Citation: 2013 TCC 271
HER MAJESTY THE QUEEN,
9100-7146 QUÉBEC INC.,
HER MAJESTY THE QUEEN,
REASONS FOR JUDGMENT
These appeals were
heard on common evidence. Rita Congiu is appealing an assessment made on
February 1, 2006, under subsections 270(3) and 270(4) of the Excise Tax Act
(ETA), and 9100‑7146 Québec Inc. is appealing an assessment made on the
same date, but under section 325 of the ETA.
The facts that led the
respondent to issue the two notices of assessment being appealed are admitted
by the parties. Moreover, the parties filed an agreed statement of facts, being
the facts set out by Judge Gilles Lareau of the Court of Québec in a judgment
rendered on June 15, 2012. Exhibits supporting the facts were also filed, including
the aforementioned judgment of Judge Lareau. No testimony was heard.
The admitted facts are
The appellant Rita Congiu (CONGIU) is appealing
a notice of assessment (PL‑2005‑453) (NOTICE) issued on behalf of
the respondent by the Agence du revenu du Québec (REVENU) pursuant to
subsection 270(4) of the Excise Tax Act (ETA). The NOTICE relates to a
tax debt of 3270227 Canada Inc. (CORPORATION) and to a distribution of property
done by CONGIU without obtaining a certificate from the Minister.
In a related file (2009-154(GST)G), 9100-7146
Québec Inc. (QUÉBEC INC.) is also appealing a notice of assessment (PL‑2005-463).
This notice was issued pursuant to subsection 325(2) of the ETA on the basis
that the CORPORATION and QUÉBEC INC. were not at arm’s length.
CONGIU, QUÉBEC INC. and REVENU agreed to proceed
on common evidence in this matter.
The CORPORATION, incorporated on July 12, 1996,
was a real estate business. Its main assets were four immovables.
On June 6, 2001, following an audit of the
CORPORATION, REVENU issued an assessment against it under the Act Respecting
the Québec Sales Tax and the Excise Tax Act.
In response to this assessment, the CORPORATION filed
on October 10, 2001, a notice of intention to make a proposal under section
50.4 of the Bankruptcy and Insolvency Act.
An amended proposal in bankruptcy was ratified
by the Registrar of the Superior Court on January 25, 2002.
CONGIU became the director of the CORPORATION on
October 28, 2002. She was also a shareholder and the signing officer for the
On November 4, 2002, the CORPORATION sold its
assets (the four immovables) to CONGIU for $1,625,000. The CORPORATION then
transferred the excess of the sale price over the balance of the hypothecary
loan ($406,000) to QUÉBEC INC., a related company (s. 19.1 c) of the Quebec
On May 8, 2003, the CORPORATION failed to meet
the conditions of the proposal in bankruptcy by failing to make the third payment of $20,000 to the trustee
On December 10, 2004, the Registrar of the
Superior Court for bankruptcy, and insolvency matters released the CORPORATION
with respect to its failure to make the third payment stipulated in the
proposal in bankruptcy, and ordered
the CORPORATION to make the third payment of $20,000 to the trustee within 48 hours
following his judgment.
The CORPORATION actually did not make this third
payment until January 14, 2005.
On February 4, 2005, the bankruptcy trustee for the
CORPORATION issued a certificate of performance and filed it with the Superior
On May 26, 2005, the Superior Court granted
a motion for revocation of judgment and cancellation of the CORPORATION’s
proposal and stated that the CORPORATION was deemed to have made an assignment
in bankruptcy as of the date of the judgment.
On February 1, 2006, REVENU issued against
CONGIU and QUÉBEC INC. the notices that are being appealed herein.
The issues before me
are essentially the same as those that were before Judge Lareau of the Court of
Québec, which he has already ruled on. Only the legislative provisions on which
the assessments are based differ. The parties also informed the Court that
Judge Lareau’s decision, which dismissed the appeals, had been appealed to the Quebec
Court of Appeal and that the case would be heard in the coming months.
