Citation: 2016 TCC 290
Date:20161219
Docket:
2012-2998(IT)G
BETWEEN:
TONY
SAMAROO,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent;
Docket:
2012-3001(IT)G
AND BETWEEN:
HELEN
SAMAROO,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent;
Docket:
2012-2997(GST)G
AND BETWEEN:
TONY
SAMAROO and HELEN SAMAROO,
Appellants,
and
HER
MAJESTY THE QUEEN,
Respondent;
Dockets: 2012-3147(GST)G
2012-3148(IT)G
AND BETWEEN:
SAMAROO HOLDINGS LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent;
Dockets:
2012-3149(GST)G
2012-3150(IT)G
AND BETWEEN:
MGM
RESTAURANTS LTD.,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS
FOR VOIR DIRE ORDER
Bocock J.
I. Introduction
a)
Nature of Motion
[1]
The Appellants bring this preliminary motion at
the beginning of the trial process. The motion was scheduled to occur some
months before the reconvening of the trial and the first calling of evidence.
It is a motion in the nature of a voir dire. By definition, it concerns
the admissibility or exclusion of evidence. In the present appeals, the ruling
regarding of such evidence will likely impact the length, volume and order of
evidence and possibly the outcome of the appeals. The evidence to be excluded
emanates from factual findings (the “Findings”) in a previous criminal trial
for income tax evasion involving some of the Appellants at bar. That previous proceeding
occurred in British Columbia provincial court: R v. Samaroo, 2011
BCPC 0503 (“Samaroo #1”). In addition, there was a subsequent order of
the British Columbia Supreme Court concerning a consequent civil proceeding for
malicious prosecution involving some of the Appellants: Samaroo v. Canada
Revenue Agency, 2016 BCSC 531, (“Samaroo #2”).
b) Exclusion of Further Evidence
[2]
The Appellants seek an order preventing any
party at the hearing of these appeals of the (re)assessments (the “Tax Appeals”)
from adducing further evidence which seeks to challenge the Findings determined
by the provincial court judge in Samaroo #1, which Findings were further
referenced and utilized by a British Columbia Supreme Court Justice in Samaroo
#2. The legal bases for this sought exclusion order are issue estoppel or
abuse of process.
[3]
While issue estoppel and abuse of process have
been applied by the Tax Court in factual situations involving guilty verdicts
for income tax evasion, the same cannot jurisprudentially be said of an
acquittal. Samaroo #1 involved just that verdict: an acquittal. The
broad issue is whether this Court should apply issue estoppel or abuse of
process in respect of Findings from an acquittal to exclude fully further
evidence contradicting or challenging the Findings. And quite apart from the en
bloc application of the doctrines, what is the further effect of the Findings
on the Tax Appeals, namely (i) to what extent; (ii) to which appeals; and (iii)
by what method should such an exclusion order apply.
II. Matters
Decided in the Other Proceedings
[4]
At the outset, counsel for the parties take differing
views of the Tax Appeal issues determined, settled or resolved by the Findings
in Samaroo #1 and Samaroo #2.
a) According to the Appellants
[5]
Drawing extensively from the provincial court
judge’s written reasons for acquittal in Samaroo #1, the
Appellants characterize the judge’s findings as manifest, determinative and
central to the Respondent’s assumptive facts in the replies to the Tax Appeals.
An excerpted portion of the Appellants’ written submissions are included below
because they succinctly cite the relevant Findings in Samaroo #1 and
their subsequent use in Samaroo #2.
Excerpt from
Appellants’ motion materials:
6. The criminal
trial in Samaroo #1 had a long procedural history including amendments
to the information, particulars, and amended particulars before the trial
began.
7. The trial was
long:
The
trial took 19 days to complete, almost all of which was used for the Crown’s
case, and was replete with applications for rulings by both sides. The Crown
called 24 witnesses and filed affidavit material. There were 51 Crown exhibits
most of which were large binders containing hundreds of working papers,
characterized by confusion on occasion because the numbers of the Crown
exhibits did not tally with the defense documents, filed as exhibits, which
were not referred to.
8. Justice
Saunders (the provincial Court judge who heard and decided the matter) acquitted
the accused on the issue of whether there was unreported income and
misappropriation of cash from unreported income [Samaroo #1].
9. Justice
Saunders also made express ‘positive’ findings in favour of the accused. For
example, she found:
[61] …it is
important to point out that I find Tony Samaroo to be credible. His demeanour
was impressive. His explanation is consistent with significant and material
aspects of the evidence and is plausible for the reasons set out below.
[62] In
general terms, I accept his evidence that he began working hard and saving when
he first arrived in Canada in 1970. I accept that he had sound business acumen
in the food and entertainment industry and bought and sold businesses with a
profit. I accept that he continued to work long hours with Helen after their
marriage and accumulated savings from their employment and inherited funds
which they held in the form of cash due to their beliefs around banking
practices.
[63] In
specific terms, as they relate to the different aspects of the Crown’s theory
itemized below, Tony Samaroo told Ed Heese about depositing old $100 bills into
his corporate account well before the auditor, Glen Foster, came to the MGM in
March, 2006. Ed Heese confirms this. Glen Foster was also told this by Tony
Samaroo but chose not to believe him.
