[OFFICIAL ENGLISH TRANSLATION]
Date: 20020430
BETWEEN:
COMMISSION SCOLAIRE DE
VICTORIAVILLE,
1999-1464(GST)G
COMMISSION SCOLAIRE DE LA
RIVIÈRE-DU-NORD,
1999-4451(GST)G
COMMISSION SCOLAIRE DE
ROUYN-NORANDA,
1999-4488(GST)G
COMMISSION SCOLAIRE DES
HAUTS-BOIS-DE-L'OUTAOUAIS,
1999-4489(GST)G
COMMISSION SCOLAIRE DE
L'OR-ET-DES-BOIS,
1999-4490(GST)G
COMMISSION SCOLAIRE DES
CHÊNES,
1999-4516(GST)G
COMMISSION SCOLAIRE
ST-JEAN-SUR-RICHELIEU,
1999-5092(GST)G
COMMISSION SCOLAIRE
ST-JEAN-SUR-RICHELIEU,
1999-5093(GST)G
COMMISSION SCOLAIRE
ST-JEAN-SUR-RICHELIEU,
1999-5094(GST)G
COMMISSION SCOLAIRE DE
L'AMIANTE,
1999-5095(GST)G
COMMISSION SCOLAIRE AU
COEUR-DES-VALLÉES,
2000-211(GST)G
COMMISSION SCOLAIRE DES
LAURENTIDES,
2000-315(GST)G
COMMISSION SCOLAIRE DES
SOMMETS,
2000-916(GST)G
COMMISSION SCOLAIRE DES
HAUTES-RIVIÈRES,
2000-1468(GST)G
COMMISSION SCOLAIRE DE
COATICOOK,
2000-1471(GST)G
COMMISSION SCOLAIRE DES
HAUTS-CANTONS,
2000-1467(GST)G
COMMISSION SCOLAIRE DES
BOIS-FRANCS,
2000-3482(GST)G
COMMISSION SCOLAIRE DES
AFFLUENTS,
2000-3483(GST)G
COMMISSION SCOLAIRE DE
SOREL-TRACY,
2000-3613(GST)G
SIR WILFRID LAURIER SCHOOL
BOARD
2000-3623(GST)G
ENGLISH MONTREAL SCHOOL
BOARD
2000-4551(GST)G
COMMISSION SCOLAIRE DU LAC
SAINT-JEAN,
2000-4842(GST)G
COMMISSION SCOLAIRE
PIERRE-NEVEU,
2001-1096(GST)G
COMMISSION SCOLAIRE DU
VAL-DES-CERFS,
2001-1152(GST)G
COMMISSION SCOLAIRE DU
GOÉLAND,
2001-1181(GST)G
COMMISSION SCOLAIRE DU
GOÉLAND,
2001-1182(GST)G
COMMISSION SCOLAIRE DU
GOÉLAND,
2001-1185(GST)G
COMMISSION SCOLAIRE CHOMEDEY DE
LAVAL,
2001-1184(GST)G
COMMISSION SCOLAIRE DES
PATRIOTES,
2001-1196(GST)G
Applicants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDERS
Archambault, J.T.C.C.
[1] Each of the applicants has moved
to strike out the respondent's Reply to its Notice of Appeal
because it discloses no reasonable grounds for opposing the
appeal within the meaning of paragraph 58(1)(b)[1] of the Tax
Court of Canada Rules (General Procedure)
(Rules) and because continuing the proceedings in
this Court would be an abuse of process within the meaning of
paragraph 53(c)[2] of the Rules. The applicants are
therefore asking that judgment allowing their appeals be
granted.
[2] In the alternative, some of the
applicants (12 applicants[3]), that is, those whose appeals to
this Court are numbered 2001-1184(GST)G;
2000-1471(GST)G; 1999-4516(GST)G;
2001-1181(GST)G; 2001-1185(GST)G;
2001-1182(GST)G; 2000-4842(GST)G;
1999-4488(GST)G; 2001-1096(GST)G;
1999-5092(GST)G; 1999-5093(GST)G; and
1999-5094(GST)G are also asking that judgment allowing
their appeals be granted under paragraph 58(1)(a) of
the Rules because of the absolute presumption of the
authority of a final judgment.
[3] When the hearing began, counsel
for the applicants informed the Court that he was in agreement
that an order be made authorizing the respondent to file, within
three weeks, an Amended Reply to the Notice of Appeal in respect
of certain applicants (eight applicants). Those
applicants are the ones whose appeals are numbered as follows:
2000-3613(GST)G; 2000-3483(GST)G;
2000-1468(GST)G; 2000-315(GST)G;
2001-1196(GST)G; 2001-1152(GST)G;
2000-4551(GST)G; and 2000-3623(GST)G. The motion by
each of those eight applicants to strike out the Reply to the
Notice of Appeal was therefore withdrawn.
Analysis
[4] Given the breadth of these
reasons, it is worth indicating the headings under which I will
set out my analysis and the numbers of the paragraphs where they
are found:
(A) FIN DE NON-RECEVOIR BASED ON THE
AUTHORITY OF A FINAL JUDGMENT [5]
(1) In a tax appeal brought in Quebec, must
the rules of evidence of Quebecor of the common law
be applied?
(a) In tax matters [9]
(b) In provincial matters
(i) In private law and in penal law
[10]
(ii) In public law (other than penal law)
[12]
(1) To administrative tribunals [22]
(2) To the courts
[34]
(c) To the Tax Court of Canada in proceedings taken in Quebec
[46]
(i) Under the informal procedure [47]
(ii) Under the general procedure [48]
(2) Can common law principles relating to res
judicata be applied to interpret the rule of the authority of
a final judgment in Quebec? [54]
(3) Conditions for applying the authority of a final
judgment in Quebec
(a) General concepts [74]
(i) Identity of object [75]
(ii) Identity of cause [86]
(b) Application of the conditions for identity in tax
matters
(i) In income tax matters [93]
(ii) In GST matters [123]
(iii) To the facts of the applicants'
appeals
(1) Procedural background [126]
(2) 2001 decision [130]
(3) Identity of object [135]
(4) Identity of cause [142]
(B) FIN DE NON-RECEVOIR ON THE BASIS THAT
THE REPLIES TO THE NOTICES OF APPEAL DISCLOSE NO REASONABLE
GROUNDS FOR OPPOSING THE APPEALS [146]
(A) FIN DE NON-RECEVOIR
BASED ON THE AUTHORITY OF A FINAL JUDGMENT
[5] I will deal with the fins de
non-recevoir raised by counsel for the applicants in
the order in which he presented them at the hearing. The first
one is based on the authority of a final judgment. The
12 applicants are part of a group of 29 applicants each
of whom obtained a favourable judgment from the Federal Court of
Appeal (2001 decision). That judgment conditionally
confirmed their right to input tax credits (ITCs) under
the Excise Tax Act (ETA) in respect of taxes
payable on student transportation services provided by
independent carriers. I will set out the relevant facts and
issues of the 2001 decision and the present appeals in
greater detail below. At this stage, we need only point out that
counsel for the applicants argued that the parties, object, and
cause in the appeal of each of the 12 applicants are the
same as those in the 2001 decision and that all of those
appeals should be allowed on the basis of the authority of a
final judgment.
[6] In support of his position,
counsel for the 12 applicants relied mainly on two
decisions: Roberge v. Bolduc, [1991] 1 S.C.R. 374; and
Leduc v. Her Majesty the Queen, [2001] T.C.J. No. 852
(Q.L.). The first is a Supreme Court of Canada decision the
reasons for which were written by
L'Heureux-Dubé J., who, in thoroughly
reviewing the rule of the authority of a final judgment,
discussed the nature of the rule and the conditions for its
application. Since the case was from the province of Quebec, she
examined the civil law concept of the authority of a final
judgment found in article 1241 of the Civil Code of
Lower
Canada (C.C.L.C.). That article is
similar to article 2848 of the Civil Code of
Québec (C.C.Q.), which has been in
force since 1994.
[7] The other decision, Leduc,
was rendered very recently, on December 20, 2001, by my
colleague Judge Lamarre (hereinafter the judge).
Counsel for the applicants attached great importance to that
decision because it not only has the merit of applying a fin
de non-recevoir based on the authority of a final
judgment in a tax case but it also completely supports his
position. In an appeal that she had to hear for a subsequent
taxation year, the judge found that a decision she had herself
rendered had the authority of a final judgment. The appeal
concerned the same parties and raised a similar issue. To reach
her conclusion that the authority of a final judgment applied,
the judge relied on both the civil law and common law rules,
specifically the authority of a final judgment in the civil law
and res judicata in the common law.[4]
[8] Since counsel for the applicants
would like me to reach the same conclusion that was reached in
Leduc,[5]
determining whether it is justified to apply those two legal
rules concurrently is crucial. To decide this question, we must
first describe the rules, determine which legal system-the civil
law or the common law-applies here and decide whether it is
appropriate to use them concurrently. I will later come back to
the nature of each of the two legal rules; at this point, we must
simply note that they are both rules of evidence.[6]
Article 2848 C.C.Q., which sets out the rule of
the authority of a final judgment, is in Book Seven (dealing with
evidence), Title Two (dealing with proof), Chapter III
(dealing with presumptions). As for res judicata,
authors Sopinka, Lederman and Bryant state the following in
The Law of Evidence in Canada, 2nd ed. (Toronto and
Vancouver: Butterworths, 1999), at page 1069,
No. 19.51: "Although the principle of
res judicata is sometimes referred to as a rule of
substantive law, the better view is that it is a rule of
evidence".[7]
(1) In a tax appeal brought
in Quebec, must the rules of evidence
of Quebecor of the common law be
applied?
(a) In tax matters
[9] The next step is to determine
which rules of evidence apply here: those found in the Civil
Code of Québec and the Code of Civil Procedure
of Quebec (rules of evidence of Quebec) or those of the
common law. In Précis de la preuve,
5th edition (Montréal: Wilson & Lafleur, 1996),
Professor Ducharme goes a long way toward answering this question
at pages 13, 14 and 16:
[translation]
(b) In
federal matters
50. The Civil Code of
Québec can govern only matters that are under the
jurisdiction of the provincial legislatures. Its provisions
cannot apply as such to matters under Parliament's
jurisdiction. In such matters, the applicable rules of
evidence are set out in the Canada Evidence
Act.
51. Section 2 of that
Act defines what is covered by the Act:
2. This Part
applies to all criminal proceedings and to all civil
proceedings and other matters whatever respecting which
Parliament has jurisdiction.
. . .
53. However,
section 40 of the Canada Evidence Act makes some room
for provincial law. It states the following:
40. In all proceedings
over which Parliament has legislative authority, the laws of
evidence in force in the province in which those proceedings are
taken, including the laws of proof of service of any warrant,
summons, subpoena or other document, subject to this Act and
other Acts of Parliament, apply to those proceedings.
54. The Canada Evidence
Act deals only with certain specific questions relating
mainly to the tendering of evidence, especially the giving of
testimony (sections 3-16), the production of
documentary evidence (sections 19-36) and public
interest immunity (sections 37-39), which means that,
under the above-mentioned section, the rules of Quebec
law, which are much broader in scope, will ultimately
apply to matters under Parliament's jurisdiction to which
they should normally not apply.
. . .
61. Under section 40
of the Canada Evidence Act, it is the law in force in
the province in which the proceedings are taken that serves as
the suppletive law. However, subsection 53(2) of the
Federal Court Act contains an exception to this rule.
Under that subsection, the Federal Court can, on a suppletive
basis, apply not the system of evidence of the province in which
the proceedings were taken but any more liberal system of any
other province. That subsection states the following:
(2) Evidence that
would not otherwise be admissible shall be admissible, in the
discretion of the Court and subject to any rule that may relate
to the matter, if it would be admissible in a similar matter in a
superior court of a province in accordance with the law in force
in any province, notwithstanding that it is not admissible by
virtue of section 40 of the Canada Evidence Act.[8]
[Emphasis added.[9]]
(b) In provincial
matters
(i) In private law
and in penal law
[10] It is clear from section 40 of the
Canada Evidence Act (CEA) that inasmuch as
the proceedings are taken in Quebec, it is the law of evidence of
Quebec that applies (unless a rule already exists in an Act of
Parliament). What remains to be determined is which Quebecrules
are relevant in an appeal from a tax assessment. In proceedings
dealing with purely civil matters, criminal law or provincial
penal law, the answer is clear: the rules of evidence of Quebec
apply in purely civil matters (and thus in private law), whereas
the common law rules of evidence apply in criminal and penal
matters. In Précis de la preuve,
Professor Ducharme states the following at page 12:
[translation]
(a) In
provincial matters
45. The rules of evidence
set out in the Civil Code of Québec are general in
scope and apply to all civil cases whose outcome depends on a
provincial statute. This means that, in principle, their
coverage extends to all Quebec legislation and is not limited
solely to matters regulated by that code. The fact that the
Civil Code of Québec is intended to apply to all
Quebec legislation is now expressly asserted in the following
terms by the preliminary provision of the new code:
The Civil Code of Québec, in harmony with the Charter
of human rights and freedoms and the general principles of law,
governs persons, relations between persons, and property.
The Civil Code comprises a body of rules which, in all
matters within the letter, spirit or object of its provisions,
lays down the jus commune, expressly or by implication. In
these matters, the Code is the foundation of all other laws,
although other laws may complement the Code or make exceptions to
it.
46. By the will of the
Quebec legislature itself, the rules of evidence in the Civil
Code of Québec are not, as such, intended to apply to
provincial penal matters. This results from article 61 of
the Code of Penal Procedure, which states the
following:
61. The rules of evidence
in criminal matters, including the Canada Evidence Act (Revised
Statutes of Canada, 1985, chapter C-5), apply to penal matters,
adapted as required and subject to the rules provided in this
Code or in any other Act in respect of offences thereunder and
subject to article 308 of the Code of Civil Procedure
. . . .
47. One effect of this
provision is to make section 7[10] of the Criminal Code, which
makes the common law the suppletive law as far as evidence is
concerned, applicable to provincial penal matters. Before the
Code of Penal Procedure came into force, the authors and
the courts, even without such an explicit provision, took the
view that the common law rules of evidence took precedence over
the provisions of the Civil Code of Lower Canada. In
support of this, it was argued that provincial penal law is
merely a residue of the criminal law, all the rules of which,
including the rules of evidence, come to us from English law.
[11] In La preuve civile, 2nd ed.
(Cowansville: Les Éditions Yvon Blais, 1995), at
page 36, Professor Royer espouses
Professor Ducharme's opinion, namely, that the rules of
evidence in the Civil Code of Québec establish the
jus commune, but in some respects he qualifies that
opinion:
[translation]
73 - Civil Code of Québec - The Civil
Code of Québec contains no rule similar to the one
stated in articles 1206 and 2712 of the Civil Code of
Lower Canada. One author has argued that this omission
means that English law and old French law no longer serve as the
suppletive law. That is a valid assertion for the substantive
rules and for the rules on the production of evidence found
in the Civil Code of Québec. That code
"completely and exhaustively regulates the law of evidence
in civil matters". Moreover, the rules in the
Civil Code of Québec originate in French law and
the common law. Thus, French law and the common law may
continue to be used to interpret them.
74 - Code of Civil Procedure - The Code of
Civil Procedure contains several provisions concerning proof
and the giving of testimonial evidence. Most of those rules
originate in the common law, and English law must generally be
relied on to interpret them. Moreover, the legislature did
not adopt a code of civil procedure that completely and
exhaustively regulates all rules concerning procedure and the
production of evidence. This could justify maintaining certain
common law privileges connected to the accusatorial and
adversarial nature of trials, even if they are not formally
recognized in the articles of the Code of Civil
Procedure.
(ii) In public law (other than
penal law)
[12] For tax matters, which come under
administrative law (and thus public law), the answer is not as
obvious, since in Quebec there is the whole problem of the
sources of public law, a problem that does not arise in the other
Canadian provinces. It must be recalled that the law that applies
in purely civil matters comes from French civil law whereas
public law, to which principles of common law generally apply,
comes from the United Kingdom.[11] In Principes de contentieux
administratif, 2nd edition (Cowansville:
Les Éditions Yvon Blais inc, 1982), at
pages 37-38, Professors Pépin and Ouellette
provide a good overview of the sources of public law; they state
that the common law is the basis of public law and explain the
role it plays in public law in Quebec:
[translation]
. . . the basic principles of administrative law originate in
English law, in the common law made by judges. This is one of the
consequences of the Conquest, which introduced English public
law into Canada. As Louis-Philippe Pigeon, later Justice of
the Supreme Court of Canada, wrote:
Not enough is made of the fact that Québec is not
purely and simply a civil-law province; it is a
civil-law province in private law but not in public law.
