[1] This application for judicial review raises the question of the inherent jurisdiction of the Tax Court of Canada (Court) to set aside notices of discontinuance filed with the Court in respect of proceedings before it.

Facts

[2] The background facts in this matter are not in dispute. The respondent had been paid employment insurance (EI) benefits in the amount of $17,000. Subsequently, it was decided that his employment did not qualify him for benefits as he was a new entrant to the labour force. Consequently, the Canadian Customs and Revenue Agency sought return of the $17,000 plus the payment of penalties and interest bringing the total in issue to about $41,000. Respondent's counsel was successful in having the penalties and interest dropped. The respondent proceeded to appeal the ineligibility finding.

[3] By letter dated January 23, 2001, the respondent was informed by the Minister of National Revenue (Minister) that his employment was insurable, but that his contract of service "was only valid for 18 weeks from August 10, 1992 to December, 11 1992." Counsel wrote to the Minister on his client's behalf to appeal this decision. The Minister redirected this letter to the Court which, on February 12, 2001, acknowledged receipt of the letter and treated it as a valid appeal.

[4] On February 20, 2001, counsel for the respondent informed the Court by fax that his client was abandoning his appeal. The Registry deemed the appeal dismissed pursuant to 16.2(2) of the Tax Court of Canada Act, R.S.C. 1985, c. T-2 as amended (Act) in its letter of February 21, 2001.

[5] On April 26, 2001, counsel for the respondent wrote the Court asking that it disregard his February 20 letter and that his client be permitted to continue with his appeal. On May 9, the applicant opposed the request. A motion to hear this request was set down for June 20, 2001.

[6] On June 14, 2001, counsel again wrote to the Registrar of the Court, this time asking that the April 26, 2001 letter that his client be permitted to continue with his appeal be disregarded. On August 28, 2001, he informed the Court in a lengthy letter that his client once again wished to have his appeal reinstated. The applicant opposed the reinstatement of the appeal. A hearing was set down for November 6, 2001, and after an adjournment, was finally heard on March 21, 2002.

[7] On April 15, 2002, the Court allowed that the notice of withdrawal be set aside and gave the respondent 60 days in which to file a reply to the notice of appeal. Hence, the application for judicial review by the Attorney General of Canada against that decision.

The decision of the Tax Court of Canada

[8] Relying upon the well established principle that every court has the authority required to govern its own proceedings, the Court claimed an inherent jurisdiction to set aside a notice of discontinuance and concluded that the facts of this case warranted the exercise of that jurisdiction. So it authorized the withdrawal of the notice. At paragraph 46 of the decision, the Court wrote:

This is in my view a case where the relief sought should be granted. The withdrawal was hasty and was based on confusion about the requirements under the Employment Insurance Act. The complexity of the Act and the rules and regulations under it is compounded by the split jurisdiction under that Act between this court and the Board of Referees. While I cannot condone the lawyer's rash withdrawal of the appeal without having his client's success with the Board of Referees clearly nailed down his actions were carried out in good faith, albeit rather inexpertly.

Analysis of the decision

[9] There are conflicting views among the judges of the Court as to whether the Court possesses an inherent jurisdiction to set aside a notice of discontinuance and, if so, whether section 16.2 of the Act is a bar to the exercise of that jurisdiction. Section 16.2 deems a discontinued proceeding to be a dismissal of that proceeding. It reads:

16.2 (1) A party who instituted a proceeding in the Court may, at any time, discontinue that proceeding by written notice.

(2) Where a proceeding is discontinued under subsection (1), it is deemed to be dismissed as of the day on which the Court receives the written notice.

16.2 (1) La partie qui a engagé une procédure devant la Cour peut en tout temps s'en désister par avis écrit.

(2) Le désistement équivaut au rejet de la procédure en cause à la date à laquelle la Cour reçoit l'avis de désistement.

The section was enacted on September 22, 1988: see R.S.C. 1985, c. 51, s. 2 (4^th Supp.). It came into force on January 1, 1991.

