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Citation: 2006TCC218
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Date: 20060405
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Docket: 91-509(IT)G, 91-1816(IT)G
91-1946(IT)G, 2004-2787(IT)G
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BETWEEN:
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LINDA LECKIE MOREL,
GEOFFREY D. BELCHETZ,
and ALAN GARBER
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Appellants,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR ORDER
BowieJ.
[1] These motions are brought by the Respondent for an Order under Rule 54 of the Tax Court of Canada Rules (General Procedure), permitting amendments to the Replies to the Notices of Appeal. The appeals in question are representative of a much larger number of appeals, in all of which the Appellants have claimed to be entitled to deduct from their other income certain non-capital losses that they say they have incurred as members of various limited partnerships. The Minister of National Revenue has denied the losses claimed.
[2] At the risk of oversimplification, it is sufficient for the purposes of these motions to say that the fundamental issue between the parties is whether the partnerships in issue ever reached the stage of carrying on business. The Appellants say they did; the Respondent says that they did not. One thing they are able to agree about, however, is that following the financial collapse of the project the promoters of the venture were convicted of fraud and sent to jail. The income tax appeals were held in abeyance for several years while first the prosecutions took place, then appeals from the convictions, and finally an application to the Supreme Court of Canada for leave to appeal. That application was dismissed almost two years ago, giving rise to the present motions.
[3] The amendments the Respondent seeks to make to the Rely in Garber v. The Queen, File no. 2004-2787(IT)G, would add the following paragraphs to the Reply:
16. Following an investigation by the RCMP and Revenue Canada Special Investigations, Bellfield, Minchella and Rochat were charged with two counts of fraud contrary to s. 390(1)(a) of the Criminal Code and two counts of uttering forged documents contrary to s. 368(1) of the Criminal Code in 1995.
17. In April 1996, Rochat pled guilty to an offence of making false entries in the books and records of OCGC under paragraph 239(1)(c) of the Income Tax Act and was sentenced to the equivalent of 2 years imprisonment.
18. In December 1999, following a trial comprised of a judge and a jury, Bellfield and Minchella were each convicted on all counts. The OntarioCourt of Appeal subsequently dismissed Bellfield's and Minchella's appeals of their convictions and sentences. The Supreme Court of Canadadismissed the applications for leave to appeal filed by Bellfield and Minchella on April 29, 2004 and May 13, 2004, respectively.
19. As a result, the following issues have been decided affirmatively by the OntarioSuperior Court of Justice and have been undisturbed on appeal:
a) that Bellfield, Minchella and Rochat, together with Overseas OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A., unlawfully did, by deceit, falsehood or other fraudulent means, defraud the public of tax revenue owing to Her Majesty in right of Canada by making false claims to Revenue Canada in relation to approximately $110,000,000.00 in losses clamed on behalf of thirty-six limited Partnerships managed by the said OCGC.
b) that Bellfield, Minchella and Rochat, together with Overseas, OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A., unlawfully did by deceit, falsehood or other fraudulent means defraud investors in thirty-six Partnerships managed by the said OCGC, of cash deposits paid, the value of promissory notes, and interest payments paid in respect of the said promissory notes to the said OCGC in respect of units purchased by investors in each of the said limited Partnerships.
c) that Bellfield, Minchella and Rochat, together with Overseas, OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A., knowing that documents were forged, unlawfully did cause or attempt to cause Her Majesty in right of Canada to use, deal with, or act on said documents, namely, limited Partnership financial statements, invoices and other documents relating to thirty-six limited Partnerships managed by the said OCGC as if they were genuine, and,
d) that Bellfield, Minchella and Rochat, together with Overseas, OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A., knowing that documents were forged, unlawfully did cause or attempt to cause investors in thirty-six limited Partnerships to use, deal with, or act on said documents, namely limited Partnership financial statements and other documentation as if they were genuine.
