Date: 20001011
Docket: A-192-00
CORAM: LÉTOURNEAU J.A.
ROTHSTEIN J.A.
NOËL J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
AND:
JOHN N. GREGORY
Respondent
Heard at Ottawa, Ontario, Wednesday, October 11, 2000
Judgment delivered from the Bench at Ottawa, Ontario, Wednesday, October 11, 2000
REASONS FOR JUDGMENT BY: NOËL J.A.
CONCURRED IN BY: ROTHSTEIN J.A.
CONCURRING REASONS BY: LÉTOURNEAU J.A.
Date: 20001011
Docket: A-192-00
CORAM: LÉTOURNEAU J.A.
ROTHSTEIN J.A.
NOËL J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
AND
JOHN N. GREGORY
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench by Noël J.A., concurred in by Rothstein J.A.,
at Ottawa, Ontario on Wednesday, October 11, 2000)
NOËL J.A.
[1] This is an appeal from the interlocutory order of Associate Chief Judge Bowman of the Tax Court of Canada, whereby he determined that the question of the constitutionality of section 245 of the Income Tax Act,1 was an appropriate question to be determined under Rule 58(1)(a) of the Tax Court of Canada Rules (General Procedure).
[2] The respondent indicated before the Tax Court that he intended to demonstrate that section 245 was not intelligible, incapable of rational application and as such, unconstitutionally vague. He argued that this could be demonstrated by a facial analysis of section 245 without regard to the particular facts underlying the appeal and indeed irrespective of the factual scenario against which section 245 is sought to be applied.
[3] Bowman A.C.J. proceeded to set the question down on this basis despite the strenuous objections of the appellant. He said in the course of his judgment:2
| Counsel for the appellant (the respondent in this appeal) stated that he does not intend to adduce any adjudicative facts of the type that were considered necessary in Danson or MacKay. His contention is that section 245 is unconstitutional on its face and no further evidence is necessary. He is not alleging any unconstitutional effects on the appellant or on any class of persons that would require the adducing of evidence. His position is that the legislation is impermissibly vague and is therefore contrary to the substantive requirements of the rule of law and in violation of section 7 of the Charter. For this counsel for the appellant contends that no evidence is required. That is the manner in which he chooses to frame the appellant's challenge to the legislation and it is not the court's place (or the Crown's) to tell the appellant how to present his case. |
He went on to say:
| Although there are many facts in dispute in the litigation generally, both in respect of the GAAR issue and the non-GAAR issues, there is no fact in dispute that is relevant to the challenge to the constitutionality of section 245 as it is framed by the appellant. |
before holding that:
| The constitutionality of section 245 is a separate and discrete issue of law that can be determined without reference to any of the other facts that are in issue in this appeal. |
[4] In our view, Bowman A.C.J. erred in law when he agreed to set the question down for preliminary determination without the benefit of the adjudicative facts which have given rise to the application of section 245 in the proceeding before him.
[5] In Ontario v. Canadian Pacific Ltd. [1995] 2 S.C.R. 1031, the Supreme Court expressed the view that the use of hypothetical facts in constitutional adjudication could be resorted to in certain instances. However, with respect to constitutional attacks based on vagueness, Gonthier J., writing for six of the nine judges, stated at 1090:
| Nevertheless, I take the view that reasonable hypotheticals have no place in the vagueness analysis under s. 7. |
| Where a court is faced with a vagueness challenge under s. 7, the focus of the analysis is on the terms of the impugned law. The court must determine whether the law provides the basis for legal debate and coherent judicial interpretation. As I stated above, the first task of the court is to develop the full interpretive context surrounding the law, since vagueness should only be assessed after the court has exhausted its interpretive function. If judicial interpretation is possible, then an impugned law is not vague. A law should only be declared unconstitutionally vague where a court has embarked upon the interpretive process, but has concluded that interpretation is not possible. In a situation, such as the instant case, where a court has interpreted a legislative provision, and then has determined that the challenging party's own fact situation falls squarely within the scope of the provision, then that provision is obviously not vague. There is no need to consider hypothetical fact situations, since it is clear that the law provides the basis for legal debate and thereby satisfies the requirements of s. 7 of the Charter. |
[6] It follows that before embarking on an analysis as to whether section 245 is on the face of it impermissibly vague, the Tax Court had to first attempt to apply section 245 to the particular facts in issue in the appeal before it; in the words of the Supreme Court, if the impugned provision can be applied to the relevant facts, it "is obviously not vague". It is only after attempting to exercise this interpretative function without success that the Court can turn to the broader question raised by the respondent.
