Canada (Minister of National Revenue) v. Ross, 2003 FCT 534

Date: 20030429

Docket: ITA-8972-99

Neutral citation: 2003 FCT 534

IN THE MATTER OF the Income Tax Act,

and

IN THE MATTER OF an assessment or assessments by the

Minister of National Revenue

under one or more of the Income Tax Act, Canada Pension Plan,

Employment Insurance Act, the Income Tax Act,

against:

GLENN A. ROSS

(sometimes known as GLENN ALEXANDER ROSS)

12135 - 229^th Street,

Maple Ridge, British Columbia,

V2X 7M9

BETWEEN:

                                                                 GLENN A. ROSS

                                                                                                                                                     Applicant

                                                                                 and

                                                        HER MAJESTY THE QUEEN

                                                                                                                                               Respondent

                                                            REASONS FOR ORDER

HARGRAVE, P.

        The Applicant, Glenn Ross wishes, by this motion in writing, to set aside the Writ of Seizure and Sale of 30 September 1999, founded on a certificate of even date issued pursuant to section 223(2) of the Income Tax Act. The certificate was registered or filed with the Federal Court under the provisions of section 223(3) of the Act. On filing with the Federal Court such a certificate has the same effect as if it were a judgment of the Federal Court, but it does not in fact become a judgment of the Court: see for example Marcel Grand Cirque v. Canada (MNR) (1995), 107 F.T.R. 18 (F.C.T.D.) at 23 and following and Nelson v. Canada (MNR), [1996] 3 C.T.C. 342 (F.C.T.D.) at 345.

        The Respondent submits that the motion should be dismissed for three reasons: first, the matter is res judicata; second, the relief sought cannot be obtained by motion under rules 398 and 399; and third, there is, in any event, no evidence to support the Applicant's substantive argument.

CONSIDERATION

        To effect the setting aside of the Writ the Applicant brings the present motion pursuant to Federal Court rules 398 and 399, that being clearly set out in his Notice of Motion. However, the Applicant, in his reply to the Crown's material, tries to change his approach and refer, for the first time, to this proceeding as one for summary judgment, although without referring to any rule. Not only is it too late to change the initial approach, but also the summary judgment procedure has no place in this application, for by rule 213 it is only available after a defence has been filed (or earlier with leave) and requires a statement of claim as a foundation, both conditions which have not been met. I will treat the present proceeding by Mr Ross just as it is characterized in his Notice of Motion, an application for a stay of an Order under rule 398, or an application to set aside an Order under rule 399.

        Mr Ross does not raise as an issue the validity of the assessments and re-assessments made against him for the 1989 and 1990 taxation years. Rather he notes that the Minister of National Revenue made payments to the province of British Columbia against debts owed to the province of British Columbia, which I take to mean payments by the Federal Crown of tax collected on behalf of the Provincial Crown, being a percentage of gross income tax jointly levied. Mr Ross observes that payments made by the Minister of National Revenue, to the province of British Columbia, were not recorded in his federal tax account, but ought to have been with the result that all of his tax debt to the province, that is the taxes which would have been collected by the Minister of National Revenue, for the province, have in fact been paid in full by the Federal Crown. Thus the Queen in Right of British Columbia has no cause of action against him.

        Mr Ross states that the Minister of National Revenue failed to obtain any assignment of the debt owed to the province and thus, in the view of Mr Ross, it follows that the Minster, paying as a volunteer, had no right to claim the full amount of the income tax assessed and evidenced by the 30 September 1999 Certificate. The result of this, in the view of Mr Ross, is that the Certificate was invalid and therefore the Writ of Seizure and Sale issued out of this Court is also invalid. Mr Ross submits that the Federal Court by reason of its "inherent authority to secure and maintain the legality of its records and to correct or avoid abuse of its process, should order that the Writ of Seizure and Sale be set aside." Here I note that rule 398, providing for a stay of an order, is not referred to in the Applicant's written argument, but rather the relief which he seeks is a setting aside or quashing, by which I take to mean a termination of the Writ of Seizure and Sale under rule 399.

        The argument which Mr Ross makes is ingenious but contrived. The argument also ignores a previous proceeding and the concept of unjust enrichment. Mr Ross has already applied for and received judicial review, from the Trial Division and the Federal Court of Appeal, of a requirement to pay of 16 May 2001, relating to unpaid taxes for the 1989 and 1990 taxation years. This present proceeding, which involves a 30 September 1999 Certificate issued by the Minister of National Revenue, is also based upon the 1989 and 1999 taxation years. As we shall see, the fact of the judicial review leads to a res judicata or estoppel argument, by which this proceeding may be dismissed. However I wish first to comment upon the concept of unjust enrichment which, while not specifically argued, is raised by the Applicant and is relevant because the Applicant says the Crown has no assignment or other means of recovering from him the provincial portion of his income tax assessment.