30. He further submits that the Appellant is precluded by the doctrine of abuse of process from litigating the following issues which have been decided affirmatively by the OntarioSuperior Court of Justice and have been undisturbed on appeal:
a) that Bellfield, Minchella and Rochat, together with Overseas, OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A., unlawfully did, by deceit, falsehood or other fraudulent means, defraud the public of tax revenue owing to Her Majesty in right of Canada by making false claims to Revenue Canada in relation to approximately $110,000,000.00 in losses clamed on behalf of thirty-six limited Partnerships managed by the said OCGC.
b) that Bellfield, Minchella and Rochat, together with Overseas, OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A., unlawfully did by deceit, falsehood or other fraudulent means defraud investors in thirty-six Partnerships managed by the said OCGC, of cash deposits paid, the value of promissory notes, and interest payments paid in respect of the said promissory notes to the said OCGC in respect of units purchased by investors in each of the said limited Partnerships.
c) that Bellfield, Minchella and Rochat, together with Overseas, OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A., knowing that documents were forged, unlawfully did cause or attempt to cause Her Majesty in right of Canada to use, deal with, or act on said documents, namely, limited Partnership financial statements, invoices and other documents relating to thirty-six limited Partnerships managed by the said OCGC as if they were genuine, and,
d) that Bellfield, Minchella and Rochat, together with Overseas, OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A., knowing that documents were forged, unlawfully did cause or attempt to cause investors in thirty-six limited Partnerships to use, deal with, or act on said documents, namely limited Partnership financial statements and other documentation as if they were genuine.
Minor amendments to paragraph 24 and the addition of paragraph 25 are also proposed to clarify an existing plea of sham:
24. To create the appearance of a business with accompanying business losses, OCGC entered into sham transactions with the Appellant and on behalf of the S/Y Garbo Limited Partnership. At no time did OCGC or its principle, Bellfield, have any intention to carry out the stated business of the S/Y Garbo Limited Partnership. Consequently, the Minister properly disallowed the Appellant's deductions of $15,058.00, $5,381.00, $6,651.00 and $6,552.00 claimed as business losses in the 1984, 1985, 1986 and 1987 taxation years, respectively.
25. All of the Promissory Notes were, in fact, mere shams designed to create an illusion of genuine Promissory Notes and calculated to deceive the investor and the Minister away from the true nature of the transactions.
[4] Counsel for the Appellants took no objection to the proposed amendments to paragraphs 16, 17, 18, 19, 24 and 25. He did, however, oppose the addition of the proposed paragraph 30, which argues that the Appellants are precluded from contesting the facts alleged in the four subparagraphs of proposed paragraph 19. There are some minor variations in the amendments that the Respondent seeks to make to the Replies filed in the other three appeals, but in all cases, it is only the addition of paragraph 30 that is opposed.
[5] In view of the disposition that I propose to make of the motions before me, I do not intend to express any view as to the merits of the arguments that were advanced before me, both for and against the proposition of law stated in proposed paragraph 30. It is sufficient to say that the Respondent relies on the emerging doctrine of abuse of process as an adjunct of issue estoppel, as exemplified in Toronto(City) v. C.U.P.E., Local 79.[1] Counsel argued that to permit the Appellants to relitigate the elements of the offences of which Bellfield and Minchella were convicted would potentially bring the administration of justice into disrepute. The Appellants, for their part, argue that the Canadian Bill of Rights, paragraph 1(a),[2] guarantees to them the right to be heard as to the correctness of the facts underlying the convictions, a right which they did not have before the Courts that dealt with the criminal charges, and which they say they must therefore enjoy in this Court. Both of these positions have considerable merit.
[6] Although most of these appeals have been before the Court for some considerable time, examinations for discovery have not yet taken place. The Appellants' only objection to the addition of paragraph 30 is that it cannot succeed. That is not a matter for me to decide on motions such as these, however. The question to be decided is whether the proposition advanced in proposed paragraph 30 is so forlorn that, if pleaded in the first instance, it would have been susceptible of being struck out.[3] That would be a very high hurdle indeed for the Appellants to surmount, even if the plea they object to were one of fact. It is even higher in the present cases, where the proposed plea is simply as to the legal effect of facts that are not themselves in dispute.
[7] The matter was argued before me as though the proposition advanced in the proposed paragraph 30 had been set down for determination before trial under Rule 58(1)(a). As I have said, there is merit on both sides of the argument, and for that reason I must permit the amendment, there being no discretionary factors that militate against doing so. It may well be that this issue should be determined before trial, but I cannot do so on these motions. The only matter properly before me is whether the Respondent may amend the Replies.
[8] The motions are allowed. The Respondent shall have leave to amend the Reply in each appeal as proposed in the various Notices of Motion. Costs of the motions will be in the cause.
Signed at Ottawa, Canada, this 5th day of April, 2006.
Bowie J.
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