Citation: 2010 TCC 619
Date: 20101202
Docket: 2009-3904(GST)G
BETWEEN:
SURREY CITY CENTRE MALL LTD.,
Appellant,
(Applicant)
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Hershfield J.
The Order
Sought
[1] The Applicant has appealed
an assessment for GST (the “Appeal”) made under subsection 182(1) of the Excise
Tax Act (the “Act”) but presently seeks an Order granting it leave
to make a Motion under Rule 58 of the Tax Court of Canada Rules (General
Procedure). This recognizes that the application of that Rule is a 2-step
process. The first step is to determine whether the question put is one that
should appropriately be dealt with under that Rule.
[2] I will set out the
complete text of the Order sought under the heading “Related Issues”. However
much of that text is incidental to its main thrust which is as follows:
(a) the Applicant’s proposed Rule
58 Motion to determine whether the Respondent is prevented by one or more of res
judicata, non-mutual issue estoppel or abuse of process from re-litigating
the issue of whether the Appellant is liable under section 182 of the Excise
Tax Act should be heard prior to any further steps being taken in this
Appeal, such as discovery of documents or examinations for discovery;
[3] The re-litigation issue
arises from a Consent Judgment issued by this Court in respect of a liability
under the Act. That judgment disposed of an assessment against a
different taxpayer in respect of the same transaction as that to which the
Appeal relates.
Background
[4] The Applicant, Surrey City Centre Mall Ltd. (the “Appellant Mall
Co.”) which, at all relevant times, was a wholly owed subsidiary of ICBC
Properties Ltd. (“Properties Ltd.”) which, at all relevant times, was a wholly
owned subsidiary of The Insurance Corporation of British Columbia (“ICBC”) which is a provincial Crown
corporation operating a mandatory scheme of motor vehicle insurance in British
Columbia. Properties Ltd., or its subsidiaries, managed all of ICBC’s real estate
investments.
[5] At all relevant times, the Appellant Mall Co. and ICBC
were both registrants for the purposes of Part IX of the Act.
[6] A series of transactions led to the Appellant Mall Co.
acquiring lands in Surrey, B.C. in 1999
and 2000. These lands were intended to be used for the development of a mall
and university space for the Technical University of British Columbia (“Tech
BC”) created by an enactment of the BC legislature to own and operate a new
university in Surrey.
[7] A development agreement was entered into among the
Appellant Mall Co., ICBC, Tech BC and the Province in 2000 whereby the Appellant
agreed to develop and construct a mall and the university space. Under that
agreement the Appellant Mall Co. agreed to lease the university space to Tech BC and Tech BC agreed to lease the space from the Appellant Mall Co.. ICBC agreed to fund
the Appellant Mall Co.’s obligations under the agreement to complete the
university space.
[8] The development proceeded. ICBC advanced funds to Properties
Ltd. which in turn advanced such funds to the Appellant Mall Co. in respect of
the project. In 2002, the Province announced that Tech BC would not fulfill its
obligations to lease the university space.
[9] A settlement agreement was entered into among ICBC,
the Appellant Mall Co., Properties Ltd., Tech BC and the Province. Under the
settlement agreement Tech BC agreed on behalf of itself and the Province to pay
to ICBC or its nominee $41.1 M (the “Payment”) in exchange for ICBC, Properties
Ltd. and the Appellant Mall Co. releasing Tech BC and the Province from all
obligations under the development agreement and related agreements.
[10] The Payment was made but there is no agreement between
the parties to the Appeal as to whom the payment was intended to be made or
benefit or on whose behalf it was received although it is not in dispute that
the Payment was directed to and received in the bank account of ICBC.
[11] In December 2005, the Minister assessed ICBC for GST in
respect of the Payment under subsection 182(1) of the Act. That
provision would be applicable if ICBC received the Payment for termination of
an agreement to make a taxable supply. The taxable supply agreed to be made was
a lease. ICBC was asserted to be the supplier of the lease right.