10. Justice
Saunders made express findings of fact [concerning] the Crown’s theory that
there was unreported income and misappropriation of unreported cash … based on
four assumptions by the Canada Revenue Agency (“CRA”):
[59] The Crown
theory, that the Samaroos misappropriated unreported cash and understated their
income and the income of the MGM and Samaroo Holdings in contravention of the
Income Tax Act and Excise Act, is based on four assumptions: namely, a) the
paper trail pursued by Keith Kendal points to almost one million dollars being
deposited to the personal accounts of the Samaroos and shareholder loan
accounts of the MGM and Samaroo Holdings for taxation years 2004, 2005 and
2006; b) that Tony Samaroo skimmed unreported cash from one till tape or shift
per day from the MGM and nightclub to a lesser extent, and deposited the cash
into his account and into the shareholder loan account for his and Helen’s
benefit; c) Tony and Helen Samaroo used the unreported cash to pay third party
suppliers, liquor and wages; and d) the net worth analysis indicates they could
not have saved close to a million dollars over the years 1980 to 2003.
11. Justice
Saunders then made express findings of fact that each of the CRA’s four
assumptions were explained or rendered invalid:
a) Tony Samaroo’s evidence was accepted with respect to
the cash deposits;
b) The Crown’s theory that Tony Samaroo skimmed
unreported cash from one till tape per day was flawed in significant respects;
c) Tony and Helen Samaroo did not use unreported cash to
pay supplies, liquor or wages as alleged; and
d) The CRA’s net worth analysis was inaccurate.
12. The Crown has
not raised an alternative basis of assessment in the present cases pursuant to
subsection 152(9) or sought to do so.
13. In Samaroo
v. Canada Revenue Agency, 2016 BCSC 531, [“Samaroo #2”] Justice Punnett
of the Supreme Court of British Columbia found that the requisite elements of
issue estoppel were met as between Samaroo #1 and Samaroo #2.
14. In
particular, Justice Punnett ruled that the Supreme Court of Canada’s decision
in Mahalingan applied such that the findings from Samaroo #1
applied to Samaroo #2 despite there being an acquittal in Samaroo #1:
“…whether the finding arises from conviction or an acquittal is irrelevant. It
is the determination of the issue that is relevant.”
15. Further, in Samaroo
#2 Justice Punnett also ruled, in the alternative, that it would be an
abuse of process for the Canada Revenue Agency to seek to relitigate the
findings and issues addressed in the Samaroo #1.
b)
According to the Respondent
[6]
The Respondent does not dispute the content of
the Findings submitted by the Appellants, but asserts that such resolved issues
cannot be divorced from the differing standard and burden of proof in criminal
proceedings: (i) guilt must be proved beyond the threshold of reasonable doubt,
and (ii) the Crown bears the burden of so proving such guilt. Therefore, given
this differing litigative context, the two consequent contextual conclusions
within the Findings were limited to:
a)
the testimony of Tony Samaroo, the sole witness
for the accused, was credible on certain issues, inter alia, no
unreported income, non-taxable sources of cash and no misappropriation of
corporate property, and
b) the Crown’s methodology for calculating unreported income, its net
worth statement calculation and failure to account for capital cost allowance
were flawed.
[7]
The Respondent further asserts that in the first
finding in a) above, Judge Saunders indicated that the credibility of Mr. Samaroo
arose from the plausible nature of his evidence. Since the judge accepted the
accused’s testimony, reasonable doubt of guilt was established and an acquittal
entered. This is the mandatory first prong of three relating to evaluation of
evidence relating to reasonable doubt.
[8]
With the second finding in b) above, the Crown
failed to prove the net worth analysis beyond a reasonable doubt. To do so
legally, the Crown must establish one of two things: disclose through the net
worth analysis the likely source of the alleged unreported income; or, disprove
all other non-taxable sources of income. The Crown failed to do so. The judge
found the calculation lacked such a degree of accuracy and was “worthless” in
meeting the Crown’s burden of establishing the criminal standard of proof. In
short, the Respondent asserts that the finding was an acquittal because the Crown,
who bore the burden of proof, failed to discharge that obligation to prove
beyond a reasonable doubt that the Appellants evaded tax contrary to the criminal
offence provisions of the Income Tax Act (the “Act”). In that criminal proceeding
the party, namely the Crown, who bore the burden of proof to an enhanced
standard of proof was central to the outcome. Both these components are
different in these Tax Appeals, at least to the extent of the correctness of
the assessment.
III. Legal
Basis for Exclusion of Evidence
[9]
The Appellants request the exclusion of further
evidence contrary to the Findings on the basis of issue estoppel or abuse of
process.
i.
Pre-requisite criteria for Issue Estoppel
[10]
It is agreed agree that the three elements of
issue estoppel are as follows:
a. That the same question or
issue has been decided (‘issue symmetry’);
b. That the judicial decision which is said to create
the estoppel was final; (‘finality’)
c.
That the parties to the judicial decision or their privies were the same
persons as the parties to the proceedings in which estoppel is raised or their privies.
(‘mutuality’)
[11]
In the matter at bar, finality and mutuality
exist in respect of Samaroo #1. The sole outstanding element is whether
there is issue symmetry: does the same question or determination exist as
between the criminal proceeding in Samaroo #1 and these Tax Appeals?