[10] In Bogie v. The Queen, 97 D.T.C. 1079, at page 1080, the Court concluded that, as a statutory creation, it did not possess such inherent jurisdiction. The case was appealed to us, but Robertson J.A. did not decide this issue and left it open for future consideration. In another decision rendered after the enactment of section 16.2 but prior to its coming into force, the Court found that it did not have the authority to grant a relief against a dismissal based on a withdrawal of the appeal: see Laskaris v. M.N.R., 90 D.T.C. 1364.

[11] The Court in Baker v. R., [1999] 2 C.T.C. 2388 relied upon section 16.2 to refuse to set aside the deemed dismissal of the proceedings. In Roberts v. Canada, [2001] T.C.J. No. 866, the Chief Judge of the Court followed the decision in Baker as he was of the opinion that, in view of the terms of section 16.2, "the discontinuance of an appeal ends the appeal": see paragraph 7 of the decision.

[12] However, in Rutledge v. The Queen, 2001 D.T.C. 65, at page 67, the Court assumed an inherent jurisdiction to "set aside a dismissal of an appeal on the basis of erroneous advice, such dismissal not have [sic] been created by a Judgment of this Court".

[13] It is fair to say that most of the cases that I have referred to, and the list is not exhaustive, brought to light sympathetic circumstances from the taxpayer's perspective, ranging from understandable confusion generated by the complexity of the law to erroneous advice from the Tax Department, all leading to the filing of a notice of discontinuance. However, there is more at stake here on this issue than sympathy: finality of decisions and efficiency of the administration of justice. I believe these fundamental concerns relating to a proper administration of justice are reflected in section 16.2 of the Act. I now turn to the origin, scope and effect of this section.

The origin of section 16.2 of the Act

[14] There seems to be a consensus that the decision of Heald J.A. in McCambridge v. The Queen, [1980] 2 F.C. 142 (F.C.A.) is at the origin of the enactment of section 16.2. The Assistant Chairman of the Tax Review Board had held that there was no appeal to be heard by the Board when the Notice of Appeal had been withdrawn by the appellant. At the time, the Board had departed from its previous policy of issuing a judgment in appeals withdrawn, discontinued or abandoned. The Assistant Chairman was of the view that a formal judgment of dismissal was not necessary. Heald J.A. reviewed the relevant provisions governing the powers of the Board. He concluded that there were only two ways in which the then legislation provided for disposing of appeals to the Board and, in both cases, the legislation required action by the Board itself. At page 145 of the decision, he wrote:

If Parliament had intended to provide that one means of disposing of an appeal could be by way of filing a notice of discontinuance, it would have been an easy matter to so provide in the statute.

[15] Section 16.2 was consequently enacted. One obvious reason for this was efficiency. It was to dispense with the need for members of the Board or judges of the Court to issue a formal judgment each time a proceeding was discontinued: hence, the deemed dismissal as if a judgment of dismissal had been issued. With an ever increasing volume of litigation, the deeming provision carried significant impact in terms of relief on the judicial resources available.

[16] The terms of subsection 16.2(2) which introduced the notion of a deemed dismissal also reveal a legislative intent to bring clarity as regards the effect of a notice of discontinuance as well as an intent to bring finality to tax litigation.

[17] In Sixgraph Informatique Ltée v. The Queen, 97-440-IT-G and 97-462-IT-I, rendered on October 27, 2000, Lamarre J.T.C.C. refused to grant a motion, dated April 7, 2000, for the withdrawal of notices of discontinuances filed almost three years before, on April 14, 1997. She endorsed the concerns expressed by the respondent for an efficient and proper administration of justice as well as the finality of dismissals of appeals. The Sixgraph Informatique Ltée case, supra, is a good example of the need, in the public interest, to put an end to litigation. A party is certainly entitled to assume as a general rule that litigation has been brought to an end when an appeal is deemed to be dismissed. It is entitled to assume that the dead proceeding will not be resurrected some 14 months, as in the present case, or three years, as in the Sixgraph case, after its burial.

[18] Instead of leaving the issue of discontinuance of a proceeding to the discretion of the Court, Parliament has chosen to legislatively determine the legal consequences of a notice of discontinuance. This brings me to an analysis of the scope and effect of section 16.2 of the Act and its resulting consequences.