This is why, for instance, English law is the basis of
municipal and school law, and of administrative law
generally.
The common law can therefore apply in Canadian and Quebec
administrative law, unless, of course, it has been repealed or
amended by the competent legislature. However, what
remains to be determined is, first, what is specifically
covered by the common law in Quebec given the fact that
constitutional legislation has excepted the field of
"property and civil rights" from English law and,
second, exactly how the National Assembly must go about
derogating from the common law; in Canadian Broadcasting
Corporation v. Quebec Police Commission, a case dealing with
contempt of court committed before a Quebec body, the Honourable
Beetz J. noted the following on this point:
The source of this law is the common law, the principles of
which are not set aside by statutes which do not mention it
. . . . When the legislator wishes to amend the
common law, he does so by express provision
. . . .
Since the common law is, in principle, a source of Quebec
administrative law, it is possible to look simultaneously at
Quebec law and federal law, which also draws on the same source,
although some statutes may, of course, establish rules
that are specific to each of the legal systems. Since Quebec
law is inspired by English law, there should be no misgivings,
when circumstances permit, about using in Quebec case law from
the other Canadian provinces, which are also, in principle,
subject to the common law, as well as case law from the United
Kingdom and even other countries from the same tradition.
[13] As can be seen, the common law is one
of the main sources of public law, especially administrative law,
in Quebec. However, the Quebec legislature can amend the common
law that applies to public law by passing laws that may or may
not correspond to the principles established by the common law
cases. Contrary to what might be thought at first glance, the
Civil Code of Québec and the Code of Civil
Procedure of Quebec lay down rules that are applicable not
only in private law but also in public law. This is the case,
inter alia, of article 300 C.C.Q., which
provides that legal persons established in the public interest
are primarily governed by the special Acts by which they are
constituted and by those which are applicable to them. Then, it
is the rules of the Civil Code that apply.
Article 1376 C.C.Q. provides that the rules set forth
in Book Five on Obligations apply to the State and its bodies,
and to all other legal persons established in the public
interest, subject to any other rules of law which may apply
to them. In the Code of Civil Procedure, article 33
gives the Superior Court a superintending and reforming power
over inferior courts within Quebec jurisdiction "and
[over] bodies politic, legal persons established in the public
interest . . . ."
[14] Thus, the question that arises is
whether the Quebec legislature has adopted a system of evidence
applicable both in purely civil matters and in public law. In the
chapter entitled [translation] "The New Law of Evidence in
Civil Matters under the Civil Code of Québec" in the
collection called La réforme du Code civil,
vol. 3 (Ste-Foy, Quebec: Les Presses de
l'Université Laval, 1993), Professor Ducharme
seems to answer negatively, writing the following at
page 443: [translation] "By devoting a special book
to the rules of evidence, the Code is indicating that those rules
are intended to apply to all civil bodies [instances à
caractère civil], as opposed to penal or administrative
bodies [instances à caractère pénal ou
administratif]".
[15] There is a potential source of
confusion in the original French wording here, depending on
whether one views this statement as pertaining to the
jurisdictional nature of the courts and tribunals in which the
rules of evidence will be used or to the fields of jurisdiction
of those courts and tribunals. By fields of jurisdiction, I mean
the various areas of law that courts and tribunals must consider,
such as private law (purely civil law) and public law (including
administrative law, judicial law and criminal law). In my
opinion, Professor Ducharme's statement is not directed
at the issue of fields of jurisdiction; rather, it concerns the
type of body (instance) before which proceedings are
taken. What does he mean when he talks about administrative
bodies? To answer this question, one must note that two types of
bodies are recognized in our legal system: courts of law, which
are part of the judicial system, and administrative tribunals,
which are part of the administrative system.
[16] To properly understand the significance
of this distinction, it is necessary to recall one of
Canada's basic constitutional principles, namely, the
separation of powers: the legislative branch (Parliament), the
executive branch (the administration) and the judicial branch
(the courts). Administrative tribunals are not part of the
judicial branch. When Professor Ducharme talks about
administrative bodies, he is referring to administrative
tribunals.
[17] The issue of what constitutes an
administrative tribunal was recently considered by the Superior
Court of Quebec in Barreau de Montréal v. Québec
(Procureur général), [2000] R.J.Q. 125,
which was affirmed in large part by the Quebec Court of Appeal,
[2001] J.Q. No. 3882. The Superior Court had before it a
motion for a declaratory judgment: the applicant was seeking to
have 13 sections of the Act respecting
administrative justice[12] declared inoperative on the ground that the
members of the ATQ did not enjoy the guarantees of independence
set out in section 23 of the Charter of human rights and
freedoms (R.S.Q., c. C-12). To decide that issue,
Rochon J. (now of the Court of Appeal) had to examine the
nature of an administrative tribunal (at
pages 144-45):
[translation]
. . . Pépin and Ouellette propose a broad definition of
the concept:
Thus, according to a broad, modern concept, the term
"administrative tribunal" encompasses all public
authorities other than the courts that make decisions
affecting citizens' rights, regardless of whether the
decision is judicial or administrative in nature. This can
just as easily include a minister as a "commission",
"agency", tribunal or "board".
These tribunals differed from the "courts" in many
ways: they had specialized members who were often not legal
practitioners, they had a simplified procedure, they were not
bound by the rules of evidence, and they were generally
vested with powers under the Act respecting public inquiry
commissions. Authors Pépin and Ouellette note that
administrative tribunals have no inherent jurisdiction and that
contempt cannot be committed against them.
. . .
Professor Patrice Garant . . . notes that the courts have
attached the "administrative tribunal" label both to
bodies whose sole function is to hear cases and to other
bodies, "commonly called boards or commissions, that have an
economic and technical regulation function". He adds
that these two categories have the shared role-the main role in
one case and an incidental role in the other-of ruling on
citizens' rights in accordance with a process that he
describes as quasi-judicial.
[18] Moreover, Mr. Justice René
Dussault, who wrote the reasons of the Quebec Court of Appeal,
added the following in concluding that the ATQ is an
administrative tribunal (at paragraph 104):
[translation]
104 . . . what basically distinguishes administrative
tribunals from the judicial branch of government is the
inability of the former to activate the enforcement procedures of
the general law themselves-the penal action and the civil
action, sometimes accompanied by an injunction-with regard to
their decisions. In our justice system, which is, in this
respect, part of the British tradition, administrative tribunals
cannot enforce their own decisions because of their separation
from the courts.
[19] After defining "administrative
bodies", the concepts of "civil bodies" and
"penal bodies" used by Professor Ducharme must be
considered. The use of those terms corresponds to that found in
the legislation defining the jurisdiction of the "courts of
law". Generally speaking, the courts are recognized as
having two types of jurisdiction: civil jurisdiction and penal
(or criminal) jurisdiction. For example, section 3 of the
Federal Court Act, R.S.C. 1985, c. F-7, gives
the Federal Court "civil and criminal" jurisdiction.
There is no reference therein to administrative or public law
jurisdiction. Under sections 18 and 28 of that statute, the
Federal Court in fact exercises review powers over administrative
tribunals and other federal boards and commissions. This
therefore takes us into the field of administrative law.
[20] Section 1 of the Courts of
Justice Act, R.S.Q. 1977, c. T-16, lists the
Quebec courts "in civil, criminal and mixed
matters". Whether one is before the Superior Court of
Quebec or the Court of Quebec, proceedings are not brought only
in purely civil or criminal matters; there may also be public law
proceedings. This is the case, for example, where the Superior
Court exercises its superintending and reforming power over
administrative tribunals and other public bodies, inter
alia, to quash a resolution by a municipal council, or where
the Court of Quebec hears an appeal from a tax assessment made by
the Deputy Minister of Revenue of Quebec. It must be concluded
that "civil matters" in such a context must be
understood as meaning everything that is not a criminal matter
and that the term encompasses administrative law and the other
fields of public law (aside from criminal law).
[21] If we now examine Professor
Ducharme's statement reproduced at paragraph [14] of
these Reasons, I think it must be concluded therefrom that the
rules of evidence of Quebec apply to courts that hear proceedings
other than criminal law proceedings and that they do not apply to
administrative tribunals (administrative bodies). Let us see to
what extent this accurately describes the state of the law in
administrative tribunals and courts.
(1) To administrative
tribunals
[22] Professor Ducharme seems to
challenge his own opinion regarding the application of the rules
of evidence of Quebec to administrative tribunals when he
discusses, in Précis de la preuve, supra, at
page 13, paragraphs 48-49, the coverage of the
rules of evidence in the Civil Code of Québec in
provincial matters:
[translation]
48. As for the system
of evidence that applied before administrative tribunals,
prior to the coming into force of the Civil Code of
Québec, legal literature and the courts took the
position that it was an autonomous system separate from the
system that applied in civil matters. According to this
theory, civil law rules of evidence could apply to an
administrative tribunal only as a result of an express provision
of the statute creating the tribunal or regulations adopted
thereunder. However, it was recognized that some of those rules,
insofar as they were an expression of the rules of natural
justice, were applicable even if there was no legislative
provision to that effect. As well, in certain cases, an
administrative tribunal would sometimes rely on civil law rules
of evidence to determine the merits of an application even if,
under its enabling legislation, it had complete freedom to accept
any means of proof that it thought could best serve the ends of
justice.
49. Has this autonomous system of evidence in administrative
matters continued to exist since the coming into force of
the new code? It seems to us that such autonomy is
jeopardized as a result of the preliminary provision of the
Civil Code of Québec, which seeks to make that code
the foundation of all other laws.
[23] In Droit administratif, 4th
edition, volume 2, "Le Contentieux" [Litigation]
(Cowansville: Les Éditions Yvon Blais, 1996), at
page 278, Professor Garant goes further when he states that
the rules of evidence in the Civil Code of Québec
apply to administrative tribunals:
[translation]
Since the Civil Code is the jus commune of Quebec,
Book Seven of the Code, entitled "Evidence", applies
to all administrative and quasi-judicial tribunals
unless an exception is provided for in special statutes. That
book therefore sets out a general system of evidence that may, in
some respects, be restrictive.
[24] Professor Ouellette does not
share that view. In Les tribunaux administratifs au Canada,
Procédure et preuve (Montréal: Les
Éditions Thémis, 1997), he defends the principle of
the autonomy of the system of procedure very vigorously.
According to him, the reason that administrative tribunals were
created was to free them from the formal rules of evidence: it
would therefore be inappropriate to subject them to the general
rules of evidence. Administrative tribunals must be free to adopt
their own rules of evidence. He writes the following at
page 256:
[translation]
The appearance at the beginning of the century of
administrative tribunals-created to be different and more
efficient than the courts, made up of specialists, and
responsible, following a hearing, for helping to administer a few
contemporary legislative standards-created a new challenge in the
law of evidence. Obviously, the slavish transposition of
technical rules from the jury trial system was inappropriate.
The courts slowly developed a theory of quasi-judicial
evidence marked by flexibility and pragmatism and inspired by the
rules of natural justice.
[25] In "Aspects de la procédure
et de la preuve devant les tribunaux administratifs" (1986),
16 R.D.U.S. 819, the same author explains the basis of the
principle of the autonomy of administrative evidence in Canada as
follows (at pages 846-47):
[translation]
Problems of procedure and evidence are, in practice, so
closely related, that the law of administrative evidence,
which is judge-made, is based on the same judicial
philosophy, marked by pragmatism and flexibility, as the law
of administrative procedure. . . .
. . . In matters of evidence, as in procedural matters, the
appellate courts have been concerned about recognizing the
distinctiveness of administrative tribunals and have been
careful not to impose their own rules of evidence on them,
preferring to confine themselves to a few basic principles while
specifying, where necessary, how those principles operate.
[26] His explanation (at
pages 827-28) of the autonomy of administrative
procedure as recognized by the Quebec courts is as follows:
[translation]
In actual fact, the principle of the autonomy of
administrative procedure results from the basic distinction, the
summa divisio, drawn in the case law between the
courts, which embody the judicial branch of government, and
administrative tribunals and bodies; the conclusions drawn by
the highest courts lead to political choices by the legislature
to create administrative bodies alongside the traditional courts
and to give them judicial powers. In such a case, it must be
concluded that, unless otherwise specified, the legislature
wanted to exclude the judicial model and allow the body to act
according to the methods or procedures that are specific to it
and that it considers appropriate to fulfil its mandate. In
practical terms, this means that procedure may vary from one body
to another. Moreover, the assumption that in the absence of
legislative direction, the body should let itself be guided by
the procedure of the courts by analogy is rejected. This was the
message that the House of Lords delivered in 1915 in the
well-known case of Local Government Board v.
Arlidge.
The principle was accepted a number of times by judges of the
Supreme Court of Canada and by the Quebec Court of Appeal: where
legislation is silent, the administrative tribunal determines its
own procedure, and the method of the courts is not necessarily a
model to be followed.
[27] However, there are decisions in which the courts
have concluded that administrative tribunals must apply some of
the rules of evidence set out in the Civil Code of
Québec. In Thibodeau v. Commission municipale du
Québec, [1996] R.J.Q. 1217, at page 1233,
Corriveau J. of the Superior Court held that an
administrative tribunal had to comply with article 2858
C.C.Q., which deals with the admissibility of evidence
that would tend to bring the administration of justice into
disrepute. That case involved a recording of a conversation with
a municipal councillor that the applicant had made without the
councillor's knowledge.
[28] In Bisaillon v. Keable,
[1983] 2 S.C.R. 60, Beetz J., writing for the Supreme Court
of Canada, assumed that article 308 C.C.P. could
apply to a provincial "inquiry commission". That
article deals with the power of a court to oblige witnesses to
divulge what has been revealed to them in the exercise of their
functions. In that specific case, the Supreme Court held that
article 308 did not apply to the disclosure by a peace
officer of the identity of a police informer and that it was
therefore the common law rule of evidence that had to be applied.
The Court went even further by stating that the Quebec
legislature could not have changed the common law rule because it
was a rule of criminal law and such a change would be
ultra vires.
[29] In Lapointe v.
Commission de police du Québec, [1974] C.A. 121,
the Quebec Court of Appeal considered the question of whether the
authority of a final judgment applied in an inquiry conducted by
the Quebec Police Commission into the actions of certain police
officers. The relevant facts before the Commission had been
considered by the Court of the Sessions of the Peace, which had
acquitted the police officers of all the charges laid against
them. The Court of Appeal concluded that, since the judgment of
the Court of the Sessions of the Peace was a judgment by a court
sitting in criminal matters, it did not have the authority of a
final judgment in the inquiry before the Commission, which was a
civil body.[13]
[30] Professors Pépin and Ouellette,
op. cit., at page 19, seem to take the same position
with regard to applying the rule of the authority of a final
judgment to administrative tribunals:
[translation]
We know, therefore, that the legal rules applicable to
administrative tribunals differ in many respects from those
applicable to the courts and thus call for a style of advocacy
that is also different, which many litigants do not yet seem to
accept. Nevertheless, orders or decisions of
administrative tribunals that dispose of a case, like court
judgments, have the force of law and are presumed to be
valid.
[31] In 1996, the same year that Ducharme
and Garant republished their book, the Quebec legislature passed
Bill 130, the Act respecting administrative justice,
supra, which affirms the specific character of
administrative justice in Quebec. Section 1 of that Act
states the following:
1. The purpose of this Act is to affirm the specific
character of administrative justice, to ensure its quality,
promptness and accessibility and to safeguard the fundamental
rights of citizens.
This Act establishes the general rules of procedure
applicable to individual decisions made in respect of
a citizen. Such rules of procedure differ according to
whether a decision is made in the exercise of an
administrative or adjudicative function, and are, if
necessary, supplemented by special rules established by law or
under its authority.
This Act also institutes the Administrative Tribunal of
Québec and the Conseil de la justice administrative.
[32] To better understand the scope of this
new statute, sections 9 and 11 thereof are worth reproducing
as well:
9. The procedures leading to a decision to be made by the
Administrative Tribunal of Québec or by another body of
the administrative branch charged with settling disputes
between a citizen and an administrative authority or a
decentralized authority must, so as to ensure a fair process, be
conducted in keeping with the duty to act impartially.
11. The body has, within the scope of the law, full
authority over the conduct of the hearing. It shall, in
conducting the proceedings, be flexible and ensure that the
substantive law is rendered effective and is carried out.
