[1] Mrs. Patricia MacCulloch is seeking damages from the federal Crown in respect of the involvement of certain federal Crown employees in the administration of the bankrupt estate of her late husband, the settlement of an income tax appeal, and certain other tax related matters. Her statement of claim named the Crown and also three federal Crown employees as defendants. All of Mrs. MacCulloch's claim are disputed.

[2] This Court is considering appeals by Mrs. MacCulloch in relation to two orders made by the Federal Court on the Crown's motion. The first order granted the Crown's motion to remove the Crown employees as defendants. The second order granted the Crown's motion to strike Mrs. MacCulloch's statement of claim.

Preliminary matter - new evidence on appeal

[3] A few days before the hearing of these appeals, Mrs. MacCulloch filed a volume of material entitled "Appellant's Authorities and Documents". Some of the documents are authorities (statutes, jurisprudence and other legal writings that set out or explain laws or legal principles; see AstraZeneca Canada Inc. v. Apotex Inc. (F.C.A.), [2004] 2 F.C.R. 364). Some of the documents are not authorities but evidence, included in the book to add to the factual foundation of Mrs. MacCulloch's appeal. Those evidentiary documents were not presented to either of the judges whose orders are now under appeal. Some of them predate those orders. Others appear to be written responses to enquiries made by Mrs. MacCulloch or someone representing her. The record does not explain why those enquiries could not have been made and answered in time to be considered by the judges who made the orders under appeal.

[4] In an appeal, this Court cannot consider evidence that was not presented to the court below, unless leave is granted under Rule 351 of the Federal Courts Rules, SOR/98-106. That rule is intended to encourage litigants to prepare their cases in a manner that ensures that all relevant evidence is presented to the trial or motions judge.

[5] An appeal is intended to test the correctness of the decision of a trial or motions judge. It is difficult to justify reversing a decision based on evidence that was not presented to the decision maker. For that reason, leave to present new evidence on appeal is rarely granted. Generally, a party seeking to present new evidence on appeal must establish that the evidence could not, with due diligence, have been presented in the court below, and that the evidence is credible and practically conclusive on a point in issue: Amchem Products Inc. v. British Columbia (Workers' Compensation Bd.) (1992), 192 N.R. 390 (S.C.C.).

[6] A request for leave to present new evidence on appeal normally is submitted, before the hearing of the appeal, in the form of a notice of motion supported by an affidavit explaining why the conditions for granting leave under Rule 351 are met. No such motion was filed in this case, and the record before this Court is not capable of establishing that the Rule 351 conditions have been met with respect to the evidentiary documents in the volume entitled "Appellant's Authorities and Documents". For that reason, I would not grant leave to permit those documents to be presented in these appeals. I have disregarded them.

First appeal - the removal of the Crown employees as defendants

[7] On April 2, 2004, the Crown filed a motion seeking, among other things, the removal of the three Crown employees as defendants. In the material filed by the Crown in support of its motion, the Crown admitted that the alleged acts of the Crown employees that are the foundation of Mrs. MacCulloch's claim would have been acts done in the course of their employment with the Crown. The Crown also admitted that, because of section 3 of the Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50, the Crown would be liable for any damages that may be found to result from the alleged acts.

[8] On April 27, 2004, a judge of the Federal Court allowed the motion to remove the Crown employees as defendants on the basis that the employees are not necessary parties to the action. Mrs. MacCulloch's first appeal seeks to reverse that order. However, the record discloses no reason to conclude that the order is based on an error of law or any other error that warrants the intervention of this Court. Nor does the record disclose any reason to conclude that Mrs. MacCulloch is prejudiced by the removal of the three Crown employees as defendants. For that reason, I would dismiss Mrs. MacCulloch's first appeal.

Second appeal - the striking of the statement of claim

[9] On July 30, 2004, the Crown moved to have Mrs. MacCulloch's statement of claim struck out. On November 24, 2004, a judge of the Federal Court allowed that motion. Mrs. MacCulloch's second appeal challenges that order.