This situation led
counsel for the respondent to raise at the beginning of the hearing the
principle of res judicata, the doctrine of abuse of process and the principle
of judicial comity or of deference toward the Court of Québec decision.
In Roberge v. Bolduc,
 1 S.C.R. 374, the Supreme Court of Canada set out the conditions under
the civil law for the application, with respect to judgments, of the principle of
res judicata and of the conditions relating to identity. The conditions pertaining
to judgments are that (1) the court must have jurisdiction over the matter,
(2) the judgment must be final, and (3) the judgment must have been
rendered in a contentious matter. The conditions pertaining to identity
are identity of parties, object, and cause. The conditions pertaining to judgments,
in my opinion, do not present any difficulties in this case.
Royer and Sophie Lavallée in the fourth edition of La preuve civile
(Éditions Yvon Blais, 2008, at paragraph 835), explain that there is identity
of object if the immediate legal benefit an appellant seeks, or the right that
he or she wishes to have sanctioned, diminished or abrogated, is the same. There
is identity of cause if the legal fact giving rise to the right claimed is identical
(see Rocois Construction Inc. v. Québec Ready Mix Inc., 
2 R.C.S. 440, at paragraph 24).
In this case, I believe
that it is possible to find that there is identity of cause: it is the sale of assets
without obtaining a certificate from the Minister and the transfer of funds
between related persons. It would be more difficult for me to find that the provincial
and federal assessments have the same object. The amounts of the assessments
and the legal basis of the assessments are different. Lastly, in my opinion,
what prevents the application of the principle of res judicata is that
there is no identity of parties here because the federal and Quebec governments
are not the same person.
Abuse of process
The Supreme Court of
Canada examined abuse of process in Toronto (City) v. C.U.P.E., Local
79,  3 S.C.R. 77. At paragraph 37 of this judgment, the
Supreme Court stated that the doctrine of abuse of process may be applied where
“the litigation before the court is found to be in essence an attempt to
relitigate a claim which the court has already determined.” At
paragraph 43, the Supreme Court explained that the primary focus of this
doctrine is to preserve the integrity of the adjudicative functions of courts,
particularly given the possibility that contradictory decisions would bring the
administration of justice into disrepute.
The application of the doctrine
of abuse of process is a discretionary power of the courts. Justice Arbour, in Toronto (City) v. C.U.P.E., supra, described a number of factors to
be considered in determining whether relitigation would constitute abuse of
process. In paragraphs 51, 52 and 53 it is stated:
51 Rather than focus on the motive or status of the parties, the
doctrine of abuse of process concentrates on the integrity of the adjudicative
process. Three preliminary observations are useful in that respect.
First, there can be no assumption that relitigation will yield a more accurate
result than the original proceeding. Second, if the same result is
reached in the subsequent proceeding, the relitigation will prove to have been
a waste of judicial resources as well as an unnecessary expense for the parties
and possibly an additional hardship for some witnesses. Finally, if the
result in the subsequent proceeding is different from the conclusion reached in
the first on the very same issue, the inconsistency, in and of itself, will
undermine the credibility of the entire judicial process, thereby diminishing
its authority, its credibility and its aim of finality.
52 In contrast, proper review by way of appeal increases confidence in
the ultimate result and affirms both the authority of the process as well as
the finality of the result. It is therefore apparent that from the
system’s point of view, relitigation carries serious detrimental effects and
should be avoided unless the circumstances dictate that relitigation is in fact
necessary to enhance the credibility and the effectiveness of the adjudicative
process as a whole. There may be instances where relitigation will
enhance, rather than impeach, the integrity of the judicial system, for
example: (1) when the first proceeding is tainted by fraud or dishonesty; (2)
when fresh, new evidence, previously unavailable, conclusively impeaches the
original results; or (3) when fairness dictates that the original result should
not be binding in the new context. . . .
