Docket: A-516-15
Citation:
2016 FCA 259
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CORAM:
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GAUTHIER J.A.
DE MONTIGNY J.A.
GLEASON J.A.
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BETWEEN:
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DAVID TUCCARO
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Appellant
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and
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HER MAJESTY THE
QUEEN
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Respondent
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REASONS
FOR JUDGMENT
GAUTHIER J.A.
[1]
Mr. Tuccaro appeals from an interlocutory order
of the Tax Court of Canada (TCC) (2015 TCC 290) dismissing his motion to strike
portions of Her Majesty the Queen’s (Crown) reply to his amended notice of appeal.
[2]
Mr. Tuccaro argues that the TCC erred in law in
failing to strike the portions of the Crown’s reply relating to whether he was
estopped from asserting a treaty right to a tax exemption pursuant to Treaty 8
of 1899.
[3]
I agree with Mr. Tuccaro that this Court must
apply the standards of review set out in Housen v. Nikolaisen, 2002 SCC
33 at paras. 8, 10, 37, [2002] 2 S.C.R. 235 (see also Hospira Health
Corporation v. Kennedy Institute of Rheumatology, 2016 FCA 215 at paras.
69, 72, 78-79, 83).
[4]
The only question before us is whether it is
plain and obvious that our Court, in an earlier decision (Tuccaro v. Canada,
2014 FCA 184 [Tuccaro 2014]) decided the issue raised in the paragraphs
of the Crown’s reply that are the subject of Mr. Tuccaro’s motion to strike,
and therefore, that the TCC had to grant Mr. Tuccaro’s motion on the basis of res
judicata (more particularly on the basis of issue estoppel).
[5]
To answer this question, one must briefly
consider the relevant history of these proceedings.
[6]
Mr. Tuccaro, a status Indian, filed an appeal
before the TCC from a Notice of Confirmation issued by the Minister of National
Revenue on December 27, 2012. He alleged at paragraph 8 of his notice of appeal,
and more clearly so in his then draft amended notice of appeal, that he was
exempt from taxation by virtue of section 87 of the Indian Act, R.S.C.,
1985, c. I-5 and by virtue of Treaty 8.
[7]
Pursuant to Rule 53(1)(a) and (c) of the Tax
Court of Canada Rules (General Procedure), SOR/90-688 (TCC Rules of
Procedure), the Crown originally filed a motion to strike paragraph 8 of
the notice of appeal relating to Treaty 8 on the basis that it constituted an
abuse of process and would delay the hearing (the 2013 Motion). By the time the
motion was argued, a draft amended notice of appeal was before the TCC and the
argument proceeded based on it. Although the Crown also challenged other parts
of the pleadings, these are not relevant to the matter before us. Thus, the
expression “the 2013 Motion” will only refer to the part of the motion relating
to the allegations relevant to the argument that Treaty 8 provided for a tax
exemption.
[8]
The TCC granted the 2013 Motion because, in its
view, Mr. Tuccaro’s argument based on Treaty 8 had no chance of success given
that the TCC was bound to apply the decision of this Court in Benoit v.
Canada, 2003 FCA 236, 228 D.L.R. (4th) 1 [Benoit], which it
described as establishing the law regarding “the lack
of legal effect of Treaty 8 in granting tax exempt status to its signatories”
(2013 TCC 300, at paras. 9 and 10).
[9]
This decision of the TCC was appealed to this
Court, and it was modified (paragraphs 1 and 2 of the TCC Order were deleted)
so as to dismiss the 2013 Motion in respect of all references to a Treaty 8
right to a tax exemption, including paragraphs 14 to 32 of the draft amended
notice of appeal.
[10]
After the filing of the amended notice of appeal
containing the references to a Treaty 8 right to a tax exemption, the Crown
filed its reply including the paragraphs at issue before us. This prompted the
filing of Mr. Tuccaro’s motion to strike from the reply all references relevant
to the defence that Mr. Tuccaro was estopped from arguing a tax exemption based
on Treaty 8 on the basis of Benoit. At the hearing, the parties agreed
that this was limited to paragraphs 42-46 and 56 of the reply.
[11]
The Crown also filed a motion pursuant to Rule
58 of the TCC Rules of Procedure to determine before trial the question
of whether, based on Benoit, Mr. Tuccaro was estopped from relying on
Treaty 8 to claim a tax exemption. This motion was dismissed. Essentially, the
TCC found that it would not be appropriate to deal with this issue by way of
another preliminary motion, regardless of whether the argument raised in Mr.
