Docket: A-358-15
Citation: 2015 FCA 248
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CORAM:
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STRATAS J.A.
NEAR J.A.
DE MONTIGNY J.A.
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BETWEEN:
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MINISTER OF NATIONAL
REVENUE
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Appellant
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and
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ROBERT MCNALLY
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Respondent
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REASONS
FOR ORDER
STRATAS J.A.
[1]
Previously, in reasons cited at 2015 FCA 195, I
directed the parties to provide submissions on the issue whether this appeal
had become moot and, if so, whether this Court should nevertheless hear the
appeal.
[2]
The circumstances behind my direction are set
out in those reasons. In brief, the Minister appeals a judgment of the Federal
Court cited at 2015 FC 767 (per Justice Harrington). The Federal Court
ordered that the Minister examine the respondent’s 2012 tax return and issue
him a notice of assessment within thirty days. The Minister has done that—she
has complied with the judgment—but still wishes to continue her appeal in order
to pursue a jurisprudential point. However, the respondent taxpayer has
declined to participate in the appeal. He got what he wanted: the Federal Court
gave judgment in his favour and the Minister has complied with it.
[3]
The parties have now filed their submissions on
whether this appeal should be heard. I have read and considered them.
[4]
The Minister properly concedes that “[t]here is no question that the appeal is moot” and
so the “only question is whether this Court should
exercise its discretion to hear the appeal in any event.” The parties
agree that the controlling authority on this is the Supreme Court’s decision in
Borowski v. Canada (Attorney General), [1989] 1
S.C.R. 342, 57 D.L.R. (4th) 231. Three factors guide
this Court’s discretion: the presence of an adversarial context, the concern for
judicial economy and the Court’s need to be sensitive to its status as the
adjudicative branch of government.
[5]
I wish to say a little more about the last
factor, the Court’s need to be sensitive to its status as the adjudicative
branch of government. The task of courts within our constitutional separation
of powers is to pronounce on legal principles only to resolve a real dispute.
Absent a real dispute, the judicial pronouncement of legal principles can smack
of gratuitous law-making, something that is reserved exclusively to the
legislative branch of government: see the opening words of sections 91 and 92
of the Constitution Act, 1867. While Borowski and cases that
apply it do not forbid courts in appropriate circumstances from determining a
proceeding after the real dispute has disappeared, this underlying rationale
reminds us that the discretion to do so must be exercised prudently and
cautiously.
[6]
The Minister wishes to continue this appeal to
resolve jurisprudential issues she says are important. Broadly, these issues
concern the scope of her authority to conduct an audit in the face of
subsection 152(1) of the Income Tax Act which requires the Minister to
review a taxpayer’s return for a particular taxation year and assess him or her
for tax, interest and penalties “with all due
dispatch.” The Minister has been undertaking a lengthy audit program
into certain tax shelters and the Minister says this has taken much time,
holding up the respondent’s assessment and the assessments of many others. The
Minister raises the spectre of harm to its authority to conduct audits and to
review tax returns if the Federal Court’s judgment is allowed to stand. In a
general sense, the question the Minister raises and wants answered is what
sorts of reviews or audits can hold up assessments.
[7]
On the first Borowski factor, the
presence of an adversarial context, the Minister concedes that the respondent’s
refusal to participate in the appeal takes away the adversarial context. This
indeed is a problem. If this Court hears the appeal, will anyone occupy the
other side of the courtroom? Will anyone be present to oppose the Minister’s
submissions?
[8]
To address this problem, the Minister offers to
pay the reasonable and proper costs of counsel “to
present opposing arguments, whether that person is [the respondent’s]
counsel…or another lawyer willing to take on that role.” But the problem
remains. The respondent declines outright to participate in the appeal so
counsel cannot be appointed for him against his will. And there are no other
parties before the Court who could oppose the Minister.
[9]
It is true that in highly unusual circumstances
of great public interest this Court can appoint an amicus to argue a
position that would not otherwise be advanced. Here there are no circumstances
of great public interest and the only party before the Court is the Minister:
see Alliance for Marriage and Family v. A.A., 2007 SCC 40, [2007] 3
S.C.R. 124, a case similar to the case at bar, where the Supreme Court refused
to permit the proceeding to continue.