It shall rule on the admissibility of evidence and
means of proof and may, for that purpose, follow
the ordinary rules of evidence applicable in civil matters.
It shall, however, even of its own initiative, reject any
evidence which was obtained under such circumstances that
fundamental rights and freedoms are breached and the use of which
could bring the administration of justice into disrepute. The use
of evidence obtained in violation of the right to professional
secrecy is deemed to bring the administration of justice into
disrepute.
[33] As can be noted, the autonomy of the
system of evidence is now codified in this statute, and it allows
for more flexibility in the production of evidence. That autonomy
can, of course, be explained in part by the fact that some
members of the ATQ are not legal practitioners. It should also be
noted that this autonomous system of evidence before
administrative tribunals does not provide for the application of
the common law rules of evidence, as do the Criminal Code
of Canada and the Code of Penal Procedure of Quebec. On
the contrary, the Act respecting administrative justice
refers to the "ordinary rules of evidence applicable in
civil matters". This means that the suppletive law
regarding evidence before administrative tribunals should be
drawn from the Civil Code of Québec and the Code
of Civil Procedure of Quebec, which are the jus
commune of Quebec. Finally, it must be noted that the
autonomous system applies only to administrative tribunals
dealing with administrative matters (that is,
"disputes between a citizen and an administrative
authority or a decentralized authority") and not to the
courts.
(2) To the courts
[34] If the autonomous system of evidence
applies only to administrative tribunals dealing with
administrative matters, what is the situation in court
proceedings that raise issues of public law? Little has been said
about this. In the legal literature that was referred to, as
shown by the passages quoted above, each time the system of
evidence in administrative law is discussed, only proceedings
taken before administrative tribunals are at issue.[14]
[35] Yet those tribunals are not the only
bodies that hear cases raising issues of administrative law. As
previously stated, the Court of Quebec hears appeals from tax
assessments made by the Deputy Minister of Revenue of Quebec.
Before Parliament gave the Tax Court of Canada exclusive
jurisdiction to hear appeals from tax assessments made by the
Minister of National Revenue (Minister), Canadian
taxpayers could take proceedings in the Federal Court-Trial
Division, another court of law. Finally, the Superior Court of
Quebec also makes administrative law when it exercises its
superintending power over administrative tribunals. It is
therefore rather strange that no interest is shown in the system
of evidence applied by courts that have to rule in administrative
matters in the same way as administrative tribunals.
[36] Generally, it seems to be assumed that
the general rules of evidence in civil matters set out in the
Civil Code are those that apply. As for the application of
the Code of Civil Procedure, Garant, op. cit.,
volume 2, at page 9, explicitly recognizes that it has
replaced the common law in public law:
[translation]
In Quebec, we believe that legal literature and the courts
have downplayed the importance of the Code, which, as a codified
law, should have replaced the common law and established itself
as the fundamental law in matters of judicial law, both private
and public.
[37] I must point out that rules of
evidence in private law were applied in public law well before
the enactment of the new Civil Code of Québec.
There are a number of cases in which the courts have applied the
rules of evidence set out in the Civil Code of Lower
Canada. In particular, in Corporation du Village de
Deschênes v. Loveys, [1936] S.C.R. 351, at
page 360, the Supreme Court of Canada applied
article 1241 C.C.L.C. (which dealt with the authority
of a final judgment) in an appeal raising the issue of the
nullity of a resolution adopted by a municipal council. Moreover,
it must be noted that the Supreme Court did not apply the common
law's res judicata but rather the Civil
Code's authority of a final judgment in this field,
namely municipal law, which is part of Quebec public law.
Similarly, in Buchanan v. La Commission des accidents
du travail, [1981] C.A. 325, the Quebec Court of Appeal also
applied the principle of the authority of a final judgment in a
case in which it was argued that a regulation of the
Workmen's Compensation Commission was invalid. In provincial
tax law,[15]
there is the decision of the Court of Quebec[16] in Larouche v.
Québec (Sous-ministre du Revenu), 1989
CarswellQue 506, in which Judge Tremblay stated:
[translation]
16 To conclude this
interpretative examination of section 82 [of the Act
respecting the Ministère du Revenu, Revised Statutes
of Quebec, 1977, c. M-31], I therefore do not think
that that section is an exception to the rule against hearsay
evidence. I cannot convince myself in any way that all of the
rules of evidence provided for in the Code of Civil Procedure and
the Civil Code must be cast aside as a result of that
section.
[38] Following this analysis of the sources
of public law in Quebec and the scope of the rules of evidence of
Quebec, one conclusion must be reached: the rules of evidence of
Quebec are the jus commune in Quebec, both in matters
of private law and in matters of public law (except criminal law
and provincial penal law). They must therefore be applied in
matters of public law-whether municipal law, as in Loveys,
or tax law-just as in matters of private law. Occasionally,
especially in interpreting a rule of evidence derived from the
common law, it will be worthwhile and sometimes necessary to rely
on common law principles, such as the hearsay rule. In some
exceptional circumstances, the common law rule may prevail,
especially if it is a rule of public order within the field of
criminal law, as was the case in Bisaillon, supra,
regarding the rule against the disclosure of the identity of
police informers. The rules of evidence of Quebec must be applied
by the courts with the usual rigour. When administrative
proceedings are taken before an administrative tribunal governed
by the Act respecting administrative justice, the tribunal
has a large degree of discretion in applying the rules of
evidence of Quebec: it "has . . . full
authority over the conduct of the hearing" and
"may . . . follow the ordinary rules of
evidence applicable in civil matters".
[39] My conclusion that the rules of
evidence of Quebec apply not only in purely civil matters but
also in administrative matters in public law is confirmed all the
more by the fact that it corresponds to the approach taken by the
common law. Professor Royer states the following in his book
referred to above:
[translation]
31 - Uniqueness of the law of evidence - Unlike
France and the other countries on the Continent, England
has neither codified its rules nor distinguished the law
of evidence in penal, administrative, commercial and civil
matters. The system of evidence is unique, although there are
exceptions specific to certain fields of law and the application
of the rules is sometimes different depending on whether the
trial is civil or criminal.
[40] According to the common law, every
person, including Her Majesty and her representatives, is subject
to the ordinary law of the land as stated by the ordinary courts
of the land. Professors Pépin and Ouellette,
op. cit., explain the sources of administrative law
as follows at page 40:
[translation]
When briefly discussing the sources of administrative law,
it is not necessary to draw a distinction between the rules
specific to government and the rules that also apply to the legal
dealings individuals may have among themselves. It must be
understood that, in some circumstances, the government is subject
to the rules of "ordinary law" or "private
law" i.e. the law applicable to individuals. This
situation arises especially in the field of administrative
litigation: we will see, for example, that the contractual,
delictual and quasi-delictual liability of the government
and its agents is basically governed by the rules of ordinary
law; we will also see that government decisions are judicially
reviewed basically in accordance with the rules established to
enable the superior courts to keep the inferior courts, which
have jurisdiction in areas defined by legislation, within the
limits of that jurisdiction. In short, administrative law has
a dualistic nature; it is made up of both ordinary law and
special law, that is, law outside the scope of the
jus commune; in both cases, those rules have the
force of law in relation to the government and are sanctioned by
the courts. Sometimes, the ordinary law-here the common
law-even acknowledges that the government has special privileges,
such as the prerogatives of the Crown.
[41] The authors later go on to say (at
pages 40-41):
[translation]
In Canada, as in the United Kingdom, it is a tradition to say,
on the contrary, that the government is, as a rule, subject to
ordinary law and the ordinary courts. Recently, the
Honourable Beetz J. stated the following for the Supreme
Court in a case concerning the legal status of a casual employee
of the Government of Quebec:
On the other hand, it is important not to lose sight of the
principles and spirit of Anglo-Canadian public law. It is a
matter of substantive law. It must be remembered that in
Anglo-Canadian law, administrative law does not constitute a
complete and independent system, separate from the ordinary law
and administered by specialized courts. On the contrary, it is
the ordinary law, administered by the courts of law, which is
made a part of public law and the provisions of which cover
the public administrative authority, unless they are replaced by
incompatible legislative provisions, or supplanted by rules
peculiar to the royal prerogative, that group of powers and
privileges belonging only to the Crown. It follows that faced
with the necessity of qualifying and regulating a given legal
relationship in public law, the jurist of the Anglo-Canadian
tradition must necessarily carry out this function with the
concepts and rules of the ordinary law, unless statute or
prerogative require otherwise.
[42] In Droit administratif
("Common law en poche" collection,
Les éditions Yvon Blais, 1997), Professor
Pierre Foucher makes similar comments at page 1:
[translation]
A. Scope
and characteristics of administrative law in the common law
Strictly speaking, there is no administrative law in the
common law, which is in keeping with its unitary tradition.
Like constitutional law, administrative law in the common law
is an academic construct, a grouping of the specific rules of
ordinary law that apply to government. However, those rules
are not established by specialized courts on the basis of some
administrative code. They are developed by the ordinary courts
as rules incorporated into the ordinary law. According to one
of the common law's most basic constitutional premises,
every person, including Her Majesty and her representatives,
is subject to the ordinary law of the land as stated from
time to time by the ordinary courts of the land. There is no
dichotomy in principle between public law and private law. No
Council of State, no specialized body with exclusive jurisdiction
to monitor the government develops an autonomous branch of the
law applicable solely to government representatives. This
conceptual unity of the law and refusal to contemplate separate
legal rules for the government is now giving way to a completely
different reality: there are many special and exceptional
rules that the courts have had to develop to take account of the
demands of modern government.
[43] When one looks at a common law treatise
on the rules of evidence-such as The Law of Evidence in
Canada, supra-it is therefore not surprising to see
that the common law does not establish a separate system of
evidence for the courts in matters of administrative law. Rather,
there is a set of rules that apply equally to civil and criminal
matters, often with more specific rules for each of those two
fields of law.
[44] Finally, since the CEA applies
not only to all civil and criminal proceedings but also to all
other fields in which Parliament has jurisdiction, I consider it
quite right to conclude that the rules of evidence of Quebec also
apply in matters of federal public law, for example, under the
Income Tax Act (Act) and the ETA. If
it had wanted to limit the rules of evidence of Quebec to the
field of private law, Parliament would certainly have specified
this, especially when one recalls that its jurisdiction in
private law is more limited than the jurisdiction of the
provinces. When it has wanted to create an exception to the
general rule set out in section 40 of the CEA, it has
done so: in section 8 of the Criminal Code, for
instance, to ensure that the common law rules of evidence apply
in criminal law, and in subsection 18.15(4) TCCA,
which provides that this Court is not bound by any legal or
technical rules of evidence in hearing an appeal governed by the
informal procedure.[17]
[45] Since the system of evidence applied to
the courts in the common law provinces is the same irrespective
of whether public law or private law is involved-subject to
legislative provisions stating otherwise-it must be recognized
that, generally speaking, the rules of evidence in civil matters
(as opposed to those in criminal matters) are what apply to those
courts when they are dealing with public law issues.
(c) To the Tax Court of
Canada in proceedings taken in Quebec
[46] As we saw above, section 40
CEA refers us to the laws of evidence of the province in
which the proceedings over which there is federal authority are
taken, subject to the provisions of that Act and any other
relevant Act of Parliament. The TCCA does not provide for
any exception that would allow the judges of this Court to apply
the laws of evidence of another province, as is the case for the
Federal Court (subsection 53(2) of the Federal Court
Act).
(i) Under the informal
procedure
[47] For taxpayers who elect to have the
informal procedure apply to their appeals, there is an exception
in subsection 18.15(4) TCCA, which provides that the
Court is not bound by any legal or technical rules of evidence.[18] By enacting
that provision, Parliament was, as it were, adopting the autonomy
of evidence principle for appeals governed by the informal
procedure, as that principle is applied by administrative
tribunals. On the other hand, taxpayers who make such an election
cannot recover more than $12,000 (18.1 TCCA).[19] In such
circumstances, it is not surprising that the TCCA also
states that a decision made under the informal procedure shall
not be treated as a precedent for any other case (18.28
TCCA).
(ii) Under the general
procedure
[48] When a taxpayer appeals from an
assessment made under the Act or the ETA, the
general procedure rules apply. (The informal procedure is an
exceptional procedure: it applies only where a taxpayer elects to
have it apply.) There is no provision in the TCCA stating
what system of evidence must be applied in such an appeal.
Section 40 CEA must therefore be given effect. When
an appeal to this Court is filed in Quebec, the rules of evidence
of Quebec are those that must be applied, with the usual rigour
of the Quebec courts.
[49] However, priority must be given to the
rules of evidence found in the CEA, the Rules and,
where applicable, the other rules adopted under the
TCCA.[20]
In such cases, common law principles should be the suppletive
law.[21] If
account is taken of the CEA's rules on the production
of evidence and of subsection 4(2) of the Rules,
which states that, where matters are not provided for in the
Rules, the practice shall be determined by the Court on a
motion, the provisions of the Code of Civil Procedure will
not generally be applicable or will rarely be applicable in this
Court.
[50] The autonomy of evidence principle
usually followed by administrative tribunals is not applicable in
appeals governed by the general procedure for two reasons. The
first is based on the general principle of the coherence of the
TCCA. If Parliament made a point of enacting a provision
stating that the Court is not bound by any legal or technical
rules of evidence for appeals governed by the informal procedure
and said nothing about appeals governed by the general procedure,
the reason is that it assumed that the ordinary rules of evidence
that apply in the courts of law would be applied in this
Court.
[51] This brings me to the second reason:
the autonomy of evidence principle applies only to administrative
tribunals, not to the courts. Contrary to what some[22] believe, this Court
is a court of law and not an administrative tribunal. To begin
with, this Court, like the Supreme Court of Canada and the
Federal Court of Canada, was established by the Parliament of
Canada pursuant to the power conferred on it by section 101
of the Constitution Act, 1867 to provide for the
"Establishment of any additional Courts for the better
Administration of the Laws of Canada".[23] Its judges are appointed by
the Governor in Council by commission under the Great Seal
(subsection 4(2) TCCA). Only a person who is a
barrister or advocate of at least ten years standing at the bar
of any province may be appointed a judge, as is the case for
superior court judges in Canada
(subsection 4(3) TCCA). A judge of the Court
holds office during good behaviour but is removable by the
Governor General on address of the Senate and House of Commons
(subsection 7(1) TCCA). The financial security of
judges necessary for judicial independence is ensured by the
Judges Act. The Court is a court of record.[24] In the exercise of
its jurisdiction, the Court has all such powers, rights and
privileges as are vested in a superior court of record.[25] Under
section 172.1(2) of the Rules, the Court may, on
certain conditions, issue a writ of seizure and sale or a notice
of garnishment. The Court may also make an order directing the
examination of a judgment debtor. Generally speaking, its rules
of procedure are similar to those of the Federal Court-Trial
Division and of the superior courts of the provinces. Decisions
rendered by the Court under the general procedure may be appealed
to the Federal Court of Appeal. Only a judgment on an appeal
governed by the informal procedure is final and conclusive and
not open to question or judicial review in any court except the
Federal Court of Appeal (section 18.24 TCCA). It is
clear from all of these attributes that the Tax Court of Canada
is part of the judicial branch of the Canadian government.
[52] The fact that this Court has a limited
jurisdiction that allows it to specialize in the field of
taxation is not inconsistent with its status as a court of law.
Parliament had the choice of creating an administrative tribunal
or a court to hear tax proceedings. To enable Canadian taxpayers
to challenge tax assessments made against them by the Minister
before a body that is totally at arm's length from the
executive branch, Parliament chose, in its great wisdom, to
create a court that is part of the judicial branch.
[53] The Commission scolaire
des Chênes (School Board) is in Quebec, and the
assessment against it was made by the Deputy Minister of Revenue
of Quebec on behalf of the Minister (of National Revenue). The
School Board filed its notice of appeal in the Registry of the
Court in Montréal, as it had done in the appeal that led
to the 2001 decision. Its appeal is governed by the general
procedure pursuant to an order of the Chief Judge dated
February 15, 2002, and this motion was heard in
Montréal. In the circumstances, there can be no doubt that
the proceedings were taken in Quebec.[26] I have no reason to think that the
situation is different for the rest of the 12 applicants.
The rules of evidence of Quebec therefore apply in this case.
Specifically, the rule of the authority of a final judgment set
out in article 2848 C.C.Q. must apply.[27]
(2) Can common law
principles relating to res judicata be applied to
interpret the rule of the authority of a final judgment in
Quebec?