[12]
Moreover, issue estoppel is a discretionary
remedy. In Danyluk, the Supreme Court of Canada (“SCC”) considered the
application of issue estoppel from a determination made by an administrative
tribunal to civil court proceeding. In that case, Justice Binnie held that the
first step in applying issue estoppel is for the courts to determine whether
the preconditions to the operation of the doctrine have been met. If the
preconditions are met, the courts must still determine, as a matter of
discretion, whether issue estoppel ought to be applied.
[13]
In exercising this residual discretion, courts
must ensure that the discretion is exercised to deal with the unique and
particular circumstances of the case before them. Within Danyluk, at
paragraph 63, Justice Binnie cited with approval the following comments by the
Ontario Court of Appeal in Schweneke:
The discretion to
refuse to give effect to issue estoppel becomes relevant only where the three
prerequisites to the operation of the doctrine exist. . . . The exercise of the
discretion is necessarily case specific and depends on the entirety of the
circumstances. In exercising the discretion the court must ask - is there
something in the circumstances of this case such that the usual operation of
the doctrine of issue estoppel would work an injustice?
. . . . .
. . . The discretion
must respond to the realities of each case and not to abstract concerns that
arise in virtually every case where the finding relied on to support the
doctrine was made by a tribunal and not a court. [Emphasis added.]
[14]
Specifically, fairness in this inquiry should be
considered from two perspectives. First, courts should consider the fairness of
the prior proceeding. Second, courts should consider the fairness of using the
results in the prior fair proceeding to bar determination of issues in the subsequent
proceeding.
ii.
Pre-requisite criteria for Abuse of Process
[15]
Two of the three elements for abuse of process
are the same as those for issue estoppel. However, mutuality need not exist for
abuse of process to apply and its primary rationale and purpose is different:
the courts’ multiple processes should not compromise the integrity of the
justice system by affording a party the opportunity to relitigate the same
question twice where doing so would result in a misuse of the courts’
procedures and bring the administration of justice into disrepute.
[16]
In City of Toronto, the SCC held that the
discretionary factors that apply to prevent issue estoppel from operating in an
unfair way are equally available to prevent abuse of process from achieving a
similar undesirable result.
Therefore, courts also have the residual discretion to apply abuse of process,
where preconditions to applying the doctrine are met.
[17]
According to the SCC, common to both issue
estoppel and abuse of process is the aim to ensure fairness in the judicial
decision-making process:
There are many
circumstances in which the bar against relitigation, either through the
doctrine of res judicata [which includes the doctrine of issue estoppel] 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.
[Emphasis added.]
[18]
Courts’ residual discretion with respect to
abuse of process has been recognized by the Tax Court of Canada. In Golden,
Justice Boyle held that like issue estoppel, “[a]buse 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.”
[19]
It is important, however, to not overstate the
importance of fairness as a consideration when exercising the residual
discretion in applying abuse of process. The fundamental goal of abuse of
process is to uphold the integrity of the judicial system. Therefore, proper
application of the doctrine should result in a balancing of different
interests, such as finality, fairness, efficiency, and authority of judicial
decisions.
IV. Jurisprudence
surrounding application of Issue Estoppel or Abuse of Process
a)
Varying Standards of Proof, Burdens of Proof and
Outcomes/Verdicts
[20]
Even where issues or questions before the
completed proceeding (i.e. Samaroo #1) and the subsequent proceeding (i.e.
The Tax Appeals) have issue symmetry, courts have differentiated between the
applicability of issue estoppel and abuse of process where different standards of
proof are at play and/or different verdicts or outcomes occur. These differing
standards of proof are distinct and longstanding at law: guilt beyond a
reasonable doubt in criminal proceedings and occurrence on the balance of
probabilities in civil matters. In terms of verdicts in criminal matters, only
proof of guilt marshalled by the Crown beyond a reasonable doubt commands a
guilty verdict, anything less results in an acquittal. For civil proceedings,
proof of occurrence on the balance of probabilities by the party seeking to
overturn the status quo results in success of the suit and the granting of
relief. That much is well-known, static and fundamental. By contrast, the
jurisprudence regarding the transfer of findings among and between standards of
proof, burdens of proof and outcomes or verdicts (“transferral”) in the context
of issue estoppel and abuse of process remains vague, evolving and tangential. This
is borne out in the various scenarios developed in common law Canada by various
courts, at various levels and various jurisdictions.
b) Transferral of Findings under Issue Estoppel
i.
The Parties’ positions
a) Appellants
[21]
The Appellants presented refined arguments
surrounding the assertion that issue symmetry existed sufficiently to allow the
Findings in Samaroo #1 to apply substantively to the Tax Appeals. The consequence
of that application should be broad: no party shall introduce further evidence
at the hearing tending to disprove those positive findings of fact.
[22]
The Appellant asserts that issue estoppel and
abuse of process afford the ready transferral of the Findings from a criminal
acquittal on tax evasion to a related tax appeal. Specifically referencing
Chief Justice McLaughlin in Mahalingan,
the Appellants’ counsel noted with respect to an acquittal in a prior criminal
proceeding, “[i]f a particular issue was decided in
favour of the accused …, even if the issue was decided on the basis of
reasonable doubt, issue estoppel applies.” Specifically, the doctrine of
issue estoppel applies to those issues that were expressly or necessarily
resolved in the acquittal.