Tuccaro’s motion (i.e. that the Crown was estopped from raising issue estoppel
as a defence) was accepted or not. The TCC noted that it was not satisfied that
the proposed question would “probably be decided in
such a way as may dispose of the [appeal] or some substantial part of it”
(2015 TCC 290 at paras. 29 in fine and 30). The TCC was also not
convinced that such preliminary motion would save time and costs (2015 TCC 290
at paragraph 33).
[12]
There is no need to say more in respect of this
portion of the TCC decision, for it is not the subject of the appeal, and it is
now final. However, nothing herein should be construed as an endorsement of the
TCC’s findings with respect to the motion under Rule 58.
[13]
On my reading of the decision before us, the TCC
dismissed Mr. Tuccaro’s motion to strike the paragraphs in the reply relating
to issue estoppel because in its view, this issue was “not
squarely before [our Court in Tuccaro 2014] as one that could be dealt with”
(my emphasis), and thus it was not clear that the Crown’s argument was bound to
fail before the trial judge (2015 TCC 290, at paras. 44-45, 47). The TCC made
other comments that I do not consider determinative and, as such, they do not
warrant further discussion.
[14]
Like the TCC, I am of the view, that the only issue
that was properly before our Court in Tuccaro 2014 was whether
the TCC made a reviewable error in determining that it was plain and obvious
that Mr. Tuccaro’s allegation that he was entitled to a tax exemption based on
Treaty 8 was an abuse of process because the TCC was bound as a matter of law to
follow Benoit (Tuccaro 2014, at paragraph 19).
[15]
Indeed, our Court in Tuccaro 2014
expressly noted that the parties had made no submissions whatsoever, either
before the TCC in 2013 or to our Court in 2014, with respect to issue estoppel
(Tuccaro 2014, at paras. 17, 19, 26). In addition, our Court never considered
the argument that Mr. Tuccaro now makes, namely, that the 2013 Motion determined
whether res judicata and, more precisely, issue estoppel applied in
respect of Benoit simply because the Crown based the 2013 Motion
on the doctrine of abuse of process
[16]
In fact, it is quite clear from the review of
the 2013 Motion (particularly paragraph 6(c)), the memoranda of the parties
before the TCC in 2013 and those filed before our Court in 2014, that the Crown
in fact never raised res judicata (be it cause of action estoppel or
issue estoppel). However, it would appear that our Court in 2014 may not have
had the benefit of reviewing the memoranda filed before the TCC as these are
usually not included in the Appeal Book.
[17]
Thus, I am satisfied that our Court’s comments
in Tuccaro 2014 in respect of res judicata and issue estoppel
arose solely from the TCC’s misapprehension or mischaracterization of the
grounds on which the Crown challenged the relevant portions of Mr. Tuccaro’s notice
of appeal and later on, its draft amended notice of appeal (2013 TCC 300, at
paragraph 2(1)). Indeed, in its said decision, the TCC only ever discussed the
argument actually made before it – that it was bound to follow the law set out
by this Court in Benoit. This is particularly clear when one considers
that the Crown also relied on Dumont v Canada, 2005 TCC 790, 2006 D.T.C.
2160, affirmed 2008 FCA 32,where the TCC noted that Benoit clearly
established that the same Treaty 8 argument was without merit. It appears that
the TCC understood (or rather misunderstood) that stare decisis was
somehow part of the doctrine of res judicata. However, the actual concept
of res judicata was never advanced before the TCC and is quite distinct
from the type of abuse of process actually relied upon by the Crown.
[18]
Indeed, as noted by the Supreme Court of Canada in
Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63 at paragraph 37,
[2003] 3 S.C.R. 77 (Crown’s memorandum, Appeal Book Volume 1, tab J at paragraph
30 and footnote 34), there is a critical distinction between res judicata
(including issue estoppel) and an abuse of process based on a previous
determination of an issue by a court on an identical matter that arose between
different parties. There is no need for the party relying on such an abuse of
process to establish mutuality or privity i.e. that the same parties or their
privies were involved in the previous case to succeed. This explains why, before
our Court in 2014, the parties focussed on the application of the then recent
decision in Canada (Attorney General) v. Bedford, 2013 SCC 72, [2013] 3
S.C.R. 1101, and the Crown filed no evidence in respect of privity.