Unjust Enrichment

        The law does not look favourably upon what is popularly called unjust enrichment or unjust benefit, that is the obtaining of a benefit which is neither intended as a gift nor legally justified. While the principles of unjust enrichment are still developing, the courts have provided a remedy where it would be unconscionable to keep a benefit, the remedy being that of restitution: see for example Consumers Glass Co. v. Canada (1988), 21 F.T.R. 131 (F.C.T.D.) at 139 and following, reversed on other grounds (1990), 107 N.R. 156 (F.C.A.). Certainly the Supreme Court of Canada has recognised the concept of unjust enrichment and restitution: Air Canada and Pacific Airline Ltd. v. British Columbia, [1989] 1 S.C.R. 1161 (S.C.C.) at 1207. See also Michelin Tires (Canada) Ltd. v. Canada (MNR) (1998), 158 F.T.R. 101 (F.C.T.D.) at 103 where Madam Justice Reed refers to various cases in the Supreme Court of Canada and sets out the elements for recovery of money in an unjust enrichment situation.

        Michelin Tires was upheld on appeal in (2001), 271 N.R. 183 (F.C.A.): of interest is the comment made by Mr Justice of Appeal Evans, at page 187, that restitutionary claims have both a legal and an equitable origin. This leads to the equitable doctrine of subrogation, which may be independent of any assignment. It is a convenient way of transferring rights from one person to another without assignment, or even without the assent of the person from whom the rights are transferred, for it may take place by operation of law in a variety of widely different circumstances: see the House of Lords decision in Orakpo v. Manson Investments [1978] A.C. 95 at 104 (H.L.(E.)):

The doctrine of unjust enrichment has advanced further in Canada than in England, however the point of this quotation is that there would be a subrogation remedy by which to retrieve the unjust enrichment garnered by Mr Ross. Thus it is simplistic to believe the mere fact of a payment, pursuant to a federal/provincial tax collection arrangement, of a sum to the province of British Columbia, by the Federal Government, either relieves Mr Ross from payment of the provincial portion of his income tax or makes him invulnerable to any collection of the provincial share of taxes by the Federal Government. This disposes of the Applicant's argument for the need of an assignment to protect the position of the Federal Crown. I now turn to the res judicata or issue estoppel argument presented by the Crown as a reason to deny the Applicant's present claim.

Res Judicata

        Res judicata is an affirmative defence which prevents the same parties from litigating a second proceeding on the same claim, or indeed any other claim arising from the same transaction, or series of transactions, which could have been but was not raised in the first suit: see, for example, the 7^th edition of Black's Law Dictionary, West Group, St. Paul, Minnesota. This concept was referred to by the Supreme Court in [1976] 2 S.C.R. 621">Grandview v. Doering, [1976] 2 S.C.R. 621 (S.C.C.) at 634, Mr Justice Richie quoting from Henderson v. Henderson (1843), 3 Hare 100 at 115:

Mr Justice Hinkson of the B.C. Court of Appeal referred to both the Henderson case and the [1976] 2 S.C.R. 621">Doering case, summarizing the law of estoppel by record, or res judicata, in Martelli v. Martelli (1983), 148 D.L.R. (3d) 746 (B.C.C.A.) at 748 as follows:

The concept here is that a party may be prevented from raising, in a later action, any issue which could and should have been raised in earlier proceeding. Indeed, it is an abuse of process to litigate, in a subsequent proceeding, that which could have and therefore should have been litigated in the earlier proceeding: see for example Yat Tung Co. v. Dao Heng Bank (P.C.), [1975] A.C. 581 (P.C.). The Privy Council in Dao Heng Bank made it clear that before applying the doctrine to cases where reasonable diligence would have allowed the matter to be raised in earlier proceedings one ought to scrupulously examine all of the circumstances (loc. cit.) and went on to elaborate on the concept from the Henderson case (supra) that "every point" properly belonging to the litigation should have been brought forward in the initial litigation so long as it could be done exercising reasonable diligence, referring Greenhalgh v. Mallard [1947] 2 All E.R. 255 at 257 (C.A.):

