
Court of Appeal decision in Dwyer. I hope there might be
some opportunity in the future for the Federal Court of Appeal to
hear a full debate on this Court's jurisdiction.
[14] Does the OSCJ have jurisdiction to
offer a public law remedy in this context? The Appellant argues,
yes, it can give declaratory relief. The Respondent suggests,
though without delving deeply into this matter, as it was not
necessary to do so, that no, the remedy available to the
Appellant in the OSCJ is the private law tort of abuse of process
or abuse of power: a remedy that is not available in the Tax
Court of Canada. Mr. Wortzman argues that this leaves no control
over Government conduct. I disagree. Without having to decide
another court's jurisdiction, there may well be a public law
remedy available - it is simply not available in the Tax Court of
Canada.[13] There
is also some control over government conduct in the availability
of the tort action of abuse of power. If the Court with
jurisdiction of such a tort action takes the view that the
appropriate damages should relate entirely to the correct quantum
of tax, wrongfully assessed, then its award can be structured to
achieve that result. The practical effect would be similar to a
declaration the assessment is null and void.
[15] I do not intend to tell another Court
what its jurisdiction is, notwithstanding recent comments from
Courts about deference to the Tax Court of Canada on tax
matters.[14] If
the OSCJ assumes the public law jurisdiction, and grants
declaratory relief, it does not follow that this Court
automatically implements that decision by vacating the
assessment. If we cannot hear the abuse of power matter directly
with a view to vacating an assessment, I fail to see how we have
jurisdiction to vacate an assessment based on another Court's
finding of abuse of power. If the Government attempts to pursue
collection of its assessment in light of such a declaration from
the OSCJ, the Appellant might seek injunctive relief in the
Federal Court. Again, that is not a matter for the Tax Court of
Canada.
[16] To conclude on the jurisdictional
issue, I accept counsels' position that the Tax Court of
Canada cannot hear the public law issue of abuse of power with a
view to vacate an assessment. I reject the Appellant's
position that we can, however, vacate an assessment if the OSCJ
grants a declaration the assessment is null and void on the
grounds of Government abuse of power. I need not decide what
authority the OSCJ has in that regard. The matter in this Court
is limited to the determination of the correctness, quantum-wise
of the GST Assessment. With that background I now turn to the
applications before me.
Application for temporary stay
[17] The overriding concern in determining
whether to grant a stay, even a temporary stay such as in this
case, must be how best the interests of justice are served. This
is particularly difficult where proceedings are afoot in two
Courts with concurrent jurisdiction. It is less problematic the
less the jurisdictions overlap. In this case, the OSCJ clearly
has sole jurisdiction to hear the private law claims for damages
in tort actions: the Tax Court of Canada, as I have found, has
sole jurisdiction to hear the substantive tax issue. There is no
overlap of jurisdiction between the Tax Court of Canada and the
OSCJ: the issues are separate and distinct in the two Courts.
[18] What is the appropriate test to apply
in determining the stay application? In the case of Varnam v.
Canada[15] it was put as follows:
A stay of proceedings is never granted as a matter of course.
The matter is one calling for the exercise of a judicial
discretion in determining whether a stay should be ordered in the
particular circumstances of the case. The power to
stay should be exercised sparingly and a stay will only be
ordered in the clearest cases. In an order to justify
a stay of proceedings two conditions must be met, one positive
and the other negative: (a) the defendant must satisfy
the court that the continuance of the action would work an
injustice because it would be oppressive or vexatious to him or
would be an abuse of the process of the court in some other way;
and (b) the stay must not cause an injustice to the
plaintiff. On both the burden of proof is on the
defendant. Expense and inconvenience to a party or the
prospect of the proceedings being abortive in the event of a
successful appeal are not sufficient special circumstances in
themselves for the granting of a stay: Communications Workers
of Canada v. Bell Canada, [1976] 1 F.C. 282 (T.D.); Weight
Watchers Int'l Inc. v. Weight Watchers of Ontario Ltd.
(1972), 25 D.L.R. (3d) 419 (F.C.T.D.); Baxter Travenol
Laboratories Ltd. v. Cutter (Canada), Ltd. (1981), 54 C.P.R.
(2d) 218 (F.C.T.D.).
[19] Other decisions of the Federal Court of
Appeal follow this two-prong approach: an injustice to the
defendant and no injustice to the plaintiff. Ontario Courts have
also considered the convenience factor, as indicated in
Sportmart, Inc. v. Toronto Hospital Foundation:[16]
Among the factors that the court should consider in determining
whether to stay one of two actions are: which action was
commenced first; who has the chief burden of proof; which is the
more comprehensive action in scope; and the balance of
convenience.
Convenience has likewise been referred to in cases in British
Columbia (Amchem Products Inc. v. British Columbia
(Workers' Compensation Board)[17]where the recommended
test is whether justice can be done at substantially less
inconvenience or expense, and the stay does not prejudice the
other side of a legitimate personal or jurisdictional
advantage.
[20] In summary, the test I adopt in the
temporary stay application in this Court is:
- Firstly, would the
continuance of the action be oppressive, vexatious or harmful to
the Appellant, or an abuse of the Court's process? This first
condition must always be met or no stay should be granted.
- Second, if there
is harm to the Appellant in proceeding, is there prejudice to the
Respondent by not proceeding?