[19]
Having found that the decision of this Court in Benoit
was based on the facts of the case (more particularly that the evidentiary
record did not support the finding of fact made by the trial judge) as opposed
to a finding of law, our Court held in Tuccaro 2014 that the TCC had
erred in law in construing Benoit to be a binding legal precedent with
regard to the question of the existence of a Treaty 8 right to a tax exemption
(Tuccaro 2014, at paras. 20-22). Considering the type of motion before
it, this necessarily meant that the TCC could not conclude that it was plain
and obvious that this ground of appeal had no chance of success.
[20]
Despite the able arguments to the contrary of
counsel for Mr. Tuccaro, in my view the other comments in Tuccaro 2014 directed
to the possible application of res judicata were necessarily obiter
considering that the argument was never raised in the 2013 Motion or addressed
by the TCC. This is particularly so considering that the Court could not reach
a conclusion on whether Mr. Tuccaro was privy to a party in Benoit as it
had no evidence in the Appeal Book and no submissions on this issue.
[21]
As mentioned, our Court had already dealt with
the ground advanced by the Crown in the 2013 Motion when it found that the TCC
had erred in law in concluding that Benoit was a binding legal precedent.
Such error was sufficient to justify granting the appeal.
[22]
With this in mind, I turn back to the question
before the TCC and thus before us: was the TCC bound to find that it was plain
and obvious that the Crown was estopped from relying on issue estoppel in its
reply?
[23]
The preconditions to the operation of issue
estoppel are well established and their application is the first step in the
analysis set out in Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44
at paras. 25 and 33, [2001] 2 S.C.R. 460 [Danyluk].
[24]
It is obvious that Tuccaro 2014 is a
final decision. It is also clear, given that this decision was made in the same
proceedings, that the parties are the same.
[25]
What is not as obvious, and I agree with the TCC
on this point (2015 TCC 290 at paragraph 42), is whether it is plain and
obvious that the issue before our Court in Tuccaro 2014 is the same
issue that the trial judge hearing the appeal on its merits would have to
decide if the reply is allowed to stand as it is.
[26]
As mentioned, the question before the TCC and
thus our Court in Tuccaro 2014, was whether it was plain and obvious
that reliance on a Treaty 8 tax exemption was an abuse of process because the
TCC was bound to follow Benoit as a matter of binding legal precedent.
This question and the question before the trial judge in respect of the
defence of issue estoppel are not the same. Rather, the issue estoppel defence
asks whether as a matter of mixed fact and law Mr. Tuccaro should be bound by
the ruling in Benoit because he is a privy to one of the parties to that
decision. While the two issues may involve the same factual background, this,
in and of itself, does not make them identical for the purpose of determining
if the Crown is estopped from relying on Benoit to raise issue estoppel
as a defence.
[27]
There may well be other cases where courts have,
on a motion to strike (or other interlocutory motions), determined on a final
basis an issue, and as a result, that issue cannot be re-litigated. For example,
a successful motion to strike settles the issue struck. But, as mentioned, this
is not what occurred here as the 2013 Motion was dismissed by this Court in Tuccaro
2014. This necessarily means that it was not plain and obvious that the
argument raised by Mr. Tuccaro could not succeed. (See in the same vein, albeit
in a different context, Tsleil-Waututh Nation v. Canada (National Energy
Board), 2016 FCA 219 at paragraph 97; also Giroux v. Canada, 2001
FCT 531 at paras. 78-79, 210 F.T.R. 63; Mintzer v. Canada, 2004 FC 1289
at paragraph 21 last sentence, 2004 D.T.C. 6655).
[28]
Even if I accepted that the issue before our
Court in 2014 properly included issue estoppel, I agree with the TCC that our
Court decision in Tuccaro 2014 cannot preclude the Crown from raising
issue estoppel as a defence to a pleading allowed to stand by our Court.
[29]
This Court in Tuccaro 2014 never
dealt with the merits per se of the Crown’s defence other than to
conclude that it did not meet the stringent test applicable on the motion
before it. This is very different from what would have occurred had the motion
been presented under Rule 58 and the motion judge (and our Court) had had to
deal with the merits of a Crown argument that Mr Tuccaro’s was estopped from
relying on Treaty 8. In such a scenario the Crown would be estopped from
including issue estoppel in its reply.