      As I say, Mr Ross had already applied for and had received judicial review of the requirement to pay of 16 May 2001, requirement being issued by the Minister for unpaid 1989 and 1990 taxes. Interestingly, the relief sought by Mr Ross, on that judicial review application, Ross v. Her Majesty the Queen in Right of Canada, 2002 DTC 6884, an action involving the British Columbia Limitation Act, included requests for a declaration that the Writ of Seizure and Sale giving rise to this proceeding and these reasons, be declared invalid, quashed or set aside and for a declaration that the requirement to pay of 16 May 2001 be declared invalid, unlawful, quashed or set aside, is the same relief which Mr Ross seeks in the present proceeding. In the Ross decision Madam Justice Dawson found that the tax debt had not been extinguished and that the requirement to pay was properly issued. In the result the judicial review proceeding was dismissed. The Court of Appeal upheld the trial decision, 2002 DTC 7462. The doctrine of res judicata provides a sound reason by which to dismiss the present motion of Mr Ross.

Availability of Relief Sought        

      Mr Ross seeks, by motion, to set aside the 30 September 1999 Writ. First, not only did Mr Ross previously seek to set aside the Writ by means of a judicial review application, but also, if there is any relief available, it must be sought by a judicial review proceeding pursuant to section 18.1 of the Federal Court Act. Here I note both the 30-day time limit for such a judicial review proceeding and that some three years have now gone by since the Certificate and writ of execution in question were issued.

      Second, rule 399 applies to the setting aside or variance of orders, not writs of execution; and third, a stay, pursuant to rule 398, is not available: see The Queen v. Rumball, 81 D.T.C. 5001 (F.C.T.D.). Re Piccott, an unreported 25 October 2002 decision of Madam Justice Heneghan, 2002 FCT 1116, is of no assistance to Mr Ross in that at issue was the effect of a tax certificate which had never been perfected for enforcement as an execution by the issuance of a writ of execution. In the present instance there is in fact a writ of execution.

Want of Evidence in Support of the Applicant's Substantive Argument

      As I indicated, the Applicant's substantive argument is that the Federal Crown has paid the tax debt which he owed to the Provincial Crown. Here the burden is on Mr Ross to establish evidence to support the assertions. Mr Ross says, in his reply argument, that he had been repeatedly assured, by the Provincial Revenue, Income and Taxation Branch, that he owes nothing to the Province under the Income Tax Act, RSBC 1996, c. 215. This is neither evidence nor an accurate reflection of the agency agreement by which the Federal Government collects tax as an agent for the province of British Columbia: see Markevich v. Canada, an unreported 6 March 2003 Supreme Court decision, 2003 SCC 9">2003 SCC 9, at paragraphs 44 and 45. Mr Ross misunderstands the tax collection relationship between he provincial and federal governments, which is a delegation of the right to collect taxes.

      There is no evidence by which to substantiate the argument that the Federal Government has paid the provincial tax debt for Mr Ross. The motion of Mr Ross being denied, I now turn to the matter of costs.

Costs

      The Crown submits that Mr Ross's attempt to re-litigate the validity of the Certificate and of the writ of execution is an abuse, which should sound in solicitor-client costs. Here I note that the present proceeding is directed against the writ of execution, however in his argument Mr Ross attacks the Certificate as the underpinning of the writ of execution.

      As I already pointed out the litigation of an issue which ought to have been litigated as a part of an earlier proceeding may be an abuse: see Dao Heng Bank (supra).

      The Crown, quite correctly, points out that solicitor-client costs may flow from reprehensible, scandalous or outrageous conduct: see Schmidt v. Canada, an unreported B.C. Supreme Court decision of 17 December 2002, 2002 BCSC 1738 (presently under appeal). In Schmidt the plaintiff had unsuccessfully appealed civil tax assessments and conviction for tax evasion and had obtained an extension of time within which to file a leave application in the Supreme Court of Canada. Notwithstanding all of this Mr Schmidt issued a statement of claim against the Crown relating to the same matter. That most recent statement of claim was struck out as an abuse of process, Mr Justice Kirkpatrick taking the view that the abuse was such as to constitute reprehensible conduct.

      The Crown's submission is that the overall conduct of Mr Ross in re-commencing proceedings attacking the Certificate and the writ of execution, after exhausting all of his appeal avenues and filing a leave application to the Supreme Court of Canada, has engaged in conduct deserving rebuke, conduct which is reprehensible. Here there is reference to Leung v. Leung (1993), 77 B.C.L.R. (2d) 305 (BCSC) at 314 in which Chief Justice Esson, as he then was, defined "reprehensible" as meaning "deserving of reproof or rebuke.".