The scope and effect of section 16.2 of the Act

[19] Section 16.2 of the Act is a deeming provision which creates a legal fiction. In the words of Beetz J. in [1978] 2 S.C.R. 838">The Queen v. Verrette, [1978] 2 S.C.R. 838, at page 845, "a deeming provision is a statutory fiction; as a rule it implicitly admits that a thing is not what it is deemed to be but decrees that for some particular purpose it shall be taken as if it were that thing although it is not or there is doubt as to whether it is". The purpose and operation of a legal fiction has also been described eloquently by Yan Thomas in an article entitled: "Fictio Legis. L'empire de la fiction romaine et ses limites médiévales", (1995) 21-22 Droits - Revue française de théorie juridique 17:

Fiction is a process that is part of the pragmatics of law. It consists first in misrepresenting the facts, stating them to be other than what they really are and extracting from that very adulteration and that false supposition the legal consequences that would flow from the dissembled truth, if that truth existed beyond the cloak of external appearances.

La fiction est un procédé qui appartient à la pragmatique du droit. Elle consiste d'abord à travestir les faits, à les déclarer autres qu'il ne sont vraiment, et à tirer de cette adultération même et de cette fausse supposition les conséquences de droit qui s'attacheraient à la vérité que l'on feint, si celle-ci existait sous les dehors qu'on lui prête.

[20] Fictions reveal "l'infirmité de notre esprit impuissant à créer sans cesse des concepts parfaitement adéquats aux réalités" (the limited ability of our mind to unceasingly create concepts which are fully adapted to realities (translation)). G. Wicker, Les fictions juridiques, Contribution à l'analyse de l'acte juridique, L.G.D.J., Paris, 1994, page 17. They are often used to obtain or avoid a legal consequence, circumvent or avoid a legal rule or bring about needed reforms of a legislative nature that the legislature has omitted to do: G. Létourneau, Les fictions en droit public, (2000) Revue Juridique Thémis 105, at pages 114-115.

[21] An appeal discontinued is, pursuant to subsection 16.2(2), an appeal dismissed. An appeal dismissed is an appeal disposed of, and an appeal which has been disposed of no longer exists: see Lehner v. M.N.R., 97 D.T.C. 5270, at page 5271 per Pratte J.A. (F.C.A.). Subsection 16.2(2) operates to turn the filing of a discontinuance into a constructive dismissal akin to an actual dismissal. In other words, the discontinuance of an appeal, as a result of that subsection, takes on all of the properties of a dismissal. It produces the same effect as a judgment of dismissal by the Court, albeit that effect is obtained by sheer operation of the legal fiction. In either case, the powers of the Court are spent: the decision maker is functus officio. A dismissal, deemed or actual, is a final determination which closes the matter, barring some vitiating circumstances such as fraud or some statutory authority allowing the decision maker to retain or recapture the lost authority.

[22] Rule 172 of the Tax Court of Canada Rules (General Procedure) SOR, often referred to as the "slip" rule, provides such authority. It allows the Court to set aside, vary or amend judgments when the conditions provided therein are met:

Setting Aside, Varying or Amending Accidental Errors in Judgments - General

172. (1) A judgment that,

(a) contains an error arising from an accidental slip or omission, or

(b) requires amendment in any matter on which the Court did not adjudicate,

may be amended by the Court on application or of its own motion.

(2) A party who seeks to,

(a) have a judgment set aside or varied on the ground of fraud or of facts arising or discovered after it was made,

(b) suspend the operation of a judgment, or

may make a motion for the relief claimed.

Annulation ou modification de jugements en raison d'erreurs - Général

172. (1) Le jugement qui :

a) comporte une erreur découlant d'un lapsus ou d'une omission;

b) doit être modifié relativement à une question sur laquelle la Cour n'a pas statué,

peut être modifié par la Cour, sur demande ou de son propre chef.

(2) Une partie peut demander, par voie de requête dans l'instance, selon le cas :

a) l'annulation ou la modification d'un jugement en raison d'une fraude ou de faits survenus ou découverts après qu'il a été rendu;

b) un sursis d'exécution d'un jugement;

c) une mesure de redressement différente de celle qui a déjà été accordée.