[10] The factual allegations in Mrs. MacCulloch's statement of claim refer to events that began in 1979 when her husband died. Mrs. MacCulloch was an executor and a beneficiary of the will of her late husband. At that time, Mr. MacCulloch's estate had significant assets but little cash, and it owed money to a bank and to the Crown for taxes. In 1982, the estate was petitioned into bankruptcy by the bank. An accounting firm was named as trustee in bankruptcy. Two bank employees and an employee of Revenue Canada were named inspectors.

[11] In 1981, Mrs. MacCulloch had purchased certain property from the estate and sold it to a third party for a higher price. The trustee in bankruptcy sued Mrs. MacCulloch on the basis that she had breached her fiduciary obligations to the estate by purchasing and reselling property of the estate. Mrs. MacCulloch defended the claim. She believed, and apparently still believes, that her transactions were lawful and justified, and were intended to benefit rather than harm the estate. She argues that in 1981 she surrendered a life interest in certain estate property that was subsequently valued at much more than the gain she realized on the resale of the property.

[12] The trustee's claim failed at trial but an appeal resulted in a declaration that Mrs. MacCulloch was required to account to the trustee in bankruptcy for her gain on the resale of the property: Price Waterhouse v. MacCulloch (1986), 72 N.S.R. (2d) 1 (N.S.S.C. - A.D.) (application for leave to appeal dismissed, S.C.C. Bulletin, 1986, pp. 761, 835). The trustee in bankruptcy was granted judgment against Mrs. MacCulloch, later quantified at approximately $1.8 million: Price Waterhouse v. MacCulloch (1987), 78 N.S.R. (2d) 300 (N.S.S.C. - A.D.).

[13] Eventually all of the creditors of the estate were paid from the property of the estate. At the time of the end of the bankruptcy, the trustee in bankruptcy had not realized on the judgment debt. It had to be dealt with as part of the administration of the will of the late Mr. MacCulloch: Re MacCulloch (1992), 113 N.S.R. (2d) 367 (N.S.S.C.).

[14] The fees charged by the trustee in bankruptcy were challenged vigorously by Mrs. MacCulloch, resulting in a lengthy hearing in the Nova Scotia court. The challenge succeeded in part, in that the trustee in bankruptcy was denied a fee in excess of the statutory amounts. However, the judgments relating to the trustee found no fault with the administration of the bankruptcy even though Mrs. MacCulloch presented numerous criticisms, including a complaint that the proceedings against her were unnecessary and wasteful of resources: Re MacCulloch (Bankrupt) (1991), 108 N.S.R. (2d) 130 (N.S.S.C. - A.D.), on that point affirming 93 N.S.R. (2d) 226 (N.S.S.C.). The trustee in bankruptcy was discharged in 1995 (unreported decision of Registrar, August 29, 1995).

[15] Mrs. MacCulloch brought an action against the trustee in bankruptcy, and another action against the bank, and the two bank employees who were bankruptcy inspectors, for negligent mismanagement of the bankruptcy estate and for wrongfully bringing an action against her. The statements of claim were struck out because they disclosed no reasonable cause of action: Re MacCulloch (Bankrupt) (1992) 115 N.S.R. (2d) 131 (N.S.S.C.), affirmed (1993) 123 N.S.R. (2d) 351 (N.S.S.C. - A.D.), leave to appeal dismissed, Supreme Court File No. 23652.

[16] Mrs. MacCulloch was assessed for income tax on the gain she realized on the sale of the property she purchased from the estate. She objected and then appealed to the Federal Court. That tax appeal was settled. As part of the settlement, Mrs. MacCulloch signed a general release of all claims against the Crown or its employees. The release covers claims relating to income tax assessments against Mrs. MacCulloch and the estate of her late husband, and also covers any steps taken to collect or secure taxes so assessed.