[23]
The Appellants state that although the SCC in Mahalingan
dealt with issue estoppel in the criminal-to-criminal context, the principles
stated by the Chief Justice are equally applicable in the criminal-to-civil
context. If Mahalingan is properly interpreted, it represents the latest
consideration by the SCC on issue estoppel as a single doctrine. That is, Mahalingan
represents the continued evolution of that doctrine of transferral of findings
of fact among and between both criminal and civil courts.
[24]
In Mahalingan, the majority's analysis
was concentrated on resolving problems in the application of issue estoppel and
its confusion with abuse of process arising from previous jurisprudence. The Chief
Justice stated that such problems are largely resolved if courts confine the
application of the doctrine to prior determinations of factual issues as
opposed to a focus on different burdens and standards of proof. In reaching
such a determination, the Chief Justice had dropped any reference to the
criminal law context and thus did not make a specific finding that the
issue-centred approach only applies to a criminal-to-criminal transferral context,
although that was the situation in Mahalingan. Therefore, the Appellants
assert that courts are not precluded from applying issue estoppel from a
criminal acquittal to a subsequent civil proceeding. Notably, in Samaroo #2
Justice Punnet expressly followed Mahalingan to find that issue estoppel
applied as between the criminal Samaroo #1 and the civil matter
resulting in the preliminary decision in Samaroo #2.
[25]
Therefore, the Appellants submit that the issues
expressly or necessarily resolved (i.e. for which there is issue symmetry) in
the Appellant's acquittal in Samaroo #1, whether on the basis of a
positive finding of fact or reasonable doubt of guilt, are subject to issue
estoppel in the Tax Appeals. The consequence should be the preclusion of the
introduction of further evidence to disprove or enhance the Findings.
b) Respondent
[26]
In turn, the Respondent submits that issue
estoppel does not apply from an acquittal in a criminal proceeding to a
subsequent civil proceeding, whether on the basis of a positive finding of fact
or reasonable doubt. The only exception to this rule is where the civil
proceeding is for malicious prosecution, as was the case Samaroo #2. Samaroo
#2 should be read merely as an illustration of this narrow exception.
[27]
Further, the Respondent asserts that issue
estoppel cannot apply in the case at bar for three other reasons.
[28]
First, the difference in the standard of proof
between civil and criminal proceedings renders issue estoppel inapplicable in a
criminal acquittal to a civil transferral context. Since the standard of proof
in civil proceedings is lower than the standard of proof in criminal
proceedings, a prior acquittal, as opposed to a conviction, is not
determinative of any factual issues to be resolved in a subsequent civil
proceeding.
[29]
Second, the nature of a criminal conviction and
an acquittal is fundamentally different. The former is a positive finding of
guilt beyond a reasonable doubt (i.e. a “guilty” verdict); the latter is simply
the absence of that finding (i.e. a “not guilty” verdict). To apply issue
estoppel from an acquittal to a subsequent civil proceeding would effectively
be introducing a third verdict, that of factual innocence. As a matter of
public policy, courts should not recognize two classes of acquitted
individuals: those who are legally not guilty, and those that are factually
innocent. To do so would diminish the significance of the “not guilty” verdict.
[30]
Lastly, the Appellants' reliance on Mahalingan
is misplaced. Issue estoppel consists of two distinct types: criminal and civil
issue estoppel. Mahalingan only considered criminal issue estoppel.
Hence, the comments of the Chief Justice are obiter in the criminal to civil
transferral context and the Supreme Court of Canada's refinement of the
criminal doctrine cannot be extended to the civil doctrine.
iii.
Analysis
[31]
The Appellants' interpretation of Mahalingan
reaches too far in the context of tax litigation concerning the correctness of
assessments. To the extent an acquittal in a prior criminal proceeding was
based on reasonable doubt, issue estoppel does not apply to a subsequent civil
proceeding because logically there exists longstanding and differing standards
of proof in criminal and civil proceedings.
[32]
The Appellants have characterized Chief Justice
McLachlin's refinement of the doctrine of issue estoppel if not incorrectly,
then over-generously. At paragraph 17 of Mahalingan, McLachlin CJ held
that “the proper and narrower concern of issue estoppel
… is particular determinations on the issues supporting the verdict”
(emphasis added). The Appellants themselves referred to this in their submissions
and concluded that Mahalingan stands for the proposition that “issue estoppel clearly can flow from an acquittal.” It
is more accurate to say that the Chief Justice concluded issue estoppel can
flow from determinations of factual issues that support a verdict of a criminal
acquittal. The focus of the analysis is on the issues, not the outcomes of the
prior proceeding.
[33]
However, both proceedings referenced in Mahalingan
were criminal. The Chief Justice stated at the opening of the decision that
“[t]hough it shares many features with its civil law
equivalent, criminal issue estoppel is a stand-alone doctrine responsive to the
unique characteristics of criminal trials.” The Chief Justice envisages
two types of issue estoppel, one for civil proceedings and one for criminal
proceedings. The Appellants' characterization of a single doctrine seems to ignore
this right-limiting preamble. Any adoption of principles from Mahalingan
within the criminal to civil transferral context would necessarily be novel and
beyond the express realm of even the obiter dicta in Mahalingan
which itself was limited to criminal proceedings only.