Subsection 225(1) of the Act calculated the net tax payable based on the
amount received by ICBC. In the alternative, the Minister pleaded that the
Appellant Mall Co. was the party that made the taxable supply but that ICBC was
still liable for the net tax under subsection 225(1) as the recipient of the
payment on behalf of the Appellant Mall Co.. ICBC appealed, pleading, inter
alia, that the Appellant Mall Co. was the party under the development
agreement that made the supply and that ICBC incurred no liability under subsection
182(1) of the Act. Presumably that obviated any concern over the
application of subsection 225(1).
[12] The Minister consented to judgment in favour of ICBC.
The Respondent in the current Appeal pleads that the consent was given solely
on the basis that ICBC was not the party to make the supply under the
development agreement. Presumably the Minister assumed the Appellant Mall Co. would
not later assert that the Minister by thus consenting, was consenting to a
judgment that found, as a matter of law, that the alternative argument, that
the Appellant Mall Co. was the supplier in respect of which subsection 182(1)
could be applied, had been adjudicated. However, the Appellant Mall Co. is indeed
asserting just that. It is asserting that the legal effect of the Consent
Judgment is that the respondent in the ICBC appeal failed in its assertion that
the Appellant Mall Co. made a taxable supply. That legal effect is said to make
the present assessment open to attack on the very grounds now being asserted as
determinable under Rule 58.
[13] Resting behind this initial arena of litigious
confrontation, the Appeal launched by the Appellant Mall Co., in addition to
raising the res judicata issue,
denies liability under subsection 182(1).
That denial appears to be based on the assertion that it was ICBC that received
the Payment for its own account for providing the releases which I take to mean
it asserts that it was
ICBC that provided taxable supplies in respect of which the Payment was received.
In the absence of an agreement otherwise, that binds it, there is no rule of
law that prevents the Appellant Mall Co. from taking a different position than
that taken by ICBC in resolving its dispute with the CRA leaving the Minister
vulnerable to missing a legal remedy to collect a tax that otherwise was
payable. That is what appears will happen if the Appellant Mall Co. ultimately succeeds
in having its position prevail. In any event, the Appellant Mall Co. is now
requesting as a preliminary matter a hearing under Rule 58 seeking an Order that
the subject assessment under subsection 182(1) is res judicata or barred on the basis of non-mutual issue
estoppel or abuse of process.
Related
Issues
[14] In addition to requesting a hearing under Rule 58 seeking
an Order barring the assessment the
request goes on as follows:
…
(b) the Applicant should
obtain a Motion date from the Court that is convenient for the Court and the
parties and file a Rule 58 Notice of Motion returnable on that date;
(c) at the hearing of
the Rule 58 Motion the only evidence will be:
(i) the pleadings in
this Appeal;
(ii) the pleadings as
finally amended in the matter of ICBC v. Her Majesty the Queen,
Court File No. 2007-858(GST)G; and
(iii) the Consent Judgment
issued by this Court in that matter;
and no other evidence will be
adduced by either party; and
(d) the costs of this motion
be in the cause.
[15] The request for the
Order as to the evidence to be allowed to be brought at the Rule 58 hearing,
should one be allowed, raises another issue. Rule 58 provides:
58.(1) A party may apply to the Court,
(a) for the determination, before
hearing, of a question of law, a question of fact or a question of mixed
law and fact raised by a pleading in a proceeding where the
determination of the question may dispose of all or part of the
proceeding, substantially shorten the hearing or result in a substantial
saving of costs, or
…
and the Court may grant
judgment accordingly.
(2) No evidence is admissible
on an application,
(a) under paragraph
(1)(a), except with leave of the Court or on consent of
the parties, or
…
[16] In addition to the
Respondent opposing the request for a Rule 58 hearing, the limitation on the
evidence to be heard, should I allow the request, is also opposed. The Respondent
has argued for the need for further evidence which would consist, amongst other
things, of the two affidavits filed with the Court as part of the current
proceeding, copies of certain documents and transcripts of discoveries held
during the ICBC appeal.