[10]
On the second Borowski factor, judicial
economy, the Minister points out that judicial economy is furthered where an
appellate court decides to take on an important issue that is evasive of
appellate review. In the abstract, I agree with that proposition. The Minister
says that the question here—what sorts of reviews or audits can hold up
assessments—is evasive of appellate review. I disagree with that.
[11]
Taking this case as an example, the Minister
could have appealed the judgment of the Federal Court and could have moved for
an immediate stay of the judgment on the basis of the principles set out in RJR
-- MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R.
311, 111 D.L.R. (4th) 385.
To enhance its chances of success on the stay motion, the Minister also could
have moved for an order that the appeal be expedited in order to minimize any
prejudice to the respondent.
[12]
The Minister says that she would never be able
to get a stay in a case like this because she could never establish irreparable
harm. Again, I disagree.
[13]
Suppose in a hypothetical case the Federal Court
finds that on the facts the Minister wrongly failed to assess the taxpayer’s
return in a timely way. If the Minister appeals on the ground that that finding
is vitiated by palpable and overriding error, if the Minister points to
evidence showing that a detailed review of the taxpayer’s return is necessary
for purposes envisaged by the Act, and if a later reassessment is not likely on
the facts to repair any harm (for instance where collection is likely to be a
problem), the Minister would have a pretty good argument for a stay.
[14]
As well, in a future case the Minister might
argue that failure to get appellate review of an important question causes her
or the treasury some sort of harm that cannot be otherwise addressed. I offer
no definitive opinion on that argument. It is enough here to say that it is not
doomed to fail and, on the right evidence, could perhaps succeed. Here there is
no such evidence.
[15]
Finally, on the third Borowski factor, I
am concerned that this appeal, if heard, would be a wholly academic exercise
divorced from any plausible factual or legal basis whatsoever. This Court would
be acting outside of its status as the adjudicative branch of government. This
is seen by examining what the Federal Court did and the nature of the
Minister’s appeal before us.
[16]
The Federal Court found that the Minister could
not justify the delay in this case on any acceptable factual or legal basis, i.e., any basis
authorized in the Act. The Minister delayed her assessment in this case to
discourage other taxpayers from participating in certain tax shelter
arrangements. The Federal Court found that this was an “extraneous purpose” (at
paragraph 41). In other words, on the facts of this case the Minister decided
not to assess the taxpayer’s return in order to further a collateral purpose,
improper purpose, or one not authorized by the Act. Decisions of that sort
cannot be regarded as acceptable or defensible and are liable to be set aside
or, in appropriate circumstances, otherwise redressed: Roncarelli v.
Duplessis, [1959] S.C.R. 121, 16 D.L.R. (2d) 689; Re Multi-Malls Inc.
and Minister of Transportation and Communications (1977), 14 O.R. (2d) 49,
73 D.L.R. (3d) 18 (C.A.); Doctors Hospital v. Minister of Health et
al. (1976), 12 O.R. (2d) 164, 68 D.L.R. (3d) 220 (Div. Ct.); Paradis
Honey Ltd. v. Canada, 2015 FCA 89, 382 D.L.R. (4th) 720 at paragraph 145.
[17]
Does the Minister advance a plausible challenge
to these factual and legal findings in this Court? The only document I have
before me that defines the issues in this appeal is the Minister’s notice of
appeal. The notice of appeal simply says that the findings are capricious and
in error. It does not say why and offers no particulars. Wholly bald notices of
appeal count for very little, if anything: Canada (National Revenue) v. JP
Morgan Asset Management (Canada) Inc., 2013 FCA 250 at paragraphs 38-48.
[18]
The
Minister wants us to hear this case and tell her what
sort of reviews or audits can justify holding up assessments. But she asks this
in a case where on the facts and the law the Minister had no proper reason to
hold up an assessment and the appeal, as pleaded, does not supply a particular
or concrete ground that will shake that finding. We would be answering a
question completely in the abstract, departing far from our proper adjudicative
role, in circumstances where future cases can provide answers to the Minister’s
question.
[19]
None of the Borowski factors favour
hearing this appeal. Therefore, I would dismiss the appeal for mootness. The
respondent has not asked for his costs concerning the submissions made to this
Court on this matter, and so none shall be awarded.
"David Stratas"
“I agree
D.G. Near J.A.”
“I agree
Yves de Montigny J.A.”
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