[34]
Leaving aside for a moment both this conclusion
by this Court and the different burden or onus of proof in Tax Appeals (at
least in the context of assessment for tax) and criminal proceedings, the
Appellants’ suggested focus on the prior factual determination of issues when
applying issue estoppel in the criminal to civil transferral context has merit.
However, this applies in exceptional cases where there are no issues with
respect to the different standards of proof. The underlying policy goal of
issue estoppel is to “balance the public interest in
the finality of litigation with the public interest in ensuring that justice is
done on the facts of a particular case.” Where, in exceptional cases,
factual issues in a prior criminal proceeding have undergone extensive judicial
scrutiny and have been conclusively resolved in accordance with the standard of
proof for the subsequent proceeding,
it serves the public interest to not allow further litigation over these
factual issues in the subsequent proceeding, regardless of whether the prior
criminal proceeding resulted in an acquittal or a conviction. This marches
along with Justice Punnet’s view in Samaroo #2, who fairly summarized
the conclusive reasoning of Mahalingan as follows: “whether the finding [that resolved a factual issue in the
prior proceeding] arises from a conviction or an acquittal is irrelevant. It is
the determination of the issue that is relevant.”
[35]
If the focus of issue estoppel is not on the
outcome/verdict of a prior criminal proceeding, but on issue symmetry per se,
whether the verdict is an acquittal or a conviction, applying issue estoppel
would not create a third category of criminal verdicts, that of factually
innocence, because the court has not turned its mind to the question of guilt
or innocence. In addition, if one is to focus only on how factual issues in the
prior proceeding were resolved, so long as the requisite standard of proof in
the subsequent proceeding is met and there are no issues regarding the
difference in the burden of proof, it is irrelevant whether the prior
proceeding was in the nature of a criminal or civil case.
[36]
But that is as far as it goes. The Appellants’
argument suffers when one considers the shift in burden of proof from that of
civil proceedings to that in these Tax Appeals. In such proceedings generally,
the burden is on the taxpayer to demolish the Minister of National Revenue's
(the “Minister”) assessing assumptions on the balance of probabilities. In this case, the Appellants'
voir dire motion seeks to preclude both parties from adducing evidence
for the purpose of challenging factual issues resolved in Samaroo #1. If
this position is accepted, this effectively allows the Appellants to discharge
their burden of proof without ever being required to affirmatively establish
their case in the context of the correctness and quantum of the assessment; the
Court would have no information other than the Findings in Samaroo #1 with
which to make its own findings with respect to the factual issues allegedly
resolved in that case. This definitionally encroaches upon the exclusive and
originating jurisdiction of this Court to determine the correctness and extent of
the tax assessments in the Tax Appeals. This was also deferentially referenced
by Justice Punnet, himself, in Samaroo #2.
[37]
This Court’s maintenance of its exclusive and
originating jurisdiction should be balanced with the principle of judicial
comity. In Houda, Justice Boyle of this Court considered an application
for an extension of time to appeal to the tax court where the taxpayer had
already obtained an extension of time from the Court of Quebec in respect of
corresponding provincial sales tax assessments. Justice Boyle held that after
considering whether the Court is bound by the decision of the Court of Quebec
under the doctrines of issue estoppel or abuse of process, even if the answers
are no, the Court must still determine whether it should extend deference to
the Court of Quebec in the interests of judicial comity.
[38]
While the Tax Court is not necessarily bound by
decisions of courts of coordinate jurisdiction, especially where the relevant
legal provisions are not the same, it is advantageous to ensure findings on a
single issue are consistent, where possible.
[39]
Judicial comity should not be accepted
indiscriminately. Where the factual matrix or evidential basis between two
cases is different, or where the issue to be decided is different, judicial
comity does not apply.
[40]
Ultimately as suggested by the Respondent, the
purposes of a criminal trial and a tax assessment appeal are fundamentally
different. The former is to determine whether the accused is guilty of the elements
of the criminal offence beyond a reasonable doubt. The latter is to determine
whether the Minister's assessment of the taxpayer's tax liability is correct
and, also, the quantum to which such assessed tax liability exists. In the Tax
Appeals, while there may be similarities and commonalities in some of the
factual issues that need to be resolved before this Court vis-à-vis
those already resolved in Samaroo #1, the exclusion of evidence before
this Court on the basis of issue estoppel rather than the simple admissions of
the Findings fails to recognize a critical object embedded within issue
estoppel. The Tax Appeals are not re-litigation at all, but are distinctly
mandated legal processes evaluating and determining different legal rights and
obligations than do the previous criminal proceedings. In this circumstance, to
allow the Appellant's voir dire motion, in toto, gives short shrift
to a taxpayer's fundamental obligation in our self-reporting system of
establishing the correctness of their tax filings in the face of the Minister’s
reassessment.
c) Transferral of the Findings through Abuse of
Process
(i) The
parties’ positions
[41]
There is no great jurisprudential difference
between the analysis and reasoning applied above to issue estoppel and that of
abuse of process in the context of these Tax Appeals. Issue symmetry and not
mutuality (the usual and sole distinction between issue estoppel and abuse of
process) is the criteria under consideration on this voir dire motion.
That criterion applies to both issue estoppel and abuse of process.