[17] One of the affidavits
referred to above, namely that of Mr. Paul Wilson, an auditor employed with the
CRA, included information supplied to the affiant by counsel for the
Respondent. Mr. Nitikman objected to the inclusion of those parts of the
affidavit that clearly offended the rule against a member of the bar appearing
as a witness in a proceeding in which he is acting as counsel. This rule
extends to giving evidence by providing it to an affiant. I agree with Mr. Nitikman on this
point and, although it may be unnecessary to do so at this stage, I will
include in my Order an order recognizing that they have been struck.
[18] That still leaves Mr. Wilson’s affidavit intact
respecting discussions he had with Mr. Nitikman before and after the signing of
the Consent to Judgment which include a proposed assessment of the Appellant
Mall Co. and a waiver signed and later revoked by it.
[19] That leaves, as well, the affidavit of Ms. Trinie Gee,
an appeals officer with the CRA. That affidavit sets out the background of the
assessment both of ICBC and the Appellant Mall Co. including a voluntary
disclosure, a meeting with Mr. Nitikman and various telephone conversations all
being implicitly suggested as being relevant to the question to be determined
at a Rule 58 hearing, should one be allowed.
Appellant Mall
Co.’s Argument
[20] In respect of the requirement in Rule 58(1)(a) that the
question for determination raised by a pleading may be made by the Court where
the determination may dispose of all or part of the proceeding, substantially
shorten the hearing or result in a substantial saving of costs, counsel for the
Appellant Mall Co. argues that if the result of a determination is to bar the
assessment against the Appellant Mall Co., the appeal will be disposed of which
meets the requirement for allowing the application of the Rule.
[21] As to whether there is an absolute requirement that
there be no facts in issue, the Appellant submits that there is no such
requirement and relies on the Federal Court of Appeal decision in Perera v.
Canada.
13 It
may be useful to recall that Rule 474 does not confer on anyone the right to
have questions of law determined before trial; it merely confers on the Court
the discretion to order, on application, that such a determination be made. In
order for the Court to be in a position to exercise that discretion, it must be
satisfied, as was stated in the Berneche case, that the proposed questions are
pure questions of law, that is to say questions that may be answered without
having to make any finding of fact. Indeed, the purpose of the Rule is to have
the questions answered before the trial; it is neither to split the trial in
parts nor to substitute for part of the trial a trial by affidavits. This
is not to say, however, that the parties must agree on the facts giving rise to
the legal questions; a legal question may be based on an assumption of
truth of the allegations of the pleadings provided that the facts, as alleged,
be sufficient to enable the Court to answer the question. [footnotes omitted,
emphasis added in the Appellant’s brief].
[22] Furthermore, counsel for the Appellant Mall Co. notes
that Rule 58(1)(a) was amended in 2004 to add the words “a question of fact or
a question of mixed law and fact”, thereby making it clear that a Court may
make a finding of fact on a Rule 58 Motion, so there need not be complete
agreement on the facts, so long as the Court is capable of making a finding of
fact on the evidence presented at the Rule 58 Motion.
[23] Further, counsel for the Appellant Mall Co. asserts
that in the Motion at bar, the pleadings and the Consent Judgment in the ICBC appeal
and the pleadings in the Appellant Mall Co. Appeal are a matter of record. Those
are the only records that are relevant to the pleas of res judicata,
issue estoppel and abuse of process. While the parties do not agree on all the
facts that might eventually be relevant to the issue of whether the Appellant Mall
Co. is liable under subsection 182(1), none of those facts bear on the res
judicata, issue estoppel or abuse of process issues. And further, in any
event, solely for purposes of this request, the Applicant is prepared to admit
to the facts asserted in the Reply other than two.
[24] First, there is no admission that the basis for the
Consent Judgment was solely that ICBC had no supply obligation under the
Development Agreement. This means that the Appellant Mall Co. will insist on
the factual assertion, drawn from the Consent Judgment itself, that the Consent
Judgment reflects a basis for it that includes a finding that ICBC was not
liable under subsection 225(1) of the Act. This in turn means the
Consent Judgment has thereby found the Appellant Mall Co. not liable under
subsection 182(1) since if it were, subsection 225(1) would have applied to
ICBC.