- Third, if there is
harm or prejudice to the Respondent as well, then the Court must
balance the respective injuries in determining how justice is
best served. In this final analysis, it is appropriate to
consider factors such as convenience, expense, the law of the
transaction, parties' location and any special circumstances
of the particular case.
[21] Applying this approach to this case,
what is the harm or oppression that Mr. Obonsawin would suffer
should the Tax Court of Canada matter proceed? Mr. Wortzman
emphasized that the prejudice to Mr. Obonsawin is the risk of
financial ruin, should the Tax Court of Canada uphold the
multi-million dollar GST Assessment, before Mr. Obonsawin has had
any opportunity to argue in another Court that the abusive
behaviour of the Government is such that the GST Assessment
should be declared null and void, or damages equivalent to the
assessment should be awarded.
[22] To be clear, the oppression or harm
does not flow as a result of the determination of a correct
assessment by the Tax Court of Canada. Nor do I accept that the
financial consequences to Mr. Obonsawin arising from such a
determination by the Tax Court of Canada are any more oppressive
than any other taxpayer facing a significant tax bill. The harm
or prejudice only arises because CCRA may attempt to collect the
tax bill prior to a determination as to an underlying validity of
the assessment itself. But how is this any different from a
normal appeal of a Tax Court of Canada GST decision to the
Federal Court of Appeal. There is no automatic stay of
collection.[18]
Mr. Obonsawin, like any other taxpayer who continues to pursue a
claim, has available whatever relief from collection he might
seek in a court of appropriate jurisdiction. In this situation he
happens to be pursuing a claim in the Ontario Superior Court. To
halt the Tax Court of Canada proceedings, which deal solely with
the determination of the correct quantum of tax, is not an
appropriate remedy for dealing with a collection problem, which
only arises after the Tax Court of Canada decision.
[23] Mr. Obonsawin is attempting to put the
cart before the horse. This Court should proceed to determine the
correctness of the GST Assessment. The OSCJ action has no bearing
on that determination. If the timing is such that
Mr. Obonsawin receives a decision from the Tax Court of
Canada, before a decision in the OSCJ action, then he could
consider the legal options available to him vis-à-vis
CCRA's collection actions. To grant a stay in these
circumstances would be ignoring the caution cited in earlier
cases to exercise this power sparingly. Where there is no
concurrent jurisdiction between the Tax Court of Canada and the
OSCJ, where the concern is one of collection, where the
Appellant's concerns can be addressed by legal options
available at the time it arises, where there may be some benefit
to the OSCJ in knowing the decision of the Tax Court of Canada on
the correctness of the assessment, I find Mr. Obonsawin is
not oppressed by the matter proceeding in the Tax Court of
Canada.
[24] Having made that determination it is
unnecessary to pursue the second or third steps in the
analysis.
Application to Amend Pleadings
[25] The Appellant's amendments to the
Notice of Appeal reflect almost entirely the Statement of Claim
in the OSCJ action. Mr. Wortzman's argument was that this was
to ready the Tax Court of Canada for the return of the Appellant
from the OSCJ with a declaration in hand that the GST Assessment
is null and void. This is no longer necessary given my view of
this Court's authority. What is necessary is that the
Appellant plead those facts establishing the basis for
determining the correct tax liability.
[26] The Respondent objected to a number of
the amendments sought by the Appellant, but did so on the basis
that he believed this Court has jurisdiction to deal with the
abuse of power issue. He has changed that position and I have
accepted that change. The application to amend should be viewed
in that context.
[27] The Appellant's amendments fall
under two main headings: Vacating Assessment (paragraphs 13 to
39) and Allegations Concerning Abuse of Power (paragraphs 40 to
61). The headings alone might suggest that all that follows is
not relevant to the substantive tax issues left before the Court.
Yet, the substantive tax issues include the question of what is
exempt from tax pursuant to section 87 of the Indian
Act,[19] as
well as what is exempt due to pre-existing rights of native
people. Some of the paragraphs do appear to have some relevance
to those issues, and I will therefore identify them as being
acceptable. The headings themselves are not acceptable and
neither are paragraphs 62, 72 and 73(a), which relate directly to
what this Court cannot do.
[28] First, paragraphs 13, 14, 15 and 16,
though relating to fiduciary duties, can be construed as
providing a base for the claim of exemption under either of the
above issues. I allow those amendments.
[29] Second, paragraphs 28, 29 and 32 (but
deleting the last phrase "and in breach of his
employee's tax exemption rights") deal with the
Respondent's administration of tax exemption rights and are
relevant. I allow them.
[30] Third, paragraphs 56, 57 and 58(a)
provide background to the GST Assessment and are allowed.
[31] No amendments other than those I have
specifically mentioned are allowed.
Conclusion
[32] The application by Mr. Obonsawin to
stay is denied on the grounds that he suffers no prejudice if the
Tax Court of Canada matter proceeds. The risk of a speculative,
negative result from collection proceedings, flowing from an
assessment judicially quantified, does not create a prejudice for
which a stay in this Court is appropriate. Other remedies may be
available to deal with collection actions.
[33] With respect to Mr. Obonsawin's
application to amend pleadings, only the following amendments are
granted: paragraphs 13, 14, 15, 16, 28, 29, 32 (with a part
deleted as indicated), 56, 57 and 58(a). The impact of this is
that the Respondent's motion is granted. Costs shall be in
the cause.
Signed at Ottawa, Canada, this 6th day of February, 2004.
Miller J.
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