(ii)
Analysis
[42]
While avoidance of relitigation is the primary
concern for the application of issue estoppel, maintaining the Court's
exclusive statutory jurisdiction to determine the validity and correctness of
tax assessments is also a proper and, in this Court’s discretion, a higher
concern with respect to the underlying distinctive purpose of abuse of process:
maintenance of the integrity of the judicial decision-making process. If the exclusion
order sought by the Appellant is granted, the Court's jurisdiction would be
infringed upon to the extent that this Court is precluded from considering any additional
rebuttal or reply evidence surrounding the Findings made by Judge Saunders. The
same reasoning applies to the Court's consideration of Samaroo #2. However,
tax litigation does not work in such a fashion. To maintain and discharge its exclusive
jurisdiction, the Court should not give exclusionary effect to the Findings.
[43]
Moreover, to give the Findings exclusionary effect
would require a legal determination that Judge Saunders make the Findings in
the Appellants' favour based solely upon the Appellant’s onus to prove same to the
civil standard of proof: the balance of probabilities. This is very much a live
point because while Judge Saunders commented favourably on Tony Samaroo's
credibility and accepted many aspects of his testimony, she did not address the
question of the extent to which she accepted the testimony as true to that
standard. The acquittal occurred because she accepted his testimony found
within the Findings as sufficiently credible to the extent of establishing
reasonable doubt. At law in a criminal proceeding, an acquittal must then be directed.
But what of the correctness of the assessment to the extent of the tax
liability.
[44]
Both counsel are correct in noting that the
interests of the parties are not determinative with respect to the application
of abuse of process. It is the integrity of the justice system that out-ranks. The
Court also agrees that abuse of process should only be applied in clear cases. The
conclusion cannot be drawn that Samaroo #1 is such a case.
d) Reconciling the Mis-match of issue estoppel and
abuse of process to Tax Appeals
[45]
Similarities and commonalities in certain of the
factual issues that need to be resolved in the Tax Appeals vis-à-vis
those already resolved in Samaroo #1 do exist. However, not all factual
issues that need to be resolved in the Tax Appeals have in fact been resolved
in Samaroo #1 such that an exclusion order for similar or rebuttal
evidence should be issued. Judge Saunders did not consider whether the quantum
of reported income was correct in Samaroo #1. As such, applying issue
estoppel or abuse of process in this case would cause rather than cure any
potential injustice.
[46]
Applying the doctrine of issue estoppel or abuse
of process to the case at bar is also inconsistent with the spirit of judicial
comity. As found by Justice Punnett in Samaroo #2, it is for this specialized
Court to determine what evidence is admissible and what factors are to be taken
into account in the Tax Appeals; it is not for other courts to speculate on
whether abuse of process or some other relief should be granted to the
Appellants in these proceedings.
[47]
It is within the scope of this concept of this
Court’s unique jurisdiction that some recognition and use of the Findings in Samaroo
#1, as buttressed in Samaroo #2, may be made. As stated, this is
however to be limited by the context of this Court’s exclusive and originating jurisdiction, unique standards and burdens
of proof and distinct jurisprudence all reflective of its national, bi-jural
and statutory foundations.
[48]
In this context, this Court shall apply the
Findings to the Tax Appeals. In doing so, it will guard the exclusive and
originating jurisdiction of this Court, give voice and effect to the Findings
in the lengthly, but asymmetrical criminal proceedings and face directly the equally
undesirable results of either granting or refusing, in toto, the voir
dire motion. The Findings are admitted and with impact, but not to the
exclusion of contrary or enhancing evidence where such further evidence meets
the normal test of being probative, relevant and necessary to the unique
determination of this Court: the correctness and extent of the levied
assessments and the validity of penalties all against multiple appellants and all
to the evidential threshold of the balance of probabilities. This
reconciliation preserves and respects the integrity of all the courts which
have dealt and will deal with these matters, but upholds the integrity of the
overall judicial system, while recognizing the differing roles played by each
part.
V. The
Evidentiary Elements of Tax Appeals, the Impact of the Findings and Utilization
of Same in these Appeals
i.
The Standard of Proof in Tax Appeals
[49]
Hickman Motors enunciates
the most recent foundational principles concerning the onus and standard of
proof in tax appeals. Justice L'Heureux-Dubé said:
a) The appellant has the initial onus to demolish the Minister's
assessing assumptions by at least a prima facie case. The appellant's initial
onus is to demolish the exact assumptions made by the Minister, but no more.
b) Where the Minister's assumptions have been demolished, the onus
shifts to the Minister to rebut the prima facie case made out by the appellant
and to prove the assumptions. If the Minister adduces no evidence, the
appellant is entitled to succeed even if the appellant's evidence contained
gaps in logic, chronology, and substance.
[50]
The SCC Justice continued by saying that “within balance of probabilities, there can be varying
degrees of proof required in order to discharge the onus, depending on the
subject matter.”
Further, the minimum case that the appellant needs to make to discharge her or
his initial onus is “a prima facie case”. Read together, these phrases seem
to contemplate a shifting standard of proof in tax appeals. That is, the
initial onus can be discharged on the basis of a standard less onerous than
proof on a balance of probabilities.
[51]
This finding, technically a minority
determination within Hickman, commenced an active and lively debate
which continues unabated to this day concerning the enigma of the elusive prima
facie case, its value, applicability and breadth in tax assessment appeals
before this Court. Supported in certain authorities and rejected or minimized in
others,
these alternative views remain.