[25] Second, the Appellant Mall Co. does not agree with the
statement in the Reply that asserts “ICBC’s appeal involved an assessment
against ICBC and not against the Appellant” Admitting this asserted fact, would
presumably suggest that the Consent Judgment could only dispose the ICBC appeal
and have no impact on the current Appeal from an assessment of a different
party. Such impact is at the heart of Appellant Mall Co.’s request for a
determination. It argues that that is the impact in law.
[26] It is also pointed out that this Court has previously
relied on Rule 58(1)(a) to determine whether a party is prevented from
litigating one or more issues under res judicata, issue estoppel or
abuse of process and that same may be based on a Consent Judgment. The authorities
cited are Mortensen v. The Queen and
Goodfellow v. The Queen.
[27] Counsel for the Appellant Mall Co. acknowledges that res
judicata or issue estoppel will only apply if the burden imposed on the
party seeking to invoke it satisfies the burden on it of proving that the Rule needs
to be applied to prevent a party from re-litigating a matter.
[28] Counsel for the Appellant Mall Co. points out the
distinction between the doctrine of abuse of process and res judicata by
quoting from Golden et al. v. The Queen:
28 The
principal difference between issue estoppel and abuse of process to prevent
relitigation is with respect to the question of mutuality of parties and
privity. Abuse of process does not require that the preconditions of
issue estoppel be met. Abuse of process can therefore be applied when
the parties are not the same but it would nonetheless be inappropriate to allow
litigation on the same question to proceed in order to preserve the courts’
integrity. [emphasis added in the Appellant’s brief]
[29] Counsel for the Appellant Mall Co. emphasizes that
whether a party has committed an abuse of process is decided by looking at the
integrity of the judicial process and not the status, motives or rights of the
parties. The Federal Court of Appeal has made this point in Garber, Belchetz
and Morel v. The Queen
as follows:
39 In
terms of how to exercise one’s discretion in applying the abuse of process
doctrine, Justice Arbour provided a number of considerations in deciding when
it would be an abuse of process to relitigate a matter in CUPE at paragraphs
51-2:
Rather than focus on the motive or status of the
parties, the doctrine of abuse of process concentrates on the integrity of the
adjudicative process. …
[30] Accordingly, abuse of process focuses on whether the
judicial system has been abused, not on whether the parties have been abused.
Therefore, an examination for discovery of the Appellant Mall Co. or ICBC to
determine if the Crown has been abused by bestowing a benefit on the other
parties would be irrelevant.
[31] Lastly, it is argued that this Court should not look
behind the Consent Judgment. It is argued that with regard to each of res
judicata, issue estoppel and abuse of process, it is clear that a court in
a subsequent proceeding cannot look behind an earlier Consent Judgment to
examine the negotiations leading up to the Consent Judgment. This was
conclusively determined in the BC Supreme Court, and confirmed by the BC Court
of Appeal in Prairie Hydraulic Equipment Ltd. v. Lakes District Maintenance
Ltd.
Respondent’s Argument
[32] Respondent’s counsel
argues that res judicata, issue estoppel and abuse of process all
involve exercises of the Court’s discretion and that they focus on issues of
fairness between the parties. It is argued that fairness will depend on a
balancing of various interests to arrive at the most just result which requires
a detailed, factual underpinning not found simply in the pleadings.
[33] Respondent’s counsel
reviews the two branches of res judicata: cause of action estoppel and
issue estoppel. Cause of action estoppel precludes a person from
bringing an action against another when an earlier proceeding has determined
that same cause of action. That is, it requires a final decision of a court of
competent jurisdiction in the prior action. While not elaborated on by
Respondent’s counsel, it also requires, amongst other things, that the parties
to the subsequent litigation must have been parties to or in privy with the
parties to the prior action [mutuality]. Issue estoppel has three
pre-conditions: a) the issue must be the same as the one decided in the prior
case; b) the prior judicial decision must have been final; and c) the parties
to both proceedings must be the same, or their privies.