[54] In Leduc, supra, the
judge addressed the position taken by counsel for the respondent,
namely, that the doctrine of issue estoppel does not apply in the
province of Quebec. She described counsel's position as
follows:
Fin de non-recevoirpleaded on the question of
the ability of the appellant's spouse to perform a basic
activity of daily living
[13] Counsel for the respondent
contends that the doctrine of issue estoppel does not apply in
the province of Quebec. He refers to the decision by the Supreme
Court of Canada in National Bank v. Soucisse et al., [1981]
2 S.C.R. 339, in which Beetz J. distinguishes the
doctrine of estoppel in common law from that of fin de
non-recevoir which exists in Quebec civil law. On this point,
Beetz J. referred to Mignault J.'s opinion in Grace and
Company v. Perras (1921), 62
S.C.R. 166, where Mignault J. noted at page 172:
... the doctrine of estoppel as it exists in England and the
common law provinces of the Dominion is no part of the law of the
Province of Quebec. This, however, does not mean that in many
cases where a person is held to be estopped in England, he would
not be held liable in the Province of Quebec.
[14] Counsel for the respondent
cites certain decisions in which, according to him, Canadian
courts have refused to apply the doctrine of issue estoppel in
the province of Quebec (Lafarge Canada Inc. v. Canada, [2001]
F.C.J. No. 372 (F.C.T.D.); Dufresne Engineering Company
Limited c. Le Sous-ministre du revenu du Québec, [1984]
R.D.F. 164 (C.A.Q.); Alameda Holdings Inc. v. Canada, [1999]
T.C.J. No. 839 (T.C.C.)).
[15] Counsel thus concludes that
the concept of estoppel as applied at common law is unknown in
Quebec civil law.
[55] The judge described
Mr. Leduc's position as follows:
[20] The appellant simply
contends that the doctrine of issue estoppel applies to every
federal statute and more particularly to the Act. According to
the appellant, there can be no doubt that this doctrine is now
part of Canadian law (see Angle, supra), and the fact that the
Supreme Court of Canada has endorsed that rule's presence in
Canadian law is sufficient to conclude that every federal statute
is subject to the application of the doctrine of issue estoppel.
He argues that this doctrine is a rule of natural justice and
there is nothing in Quebec law preventing its application.
[56] To decide this issue, the judge
acknowledged that estoppel by representation does not exist in
Quebec law and rightly stated that there is a distinction between
estoppel by representation and issue estoppel: they are two very
different kinds of estoppel (see her analysis at
paragraphs 23-28). However, since the conditions of
applying the authority of a final judgment and issue
estoppel are, according to her, similar and even
"interchangeable",[28] this justifies using the issue estoppel
principles set out in common law cases to apply the
fin de non-recevoir based on the authority of a
final judgment in proceedings taken in this Court in Quebec.
[57] With respect for those who hold the
opposite view, I think that this interpretation is wrong. I
believe instead that the rule of issue estoppel, like that of
estoppel by representation, does not apply in Quebec. Indeed,
there is some similarity between the authority of a final
judgment and issue estoppel (the latter being one of the two
forms of the concept of res judicata), as shown by
the definition of each of those rules. The authority of a final
judgment is defined in article 2848 C.C.Q.:
ART. 2848 The authority of a final judgment
(res judicata) is an absolute presumption;
it applies only to the object of the judgment when the
demand is based on the same cause and is between the
same parties acting in the same qualities and the thing
applied for is the same.
However, a judgment deciding a class action has the authority of
a final judgment in respect of the parties and the members of the
group who have not excluded themselves therefrom.
[58] First of all, it should be noted that
the rule of the authority of a final judgment originates in the
Napoleonic Code: see Roberge, supra, at
page 401. It is also important to point out that, in
Roberge, L'Heureux-Dubé J. relied
solely on Quebec and French doctrine and cases to define the
nature, basis and conditions for applying the authority of a
final judgment: she never referred to the common law concept of
res judicata.
[59] In Pesant v. Langevin et al.
(1926), 41 Que. K.B. 412, at page 419, Rivard J.A.
quoted the following passage from Mignault J. to describe
the effect and basis of the rule of the authority of a final
judgment:
[translation]
In Laferrière,[29] Mignault J. stated the following:
The doctrine of the authority of a final judgment is based on
a presumption juris et de jure and even of public order
that a fact found by a judge is true: res judicata pro
veritate habetur. Its basis is not the party's consent,
which arises from the circumstance that he did not appeal the
judgment rendered against him, but the unchallengeable truth of
the fact acknowledged by the judgment, which, when it becomes
final, may no longer be questioned. And this presumption of
truth has been allowed in order to prevent new trials between the
same parties on the same question and to make it impossible for
the parties to obtain contradictory judgments.
[60] As for res judicata, the
following definition is found in Lange, op. cit., at
page 9:
. . . In C.U.P.E. Local 1394 v. Extendicare Health Services
Inc., Doherty J.A. stated the principle:
Res judicata is a rule of evidence. Assuming the
requirements of the doctrine are met, the party against whom the
issue was decided in the earlier litigation cannot proffer
evidence to challenge that result. Looked at from the vantage
point of the successful litigant in the earlier proceedings, the
doctrine operates to admit into evidence at the second proceeding
the judicial determination of the relevant issue at the earlier
proceedings. Not only is that earlier determination rendered
admissible, it is also declared to be conclusive with
respect to that issue: Spencer-Bower and Turner, The Doctrine
of Res Judicata, 2nd ed (1969) at 9; Sopinka, Lederman and
Bryant, The Law of Evidence in Canada (1992) at
989-90.
[61] In Angle v. M.N.R., [1975] 2
S.C.R. 248, at pages 253-54, 1974 CarswellNat 375F,
Dickson J. provided the following overview of this common law
concept and its two species:
In earlier times res judicata in its operation as
estoppel was referred to as estoppel by record, that is to say,
estoppel by the written record of a court of record, but now the
generic term more frequently found is estoppel per rem
judicatam. This form of estoppel, as Diplock L.J.
said in Thoday v. Thoday [[1964] P. 181], at
p. 198, has two species. The first, "cause of
action estoppel", precludes a person from bringing an
action against another when that same cause of action has been
determined in earlier proceedings by a court of competent
jurisdiction. We are not here concerned with cause of action
estoppel as the Minister's present claim that Mrs. Angle is
indebted to Transworld in the sum of $34,612.33 is obviously not
the cause of action which came before the Exchequer Court in the
s. 8(1)(c) proceedings. The second species of
estoppelper rem judicatam is known as "issue
estoppel", a phrase coined by Higgins J. of the
High Court of Australia in Hoystead v. Federal Commissioner of
Taxation [(1921), 29 C.L.R. 537], at p. 561:
I fully recognize the distinction between the doctrine of
res judicata where another action is brought for the same
cause of action as has been the subject of previous adjudication,
and the doctrine of estoppel where, the cause of action being
different, some point or issue of fact has already been
decided (I may call it "issue-estoppel").
Lord Guest in Carl Zeiss Stiftung v. Rayner & Keeler
Ltd. (No. 2) [[1967] 1 A.C. 853], at p. 935, defined the
requirements of issue estoppel as:
. . . (1) that the same question has been decided;
(2) that the judicial decision which is said to create the
estoppel was final; and, (3) that the parties to the
judicial decision or their privies were the same persons
as the parties to the proceedings in which the estoppel is
raised or their privies . . . .
[62] The fact that the authority of a final
judgment and res judicata seem to have the same basis
may explain their similarity. For reasons of public order, court
decisions must be final: the same question cannot be litigated
over and over. It would be unfair for a party to be continually
obliged to defend himself or herself in court on the same
question.
[63] However, when one has a closer look,
one cannot help but notice major differences between these two
rules of evidence. First of all, it is important to note that the
rule of the authority of a final judgment is a codified rule,
initially in article 1241 C.C.L.C. and, since 1994,
in article 2848 C.C.Q. It is not a doctrine developed
by the courts. There is also a major difference in the effect of
the two rules. According to the Civil Code, the authority
of a final judgment is an absolute presumption; a fact that has
such authority is considered to be established conclusively.[30] In the common
law, there seems to be two lines of thought: one is that, if
there is res judicata, judges have no choice but to
apply it, while the other is that judges have the discretion to
apply it or not.[31]
[64] Moreover, and this is the most
important reason, there seem to be significant differences in the
conditions of application of the two rules. For example, for the
authority of a final judgment to exist, it is essential that
there be three identities in the two proceedings: identity of
object, identity of cause and identity of parties. On the other
hand, res judicata in the common law can be
subdivided into two separate rules: issue estoppel and cause of
action estoppel. As we saw above, issue estoppel applies where
the causes of action are distinct.[32] D. Lange,
op. cit., states the following at page 29:
"The Supreme Court of Canada has clearly established the
principle that issue estoppel applies to separate and distinct
causes of action." For there to be issue estoppel and
thus res judicata, only two identities are necessary:
identity of issue and identity of parties. There is another
important distinction: as I understand the common law rule,
"issue" is not a synonym of "object". In the
civil law, an object is a right - I will come back to this
later - whereas in the common law, an issue is apparently
not limited to a right. It applies[33] to any conclusion of fact, any
conclusion of law and any mixed conclusion of law and fact.[34] Thus, it is not
necessarily the same thing as an object. The concept of issue is
much broader. Issue estoppel and the authority of a final
judgment therefore represent two rules that do not apply under
the same conditions. They are not
"interchangeable" rules.
[65] This brief analysis shows that there
are important differences not only in the conditions required for
the application of the authority of a final judgment and of
res judicata but also in the effects of the two
rules. In my opinion, those differences are such that the two
rules are incompatible. In the common law, judges have the
discretion to apply or not to apply res judicata,
whereas in the civil law, the authority of a final judgment
creates an absolute presumption, and judges are obliged to give
effect to it. In my view, only a legislative provision can
release judges from their obligation to give effect to that
presumption. An example of such a provision is
subsection 18.15(4) TCCA, as we saw above.
[66] I believe that these differences in the
application of res judicata and the authority of a
final judgment convince us of the soundness of
Mignault J.'s comments quoted in Soucisse,
supra, which were taken from the article "The
Authority of Decided Cases" (1925), 3 Can. Bar Rev.
1, at pages 22-23:
. . . Remember however that the civil law is a distinct and
entirely self sufficing system, that its legal literature
is extremely rich and abundant, that monumental works of
reference like Fuzier-Herman, the repertories of Dalloz and Sirey
and the Pandectes Françaises are on the shelves of our
libraries, and that, even where the common law and the civil
law have a similar rule, as in many cases of mandate, suretyship
and torts, to mention these only as typical of many others, it
can only lead to confusion to go outside of our system to seek
authorities in other systems of law where the rule in question
may well be a deduction from another rule which does not exist in
our code. I feel very strongly on this subject and I have
lost no opportunity in my humble way since I have had the honour
of a seat on the bench of our highest appellate court, to
insist that each system of law be administered according to its
own rules and in conformity with its own
precedents.
[67] These comments by Mignault J. are
consistent with those he made in Curley v.
Latreille(1920), 60 S.C.R. 131, at page 177:
[translation]
It is sometimes dangerous to go outside of a legal system
to seek precedents in another system on the ground that the two
systems have similar rules, except, of course, where one system
has borrowed from the other a rule that was formerly unknown to
it. Even if the rule is similar in both systems, it may not
have been understood or interpreted the same way in each of them
. . . .
[68] It is therefore not surprising that in
Grace & Co., supra Mignault J.
decided, at page 172,[35] that the common law's estoppel by
representation is not applicable in Quebec.[36] To the passage previously
quoted, I will add the following:
. . . May I merely add, with all due deference, that the
use of such a word as "estoppel," coming as it does
from another system of law, should be avoided in Quebec
cases as possibly involving the recognition of a doctrine which,
as it exists today, is not a part of the law administered in the
Province of Quebec.
[69] That decision was followed by
Judge Dussault of this Court in Alameda Holdings
Inc., supra. Faced with arguments concerning the
applicability of the doctrine of estoppel by representation in
Quebec, he stated the following:
70 Counsel for the
appellant pleaded the doctrine of estoppel and that of fins de
non-recevoir. According to counsel, the characteristics and
conditions of application of these two institutions are similar,
and so should be their effects. This is an
over-simplification in my view. I believe that the doctrine
of estoppel cannot be pleaded in the instant case and that it is
the Civil Code of Quebec that applies. In Soucisse, supra,
Beetz J. of the Supreme Court of Canada distinguishes between the
two concepts, while recognizing that there has often been
confusion between the two and that both terms are used. He refers
in particular to Mignault J.'s opinion in Grace and
Company, supra, that the concept of estoppel, as applied in the
English system, is unknown to the civil law.
[70] In Lafarge Canada Inc.,
supra, Nadon J. relied not only on those comments by
Judge Dussault in Alameda but also on the decision of
the Quebec Court of Appeal in Dufresne Engineering Co. Ltd. v.
Sous-ministre du Revenu du Québec, [1984]
R.D.F.Q. 164, to conclude that the rule of estoppel by
representation was not applicable in that case. The passage from
Dubé J.A.'s decision in Dufresne that
concerns the applicability of the doctrine of estoppel in the
province of Quebec is as follows (at page 168):[37]
[translation]
I think, therefore, that there is no reason whatsoever for the
appellants in this case to invoke estoppel; moreover, I do not
think this theory of estoppel could be applied in the province of
Quebec against a clearly defined law; it is up to the courts,
and not government officials, to define the provisions of the
law; Mignault J., in Grace and G. [sic]v.
Perras (1921) 62
S.C.R. 166, 172, ruled clearly on this issue and I think his
opinion is still valid:
I have no doubt whatever that Mr. Justice Greenshields will
fully agree with me when I venture to observe that the doctrine
of estoppel as it exists in England and the common law provinces
of the Dominion is no part of the law of the Province of
Quebec.
Obviously, in this instance I am looking at the theory of
estoppel as simply a rule of evidence precluding a person who
has admitted an established fact from denying it subsequently;
such a theory may of course have some effect as to the decision
to be rendered on the facts, but I cannot consider it
authority to alter the law.
[71] I admit that those decisions dealt with
estoppel by representation, a type of estoppel that is different
from issue estoppel and cause of action estoppel. However, if it
was determined that the doctrine of estoppel by representation is
not part of the law of Quebec because it is a common law rule of
evidence, then the same conclusion must be drawn regarding the
other two types of estoppel, which are also common law rules of
evidence. This conclusion is all the more necessary where there
is already a similar rule[38] in the law (the Civil Code) and where
there is an incompatibility in the concurrent application of the
two rules in terms of their conditions of application and their
effects. In particular, it would be totally inappropriate to
apply the rule of issue estoppel established by the courts (which
applies where the same cause of action does not exist) even
though article 2848 C.C.Q. requires identity of cause
and object. As Dubé J.A. put it so well in
Dufresne, supra, a case law rule cannot be
considered authority to change the law.
[72] Moreover, it is worth noting that in
Quebec doctrine, the position taken with respect to estoppel by
representation is also taken with respect to estoppel per rem
judicatam: it does not apply in Quebec. In particular, in
"L'estoppel dans le contexte du droit civil
québécois" (1986), 46 R. du B. 599,
Claude Nadeau states the following at
pages 603-04:
[translation]
Since rules to this effect have been specifically stated in
the Civil Code and in the Code of Civil Procedure, it seems
obvious that the common law rule concerning estoppel by record
does not apply beyond what our codifiers have provided
therein. Moreover, our courts have been more restrictive
about the part of the judgment covered by the authority of a
final judgment.
[73] In light of all these teachings, one
conclusion alone is in order: the res judicata rule
does not apply in proceedings taken in Quebec, just like the
interpretations of that rule of evidence developed by the common
law courts do not apply. The rule that must instead be applied is
the authority of a final judgment under article 2848
C.C.Q., as interpreted on the basis of the principles of
Quebec and French civil law.
(3) Conditions for
applying the authority of a final judgment in Quebec
(a) General concepts
[74] What must now be determined is how the
rule of the authority of a final judgment should apply in
proceedings taken in this Court in Quebec. One must review the
conditions for applying that rule set out in article 2848
C.C.Q. As previously mentioned,
L'Heureux-Dubé J. provided a complete
overview of those conditions in Roberge. She discussed the
extensive doctrine and jurisprudence concerning the conditions
pertaining to the judgment and the conditions pertaining to
identity. Since the former conditions are not problematic here, I
will merely list them briefly: (i) the court must have
jurisdiction over the matter, (ii) the judgment must be
definitive,[39]
and (iii) it must have been rendered in a contentious matter. As
for the conditions pertaining to identity, there must be identity
of parties, object, and cause. Since only identity of object and
identity of cause are problematic here, I will focus solely on
those. I will first deal with identity of object.