      The Applicant's position is that a search for the truth is never vexatious and that he is merely "... following the advice of the Court, given in a matter not dissimilar to this one, with respect to process.". This latter reference to advice as to process is apparently in reliance upon Re Piccott (supra). He also maintains that he first sought directions, although that is not in the present file, and was advised to proceed by motion under rules 398 and 399. However, in Re Piccott Madam Justice Heneghan made the point at paragraph 19 that the motion of Mr Picott for revocation was not receivable because the certificate at issue while the equivalent of a judgment, was not a judgment of the Federal Court. Rules 398 and 399 apply only to orders and judgments.

      When considering solicitor-client costs, which serve not only to indemnify a successful litigant, to some degree, but also of deterring frivolous proceedings, I should keep in mind, on the one hand, that costs should be kept within relatively modest limits so as not to deter those with meritorious claims and, on the other hand, should be a sufficient deterrent to inappropriate behaviour: see for example Houweling Nurseries Ltd. v. Fisons Western Corp. (1988), 37 B.C.L.R. (2d) 2 (B.C.C.A.), a decision of Madam Justice of Appeal McLachlin, as she then was, leave to appeal to the Supreme Court of Canada refused 37 B.C.L.R. (2d) as noted at page 2.

      The B.C. Court of Appeal further considered the issue of solicitor and client costs in Fullerton v. Matsqui (District) (1992), 74 B.C.L.R. (2d) 311 pointing out that solicitor and client costs are awarded in instances in which a court seeks to disassociate itself from misconduct. Thus the court is expressing disapproval and in such an instance the award of costs should go beyond indemnity and become a punishment: see pages 318 and 319.

      Madam Justice McLachlin, in Young v. Young (1994), 160 N.R. 1 (S.C.C.) at page 41 observed that "solicitor-client costs are generally awarded where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties.". She went on to point out that the fact that an application had little merit is no reason to award solicitor-client costs. From all of these it is apparent that solicitor-client costs are an exceptional remedy: see for example Hassanali Estate v. Canada (Minister of National Revenue) (1996), 197 N.R. 51 (F.C.A.) at 54, referring Bland v. National Capital Commission, [1993] 1 F.C. 541 (F.C.A.) at 544.

      There is also the concept that extreme positions and unreasonable allegations, which stop short of abuse, may attract enhanced costs: see for example The Arctic Taglu (1997), 145 F.T.R. 102 (F.C.T.D.) at 106, a decision of Madam Justice Reed.

      In the present instance there is clear abuse, but I am reluctant to award solicitor-client costs, for the abuse engaged in by Mr Ross, some of it perhaps by way of a misunderstanding of the doctrine of res judicata, stops just short of the abuse in Schmidt (supra), which consisted of layers of litigation and the use of Federal Court proceedings in order to mount a collateral attack upon a criminal conviction. However, Mr Ross should be well aware that having sought, as part of his relief in Ross v. The Queen (supra), exactly the same relief that is sought in the present action, albeit using different legal argument, there is an abuse which deserves some censure. I have therefore set costs as a lump sum, being guided by Tariff B, Column V. The lump sum for costs and disbursements shall be $1,200, payable forthwith.

(Sgd.) "John A. Hargrave"

                                                                                              Prothonotary

Vancouver, British Columbia

29 April 2003

                                                  FEDERAL COURT OF CANADA

                                                                    TRIAL DIVISION

                             NAMES OF COUNSEL AND SOLICITORS OF RECORD

MOTION DEALT WITH IN WRITING WITHOUT THE APPEARANCE OF PARTIES

DOCKET:                                            ITA-8972-99

STYLE OF CAUSE:                        Glenn A. Ross v. Her Majesty the Queen

REASONS FOR ORDER OF: Hargrave P.

DATED:                                                29 April 2003

WRITTEN REPRESENTATIONS BY:                              

Glenn A Ross                                                                              APPLICANT

David Jacyk                                                                                  FOR RESPONDENT

SOLICITORS ON THE RECORD:

Glenn A Ross                                                                              APPLICANT on his own behalf

Maple Ridge, British Columbia

Morris A Rosenberg                                                                  FOR RESPONDENT

Deputy Attorney General of Canada

Department of Justice

Vancouver, British Columbia