[30]
That said, even if I were to assume that as
argued by Mr. Tuccaro, the issue before our Court in 2014 was the same as that
which would have to be decided by the trial judge assessing the merits, I still
believe that the TCC in this appeal was justified in not striking the
paragraphs of the reply at issue, because one must proceed to the second step
of the Danyluk analysis, namely, whether there are special circumstances
that warrant the exercise of the discretion to refuse to apply issue estoppel.
(Danyluk at paras. 33 and 62)
[31]
Indeed, as found by the Supreme Court of Canada
in Danyluk, the Crown “is entitled at some stage
to appropriate consideration of the discretionary factors and to date, this has
not happened” (Danyluk at paragraph 66). Thus, in Danyluk,
the Supreme Court considered how the discretion should be exercised rather than
returning the file to the motion judge, and concluded, after a review of
various relevant factors including most importantly whether “taking into account the entirety of the circumstances, that
the application of issue estoppel would work an injustice”. In that
case, like here, the party facing a possible estoppel never had an opportunity
to respond to the argument relied upon by the decision maker (Danyluk at
paragraph 80).
[32]
In this case, if Mr. Tuccaro’s motion is
dismissed, he will for the same reasons discussed earlier, be entitled to argue
before the trial judge that the Crown is estopped from raising this defence of
issue estoppel. This means that the trial judge will be in a position to
exercise his or her own discretion in respect of this estoppel argument (as
well as in respect of the Crown defence based on issue estoppel). Thus, in my
view, I need only to assess whether it is plain and obvious that such
discretion could not be exercised in favour of the Crown as argued by Mr
Tuccaro. I have no hesitation in concluding that this is not so. Indeed, in my
opinion, after a review of all the relevant circumstances, there is an arguable
case that the discretion should be exercised in favour of the Crown because, among
other things, the Crown never had the chance to present its argument and to
file evidence on the issue of “privity”.
[33]
At the hearing, Mr. Tuccaro submitted that the
fact that the Crown had no opportunity to present arguments on issue estoppel
was of no moment because by filing the 2013 Motion on the basis of abuse of
process, it was bound to put its best foot forward and had to expressly raise
issue estoppel if it had an arguable case. For Mr. Tuccaro, the simple fact
that issue estoppel may be raised as a type of abuse of process means that
there is no particular injustice, because prior judicial decisions dealing with
the merits of a question (here abuse of process) will operate as an estoppel
even when a party failed to raise a particular argument. I cannot agree that
this is so here.
[34]
Had it not been for the TCC’s misapprehension of
the grounds raised in the 2013 Motion, this Court would not even have used the
words “issue estoppel”. Thus, the situation is
more akin to what occurred in Danyluk. Further, as mentioned, I cannot
agree that the principle that applies to decisions dealing with the merits of an
issue (Danyluk at paragraph 24) apply to decisions dismissing a motion
to strike because the party has not met the stringent test applicable to such
motion.
[35]
In fact, Mr. Tuccaro’s argument can have grave
consequences. It would force a litigant to raise grounds that she or he knows
have no chance of meeting the stringent test applicable to motions to strike,
simply to avoid facing a possible argument of issue estoppel. This runs counter
to the fundamental judicial policy of promoting judicial economy, efficiency
and proportionality. This is particularly so when one considers that abuse of
process is a flexible concept that can encompass many scenarios.
[36]
In the present case, as noted by the TCC, it is
far from obvious how the evidence produced in support of the Crown’s Motion
under Rule 58 would be construed and whether it would be sufficient to succeed
on the merits (2015 TCC 290 at paragraph 29 in fine). Thus, why would
the Crown be forced to raise it in its 2013 Motion? Considering that the
concept of “privity” was described in Danyluk as one where the degree of
interest required must be determined “on a case-by-case
basis” (Danyluk at paragraph 60), how could one conclude that the
Crown is precluded from raising as a defence an argument that is, on its face,
ill-suited to meet the stringent test applicable under Rule 53?
[37]
For all of the above reasons, I believe that the
TCC did not err in dismissing this motion because it is not plain and obvious
that the Crown is estopped from relying on issue estoppel as a defence. In sum,
while I do not endorse all the reasons given by the TCC, I believe that it
reached the correct result.
[38]
I thus propose that the appeal be dismissed with
costs fixed at an amount of $3000.00 (all-inclusive).
"Johanne Gauthier"
“I agree
Yves de
Montigny J.A.”
“I agree
Mary J.L.
Gleason J.A.”
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