[7] Without the relevant adjudicative facts, the question as framed by the respondent is therefore not one which can be adjudicated upon on a preliminary basis. This is sufficient to dispose of the appeal and we refrain from expressing any view on the other grounds advanced by our colleague for allowing the appeal.
[8] The appeal will be allowed with costs.
J.A.
Date: 20001011
Docket: A-192-00
CORAM: LÉTOURNEAU J.A.
ROTHSTEIN J.A.
NOËL J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
AND:
JOHN N. GREGORY
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Ottawa, Ontario
on Wednesday, October 11, 2000)
LÉTOURNEAU J.A.
[1] I agree with my colleagues that this appeal should be allowed. In my view, there is an additional related reason for doing so.
[2] This appeal is against a decision of the Tax Court of Canada made in response to a successful motion brought by the respondent to have the constitutionality of section 245 of the Income Tax Act (Act) decided under Rule 58 of the Tax Court of Canada Rules. Section 245 contains the so-called General Anti-Avoidance Rules (GAAR). Basically, the challenge is that section 245 and the GAAR therein contained are unconstitutional for vagueness as they violate section 7 of the Charter of Rights and Freedoms (Charter) and the rule of law. I should add that the trial scheduled to take place between the parties involved non-GAAR as well as GAAR issues.
[3] The learned Tax Court judge granted the respondent's motion and referred the GAAR issue for a preliminary determination pursuant to Rule 58(1)(a) which reads as follows:
| 58. (1) A party may apply to the Court, |
| (a) for the determination, before hearing, of a question of law 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 |
[1] The respondent's contention before the Tax Court judge was that section 245 is unconstitutional on its fact and no further evidence is necessary. The learned judge resumed the respondent's position as follows:
| [17] [He] stated that he does not intend to adduce any adjudicative facts of the type that were considered necessary in Danson or MacKay. His contention is that section 245 is unconstitutional on its face and no further evidence is necessary. He is not alleging any unconstitutional effects on the appellant or on any class of persons that would require the adducing of evidence. His position is that the legislation is impermissibly vague and is therefore contrary to the substantive requirements of the rule of law and in violation of section 7 of the Charter. For this [he] contends that no evidence is required. |
[2] As my colleagues have pointed out, the judge accepted the respondent's position as stated. At paragraphs 19 and 20 of his decision, he concluded that there was no fact in dispute that is relevant to the constitutionality of section 245 as it was framed by the appellant and that the constitutional issue was a separate and discrete one that could be determined without reference to any of the other facts that were in issue in the proceedings before him.
[3] Before us, the respondent has reiterated his position. Section 245 is unconstitutional on its face for vagueness and no adjudicative facts are necessary to establish that section 7 of the Charter is engaged. It is sufficient for the constitutional issue to be the subject of a reference and determination, the respondent argued, that his section 7 rights can be engaged as a result of the appellant's alleging in its pleadings that section 245 of the Act applies to the transactions to which he was a party and which were made the subject of a reassessment by the Minister of National Revenue.
[4] With respect, I think that the respondent's broad position regarding the constitutionality of section 245 for vagueness, in the absence of evidence of adjudicative facts which would tend to establish that his section 7 rights are engaged, cannot be properly assessed and determined on a Rule 58 reference.