(i) Identity of
object
[75] In her analysis,
L'Heureux-Dubé J. quoted Mignault to
illustrate the scope of this concept (at
pages 413-14):
Mignault, op. cit., at p. 105, offers the following
illustration:
[translation] But what is the object of an action at law?
Clearly it is the immediate legal benefit[[40]] sought
in bringing it, namely the right whose implementation is
desired. Thus, A claims house C from B. The object of the
claim is that A should be declared owner of the house. If this
claim is rejected, A can no longer claim house C from B, but this
judgment will not prevent him from claiming house D from the
defendant. Similarly, A can claim the usufruct of house C from B,
despite the dismissal of his action to claim ownership, because
the object of the two actions is not the same.
[76] However,
L'Heureux-Dubé J. specified that the remedy
sought or the purpose pursued need not be identical: it is
sufficient for the object of the second action to be implicitly
included in the object of the first. One of the authorities she
cited in support of this proposition was Pesant,
supra. She wrote the following at
pages 414-15:
. . . The leading case on the identity of object is Pesant
v. Langevin (1926), 41 Que. K.B. 412, where Rivard J.A.
states, at p. 421:
[translation] The object of an action is the benefit to be
obtained in bringing it. Material identity, that is
identity of the same physical thing, is not necessarily
required. This perhaps forces the meaning of "object"
somewhat, but an abstract identity of right is taken to be
sufficient. "This identity of right exists not only when
it is exactly the same right that is claimed over the same
thing or over one of its parts, but also when the
right which is the subject of the new action or the new
exception, though not absolutely identical to that which was the
subject of the first judgment, nevertheless forms a necessary
part of it, is essentially included in it, as by being a
subdivision or a necessary sequel or
consequence".[[41]] In other words, if two objects are so
related that the two arguments carried on about them raise the
same question regarding performance of the same obligation
between the same parties, there is res judicata.
[77] L'Heureux-Dubé J.
stated in her own words (at page 415):
A logical extension is that if the second action claims
something which is similar or is a necessary
consequence of the first action, then there is identity of
object. Pothier, op. cit., at No. 892, p. 471,
offers the following example:
[translation] . . . if I have succumbed in the action for a
principal sum, I should not be entitled to claim
interest on that sum, as such interest cannot be owed to
me if the principal sum is not owed to me.
[78] Pothier's example clearly
illustrates the concept of inherent object. It should be noted
that, like the immediate object, it is first and foremost a
right. Thus, in the example, there is the right to the principal
sum (the immediate object) and the collateral right to interest
(the inherent object). In both cases, the [translation]
"object of a legal action is the benefit a litigant seeks
or the right the litigant wishes to have sanctioned, limited or
revoked."[42] If one has recourse to a court, it is to have a right
recognized, not to have a fact such as the colour of one's
eyes or one's physical impairment recognized. It is important
to properly understand this concept of object so as not to
confuse it with the concept of cause (to be examined later),
which is the legal fact that gives rise to that right (for
example, the existence of a physical impairment where it is
characterized in accordance with some rule of law).
[79] To the passage from Pesant
reproduced above and quoted by
L'Heureux-Dubé J. in Roberge, it is
worth adding the following passage found at
pages 421-22 of Pesant:
[translation]
. . . Identity of issue may therefore compensate for the lack
of physical identity of object where the close connection that
links the two proceedings to each other is such that
the judge deciding the issue the first time was able to
anticipate the consequence in respect of which it is raised a
second time.
[80] Since the object of a decision is the
recognition of a right, it is normal that the scope of "the
authority of a final judgment" can be determined by
consulting the judgment itself. In Précis de la
preuve, supra, Ducharme notes the following at
page 178, No. 585:
[translation]
. . . whereas, for the purposes of the authority of a final
judgment, the comparison must be made between the disposition of
the judgment and the conclusions sought in the new action at law.
The conclusions sought in an action at law are in fact more
limited in scope than the judgment disposing of that action. The
object of a judgment extends not only to what has been specially
applied for but also to everything necessarily related
thereto.
[81] This statement is based on comments
like those of Rivard J.A., who said in Pesant that
the object of proceedings can be found not only in the
disposition of the judgment but also in the reasons for judgment.
He stated the following on this point at page 423:
[translation]
It is true that, in principle, the authority of a final
judgment must not be given to the reasons for the judgment.
However, the reasons must be taken into account where they are
essential to the decision of the contested point and where
they led to the decision. . . .
[82] To better understand the significance
of the principles stated by Rivard J.A. in relation to the
concept of object, especially the concept of inherent object, we
will look at how he applied them in Pesant[43] (at
pages 422-23):
[translation]
Applying these rules to the actions in warranty in the Lion
and Raymond cases, it first appears that exactly the same
issue- concerning the same right claimed and
the interpretation of the same instrument relied on-was
submitted to and decided by the court in both cases. There is
therefore identity of object.
Aside from the name of the creditor in the main action and the
amount of that creditor's claim, the pleadings are similar
and the exhibits and evidence are the same; as well, the
judgments are the same and the issue, the abstract object of
the action, is identical. Even if one views the right as
being applied to the physical object, that is, the amount
claimed, it must still be concluded that the right that is
the subject of the new action was actually included[[44]] in the
first action and is a necessary sequel or consequence
thereof.
[83] In other words, the material object was
the right to the specific amount of money claimed[45] by Langevin from
Pesant, and the abstract object was the right to be indemnified
pursuant to Pesant's undertaking. Even if the right to the
specific repayment amount is considered the immediate object
(right), the inherent object (the right to be repaid pursuant to
Pesant's undertaking) was included in that immediate object:
that right was [translation] "essentially included in
it [the right to the specific amount], as by being a
subdivision or a necessary sequel or consequence". This
means that the inherent object, as described by Rivard J.A.,
is also a right. In subdividing the "essentially
included" right, care must be taken not to go as far as
the "cause" of that right, because there would then no
longer be a distinction between object and cause.
[84] Finally, Rivard J.A. concluded his
analysis by setting out a simple rule for determining the extent
to which there is identity of object (at
pages 423-24):
[translation]
In short, "the idea that must guide us in determining
whether there is identity of object is as follows: in ruling on
the object of the action, does the judge risk contradicting a
previous decision by affirming a right denied or by
denying a right affirmed by that previous decision? If the
judge cannot rule without running the risk that there be such a
contradiction, identity of object and the authority of a final
judgment exist. . . .
The judgment on the action in warranty in the Lion Co.
case found that Pesant had to indemnify
Langevin . . . in respect of the judgment rendered
against [him] on the main action because . . . he
[Pesant] had undertaken to pay the debts of Langevin's
business . . . and indemnify him in respect of any judgments that
might be rendered against [him] and because Pesant had, in
relation to Langevin, assumed . . . the
obligations . . . that [Pesant's
prête-nom] had incurred [on Pesant's
behalf]. That was the Superior Court's interpretation, in the
Lion Co. case, of the deeds executed by the parties; this
interpretation, expressly set out in the reasons, is
implicitly and necessarily included in the disposition; it is
essential to the decision.
[85] Let us now see how
L'Heureux-Dubé J. applied the condition for
identity of object to the facts of Roberge[46] and described
the "right" at issue (at pages 424-25):
. . . While, as the appellant suggests, the sole issue in that
case related to the default of the debtor and the application of
the giving in payment clause in the deed of loan, nevertheless,
the juridical benefit sought was the ownership of the
property.
. . .
. . . The judgment in favour of the Caisse had to presume that
these securities were validly given. As discussed earlier, even
if this was in error, such error does not prevent the judgment
from acquiring the authority of res judicata on the facts
of this case, given the object of the proceedings, i.e., the
ownership of the immoveable property, and the effect of such
judgment on charges against the immoveable property, provided, of
course, that all other conditions of art. 1241
C.C.L.C. are respected.
(ii) Identity of
cause
[86] We will now look at the concept of
identity of cause as analysed by
L'Heureux-Dubé J. in Roberge,
supra. On this point, she relied on the decision of her
colleague Gonthier J. in Rocois Construction Inc. v.
Québec Ready Mix Inc., [1990] 2 S.C.R. 440. She
wrote the following at pages 416-17:
In our context, my colleague's analysis of
"cause" in Rocois, supra, is very
pertinent to the present discussion and I propose to refer to it
at length. After setting out the different approaches,
Gonthier J. proposes the following test, at
pp. 454-56:
The definitions of "cause" proposed by the various
authors fall along a spectrum ranging from the raw facts
to the potentially applicable abstract rule of law. The
phrases "principal . . . fact which is the
direct . . . basis" for the right,
"legal fact which gave rise to the right
claimed", "origin of or principle giving rise to
the right claimed" or "legal source of the
obligation" are attempts to capture in words the elusive
idea of "cause", on the bridge linking the body of
facts to the legal rule in legal reasoning.
First, it is clear that a body of
facts[[47]]cannot in
itself constitute a cause of action. It is the legal
characterization given to it which makes it, in certain
cases, a source of obligations. A fact taken by itself
apart from any notion of legal obligations has no meaning in
itself and cannot be a cause; it only becomes a legal fact
when it is characterized in accordance with some rule of
law.[[48]] The same body of facts may
well be characterized in a number of ways and give rise to
completely separate causes. For example, the same act may be
characterized as murder in one case and as civil fault in
another. . . .
. . .
It is equally clear that a rule of law removed from the
factual situation cannot be a cause of action in itself. The
rule of law gives rise to a cause of action when it is applied to
a given factual situation; it is by the intellectual
exercise of characterization, of the linking of the fact and the
law, that the cause is revealed.[[49]]
It would certainly be an error to
view a cause as a rule of law regardless of its application to
the facts considered. Accordingly, the existence of two
applicable rules of law as the basis of the plaintiff's
rights does not lead directly to the conclusion that two causes
exist.
Of course, the existence of two rules of law applicable to a
factual situation in practice gives rise to a duality of causes
in the vast majority of cases, because separate rules generally
require different legal characterizations. However, it is not the
fact that there are two applicable rules which is conclusive in
itself: it is the duality of legal characterizations which
may result therefrom. When the essence of the legal
characterization of the facts alleged is identical under either
rule, it must follow that there is identity of cause.
[87] Royer, op. cit., provides a
good summary of this overview at pages 495-96:
[translation]
. . . The cause of an action consists in the facts
alleged in a proceeding that have legal effects. It includes a
material and concrete element, namely, the material facts and
legal acts[[50]] alleged in the written pleadings, and a
formal and abstract element, which is the legal
characterization of those facts. Identity of cause suggests
identity of those two elements.
[88] L'Heureux-Dubé J.
then acknowledged that the characterization of cause will depend
upon the choice one makes between a more general approach to
cause and a narrower one. To provide examples of such
characterization, she quoted two French authors (at
page 418):
Cornu and Foyer, op. cit., provide examples of such
characterization, at p. 410:
[translation] Concrete[[51]] or special concept of
cause.-The cause will be: in an action for nullity of a
contract, fraud, violence, mistake, or minority and interdiction;
in an action for divorce, serious injury, adultery and so
on; in an action to establish natural paternity, notorious
concubinage, fraudulent seduction, unambiguous admission and so
on. Without more detailed discussion of the facts, it is hard to
conceive of a more concrete cause.
Abstract[[52]]or
general concept of cause (clausula generalis).-In an
action for nullity of a contract the cause becomes a defect in
consent or incapacity; in an action for divorce, the fact that
marital life is intolerable; in an action to establish
natural paternity, the natural paternity itself.
. . .
My colleague Gonthier J. in Rocois,
supra, seems to have adopted the narrower approach to
"cause", favoured by Cornu and Foyer, a position
I agreed with in Rocois.
[89] It must be realized that adopting the
narrow approach to cause has the effect of limiting the
application of the authority of a final judgment and has
[translation] "the advantage of not depriving a litigant
of the right to bring a valid action".[53]
[90] Let us now see how the concept of
identity of cause was applied to the facts in Roberge (at
pages 425-26):
The test for identity of cause, as discussed previously, is
set out by Gonthier J. in Rocois, supra, at
p. 456 in the following terms:
When the essence of the legal characterization of the
facts alleged is identical under either rule, it must
follow that there is identity of cause.
Both parties propose that the contract of loan is the
"cause" of the action taken by the Caisse. If this is
so, the "cause" is not the debt between Paul Leclerc
and the Caisse, nor the securities listed in the loan agreement.
These are simply "a body of facts", to use the words of
Gonthier J. in Rocois, supra, at p. 455.
It is the legal characterization of these facts that is
crucial, and these facts are only relevant in the legal
context of a contract of loan, secured by both a hypothec and a
giving in payment clause. The inexecution of the obligation
undertaken in the contract of loan will be the
"concrete"[[54]] cause of action.
[91] The judge concluded her analysis of the
facts as follows (at page 426):
. . . The legal characterization of the facts alleged thus
remains a contract of loan. The inexecution of the obligations
undertaken in that contract is the "cause" and
would constitute but one cause of action. Given that
characterization, the inevitable result is that the requirement
of identity of cause is satisfied.
[92] It is also interesting to note that
Rivard J.A. described cause as follows in Pesant (at
pages 420-21):
[TRANSLATION]
Cause is the legal fact that is the legal basis for the
benefit, the object of the action, the principle
giving rise to the right claimed. . . . There
is thus identity of cause, enabling the authority of a final
judgment to be raised, where the same legal fact is relied on
as the basis for the right.
In the case at bar, the cause of both of the
actions in warranty, that is, the actions in the Lion Co.
case and in the Raymond case, is the undertaking[[55]] that
Pesant allegedly made to pay the business debts of
Langevin . . . under which he would be required to
indemnify [Langevin] for the payments [he would be obliged] to
make to [his] creditors. . . . What gives rise to
the right claimed by Langevin . . . in [his
action] in warranty is the obligation that the defendant in
warranty allegedly incurred toward [him] to pay [his] debts, and
that is his cause of [action], which is identical in the
Lion Co. case and in this one.
There is therefore identity of cause.
(b) Application of the
conditions for identity in tax matters
(i) In income tax
matters
[93] Before applying the conditions for the
authority of a final judgment to the relevant facts of the
applicants' appeals, we will look at how the authority of a
final judgment might generally be applied in tax matters. Aside
from Leduc,[56] I was not referred to any tax decision by a Canadian
court in which that rule was applied with respect to a subsequent
taxation year. I would like to begin by dealing with cases
arising out of the application of the Act, which was the
relevant statute in Leduc. Moreover, by testing the
conditions for identity in the context of a tax statute that has
been in force much longer than Part IX of the ETA, I
think that it will be easier to find the appropriate way of
applying them in the context of the ETA.
[94] First, it is important to note that
income tax assessments made by the Minister almost always involve
a single taxation year.[57] Each year, Canadian taxpayers must file a tax return
computing the amount of tax owed to the Minister. That obligation
recurs annually for all taxpayers who owe tax to the Minister.
The Act is therefore, by nature, recurrent in its
application.
[95] Generally speaking, tax is determined
on the basis of taxable income as computed in accordance with the
Act's provisions. A surtax may be added to that basic
tax, and certain tax credits may be deducted from it, such as the
credit for physical impairment provided for in
sections 118.3 and 118.4 of the Act. On receipt of
the tax return, the Minister must issue a notice of assessment
stating the amount of tax owed by the taxpayer. If the taxpayer
has failed to report income or has deducted an amount to which he
or she is not entitled in computing taxable income or tax, the
Minister may, in making his assessment, add that omitted income
or disallow the deduction that the taxpayer made.
[96] If the taxpayer disagrees with the tax
assessed by the Minister, the taxpayer may file a notice of
objection within the time provided for by the Act and ask
the Minister to reconsider his position. If the Minister refuses
to correct the amount of the assessment, the taxpayer can appeal
to this Court and ask it to render a judgment ordering the
Minister to make a reassessment that will reduce or eliminate the
tax claimed on the basis that the taxpayer was not required to
include the additional income or was entitled to the disallowed
deduction. Moreover, what is subject to being appealed is the
Minister's assessment, not the reasons for the assessment.
Judge Christie explored this question in Hagedorn v.
Canada, [1993] T.C.J. No. 727:
6 When the appellant appealed the reassessment of
October 16, 1989, to this Court regarding his 1988 taxation
year, what was subject to being appealed has been described by
judicial authority in different words but, in my opinion, the
substance of the language employed is the same. What is
open on an appeal to this Court is the result of an
assessment, not the process or reasoning by which it was arrived
at. In Vineland Quarries and Crushed Stone Limited v. M.N.R.,
70
D.T.C. 6043, Cattanach J. said at page 6045:
"As I understand the basis of an appeal from an
assessment by the Minister, it is an appeal against the amount
of the assessment.