[23] In Roberts, supra, at paragraph 11, Chief Judge Garon assumed reluctantly without deciding that a discontinuance pursuant to section 16.2 of the Act was equivalent to a judgment dismissing the appeal. Although he doubted whether this was the correct approach, nevertheless, he proceeded, pursuant to Rule 172(2), to determine if the judgment could be set aside or varied on the ground of fraud or on account of facts arising or discovered after the judgment was made.

[24] As is often the case with legal fictions, they do not integrate well or fully with other existing relevant legislation. Necessary adjustments are sometimes needed to fill gaps or obviate disparities or potential injustices. Rule 172 gives the Court jurisdiction to vary or set aside any of its judgments, including a judgment of dismissal. As previously mentioned, the legal fiction turns a discontinuance into a dismissal. Such dismissal carries the same effect as a judgment of dismissal by the Court. It is, indeed, tantamount to a judgment of dismissal on consent.

[25] For the purpose of allowing the limited remedial provisions of Rule 172 to apply, I am willing to give full and consistent effect to the legal fiction created by subsection 16.2(2) and to fill the gap created by the wording of the subsection and of Rule 172. I do not think that it does violence to Parliament's intent to find that the dismissal under subsection 16.2(2) ought to be treated as a judgment of dismissal to which Rule 172 will apply if and when the conditions are met.

[26] In practice, it is Rule 172(2)(a) which is more likely to be invoked where the deemed dismissal has been obtained by fraud or where facts have arisen or have been discovered after the dismissal took effect. I hasten to add that, in the present case, there is no allegation of fraud and, although invited by us to do so, counsel for the respondent has been unable to point to facts discovered or that have arisen after the dismissal which would warrant the application of Rule 172.

[27] The respondent submitted that the Court possessed and could exercise an inherent jurisdiction to allow the withdrawal of a notice of discontinuance. I cannot accept that submission in view of subsection 16.2(2). As properly stated by I.H. Jacob in an article entitled "The Inherent Jurisdiction of the Court", Current Legal Problems 1970, pages 23 and 24:

...the court may exercise its inherent jurisdiction even in respect of matters which are regulated by statute or by rule of court, so long as it can do so without contravening any statutory provision.

(emphasis added)

I believe section 16.2 by its plain meaning took away any inherent or residual jurisdiction in the Court to allow for withdrawals of notices of discontinuance. Both law and logic suggest that there is no more scope or authority for doing so than there is for re-opening a matter after the Court has rendered its judgment.

[28] In Rutledge, previously cited, the Court appears in paragraph 13 of its decision to have relied upon section 13 of the Act as legislative authority to set aside a deemed dismissal. That section gave the Court with respect to the attendance and examination of witnesses and other matters necessary for the due exercise of its jurisdiction the powers, rights and privileges that are vested in a superior court of record. That section has now been replaced by a section which gives the Court the power to punish for contempt of court. In any event, that provision had been interpreted in McCambridge, previously cited, at page 146, as not conferring upon the Board added jurisdiction: it merely gave the Board the ancillary powers of a superior court to exercise the jurisdiction conferred upon it by the Act.

Conclusion

[29] For these reasons, I would allow the application for judicial review, set aside the decision of the Tax Court of Canada and restore the deemed dismissal of the respondent's appeal.

"Gilles Létourneau"

J.A.

"I agree

M. Nadon J.A."

"I agree

K. Sharlow J.A."

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-313-02

STYLE OF CAUSE: ATTORNEY GENERAL OF CANADA v.

LORETO SCAROLA

PLACE OF HEARING: TORONTO, ONTARIO

DATE OF HEARING: March 13, 2003

REASONS FOR JUDGMENT: LÉTOURNEAU J.A.

CONCURRED IN BY: NADON J.A.

SHARLOW J.A.

DATED: March 26, 2003

APPEARANCES:

Mr. J. Paul Malette FOR THE APPELLANT

Mr. Brent E. Cuddy

Mr. Mitchell Worsoff FOR THE RESPONDENT

SOLICITORS OF RECORD:

Morris Rosenberg FOR THE APPELLANT

Deputy Attorney General of Canada

Worsoff, Silver Associates FOR THE RESPONDENT

2788 Bathurst St., Suite 303

Toronto, Ontario M6B 3A3

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Canada (Attorney General) v. Scarola, 2003 FCA 157

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2003 FCA 157