[5] First, as the Supreme Court of Canada said recently in Blencoe v. British Columbia (Human Rights Commission), 2000 S.C.C. 44, File no.: 26789, October 5, 2000, at paragraph 46, the question to be addressed in section 7 challenges is not whether the alleged fact can engage section 7 of the Charter, but whether the respondent's section 7 rights were actually engaged in the circumstances of the case. Here there are, beyond a mere assertion that they will, no evidence whatsoever as to how, why and when the rights to life, liberty and security of the respondent are engaged by the potential application of section 245. I say potential application because it is possible that the liability of the taxpayer in these proceedings be determined by the Tax Court adjudicating upon the non-GAAR issues, thereby making it unnecessary to rule on the constitutionality of GAAR.
[6] It is trite law that a section 7 challenge proceeds in two steps. First, there has to be evidence that a citizen is deprived of his section 7 rights. Second, evidence has to be adduced that this was done in a manner that was not in accordance with the principles of fundamental justice: Blencoe, supra, R. v. Beare [1988] 2 S.C.R. 387, at page 401. In my view, the adjudicative facts necessary to support a challenge under section 7 of the Charter have not been established and the position taken by the respondent is merely "a reasonable hypothetical" which, as the Supreme Court said in Ontario v. C.P. [1995] 2 S.C.R. 1031, at page 1090, has "no place in the vagueness analysis under section 7".
[7] Furthermore, the respondent's position postulates that every citizen is entitled to be free from vague laws that lead to arbitrariness. As section 245 is vague on its fact and leads to arbitrariness, therefore section 245 is unconstitutional.
[8] To accept this position without evidence that the respondent's section 7 rights are engaged elevates freedom from vagueness "to the stature of a constitutionally protected section 7 right", something which cannot be done: see Blencoe, supra, at paragraph 97.
[9] Finally, to say, as the respondent in effect says, that the legislation is impermissibly vague and therefore offends the principles of fundamental justice transforms these principles into a protected interest. As the Supreme Court said in Reference Re Section 94(2) of the Motor Vehicle Act, 24 D.L.R. (4th) 536, at page 548:
| In the framework of a purposive analysis, designed to ascertain the purpose of the s. 7 guarantee and "the interests it was meant to protect" (R. v. Big M Drug Mart Ltd., supra), it is clear to me that the interests which are meant to be protected by the words "and the right not to be deprived thereof except in accordance with the principles of fundamental justice" of s. 7 are the life, liberty and security of the person. The principles of fundamental justice, on the other hand, are not a protected interest, but rather a qualifier of the right not to be deprived of life, liberty and security of the person. |
[10] In my view, there are necessary adjudicative facts with respect to the constitutional challenge which are missing and which lead me to conclude that the question as framed and developed by the respondent cannot be, and should not have been made, the subject of a preliminary determination.
[11] I cannot leave the matter without also expressing some concerns as to the respondent's underlying assumption that the preliminary determination of the constitutional issue may substantially shorten the hearing or result in a substantial saving of costs.
[12] The preliminary determination of the constitutionality of the GAAR provisions would result in the splitting of a trial which, as I have already mentioned, involves non-GAAR as well as GAAR issues. In these circumstances where an adjudication upon the non-GAAR issues may make it unnecessary to deal with the constitutional issue at all, I am not sure that such a splitting would result in a substantial saving of time and costs and in judicial economy. Indeed, the sole issue of the advisability of determining the constitutionality of section 245 before trial has already delayed the hearing on the merits, resulted in substantial costs and taxed scarce judicial resources.
[13] In addition to hearing this first appeal, I fear that this Court would, in the end, have to hear two other appeals rather than a comprehensive one: a first appeal on the constitutionality of section 245 and a second appeal on the non-GAAR issues as well as on the applicability of section 245 to the facts of the case should the section have been found to be constitutional. Some of the economic gains expected to be made at trial have already been lost through the present proceedings and others would also likely be lost as a result of splitting the trial and the appeals.
[14] I would dispose of the appeal as proposed by my colleagues.
"Gilles Létourneau"
J.A.
__________________
1RSC 1985 (5th Supp.), c.1, as amended.
2Reasons for Judgment at paras. 17, 19 and 20 respectively, Appeal Book at 11-12.
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