In Harris v. M.N.R., (1965) 2 Ex.C.R. 653 [64
D.T.C. 5332], my brother Thurlow said at page 662:
'... On a taxpayer's appeal to the Court the matter
for determination is basically whether the assessment is too
high. This may depend on what deductions are allowable in
computing income and what are not but as I see it the
determination of these questions is involved only for the purpose
of reaching a conclusion on the basic question...'."
In Midwest Oil Production Ltd. v. The Queen, 82
D.T.C. 6092 (F.C.T.D.), Mr. Justice Mahoney said at
page 6094-5: "It is to be emphasized that it
is the Minister's assessment, not his reasons for it, that is
the subject matter of the appeal." On appeal to the
Federal Court of Appeal, Mr. Justice Ryan speaking for the Court
said: "I agree with the reasons for judgment of the learned
trial judge and, accordingly, I would dismiss the appeal with
costs." Leave to appeal to the Supreme Court of Canada was
refused on November 24, 1983: [1983] 2 S.C.R. x.
[97] Even though the Act's
application is recurrent, this does not mean that the Act
applies the same way year after year: changes in the Act
or in a taxpayer's circumstances may lead to different
consequences from one year to the next. We will look at a
hypothetical case to illustrate how the application of the rule
of the authority of a final judgment is applied in tax matters. A
taxpayer operating a business purchases a truck in 1997 to
deliver its goods. That purchase is made under a leasing
contract.[58]
According to the Minister's interpretation of the contract,
the taxpayer is not the owner of the truck (the lessor is in fact
the owner), and the Minister disallows the capital cost
allowance[59]
(CCA) that the taxpayer claimed in computing his business
income for 1997. The appeal, governed by the general procedure,
is heard by this Court, which finds in the taxpayer's favour;
it confirms that the leasing contract gives the taxpayer valid
title to the truck.[60]
[98] For 1999, the Minister makes an
assessment and again disallows CCA for two reasons: the first
being that the taxpayer never became the owner of the truck in
1997 under the leasing contract, and the second (an alternative
reason) being that the taxpayer no longer owned the truck at the
end of 1999 because he had promised to sell it to a third party
to which he had given possession. The taxpayer appeals to the
Court again (under the general procedure[61]). In my opinion, the taxpayer would
be entitled to rely on the authority of a final judgment as a
fin de non-recevoir with regard to the first reason
given by the Minister, since it meets the conditions for
identity. The identity of parties is obvious: the appeal involves
the same taxpayer and the same minister, represented by Her
Majesty.
[99] Several objects can be identified for
1999. There is an immediate object and an inherent object. The
immediate object may involve material identity (the same amount
of tax being contested[62]) or abstract identity (the right to reduce the tax
payable because of CCA). The object may be inherent (involving an
"essentially included" right). To be entitled to
a reduction in tax, the taxpayer must be entitled to CCA, and to
be entitled to CCA, he must, inter alia, be the owner
of the truck at the end of 1999¾the relevant year. To meet
that condition, the taxpayer must show how he became the owner.
One way[63]
involves showing that he acquired title to the truck under the
leasing contract in 1997. That ownership right thus acquired
becomes one of the inherent objects (the right or benefit one
seeks to have recognized) on which a judge must rule. In the
appeal for 1999, that inherent object relating to the ownership
right (or title) acquired in respect of the truck is the same as
the one dealt with in the appeal for 1997.[64] To have been able to conclude that
the taxpayer did not have to pay the tax claimed by the Minister
for 1997, the judge of this Court had to find that the taxpayer
was entitled to CCA in computing his business income. And to have
been able to conclude that the taxpayer was entitled to CCA, the
judge necessarily had to find that the taxpayer had acquired the
truck. As a result, the right (title) arising out of the leasing
had been recognized. There is therefore identity of object.
[100] As for identity of cause, it is necessary to
identify the "fact to be characterized legally", that
is, the "fact giving rise to the right claimed" or the
fact that must be "characterized in accordance with some
rule of law". For the inherent object at issue for 1999 (the
ownership right acquired in respect of the truck, the absence of
which was the Minister's first reason for disallowing CCA),
the fact giving rise to the right is the acquisition of the truck
in 1997 under the leasing contract. The "fact giving rise to
the right claimed" for 1997 (that is, the ownership right in
the truck) is the same, namely, the 1997 acquisition of the truck
under the leasing contract. Therefore, there is identity of
cause.
[101] Since the three identities are all present, the
final decision for 1997 on this issue has the authority of a
final judgment for 1999 even if the judge may have erred in law.
The Minister is not entitled to raise the issue again. The matter
has been decided. Under article 2848 C.C.Q., the
ownership right in the truck acquired under the leasing contract
is conclusively deemed to be the taxpayer's, and the Minister
cannot adduce any evidence to the contrary. The goal of that
article is achieved: the Minister and the taxpayer will not be
allowed to debate the issue in court year after year. The right
acquired as a result of the judgment is protected.[65] Another judge will
not be allowed to reach a conclusion different than the one
reached on this issue.[66] If the Minister was not satisfied with the decision
for 1997, he had only to exercise his right of appeal.
[102] Although the taxpayer was entitled to CCA for the
1997 taxation year, this does not necessarily mean that he is
entitled to CCA for 1999. The conditions set out in the
Act and the Regulations must be met once again for
1999. In particular, the issue of the truck's ownership can
be raised again for 1999 because it is one of the conditions that
apply in calculating CCA for that year. As we saw earlier,
though, it cannot be raised as regards the ownership right in
which there is an absolute presumption that it was acquired in
1997 under the leasing contract. However, the fact that the
decision for 1997 has the authority of a final judgment has no
effect on the issue of whether the taxpayer still owned the truck
at the end of 1999. As article 2848 C.C.Q. states,
the authority of a final judgment "applies only to the
object of the judgment".
[103] In our example, the Minister argues that the
taxpayer disposed of its ownership of the truck under its promise
of sale made before the end of 1999. If it were established that
the promise was with delivery and possession of the truck-which,
according to article 1710 C.C.Q., is equivalent to
sale-the taxpayer could no longer claim CCA on the truck because
it was no longer the owner of the truck at the end of the year.
In the appeal for 1997, the judge had no jurisdiction to decide
the issue of ownership at the end of 1999. There was no appeal
before him for 1999.
[104] This explanation can be recast using the more
technical terms of article 2848 C.C.Q. and
Roberge. The ultimate inherent object (the relevant right
that must be recognized) at issue for 1999 would be as follows:
establishing that the taxpayer still had an ownership right in
the truck at the end of 1999. That object is therefore different
from the one for 1997, which involved establishing an ownership
right existing at the end of 1997. The facts to be characterized
legally (that is, the relevant cause in relation to the object
for 1999) are the raw facts (agreement and delivery) to which the
tax law rule[67]
must be applied: there was a disposition if the truck was sold.
According to the civil law rule-that is, article 1710
C.C.Q., applied to the agreement creating rights and
obligations-the promise of sale with delivery of the truck is
equivalent to sale. If the sale occurred before the end of 1999,
there can be no entitlement to CCA; otherwise, entitlement exists
so long as the other conditions are met. In the appeal for 1997,
the object did not relate to the loss of the ownership right as a
result of a disposition. There was no "sale" in 1997;
that cause did not exist in 1997. Since the object and the cause
of the proceedings for 1999 are not the same as those for 1997,
there can be no authority of a final judgment on that issue. This
means that no fin de non-recevoir can be accepted in
relation to the second reason. The Minister can oblige the
taxpayer, if it bears the burden of proof, to prove that he still
owned the truck until the end of 1999.
[105] Similarly, the fact that it has been held that a
taxpayer is entitled to a tax credit for physical impairment for
1997 does not necessarily mean that the taxpayer is so entitled
in 1999. Let us take an example similar to the facts of
Leduc[68]but replace Mr. Leduc with a
Mr. Lévesque whose wife has cataracts that have made
her blind. We will also assume that, in 1997, it has not yet been
discovered that an eye operation can replace the clouded
crystalline lens with a small lens called an implant. The state
of medical science is such that a doctor has even diagnosed a
"permanent" physical impairment because there is no
known surgical operation to restore vision. Moreover, no
medication, glasses or corneal lenses can enable
Mrs. Lévesque to see. A final judgment by a judge of
this Court in 1998 confirms Mr. Lévesque's
entitlement to the tax credit for 1997 because
Mrs. Lévesque had, according to the judge, a
"severe and prolonged physical impairment the effects of
which were such that her ability to perform a basic activity of
daily living was markedly restricted, that is, all or
substantially all of the time, even with therapy and the use of
appropriate devices and medication, she was blind"
(required impairment).
[106] If the general approach to the concepts of object
and cause were applied without taking account of the different
taxation years, it would have to be concluded that the Minister
could not deny Mr. Lévesque his tax credit for 1999
even though, as a result of a spectacular scientific development,
it has been discovered that an operation to eliminate cataracts
through an implant can be performed. Mr. Lévesque
would be entitled to say that his spouse is deemed to have the
required impairment because of the decision for 1997. In fact, it
is obvious that, since she was operated on in 1999,
Mrs. Lévesque has regained her vision and no longer
has the required impairment.
[107] The most technical reason for concluding that the
decision for 1997 does not have the authority of a final judgment
is that neither the object nor the cause is the same. For 1997,
the abstract object[69] (the right or benefit sought) was obtaining a credit
for physical impairment for 1997. To have that right
recognized, it was necessary to establish the cause (the fact to
be characterized legally in accordance with some rule of law),
namely, that Mrs. Lévesque had the "required
impairment" in 1997[70] (the legal fact) according to the tests in
sections 118.3 and 118.4 of the Act in force in 1997
(the relevant tax law rule). The object and cause for 1997 are
similar to but not the same as those for 1999. To obtain
recognition of the right to the credit for 1999 (the
object), it is necessary to establish, according to the tests in
sections 118.3 and 118.4 of the Act in force in 1999
(the relevant tax law rule), the legal fact that the required
impairment existed in 1999 (the cause). Since there is no
identity of object or cause, the decision for 1997 cannot have
the authority of a final judgment for 1999.
[108] It should be added that the judge who made the
1997 decision had no jurisdiction to determine
Mr. Lévesque's right to a credit for physical
impairment for 1999, since the appeal concerned only the tax
payable in 1997 and the situation in 1997 with respect to the
required impairment. He never found that
Mrs. Lévesque had the required impairment in 1999.
The authority of a final judgment "applies only to the
object of the judgment". Of course, if the Minister
ventured to make a reassessment in 2000 denying the credit for
physical impairment for 1997, the authority of a final judgment
would apply in favour of Mr. Lévesque, who could have
the Reply to the Notice of Appeal struck out under
section 58 of the Rules. In such a case, the three
identities would all be present.
[109] In my opinion, it is necessary to reject the
general approach whereby the abstract object sought is the
disability tax credit, without considering the year for which it
is claimed, and whereby the cause is the required impairment,
without considering either the state of that impairment or the
tax law rule that exists for the year for which the credit is
claimed. As Gonthier J. stated in Rocois,
supra, a fact is not legal unless it has been
characterized in accordance with some rule of law, and a rule of
law is not a cause unless it has been applied to specific facts.
Even if, contrary to what I believe, the object can be defined
without relating it to a particular taxation year, I do not think
that the relevant rule of law applicable to the raw facts can be
determined without taking account of the taxation year.
[110] To characterize those facts, it is first necessary
to prove them as they existed during the year for which the tax
credit is being claimed and to determine the appropriate rule of
law in force for that year. Not just any yearly (commercial)
edition of the Act can be used. A taxpayer (or the
taxpayer's tax practitioner) must first determine the
relevant taxation year and then the legislative provisions in
force for that year. Once those provisions have been identified,
they cannot be applied to just any raw facts. They must be
applied to the facts existing during the relevant year. For
example, the provisions of the Act in force in 2002 cannot
be applied to the facts making up the description of the state of
a person's health in 1997 in order to determine the relevant
legal fact (the required impairment) for 1999. I think that this
is inescapable.
[111] If the Act allowed a taxpayer to be
entitled to the disability credit for a particular year so long
as the taxpayer had been entitled to that credit for a previous
year, then the "authority of a final judgment" for 1997
would make it possible to establish the right to the credit for
subsequent years. In such a case, there would be identity of
object and cause. In such circumstances, the taxpayer could have
a yearly "annuity" as long as no amendments were made
to the Act. The Act is not to this effect.
Verifying the state of a person's health and determining
whether the person has the "required impairment" must
be done each year. Accordingly, the decision recognizing the
right to the credit (the object) for 1997 does not have the
authority of a final judgment in any way in determining the right
to the credit (the object) in the appeal for 1999. The required
impairment (the cause) must therefore be proved for 1999. Because
Mrs. Lévesque had a cataract operation in 1999, has
regained her vision, and no longer has the required impairment,
her husband is not entitled to a transfer of her credit for
physical impairment for 1999.
[112] Moreover, even where the relevant provision (the
tax law rule) for 1999 is exactly the same as the one for 1997
and the state of health in 1999 is exactly the same as in 1997,
as was the case in Leduc, this would not enable us to
conclude that the authority of a final judgment applies. At the
most, we could speak of a mere presumption (as opposed to the
absolute presumption of the authority of a final judgment). The
decision for 1997 might be a persuasive precedent; in other
words, if the same provisions of the Act are applied to
the same facts, we should expect to obtain the same result.
[113] I am convinced that the Supreme Court of Canada in
Roberge would not have found that the authority of a final
judgment existed if, by a strange coincidence, the same
immoveable property had been acquired by P.L. Inc. one year
after the Superior Court's decision, and the caisse populaire
had granted P.L. another hypothecary loan for the same amount and
on the same terms and had again registered the hypothec on the
property of P.L. Inc. rather than on that of P.L. In a new
giving in payment action by the caisse populaire against
P.L. Inc., P.L. Inc. could plead the irregularity of the
hypothec and oppose the fin de non-recevoir
presented by the caisse based on the previous decision having the
authority of a final judgment. Even if the caisse alleged that
the action involved the same parties, the same material object
(being granted ownership of the same immoveable property), a
contract of loan with the same terms (same amount, same giving in
payment clause) and a hypothec that was registered on the same
wrong immoveable property, and assuming that the relevant
provisions of the Civil Code in effect were the same,
there would not be the same cause, that is, inexecution of the
"same" obligation. There would be a different cause,
that is, failure to fulfill an obligation resulting from the
"second" contract of loan. The legal fact giving rise
to a right would be different. It would instead be
"inexecution of the obligation undertaken in
[another] contract of loan". As a result, the
authority of a final judgment could not exist.
[114] Contrary to what occurred in Leduc, even if
the facts and the rule of law were virtually identical, this
example could not be a persuasive precedent because in
Roberge the caisse populaire was successful only because
of the negligence of P.L. Inc. and perhaps the trustee's
unawareness of the defect in the hypothec. In any event, I am
convinced that, in the second giving in payment action, the
Supreme Court of Canada would allow P.L. Inc. to raise its
defence, find that the first decision did not have the authority
of a final judgment and dismiss the action.
[115] Given that it is an absolute presumption, it is
important not to extend the scope of the irrebuttable presumption
of the authority of a final judgment too far. This is even more
true as regards its application in appeals from tax assessments.
Adopting the narrow approach not only to cause, as
L'Heureux-Dubé J. did in Roberge,
but also to object is imperative. To illustrate this point, we
shall reconsider Leduc. Let us assume that the judge had
considered that, for 1997, Mrs. Leduc did not have the
required impairment since she did not require an inordinate
amount of time to shop for her grain product replacements and had
instead ruled in the respondent's favour.
[116] If the interpretation adopted in Leduc were
applied, it would have to be concluded that the authority of a
final judgment would exist from then on, and Mr. Leduc could
no longer be entitled to a credit in subsequent years,[71] even if he could
adduce better evidence about the time his wife spent doing her
shopping.[72] I
do not think that Mr. Leduc would then argue, as he seems to
have done in his appeal for 1999, that not finding that the
decision for 1997 had the authority of a final judgment for 1999
would be a breach of a rule of natural justice. On the contrary,
he would be happy to be told that the decision concerning his
disability tax credit for 1997 did not have the authority of a
final judgment and that he could introduce in evidence all the
relevant facts for 1999 concerning the inordinate effort it took
for his wife to do her shopping.