[17] In 1982, Mrs. MacCulloch was involved in another transaction by which a company she controlled issued her a debenture in the amount of $1 million. In 1995, she sought to have Revenue Canada recognize a loss on that debenture. She claimed that the loss occurred in 1988. The request to recognize the loss occurred outside the normal reassessment period for 1988. The request was considered but denied in 1995. A renewed request in 2000 was also denied. Mrs. MacCulloch did not seek judicial review of that decision.

[18] The statement of claim that is the subject of this appeal was filed in 2003. It is not clearly written and the actual claims made are difficult to discern. However, it appears that most of the allegations relate to acts taken or omitted to be taken by federal Crown employees in the collection of debts. It is not clear from the statement of claim which of the alleged acts relate to the attempted collection of the tax debts of the bankrupt estate, which relate to the attempted collection of the tax debts of Mrs. MacCulloch, and which relate to the attempted collection of the judgment debt obtained by the trustee in bankruptcy against Mrs. MacCulloch.

[19] In my view, Mrs. MacCulloch has no claim for damages against the Crown or its employees in respect of anything done by the Crown employees to assist the trustee in bank-ruptcy in collecting the judgment debt against her. In the Nova Scotia courts, Mrs. MacCulloch was found to have no reasonable cause of action against the trustee in bankruptcy, the bank as a creditor of the bankrupt estate, or the two inspectors who were bank employees. Similarly, she cannot maintain a claim in the Federal Court for damages against the Crown as a creditor of the bankrupt estate, or the Crown employees who worked in the Crown's interest in relation to the bankruptcy. Contrary to Mrs. MacCulloch's submissions, those Crown employees had no legal obligation to assist Mrs. MacCulloch in defending herself from the claims of the trustee in bankruptcy, or in assisting her in impugning the actions of the trustee in bankruptcy.

[20] Mrs. MacCulloch cannot maintain a claim for damages against the Crown in respect of any acts taken by the Crown to collect tax debts owed by the bankrupt estate. In that matter, the employees of the Crown were entitled to act in the Crown's interest only and owed no duty to Mrs. MacCulloch.

[21] In any event, all of Mrs. MacCulloch's complaints about the administration of her husband's estate in bankruptcy were or should have been dealt with in the proceedings before the Nova Scotia courts. It is an abuse of process to attempt to raise substantially the same complaints in the Federal Court, merely by naming different respondents.

[22] It is no answer to say, as Mrs. MacCulloch does, that evidence of the value of the rights Mrs. MacCulloch surrendered in 1981 was not presented in the Nova Scotia proceedings, and so those proceedings were concluded without the courts of Nova Scotia having all of the relevant evidence. The record does not explain why Mrs. MacCulloch, as a party to the proceedings in the Nova Scotia courts, could not have presented that evidence.

[23] Some of Mrs. MacCulloch's claims relate to assessments of tax that Mrs. MacCulloch now asserts was not owed. There is a statutory presumption that an income tax assessment is valid and binding, subject only to a further reassessment, an objection, or an appeal: subsection 152(8) of the Income Tax Act, R.S.C. 1985, c. 1 (5^th Supp.). A challenge to the correctness of an income tax assessment can be resolved only by the statutory objection and appeal procedure. Mrs. MacCulloch availed herself of that procedure, and consented to a settlement of her tax appeal, as described above.

[24] There are allegations in Mrs. MacCulloch's statement of claim to the effect that the release signed by Mrs. MacCulloch when she settled her income tax appeal should be vitiated by the failure of the Crown to disclose certain facts to her. I take that as an attempt to establish that Mrs. MacCulloch is not or should not be bound by the release upon which the Crown relies. The Crown alleges that at the relevant time Mrs. MacCulloch was aware of the facts in question. The Crown may be correct, but for the purposes of this appeal, the issue is not whether Mrs. MacCulloch has alleged facts that will ultimately be proved, but whether she has alleged facts that, if proved, would establish a cause of action.