[34] Respondent’s counsel
asserts that the doctrine of non-mutual issue estoppel is an American concept
that is not accepted as a general principle of Canadian law. The American
concept would drop the third pre-condition noted above in respect of issue
estoppel. That is, the condition respecting mutuality of parties is not
required under a doctrine of non-mutual issue estoppel. It is suggested that
even this doctrine encounters difficulties when used offensively as the Respondent
asserts Appellant Mall Co. seeks to do in this case.
[35] Further, it is
asserted that non-mutual issue estoppel is not a mechanical, self-applying
rule. It contains discretionary elements which may militate against its
application. Its abandonment of mutuality requires it to contain sufficient
flexibility to prevent unfairness.
[36] With respect to
abuse of process, it is submitted that it is a flexible doctrine that does not
bar litigation where its continuation would enhance the integrity of the judicial
system, including when fairness dictates that the original result should not be
binding in the new context.
[37] It is also
acknowledged that abuse of process may be established where proceedings would
violate the fundamental principles of justice underlying the community sense of
fair play and decency.
[38] In focusing on the
Court’s discretion to apply the doctrines sought to be applied by the Appellant
Mall Co., the Respondent underlines that their purpose is to prevent unfairness
and cites the Supreme Court of Canada in Toronto (City) v.
Canadian Union of Public Employees (C.U.P.E.), Local 79:
53 … There are many circumstances in which the bar
against relitigation, either through the doctrine of res judicata or
that of abuse of process, would create unfairness. …
[39] In order to
determine the question of fairness and justice the Court must look at the entirety
of the circumstances to see whether the application of the res judicata
or the abuse of process doctrines would work an injustice in this particular
case.
That is, the Court requires a proper factual underpinning which includes a
complete picture of what led up to the execution of the Consent Judgment in the
ICBC Appeal. This can be
achieved by having the trial Judge, hearing the totality of the evidence, decide
whether in fairness the Respondent should be precluded from pursuing the
assessment against the Appellant Mall Co.. The question asked cannot be
determined in the abstract or in a vacuum.
Determining or assuming in advance what facts may or may not be relevant to the
determination of a question of law is asserted to be troublesome and heightens
the importance of at least allowing for discoveries before considering such a
hearing. The
Respondent’s right to discoveries would be unfairly barred if the evidentiary
limitations sought by the Appellant Mall Co. are accepted. It is asserted, as
well, that the discoveries relating to the ICBC appeal, amongst other things,
are necessary to give the necessary factual picture.
[40] As well, the Court’s
discretion must be exercised, in addition to fairness, on the basis of
convenience and efficiency.
The Respondent’s counsel argues that the application of Rule 58 would only
serve to bifurcate the proceedings and would not likely result in a substantial
saving of time or cost. Indeed, it could increase the cost if the Court
determines that none of these doctrines preclude the Respondent from litigating
the assessment against the Appellant Mall Co..
[41] Again focusing on the
Court’s discretion, the Respondent emphasizes the importance of the principles of
law that may be involved, such as non-mutual estoppel, have far-reaching effect
and are of serious public concern given their resonance within the system of administration
of justice. As such, consideration of the application of such principles should
not be considered in a vacuum.
Analysis
[42] Counsel for
Appellant Mall Co. has argued that the facts set out in the pleadings in this Appeal, the pleadings as finally
amended in the ICBC appeal, and the Consent Judgment issued by this Court in
that matter be the only evidence allowed to be adduced by either party on the
hearing of a Rule 58 determination. As well, the Appellant Mall Co. is prepared to admit to the facts asserted in the Reply to the Appeal other
than the two referred to above.
[43] There is no admission that the basis for the Consent
Judgment was solely that ICBC had no supply obligation under the Development
Agreement. However, this is the very basis on which the Respondent relies to
escape the determination sought by the Appellant Mall Co.. The purpose of the Respondent’s
request for more evidence is to demonstrate that the basis for the Consent
Judgment was solely that ICBC had no supply obligation under the Development Agreement
and that the question of whether the Appellant Mall Co. had made the taxable supply in question has not
been litigated or decided.