[117] Those comments on Leduc clearly illustrate
the problem that a general approach to the concept of cause could
present in applying the authority of a final judgment in tax
matters, a problem that is due to the fact that tax is paid every
year, as previously discussed. A taxpayer's duty to pay
income tax recurs every year, and that tax liability must be
computed on the basis of the tax system in force during the
relevant taxation year.
[118] If the question is considered from the standpoint
of public order, the narrow interpretation of the concepts of
object and cause gives taxpayers who have lost an appeal for one
taxation year a second chance, by enabling them to ask a court to
grant them what they are entitled to for another taxation year
without having to defend themselves if they were negligent in the
previous appeal. Account must be taken of the reality that a good
number of taxpayers represent themselves before the Court[73] in appeals governed
by the general procedure[74] and that they do not have all the necessary knowledge
and experience to prepare their appeals properly.
[119] I think it is safe to say that the vast majority
of taxpayers do not like to pay taxes. If, as a result of an
oversight, negligence or even ignorance, taxpayers did not adduce
the evidence needed to establish their right to a tax credit or
deduction in computing their income or to challenge the inclusion
of an amount in their income for a given year, and if taxpayers
could no longer raise the same issues in relation to a subsequent
taxation year because of the authority of a final judgment, then
we would have very disgruntled taxpayers who might be tempted to
find some other ways of reducing their taxes. Since the Canadian
tax system is based on self-assessment, it is essential
that Canadian taxpayers at least be convinced that the tax they
are required to pay is in keeping with the Act's
provisions and that they are not bound by an incorrect
interpretation concerning a previous taxation year.
[120] The interpretation I am adopting could, at first
glance, enable the Minister to mount a fresh attack year after
year and deny taxpayers the tax credit that this Court or an
appellate court has already found them entitled to. That
recurring denial by the Minister would oblige them to apply to
this Court over and over and to engage in the same debate again.
Such conduct by the Minister could be an unacceptable
administrative abuse. Why should a taxpayer who has been
recognized by the Court as having the required impairment have to
come back to the Court when his or her condition or the state of
medical science has not changed and when the relevant provisions
of the Act have not been amended? That was really the crux
of the problem raised in Leduc and the issue was not an
easy one to resolve. It is not impossible that there was
administrative abuse in Leduc, but it would be
inappropriate for me to comment on that specific case.
[121] Nevertheless, it is difficult to understand
generally why the Minister does not apply to the Federal Court of
Appeal for judicial review of a decision made in a case governed
by the informal procedure or appeal a decision made under the
general procedure if he disagrees with a legal interpretation
adopted in such a decision. For example, why oblige numerous
taxpayers to appeal to this Court on the issue of the extent of
the concept of feeding oneself (does it include doing one's
shopping?) when a single appeal to the Federal Court of Appeal
(or a single case of judicial review by that court) could
determine the issue? This conduct by the Minister is certainly a
source of frustration for many taxpayers: what a pointless waste
of time and money, not only for taxpayers, but also for the
Minister and the Court!
[122] To counter administrative abuse by the Minister,
the Court has tools other than the rule of the authority
of a final judgment at its disposal. Before the hearing of his or
her appeal, a taxpayer can apply to the Court to strike out the
respondent's reply to the notice of appeal because it
discloses no reasonable grounds for opposing the appeal.[75] After the evidence
is heard, the taxpayer can ask the Court to order the respondent
to pay costs, including costs on a solicitor and client basis if
the facts are basically the same and the legislative provisions
are the same. Since taxpayers have these methods of discouraging
such abusive practices at their disposal, it is preferable to
adopt a narrow approach to the concepts of object and cause. In
my view, the argument based on the principles of natural justice
that is made to defend a general approach to the concept of cause
is totally unfounded.
(ii) In
GST matters
[123] In my opinion, the approach described for applying
the authority of a final judgment in income tax matters should
also be followed in goods and services tax (GST) matters
because the filing of GST returns and the remittance of the net
tax payable by a registrant under the ETA are recurrent in
nature. Moreover, the rules that apply to an assessment and to
the challenging of an assessment are basically the same.
[124] A registrant that makes a taxable supply
(output) is required to collect the GST payable by the
recipient of the output and to remit that amount to the Minister
on the recipient's behalf. Like other recipients, a
registrant must pay GST when it acquires a taxable supply
(input). However, when the input is acquired by the
registrant in the course of its commercial activities, the
registrant is entitled to claim an input tax credit (ITC) from
the Minister.
[125] A registrant must remit the net tax (the GST
collectible on outputs minus the ITCs claimed on inputs) when it
files its GST return for a particular period.[76] That period varies depending
on the registrant's situation. Some must file an annual
return and others a quarterly return, while a good number of
registrants must file a monthly return. If the amount of net tax
is positive (the GST collectible exceeds the amount of ITCs
claimed), the registrant must remit that amount to the Minister.
However, if the amount is negative (the ITCs claimed exceed the
GST collectible), the Minister must refund it to the registrant.
In both cases, the Minister issues a notice of assessment. Here
again, if there is a disagreement over the amount of the
Minister's assessment, the registrant can exercise a remedy
similar to the one provided for in the Act.
(iii) To the facts of the
applicants' appeals
(1) Procedural background
[126] By way of its motion, each of the
12 applicants is seeking to have the Court recognize that
the 2001 decision has the authority of a final judgment.
They are arguing that this decision is final because the
respondent has not appealed it and, as a result of the authority
of a final judgment, this Court can immediately render a
favourable judgment on their appeal because the conditions for
identity-that is, identity of parties, object and cause-are met
in the case at bar.
[127] Since the 2001 decision was rendered by the
Federal Court of Appeal in the School Board's appeal and
that decision was filed in the record of each of the other of the
12 applicants, I will limit my remarks to the School Board's
motion and simply consider the relevant facts that emerge from
reading its record.[77] The 2001 decision was rendered in case
97-3347(GST)G on the appeal (appeal for 1996) of
November 12, 1997, with respect to the reporting period from
May 1 to May 31, 1996 (May 1996 period). In the
case considered here-1999-4516(GST)G-the appeal of
October 26, 1999 (appeal for 1998), concerns the
reporting period from November 1 to November 30, 1998
(November 1998 period).
[128] For the November 1998 period, the School
Board claimed ITCs of $257,532.78.[78] Neither the Notice of Appeal nor
the Reply to the Notice of Appeal indicates whether those ITCs
relate solely to the GST that became payable during the
November 1998 period or whether they relate instead to a
period that began earlier. Paragraph 12 of the
respondent's Reply to the Notice of Appeal for the appeal for
1996 states that, in its return for the May 1996 reporting
period, the School Board claimed ITCs of $505,273[79] [translation]
"in respect of the GST it has supposedly paid independent
carriers since July 1, 1992[80] [(1992-96 ITC period)]
for the supply of a student transportation service acquired
from those carriers". Since the ITCs of
$257,533 represent about half of the ITCs covered by the
2001 decision, it is highly likely that they also relate to
a reporting period (relevant ITC period) prior to the
November 1998 period.
[129] When the Minister denied the ITCs of $505,273, the
School Board appealed. On February 10, 2000, my colleague
Judge Lamarre Proulx rendered her decision dismissing that appeal
for 1996 and the appeals of the rest of the 12 applicants.
That decision was reversed by the 2001 decision of the
Federal Court of Appeal on October 17, 2001. The
2001 decision is indexed as follows: Commission scolaire
des Chênes v. The Queen, 2001 FCA 264.[81]
(2) 2001 decision
[130] To determine to what extent the conditions for
identity have been met here, we will review briefly the
2001 decision. As we saw earlier, the Minister denied the
ITCs claimed by the School Board in respect of the GST that had
become payable on its inputs for the 1992-96 ITC period,
that is, the student transportation service provided by one or
more independent carriers (the carrier). The Minister
argued that the School Board had not met all the conditions set
out in subsection 169(1) ETA-that it had not acquired
the transportation service (its input) for consumption, use or
supply in the course of its commercial activities. The relevant
legislative provisions are as follows:
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169(1) General rule for [input tax] credits
- Subject to this Part, where property or a
service is supplied to or imported by a person and,
during a reporting period of the person during which
the person is a registrant, tax in respect of the
supply or importation becomes payable by the
person or is paid by the person without having become
payable, the input tax credit of the person in
respect of the property or service for the
period is the amount determined by the formula
A x B
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169(1) Règle générale - Sous
réserve de la présente partie, le
crédit de taxe sur les intrants d'une
personne, pour sa période de déclaration au
cours de laquelle elle est un inscrit, relativement
à un bien ou à un service
qu'elle importe ou qui lui est fourni, correspond au
résultat du calcul suivant si, au cours de cette
période, la taxe relative à
l'importation ou à la fourniture devient
payable par la personne ou est payée par elle
sans qu'elle soit devenue payable :
A x B
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where
A is the total of all tax in respect of the
supply or importation that becomes payable by
the person during the reporting period or that is paid by
the person during the period without having become payable;
and
B is
. . .
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où :
A représente la taxe relative à
l'importation ou à la fourniture
qui, au cours de la période de
déclaration, devient payable par la personne
ou est payée par elle sans qu'elle soit devenue
payable;
B représente :
[. . .]
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(c) in any other case, the
extent (expressed as a percentage) to which the person
acquired or imported the property or service
for consumption, use or supply in the course of commercial
activities of the person.
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c) dans les
autres cas, le pourcentage qui représente
la mesure dans laquelle la personne a acquis ou
importé le bien ou le service pour consommation,
utilisation ou fourniture dans le cadre de ses
activités commerciales.
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123(1) "commercial activity" of a
person means
(a) a business carried on by the person (other
than a business carried on without a reasonable expectation
of profit by an individual, a personal trust or a
partnership, all of the members of which are individuals),
except to the extent to which the business involves the
making of exempt supplies by the person,
. . .
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123(1) « activité commerciale
» Constituent des activités commerciales
exercées par une personne :
a) l'exploitation d'une entreprise
(à l'exception d'une entreprise
exploitée sans attente raisonnable de profit par un
particulier ou une société de personnes dont
l'ensemble des associés sont des particuliers),
sauf dans la mesure où l'entreprise comporte
la réalisation par la personne de fournitures
exonérées;
[. . .]
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123(1) "consideration" includes any
amount that is payable for a supply by operation of
law;
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123(1) « contrepartie » Est
assimilé à une contrepartie tout montant
qui, par effet de la loi, est payable pour une
fourniture.
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123(1) "exempt supply" means a supply
included in Schedule V;
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123(1) « fourniture exonérée
» Fourniture figurant à l'annexe
V.
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123(1) "recipient" of a supply of
property or a service means
(a) where consideration for the supply is payable
under an agreement for the supply, the person who is
liable under the agreement to pay that
consideration,
(b) where paragraph (a) does not apply
and consideration is payable for the supply, the
person who is liable to pay that consideration, and
(c) where no consideration is payable for the
supply,
(i) in the case of a supply of property by way of sale,
the person to whom the property is delivered or made
available,
(ii) in the case of a supply of property otherwise than
by way of sale, the person to whom possession or use of the
property is given or made available, and
(iii) in the case of a supply of a service, the person
to whom the service is rendered,
and any reference to a person to whom a supply is made
shall be read as a reference to the recipient of the
supply;
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123(1) « acquéreur »
a) Personne qui est tenue, aux termes
d'une convention portant sur une fourniture, de
payer la contrepartie de la fourniture;
b) personne qui est tenue, autrement
qu'aux termes d'une convention portant sur
une fourniture, de payer la contrepartie de
la fourniture;
c) si nulle contrepartie n'est payable pour
une fourniture :
(i) personne à qui un bien, fourni par vente, est
livré ou mis à sa disposition,
(ii) personne à qui la possession ou
l'utilisation d'un bien, fourni autrement que par
vente, est transférée ou à la
disposition de qui le bien est mis,
(iii) personne à qui un service est rendu.
Par ailleurs, la mention d'une personne au profit de
laquelle une fourniture est effectuée vaut mention
de l'acquéreur de la fourniture.
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Schedule V
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Annexe V
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Part III
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Partie III
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5. [School busing] - A supply made by a
school authority to elementary or secondary school
students of a service of transporting the students
to or from a school that is operated by a school
authority.
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5. Service consistant à assurer le transport
d'un élève - La fourniture,
effectuée par une administration scolaire au
profit d'un élève du primaire ou du
secondaire, d'un service consistant à assurer le
transport de l'élève entre un point
donné et une école administrée par une
administration scolaire.
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[131] Since the Minister argued that the School Board
was supplying transportation to students, that output represented
an exempt supply, and the transportation activity was therefore
not considered a "commercial activity". According to
the Minister, this meant that the School Board was not entitled
to any ITCs in respect of the GST paid to the carrier.
[132] To finance its transportation service, the School
Board obtained a subsidy from the Minister of Transport of Quebec
under "budgetary rules" adopted each year. That subsidy
was intended to cover the costs incurred by the School Board to
transport students. Relying on the definitions of the terms
"recipient" and "consideration" in
subsection 123(1) ETA, the School Board argued that
the Minister of Transport-and not the students-had to be
considered the recipient of its transportation service and that
that output was therefore not an exempt supply. This meant that
it was carrying on commercial activities and was entitled to
ITCs.
[133] In reasons written by Mr. Justice Marc Noël,
the Federal Court of Appeal ruled in favour of the School Board.
To reach the conclusion that the subsidy paid by the Minister of
Transport was the consideration for the transportation service,
the Court of Appeal first found that the Minister of Transport
had an obligation to pay the subsidy, that the only purpose of
the subsidy was to provide transportation for the School
Board's students and that there was a direct link between the
payment of the subsidy and the supply of the service.
Accordingly, the Minister of Transport had paid the consideration
for the supply otherwise than under an agreement for the supply[82] and was deemed
to be the recipient for the purposes of the ETA (even
though the students were the ones to be provided with the
service).
[134] Before ending this analysis of the
2001 decision, it should be noted that counsel for the
respondent seemingly admitted before the Federal Court of Appeal
that the School Board was entitled to the ITCs if the subsidy
represented consideration paid by the Minister of Transport to
the School Board: in such circumstances, the transportation
service (output) would not be an exempt supply. (See
paragraphs 11 and 12 of the 2001 decision.)
(3) Identity of object
[135] We will now determine whether the conditions for
identity are met as regards the appeal for 1998. Without a doubt,
the parties-the School Board and the respondent¾are the
same as in the appeal for 1996. However, what about identity of
object? It must be remembered that the object is the benefit or
right being sought. Here, the object is easy to determine. In its
appeal for 1996, the School Board sought a rebate for the
negative amount of its net tax (the immediate material object)
for the May 1996 period. Since the Minister had denied that
rebate, the School Board took proceedings in this Court to have
its right to the amount recognized. To be entitled to that
negative amount, it also had to be entitled to ITCs for the
1992-96 ITC period (the inherent object).
[136] The inherent material object[83] (the amount of the ITCs) in
the two appeals is clearly different: one is an amount of
$505,273, and the other is an amount of $257,533. Moreover, we
note that the 2001 decision did not decide this issue. The
disposition of the judgment reveals the following:
The appeal is allowed with costs here and in the Tax Court of
Canada, the decision under appeal is set aside and the assessment
is referred back to the Minister of National Revenue for
reassessment on the basis that the subsidy paid by the
Minister of Transportation to the appellant constitutes
the consideration for the supply of the student
transportation service, subject to the right to audit that was
reserved by the respondent pursuant to paragraph 18[84] of the agreed
statement of facts filed with the Tax Court of Canada.
[137] As can be seen, by ordering the Minister to
recalculate on the basis that the subsidy constituted
consideration "subject to the right" of the Minister to
ensure that the amount of ITCs did in fact represent the total
GST amounts that had become payable on the inputs supplied to the
School Board by the carrier during the 1992- 96 ITC period, the
2001 decision found that the School Board had, at the most,
a conditional right to the ITCs claimed. All that the decision
confirmed was that one of the many conditions that must be met to
be entitled to ITCs (those conditions constituting all the legal
facts giving rise to the right to ITCs) had been met. In other
words, the 2001 decision confirmed the existence of one
component of a cause, not the existence of a right. It could not
confirm such a right because one or more of the other conditions
had not been dealt with, such as the condition that GST amounts
become payable on the inputs during the 1992-96 ITC period
or the condition that the ITC application be made within the
required time.[85]
[138] The inherent abstract object (which does not take
account of the amount itself), namely the right to ITCs, would be
the same in the two appeals if no account were taken of the ITC
period for which they were claimed. For the reasons already set
out above, I believe that the object must be defined in relation
to the period for which ITCs are claimed. In its
2001 decision, the Federal Court of Appeal could render
judgment only as regards the ITC period covered by the appeal for
1996, that is, the 1992-96 ITC period. There would
therefore be no identity of object.