[52]
To reconcile this subsisting debate and make it
useful to the case at bar, some rendering of the hard edges is required. In tax
appeals generally and in regards to the Findings specifically, a conclusion
must be drawn. In tax appeals, the onus is on the appellant to demolish the
Minister's assumptions on a balance of probabilities standard and nothing more or less than
that.
The “prima facie” qualification in Hickman Motors should not be
interpreted as having altered the usual standard of proof in tax appeals. Where the initial requirement
to marshall evidence tactically shifts from the appellant to the Minister, as
discussed below, the applicable standard of proof still remains the same: proof
on a balance of probabilities, not a lesser or differing standard. Simply, the
change is the Court’s requirement to next turn its attention to the Minister’s
assumptions to evaluate their correctness or incorrectness through cognizance
of rebuttal evidence.
ii. The
Burden of Proof and Tactical Considerations in Tax Appeals
[53]
In turn, the reverse onus or burden of proof in
tax appeals against normal (re)assessments is recognized in common law and
codified in the Income Tax Act and structured under the Tax Court of
Canada Rules (General Procedure).
The Appellant bears the onus to call evidence directed at the target of the
factual underpinnings of the Minister’s assumptions. As facts are marshalled so
as to demolish or approach demolishing those facts embedded within the
assumptions, the Minister tactically and prudentially should respond or risk
having the judge determine, more likely than not, that the taxpayer has met his
or her legal burden of proof.
[54]
Unlike the standard of proof which never changes,
a dynamic tactical obligation to call evidence continually arises as between an
appellant and the Minister. Where a tactical shift occurs, both parties
experience an issue by issue requirement to call evidence to carry such issue
then in contention, both to the balance of probabilities.
[55]
The underlying policy which requires an
appellant to bear the initial onus is as follows. Canada's taxation system is a
self-assessment system. Facts regarding any taxpayer's tax affairs are “in a special degree if not exclusively within the
[taxpayer’s] cognizance”.
As the taxpayer is best positioned to know and support the factual basis of
their tax affairs, the taxpayer must bear the initial onus when contesting the
Minister's assessment of tax.
[56]
However, the appellant having the initial onus
is merely a general principle and like all general principles, it is subject to
exceptions. These exceptions are generally premised on procedural fairness
grounds, such as when a pleaded assumption is solely within the knowledge of
the Minister. It should be noted that procedural fairness goes both ways: when
ordering a reverse onus, courts must ensure shifting the appellant's initial
onus to the Minister does not compromise the integrity, enforceability, the
credibility of Canada's self-reporting taxation system.Similarly, where imposing the
onus or burden of proof on the appellant would result in procedural unfairness
because there would be a lack of clarity in the assumptions asserted by the
Minister, courts have shifted the initial onus to the Minister.
[57]
Ultimately, as noted by Associate Chief Justice Bowman
(as he then was) in Mungovan, the Court should not press the
conventional rule about the appellant having the initial onus so far that it
loses sight of the rule's original purpose and of all considerations of
procedural fairness. The ordinary rules of practice and pleadings for civil
cases apply to tax appeals as well: the onus of proof should, as a rule but not
invariably, rest upon the party who maintained the affirmative of the issue in
their pleading, as a negative is generally incapable of proof. Whether the
initial onus should shift to the Minister in a particular case is a matter for
the trial judge.
(iii) Conclusions
on who bears the burden to call evidence on these Tax Appeals
[58]
In summary, the Court may view the initial onus
of proof as having shifted from an appellant to the Minister where doing so
would not compromise the integrity, enforceability, the credibility of the
self-reporting taxation system and any of the above-referenced and repeated below
factors applies:
a)
knowledge of the pertinent facts skew in favour
of the Minister;
b)
imposition of the initial onus on the appellant
would result in procedural unfairness; or
c)
strictly placing the initial onus on the
appellant fails to give sufficient consideration that a person who puts forth
an affirmative assertion bears the onus with respect to that assertion.
[59]
The last two factors bear on the specifics and
inter-relationship among the Findings, the Tax Appeals and the general objects,
if not the full effect of, issue estoppel and abuse of process. The application
of the trial judge’s discretion limited by the uniquely combined burden,
standard and tactical dynamic of evidence in Tax Appeals allows contextual
recognition and use of the Findings directed to the goal of fairness and
efficacy of the trial in these Tax Appeals.
[60]
Throughout, as noted below, the determination of
the issues through utilization of the Findings remains within the discretion of
the Court.
VI. Utilization
of the Findings in these Appeals
i.
Application of Findings
[61]
This Court will apply its residual discretion is
in the context of its own rules. For the hearing of these multiple appeals, the
Findings comprise admissible evidence marshalled by the Appellants. The
Findings are enumerated within the affidavits containing the transcripts of the
reasons for decision of Judge Saunders in Samaroo #1. To do otherwise
lacks common sense and fails to deploy the considerable time, effort and
considerable determination on similar facts within the Findings. The
determination concerning the weight to be given to the Findings and their
impact on the Tax Appeals shall reconcile the differing and varying processes,
standards of proof and purposes among the criminal, civil and tax courts.
ii.
Limitations of Findings
[62]
Another of the reasons for not granting the
motion in toto is the incompleteness of the Findings across the
assumptions pleaded by the Respondent. As stated, assumptions are a critical element
in tax litigation. But not all the pleaded assumptions in the Tax Appeals were
considered, referenced or impacted by the Findings. Similarly, the Findings do
not reference all the Appellants nor all taxation years before this Court,
since not all Appellants were charged and not all taxation years were before the
courts in Samaroo #1.
iii.