53 The discretionary factors that apply to prevent the doctrine of issue
estoppel from operating in an unjust or unfair way are equally available to
prevent the doctrine of abuse of process from achieving a similar undesirable
result. There are many circumstances in which the bar against
relitigation, either through the doctrine of res judicata or that of
abuse of process, would create unfairness. If, for instance, the stakes
in the original proceeding were too minor to generate a full and robust
response, while the subsequent stakes were considerable, fairness would dictate
that the administration of justice would be better served by permitting the
second proceeding to go forward than by insisting that finality should
prevail. An inadequate incentive to defend, the discovery of new evidence
in appropriate circumstances, or a tainted original process may all overcome
the interest in maintaining the finality of the original decision . . . .
International Inc. v. Canada, 2010 TCC 622, my colleague Justice Boyle
reiterated what he had said in Golden v. Canada, 2008 TCC 173, affd.
by 2009 FCA 86. The relevant passages are paragraphs 26 to 30 of Golden:
26 It is also open to this Court to apply the doctrine of
abuse of process to prevent relitigation of matters already decided in another
27 The scope and application of the doctrine of abuse of
process to prevent relitigation has recently been thoroughly canvassed by the
Supreme Court of Canada in C.U.P.E.
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
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.
30 Relitigation should be avoided unless it is in fact
necessary to enhance the credibility and effectiveness of the adjudicative
process. This could be the case where (1) the first proceeding is tainted by
fraud or dishonesty; (2) fresh new evidence, previously unavailable,
conclusively impeaches the original result; or (3) when fairness dictates that
the original result should not be binding in the new context.
In this case, the appellants
have not submitted any different evidence from that submitted in the Court of Québec.
Indeed the agreed statement of facts filed in this Court is based on Judge
Lareau’s statement of the facts in his judgment of June 15, 2012. Moreover, this
Court must rule on an issue very similar to that which was before the Court of
Québec. The legislative provision here is not the same, but it is similar to
provisions found in Quebec legislation. It is not an exaggeration to say that
this is almost an appeal of the Court of Québec’s judgment.
I agree with the
conclusion of Justice Boyle, who stated in paragraph 21 of Houda, supra,
that the issue before him had already been addressed by the Court of Québec
and that it should not be relitigated in this Court as that might result in a
different outcome. He also added that reopening the issue would lead to an inefficient use of public and private
resources, could lead to inconsistent decisions that could not be reasonably
explained to taxpayers in Quebec and elsewhere in Canada, and would
unnecessarily erode the principles of finality, consistency, predictability and
fairness so important to the proper administration of justice. This is
all the more certain in this case since Judge Lareau’s decision has been
appealed. Consequently, I am not going to reopen the issues in these appeals.
It is generally
accepted that this Court must show deference toward judgments of the Court of
Québec unless one of the exceptional circumstances listed in paragraph 62 of
Almrei v. Canada (Citizenship and Immigration), 2007 FC 1025, is
The existence of a different
factual matrix or evidentiary basis between the two cases;
Where the issue to be
decided is different;
Where the previous condition
failed to consider legislation or binding authorities that would have produced
a different result, i.e., was manifestly wrong;
The decision it followed
would create an injustice.
Justice Boyle, in Houda,
supra, granted the application for an
extension of time for filing an appeal; he did so in deference to the Court of
Québec. He states the following at paragraph 28 of his decision:
. . . Otherwise, there would be
unnecessary disorder in the administration of justice with respect to tax
appeals, the law would become uncertain and the confidence of the public would
be undermined. This would occur whether or not this Court were to decide the
matter on the merits in favour of the Applicant or not.
In my opinion, none of
the exceptional circumstances set out in Almrei, supra, are
present in this case. Even though I am not bound by Judge Lareau’s decision, it
is desirable, in my view, to conform with it since it is “important, insofar as it is possible, to help ensure that
the judgments on a single issue are consistent” (see 2749807 Canada
Inc. v. Canada, 2004 TCC 457, at paragraph 19).
For these reasons the
appeals are dismissed without costs.
Signed at Ottawa,
Canada this 29th day of August 2013.
on this 18th day
of December 2013.
Erich Klein, Revisor