[139] The only other inherent object that is relevant
for the purposes of this case, and on which the Federal Court of
Appeal made a decision, is the School Board's right to the
subsidy. It is an object that might be described as inherent and
ultimate; it is, as it were, the most inherent object. To
determine whether the subsidy constituted
"consideration" within the meaning of the tax law rule
(the rule consisting of the definition of the term
"consideration" for the purposes of the definition of
"recipient", both of which are found in
subsection 123(1) ETA), the Federal Court of Appeal
considered whether the School Board had a right to the subsidy
and concluded that it did: "In my view, there is no doubt
as to the duty of the Minister of Transport to pay the
subsidy" (paragraph 24 of the
2001 decision).
[140] As shown by the Federal Court of Appeal's
analysis, the existence of the right was determined in accordance
with the administrative law rule (see paragraphs 24 and 25
of the 2001 decision). For that purpose, the Federal Court
of Appeal reviewed the relevant legislative provisions:
section 4 of the Transport Act, R.S.Q. 1977,
c. T-12, and, in particular, section 300 of the
Education Act, R.S.Q. 1977, c. I-14,[86] which authorizes the
Minister of Transport to establish budgetary rules "[e]ach
year". Moreover, the Federal Court of Appeal noted that
"[c]ounsel for the respondent, moreover, conceded that
there was such an obligation at the hearing"
(paragraph 25 of the 2001 decision).
[141] Since the subsidies are payable under budgetary
rules established each year, the recognition of a right to the
payment of part of the subsidy pursuant to a given budgetary rule
could also apply to the payment of the rest of the subsidy under
the same budgetary rule. However, since those rules were not
filed and many facts are missing, it is impossible to come to a
decision on this. Moreover, I will add that, even if such
evidence had been adduced and it could be concluded that the
authority of a final judgment applied as regards the existence of
the School Board's right (that is, if it could be concluded
that a subsidy was payable in accordance with the administrative
law rule), this would not be sufficient to conclude that the
subsidies paid constituted "consideration" in
accordance with the tax law rule applicable for the relevant ITC
period, which is different for the purposes of the appeal for
1998.
(4) Identity of cause
[142] As can be seen from the 2001 decision, the Federal
Court of Appeal limited itself to characterizing the subsidy as
consideration given for an output supplied by the School Board to
the Minister of Transport. The importance of that
characterization can be summarized briefly as follows. The fact
that the subsidy was consideration paid by the Minister for the
output made the Minister the recipient of that output. This
excluded the students as recipients of the output, thus making it
impossible for the output to become an exempt supply. The output
could therefore be considered a supply that was part of the
School Board's commercial activities, entitling it to
ITCs.
[143] The School Board's right to ITCs depends here,
as it were, on a crucial legal fact: does the subsidy constitute
consideration paid by the Minister of Transport? The benefit
sought (the object) is the right to ITCs for a particular
reporting period, and the right to ITCs must be established in
accordance with the relevant tax law rule, namely, the rule
applicable to the relevant ITC period-the period during which GST
on the input became payable. The relevant legal fact to be
characterized (which becomes the legal fact giving rise to a
right) for the purposes of that object is the subsidy (raw fact)
characterized in accordance with the relevant tax law rule, that
is, the definition of the word "consideration" for the
purposes of the definition of the word "recipient"
(both of which are found in subsection 123(1) ETA).
If payment of the subsidy constitutes payment of the
"consideration . . . for the
supply"[87] at the relevant time, then the Minister of Transport
is the recipient, which causes the chain reaction leading to the
right to the ITC.
[144] Since the characterization of the raw facts
depends on the tax law rule applicable during the relevant
period, and since that rule must be applied to the raw facts
existing during that relevant period, the cause in the appeal for
1996 would not be the same as the cause in the appeal for 1998
because that appeal does not relate to the same relevant period.
I have no evidence suggesting that there is any overlap of
relevant ITC periods here.
[145] The conditions for identity-identity of object and
of cause-are not met here. Whatever value the authority of a
final judgment in respect of the 2001 decision may have for
the School Board in its appeal for 1996, it is of no use to the
School Board in its appeal for 1998. To establish its right to
the ITCs claimed, it will have to show that all the conditions
set out in the ETA are met for the relevant ITC period to
which its appeal for 1998 applies. It must, inter alia,
meet the condition of having carried on commercial activities at
the relevant time. This means that the first fin de
non-recevoir based on the authority of a final judgment
cannot succeed and must be rejected for both the School Board and
the rest of the 12 applicants.
(B) FIN DE NON-RECEVOIR
ON THE BASIS THAT THE REPLIES TO THE NOTICES OF APPEAL DISCLOSE
NO REASONABLE GROUNDS FOR OPPOSING THE APPEALS
[146] The merits of the second fin de
non-recevoir relied on by the applicants (aside from
those who withdrew their motions during the hearing) must still
be determined. Counsel for the applicants argued that the
respondent's Replies to the Notices of Appeal disclose no
reasonable grounds for opposing their appeals. The reasons he
gave in support of his allegations in his motion are as
follows:
[translation]
10. As regards the other appeals, the Applicants
submit that the Court can apply paragraph 53(c) and
especially paragraph 58(1)(b) of the Tax Court of Canada
Rules (General Procedure) to strike out the respondent's
Replies to the Notices of Appeal because they disclose no
reasonable grounds for appeal or for opposing the appeals given
the judgments rendered by the Federal Court of Appeal in the same
matter and because allowing the proceedings to continue in this
Court would needlessly obstruct the judicial process, which would
be an abuse of the process of this Honourable Court;
11. The fact that the Minister of Finance of Canada has
announced legislative amendments to the disputed provision of
Part IX of the Excise Tax Act after final, enforceable
judgments were rendered by the Federal Court of Appeal concerning
that provision is an obstruction of the judicial process.
Allowing the respondent to wait until the proposed amendments are
in force before this Honourable Court has to decide on the
remedies sought by the Applicants in their appeals now pending
before this Court would bring the administration of justice into
disrepute;
12. Since those proposed legislative amendments have not
yet been passed by the House of Commons and therefore do not have
the force of law, this Honourable Court has the power to grant
the relief sought through this motion under
paragraphs 53(c), 58(1)(a) and 58(1)(b) of the Tax Court of
Canada Rules (General Procedure).
[147] A first preliminary comment must be made. A fin
de non-recevoir based on paragraph 58(1)(b)
of the Rules must be decided by examining the pleadings
only, since no evidence is admissible on an application under
that paragraph (see subsection 58(2) of the
Rules).
[148] Counsel for the respondent cited the decision of
the Supreme Court of Canada in Hunt, supra, a case
concerning a motion to strike based on Rule 19(24) of the
Rules of Court (British Columbia), which is analogous to
paragraph 58(1)(b) of the Rules. Since
paragraph 58(1)(b) is a procedural rule adopted under
the TCCA, I am of the view that it takes precedence over
the rules of evidence of Quebec. And since the Code of Civil
Procedure of Quebec does not apply here[88] and
paragraph 58(1)(b) of the Rules has its origin
in the common law, it is entirely appropriate to adopt the
Supreme Court of Canada's interpretation in Hunt,
which is based on common law case law.
[149] After reviewing English case law, its own
judgments and the decisions of the Ontario Court of Appeal and
the British Columbia Court of Appeal, the Supreme Court of Canada
held that the test for striking out a pleading is whether the
outcome of the case is "plain and obvious" or
"beyond reasonable doubt". Wilson J.,
speaking for the Court, described this rule as follows at
page 980:
Thus, the test in Canada governing the application of
provisions like Rule 19(24)(a) of the British Columbia
Rules of Court is the same as the one that governs an
application under R.S.C. O. 18, r. 19: assuming
that the facts as stated in the statement of claim can be proved,
is it "plain and obvious" that the plaintiff's
statement of claim discloses no reasonable cause of action?
As in England, if there is a chance that the plaintiff might
succeed, then the plaintiff should not be "driven from the
judgment seat". Neither the length and complexity of the
issues, the novelty of the cause of action, nor the potential for
the defendant to present a strong defence should prevent the
plaintiff from proceeding with his or her case. Only if the
action is certain to fail because it contains a radical defect
ranking with the others listed in Rule 19(24) of the
British Columbia Rules of Court should the relevant
portions of a plaintiff's statement of claim be struck out
under Rule 19(24)(a).
[150] Among the decisions cited by Wilson J. is the
decision of the British Columbia Court of Appeal in Minnes v.
Minnes (1962), 39 W.W.R. 112. At page 978, she
quoted Tysoe J.A.:
In my respectful view it is only in plain and obvious
cases that recourse should be had to the summary process
under O. 25, R. 4, and the power given by the Rule
should be exercised only where the case is absolutely beyond
doubt. So long as the statement of claim, as it stands or as
it may be amended, discloses some question fit to be tried by a
judge or jury, the mere fact that the case is weak or not
likely to succeed is no ground for striking it out. If the
action involves investigation of serious questions of law or
questions of general importance, or if facts are to be known
before rights are definitely decided, the Rule ought not to be
applied.
[151] At page 976, she also cited the Ontario Court
of Appeal's decision in Ross v. Scottish Union and
National Insurance Co. (1920), 47 O.L.R. 308 (C.A.),
which concerns a rule similar to the one in
paragraph 58(1)(b) of the Rules. In that
decision, Magee J.A. stated the following: "The
Rule has only been acted upon in plain and obvious
cases, and it should only be so when the Court is satisfied
that the case is one beyond doubt, and that there is no
reasonable cause of action or defence."
[152] Counsel for the respondent also cited the decision
of my colleague Judge Lamarre Proulx in Glenmaroon
Holdings (1986) Ltd. v. Canada, [1996] T.C.J. No. 1558
(Q.L.); appeal dismissed: [1999] F.C.J. No. 443 (Q.L.)
(F.C.A.). In her decision, Judge Lamarre Proulx stated
the following:
10 My analysis of
the questions at issue in the present motion is that although
the decision of the Federal Court of Appeal in Husky Oil
(supra) regarding the interpretation of paragraph 245(2)(a) of
the Act may appear difficult to distinguish from the facts in
the present appeal it remains however that the matter of
artificial transactions is complex and that not all arguments may
have been submitted to the Courts. Moreover, it seems that the
said decision is the first one on this subject. The matter
being complex and the decision being recent, I do not think
that it would be prudent for a Court to strike out the ground for
opposing the appeal as being superfluous and an abuse of the
court process.
[153] The following are some of the grounds for opposing
the second fin de non-recevoir set out by counsel
for the respondent at paragraphs 15-18 of his written
representations:
[translation]
15. The applicants argue that the pleadings in the cases
on which a judgment has been rendered are
identical . . . to the pleadings in their cases.
This is, in fact, the main ground put forward by the applicants.
However, the respondent submits that the Court cannot presume
that the evidence will be the same, and the respondent should
not be deprived of the chance of using the discovery process to
try to adduce new evidence.
16. Moreover, the respondent will be able to make
arguments that were not made to the Court of Appeal. The
respondent will be able to argue that the Minister of Transport
did not have an obligation to pay the subsidy. In support of that
argument, the respondent can cite a recent decision by the
Quebec Court of Appeal, Ruel v. Pauline Marois
(rendered after Commission scolaire des
Chênes), which establishes that a subsidy is a
discretionary act.
Paul Ruel et al. v. Pauline Marois et al.
Que. C.A. 500-09-006303-986, October 30, 2001,
para. 64
17. The respondent can already tell the
Court that she will be able to adduce evidence showing that a
number of the applicants were registered charities within the
meaning of the Income Tax Act.
18. Those charities are thus "public
institutions" within the meaning of section 123 of the
Act, and their supply of school transportation is exempt
under section 2 of Part VI of Schedule V of the
Act. In Commission scolaire des Chênes, the
Court had to determine only whether the supply in question was
exempt under section 5 of Part III of Schedule V
of the Act.
[154] Two of the 12 applicants, the Commission scolaire
Chomedey de Laval and the Commission scolaire de
Rouyn-Noranda, may have been registered charities during
the relevant period at issue. According to counsel for the
respondent, such charities are "public
institution[s]" within the meaning of section 123
of the ETA, and their supply of school transportation is
exempt under section 2 of Part VI of Schedule V of
the ETA. If this were the case, those school boards would
not be entitled to ITCs, since their inputs (the transportation
service provided by the carriers) would not have been acquired
for consumption, use or supply in the course of their commercial
activities. As we have seen, the activities of a business that
involve the making of exempt supplies are not commercial
activities.[89]
[155] Counsel for those two applicants explained that
the only reason he did not agree to withdraw his motion to strike
in regards to them is that their 2001 decision has the
authority of a final judgment. Since that argument has been
rejected, I am convinced that he would have agreed to withdraw
those applicants' motions as well. In any event, it is clear
that it is not appropriate to strike out the respondent's
Replies to the Notices of Appeal of the two applicants in
question given the new defence referred to in the preceding
paragraph. An amendment to those Replies could certainly disclose
a valid ground for opposing the appeals.
[156] As for the motions of all the other applicants, I
agree with counsel for the respondent that the decision rendered
by the Quebec Court of Appeal in Marois on
October 30, 2001, a few days after the 2001 decision of
the Federal Court of Appeal on October 17, 2001, raises
serious legal issues that deserve to be considered in the
applicants' appeals.
[157] In particular, the respondent could rely on the
in-depth analysis in Marois of the basis, nature and
conditions of application of the budgetary rules adopted in
Quebec by the Government of Quebec. In that analysis, the Quebec
Court of Appeal referred to academic texts and court decisions
that do not seem to have been considered by the Federal Court of
Appeal-in any event, it did not refer to them. The following
passage from Marois merits serious examination:
[translation]
64. Those budgetary rules establish a legal tie of a
contractual nature between the government and the
universities whereby the government gives the money to the
universities. The universities accept the conditions set by the
Minister before the subsidy is paid. The legal relationship is
based above all on that specific legal tie and not on a
legislative provision giving the Minister or the government
some sort of management power. Authors Andrée Lajoie
and Michelle Gamache have defined the nature of this legal
relationship particularly well:
The subsidies can therefore be characterized as a
discretionary, bilateral administrative act, that is, an
administrative contract of gift by which the Minister
undertakes to pay an amount that the universities accept
expressly or through acts implying such acceptance.
Therefore, between parties expressly authorized by law,
there is a true agreement of wills in relation to a legal
object, namely, the transfer of an amount for a consideration
that is in keeping with public order. Since it is a gift,
governed here by the civil law unless an exception is created by
statute, the consideration lies simply in the intention to
make a gift.
. . .
This is not to say that the universities receiving the
subsidies have no obligations imposed on them. However,
those they have, particularly with respect to limiting
tuition fees, managing in accordance with certain standards and
being accountable, do not relate to an object to be provided,
are not stipulated in the interest of the contracting
Minister and are meant to be not reciprocal obligations but
preconditions to the formation of the relationship creating the
gift.
. . .
The consequence of this characterization of the
operating subsidies as contracts of gift is that the
Minister becomes the debtor of the allocated amount as soon as
the university has accepted it. Thus, during a fiscal year, the
Minister can no longer unilaterally change the budgetary rules
applicable to that year and deny or reduce the announced
payments.
65. The sanction for a breach by the university of the
conditions it has accepted for the grant has its source in
that same "contractual" tie.
[158] Obviously, I do not have to decide whether such an
analysis is correct or whether it would be accepted by this Court
or the Federal Court of Appeal. All I must decide is whether the
respondent's Replies to the Notices of Appeal disclose no
reasonable grounds for opposing the appeals. Such a conclusion is
not possible here. To repeat what my colleague Judge
Lamarre Proulx said in Glenmaroon Holdings,
supra, "I do not think that it would be prudent
for a Court" to strike out the respondent's Reply to
the Notice of Appeal in each of the applicants' cases, even
if the applicants are in a race against time because the Minister
of Finance wants Parliament to amend the ETA
retroactively.
[159] For all these reasons, each applicant's motion
is dismissed. The Court hereby confirms the order made orally
giving the respondent three weeks to file Amended Replies to the
Notices of Appeal in the cases of the eight applicants. The
respondent is entitled to her costs, calculated as if there had
been just one motion.
Signed at Ottawa, Canada, this 30th day of April 2002.
J.T.C.C.
Translation certified true
on this 3rd day of July 2003.
Sophie Debbané, Revisor
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