Methodology used to apply the Findings to the
Tax Appeals
[63]
Reconciling these differences is a detailed
task. Methodologically, it requires an analysis of the Findings against the
Respondent’s assumptions in each specific reply, both in the context of a made
finding in Samaroo #1 and the party to whom and the taxation year to
which such findings relate.
iv.
Application of Methodology to the Pleadings
[64]
This preliminary task has been undertaken in two
steps. The first is an analysis of the text of Judge Saunders’s Findings in Samaroo
#1 and an extraction of those Findings relevant to the Tax Appeals. Appendix
I to these Reasons for Order outlines the result of the Findings in chart
format for ease of reference. Quite apart from the theoretical legal arguments and
these reasons concerning burden, standard, admissibility, issue estoppel and
abuse of process, a trial before this Tax Court involving taxpayers and the
Minister, with counsel and witnesses must still occur. This convenient
reference tool suits that task.
[65]
The second task reconciles the Findings against
the relevant assumptions in the replies of the Respondent among the applicable
taxation years and Appellants. These reconciled conclusions are outlined in Appendix
II attached to these Reasons for Order.
VII. The
Result and its Impact on the Order of Presentation during the balance of the hearing
(i) Order of Presentation at
Hearing
[66]
The conclusions regarding the various
assumptions, taxation years and Appellants impacted by the Findings leaves at
best a checkerboard across all the Tax Appeals. Some assumptions are
evidentially challenged or potentially demolished by the Findings and some are
not. Again, this checkerboard spans Appellants, assumptions and tax years. The
purpose of these Reasons for Order and related Order is to apply the Findings,
to the extent of the Tax Appeals, in a useful, common-sense and discerning
manner and render a process which fairly assists the judge and counsel at a
fair, proportioned and balanced hearing.
[67]
Section 135 of the Tax Court of Canada Rules
(General Procedure) provides as follows [emphasis added]:
135 (1) If at a hearing a party proposes to adduce evidence, the
party or the party’s counsel shall, unless the judge directs otherwise,
immediately before adducing the evidence, open his case by making a short
statement giving a concise outline of the facts that the party proposes to
prove and of the applicable law.
(2) Unless the judge directs otherwise, the parties shall put
in their respective cases by evidence or by putting before the Court the facts
on which they rely, [in the following order],
(a) the appellant,
(b) the respondent, and
(c) the appellant in
respect of rebuttal evidence.
(3) Unless the
judge directs otherwise, after all parties have adduced their evidence,
they shall be heard in argument in the order in which they adduced their
evidence and the party who was first heard in argument may reply and an
opposing party may answer a new point of law raised in the reply.
[68]
At this stage, it is neither rational nor likely
possibly to separate a differing order of presentation of evidence and argument
at the hearing into separate appellants, tax years and specific assumptions. Of
assistance therefore, is subsection 4(1) of the Rules which provides:
4 (1) These rules
shall be liberally construed to secure the just, most expeditious and least
expensive determination of every proceeding on its merits.
[69]
Therefore, on this basis, and given the apparent
materiality of the Findings to many of the determinations to be made by this
Court, the order of proceedings shall be altered. The Findings solicit that the
Respondent shall commence to first call evidence in all appeals, followed by
the Appellants and the Respondent in respect of rebuttal evidence. A concordant
sequence shall be followed for argument. Moreover, since subsection 163(2)
penalties have also been assessed, to that extent the Respondent already bore
the inceptive burden.
(ii) Weight
of findings
[70]
The weight given to the Findings presently is
that they have preliminarily challenged and potentially demolished certain assumptions
of facts of the Minister, for those taxation years and Appellants outlined in Appendix
II. Therefore, described within Appendix II are those impugned and potentially demolished
assumptions. For clarification, the standard of proof remains the balance of
probabilities which the Appellants in the end must meet. Since the hearing has
not yet begun in earnest, it would be prejudicial for this trier of fact to
conclude that an impugned assumption has been evidentially demolished.
[71]
Presently, such assumptions are identified as
having been challenged directly, impugned and potentially demolished by the
Findings. For such impugned assumptions, the Respondent ought to perceive a
high level of tactical or precautionary need to marshall evidence to rebut the
Findings. As for the Appellants, the balance of the assumptions not identified
in Appendix II remain unassailed and must be addressed in accordance with the
subsisting burden of taxpayers in a tax appeal of normal reassessments. As with
any hearing, the Court will follow such assumptions, impugned and unassailed
alike, weigh the evidence adduced both through the Findings and at the hearing
and determine the appeal in accordance with the usual overarching unchanging
onus and standard of proof.
VIII.
Balance of Hearing and Costs on Motion
[72]
In addition to these Reasons for Order and correlated
order attached, a separate trial management timetable order shall issue
regarding dates, place and length of the remaining trial process.
[73]
Notwithstanding its duration and timing before
the hearing, the motion remains a preliminary voir dire during pendency
of trial. Therefore, there shall be no present order on costs, which shall be
accounted for in any final dispositive cost order.
Signed at Ottawa, Canada, this 20th day of December
2016.
“R.S. Bocock”
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