[44] Further, the Appellant Mall Co. does not agree with the
statement in the Reply that asserts “ICBC’s appeal involved an assessment
against ICBC and not against the Appellant.” As noted earlier in these Reasons,
admitting this asserted fact would presumably suggest that the Consent Judgment
could only dispose the ICBC appeal and have no impact on the current Appeal
from an assessment of a different party. Such impact is at the heart of
Appellant Mall Co.’s request for a determination. It argues that that is
the impact in law.
[45] I agree with the Respondent’s position in this matter. Indeed,
I am of the view that the correctness of that position should be self-evident. As
Dickson J. (as he was then) wrote when discussing the requirements for an
estoppel of this sort:
It will not suffice if the question arose
collaterally or incidentally in the earlier proceedings or is one which must be
inferred by argument from the judgment.
[46] We must be all the more wary of drawing inferences from
consent judgments, which provide no reasons. The result, and only the result,
to the parties to the appeal that the consent relates to, is normally all that
can be drawn from such a judgment. That is, all that can be taken as disposed
of by a consent judgment is that which can obviously and necessarily be drawn
from it as being disposed of. That which is not expressly declared on the face
of the judgment cannot be presumed to have been dealt with or disposed of unless
it is, nonetheless, necessarily such an integral part of it as to require a
finding that it has effectively been dealt with in express terms; beyond that
there can be no such thing as res judicata by implication.
It is only the necessary aspects of a consent judgment, not the inferred or possible
indirect aspects of it, that can be said to have been disposed of by the Court.
More simply put, when no reasons or factual basis for a judgment is given, it
is not possible to say what issues and arguments a litigant is estopped from
raising except for the single issue resolved by the judgment. In this case, the
only issue resolved on the face of the judgment was the liability of ICBC.
[47] Further, the elevation of an agreement to a judgment
does not necessarily change the underlying premises of the agreement which
might still stand as between the parties and others, provided it is not
inconsistent with the direct result of the judgment. In some cases it has even
been held that a consent judgment is not a judicial determination of the merits
of a case and can be defeated on the same grounds as the agreement.
While in tax cases a consent judgment can be taken as judicial approval of the
merits of the particular agreed result, it cannot be taken as addressing the
merits of any other aspect of the matters that are entangled in the litigation
events that gave rise to the agreement and judgment.
[48] It is all the more important then, in such cases, to
ascertain what the real matter of controversy in the case was and the enquiry
required to make that determination cannot be limited to what is found on the
record. Indeed, limiting the enquiry, in this way, in any genre of case seeking
to find what issues are res judicata, has a heritage of not being
encouraged by the Courts.
[49] To argue that the Consent Judgment does more than
dispose of the liability of ICBC puts the onus on the party asserting it to
demonstrate a compelling factual background that would lead to a finding that limiting
the result of the Consent Judgement would lead to an abuse that would undermine
in some material way the administration of justice. The need for that factual
background is exactly what the Respondent is asserting is required. Granting that
request, however, undermines the purpose of applying Rule 58 in the first
place.
[50] Further, without an
esoteric analysis of when and why res judicata, non-mutual issue estoppel or abuse of process are bars
to litigation, it strikes me as self- evident, in this case, that there is no
danger to the administration of justice in allowing the litigation to proceed.
Rather, the administration of justice could be more damaged by applying those
doctrines, in this case, than by not applying them.
[51] Further still, the allowance of the request for a Rule 58
determination is discretionary. Even if I have placed less reliance on the Appellant
Mall Co.’s counsel’s well-crafted arguments and use of authorities than he
believes to be appropriate, he is not prevented from urging the trial judge to
consider, ab initio, the bar to the re-litigation issue raised in the
Notice of Appeal. My finding ultimately is only to dismiss the request for a
Rule 58 determination.
[52] In short, I embrace all the Respondent’s arguments. I
see no need to review the authorities relied on further. They are referred to in
these Reasons and afford me sufficient comfort in arriving at my conclusion to
dismiss the request.
Signed
at Ottawa, Canada this 2nd day of December 2010.
"J.E. Hershfield"
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