[25] For the purposes of this appeal, I am prepared to assume that at the time Mrs. MacCulloch signed the release upon which the Crown relies, there may have been facts known to the Crown, but not known to Mrs. MacCulloch, that would or might have caused her to decide not to sign the release (although I must also say that it is not clear from the statement of claim why the alleged undisclosed facts could have been relevant to that decision). Even with those assumptions, I am unable to discern from the statement of claim any basis for concluding that the Crown was under a legal obligation to disclose those facts to Mrs. MacCulloch. In my view, the statement of claim is not capable of supporting a claim for damages based on a wrongfully obtained settlement agreement and release.

[26] Mrs. MacCulloch's statement of claim also contains allegations to the effect that Revenue Canada officials took action to collect tax debts that they knew or should have known were not legally owed. Those allegations are an attempt to challenge indirectly the amount of tax assessed. They cannot form part of a claim for damages against the Crown.

[27] It may, in certain cases, be possible to maintain a claim for damages against the Crown for unlawful acts taken to collect a tax debt. However, Mrs. MacCulloch's statement of claim does not contain allegations that are sufficient to support such a claim. In part, that may be because it is impossible to determine which allegations in her statement of claim relate to the collection of Mrs. MacCulloch's tax debt. In any event, Mrs. MacCulloch's fundamental complaint appears to be that no tax was owed, an allegation that, as explained above, cannot be the basis of a claim in damages.

[28] Mrs. MacCulloch also claims damages in relation to the refusal of the Crown to recognize, for income tax purposes, a loss on her debenture that was first asserted many years after the loss is said to have occurred. A decision by tax officials to reject a taxpayer's request to reassess can be challenged by means of an application for judicial review of the decision. The time for doing that has long since passed. More importantly, however, I cannot find in Mrs. MacCulloch's statement of claim any factual allegation that would support a claim for damages because of the Crown's rejection of her request for reassessment.

[29] The motions judge appears to have concluded that all of Mrs. MacCulloch's claims are time barred. Mrs. MacCulloch did not challenge that conclusion, and it was not mentioned in the written or oral submissions of Mrs. MacCulloch or the Crown. I express no opinion on that point.

[30] Mrs. MacCulloch may honestly believe that she has been wrongfully deprived of property. Perhaps she is correct, perhaps not. However, as explained above, her statement of claim does not assert the elements of a valid legal claim against the Crown. If Mrs. MacCulloch has been deprived of her property, and if she has a claim for damages against the Crown or someone else as a result of that deprivation, it may be that the claim is sufficiently complex in fact and in law that it cannot be effectively advanced without the assistance of legal counsel.

[31] I am compelled to conclude that the record discloses no error that would justify reversing the order striking out Mrs. MacCulloch's statement of claim. I would dismiss Mrs. MacCulloch's second appeal.

Conclusion

[32] The Crown is not seeking costs. Both appeals should be dismissed without costs.

"K. Sharlow"

J.A.

"I agree.

A.M. Linden J.A."

"I agree.

John M. Evans J.A."

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKETS: A-283-04

A-648-04

APPEALS FROM A JUDGMENT OR AN ORDER OF THE FEDERAL COURT DATED APRIL 27, & NOVEMBER 24, 2004, FEDERAL COURT FILE NO. T-1835-03

STYLE OF CAUSE: MRS. PATRICIA B. MACCULLOCH

Pres. C.E.O. and owner of MacCulloch

Holdings Ltd. And Executor of the Estate

of the late Charles E. MacCulloch and

HER MAJESTY THE QUEEN

PLACE OF HEARING: Ottawa, Ontario

DATE OF HEARING: September 7, 2005

REASONS FOR JUDGMENT BY; SHARLOW J.A.

CONCURRED IN BY: LINDEN J.A.

EVANS J.A.

DATED: September 13, 2005

APPEARANCES:

Mrs. Patricia B. MacCulloch Appellant on her own behalf

Mr. John J. Ashley for the Respondent

SOLICITORS OF RECORD:

Mrs. Patricia B. MacCulloch Appellant on her own behalf

Hubbards, N.S.

John H. Sims, Q.C. for the Respondent

Deputy Attorney General of Canada

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MacCulloch Holdings Ltd v. Canada, 2005 FCA 287

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2005 FCA 287