Citation: 2017 TCC 177
Date: 20170908
Docket: 2015-2825(IT)G
BETWEEN:
YANAÏ
ELBAZ
Appellant,
and
HER
MAJESTY THE QUEEN
Respondent.
[OFFICIAL
ENGLISH TRANSLATION]
REASONS FOR ORDER
Smith,
J.
I.
Overview
[1]
The appellant filed a motion to stay his
appeal before the Tax Court of Canada (the “Court”) from the notices of
assessment made by the Canada Revenue Agency (the “CRA”) under the Income
Tax Act, R.S.C. 1985, c. 1 (5th sup.) (the “Act”) for the 2006 to 2011
taxation years, inclusively.
[2]
The appellant is asking that the appeal
be stayed pending the outcome of a criminal proceeding regarding several counts
related to his financial activities. Although the charges were laid against the
appellant on February 14, 2013, no date had yet been set for the criminal trial
when this motion was heard.
[3]
After reviewing the motion to stay, to which
the respondent objects, I am of the opinion that the proceedings before this
Court must not be stayed.
II. Nature of the tax appeal
[4]
To place the specific question that the
Court must now answer in the broader context of the notices of assessment made by
the CRA, it should first be noted that the notices of assessment are based on
subsection 152(7) of the Act, which provides that “[t]he Minister is not bound
by a return or information supplied by or on behalf of a taxpayer” and that he
“may, notwithstanding a return or information so supplied . . . , assess the
tax payable under this Part”. In such a case, the assessment is deemed to “be
valid and binding” under subsection 152(8) of the Act.
[5]
On this basis, the CRA may determine the
tax for taxpayers whose assets do not seem to correspond to the reported income,
based on the net value of the assets. When making an assessment under
subsection 152(7) of the Act, the Minister is not obligated to identify the
source of the income or the origin of the assets that was the basis for the
assessment established according to the net worth method: Boroumand v. The
Queen, 2015 TCC 239, at para. 69; Hsu v. The Queen, 2001 FCA 240, at
para. 3; and Molenaar v. The Queen, 2004 FCA 349, at para. 4:
[4]
Once the Ministère establishes on
the basis of reliable information that there is a discrepancy, and a
substantial one in the case at bar, between a taxpayer's assets and his
expenses, and that discrepancy continues to be unexplained and inexplicable,
the Ministère has discharged its burden of proof. It is then for the taxpayer
to identify the source of his income and show that it is not taxable.
[6]
It will therefore be incumbent on the
appellant to show that the Minister’s assumptions are unfounded by identifying
the various sources of his income or the origin of his assets.
[7]
The appellant’s claims and motion to
stay therefore pertain to an assessment based on net worth.
[8]
In support of his motion, the appellant
states that the criminal offences of which he stands accused involve four of
the six years in issue in this appeal, and he submits that the issue of the
existence of a source of income will be raised in both proceedings. According
to him, there is therefore a factual and temporal nexus between the two
proceedings.
[9]
He adds that the obligation to [translation] “testify regarding facts
directly or indirectly related to the criminal accusations against [him]”
(Notice of Motion, sworn statement, para. 6) would infringe his right to remain
silent and that he would be prejudiced thereby, as he intends to invoke that
right during the criminal proceedings.
[10] The
appellant also submits that [translation]
“[his] testimony would not be protected by any procedural guarantees and could
be used against [him] in the criminal proceedings” (Notice of Motion, sworn
statement, para. 7). Given the absence of any procedural guarantees, he would
thus be forced to choose between his right to remain silent in the criminal
proceedings and his right to appeal to this Court.
[11] Finally,
the appellant submits that, despite the legal provisions (which will be
examined below) that aim to avoid having his testimony used against him in
another proceeding (in this case, the criminal proceeding), if there is the slightest
risk of prejudice, our Court should exercise its discretion and grant the stay.
III. The burden of proof
[12] The
appellant also submits that an appeal before our Court calls for a greater
burden of proof than a simple civil proceeding, given the presumption that the
assessment is valid (as explained above).
[13] There
is no doubt that the appellant will be required to testify (or at least call
witnesses to appear) and provide evidence to satisfy the Court of the soundness
of his submissions and thus “demolish” the assumptions of fact on which the
notices of assessment are based, failing which the assessments will be confirmed
(Hickman Motors Ltd. v. Canada, [1997] 2 S.C.R. 336, para. 92). That is
the very nature of a tax dispute. The issue is then to determine whether, in
doing so, the appellant will suffer prejudice.
IV. The applicable law
[14] The
case law of this Court on temporary stays of proceedings is not rich, possibly
because, upon consent by the parties, decisions have been rendered without being
published.
[15] Prior
to any examination of a motion to stay proceedings, the Court must first
determine whether there is a real nexus between the two disputes involving the
taxpayer. If there is, the Court will consider the merits of the motion to stay
proceedings, bearing in mind that it is “an extraordinary discretionary remedy
and it must be based upon compelling reasons” (Imperial Oil Limited v. The
Queen, 2003 TCC 46, para. 50, and Gregory v. The Queen, [2001]
T.C.J. No. 50 (QL) (T.C.C.)).
[16] In
Obansawin v. The Queen, 2004 TCC 3, the appellant had instituted an
action in damages before the Ontario Superior Court of Justice alleging abuse
of power or abuse of process by the CRA. He thus asked our Court to stay his
appeal, pending the decision of the Superior Court. C. Miller J. wrote the
following:
[17]
The overriding concern in determining whether to grant a stay, even a
temporary stay such as in this case, must be how best the interests of
justice are served. This is particularly difficult where proceedings are
afoot in two Courts with concurrent jurisdiction. It is less problematic the
less the jurisdictions overlap. In this case, the OSCJ clearly has sole
jurisdiction to hear the private law claims for damages in tort actions: the
Tax Court of Canada, as I have found, has sole jurisdiction to hear the
substantive tax issue. There is no overlap of jurisdiction between the Tax
Court of Canada and the OSCJ: the issues are separate and distinct in the
two Courts.
[Emphasis
added]
[17] C.
Miller J. then asked whether the continuance of the appeal would cause harm to
the appellant (which he presented as an essential condition) and, if so,
whether there would be prejudice to the opposing party as well. If the Court is
of the opinion that both parties would suffer harm, it must then consider
various “factors such as convenience, expense, the law of the transaction,
parties’ location and any special circumstances of the particular case” (para.
20).
[18] C.
Miller J. again examined a motion to stay in Blackmore v. The Queen,
[2012] 3 C.T.C. 2010. In that case, the taxpayer had sought a stay of his tax
appeal, alleging that he would be “required to answer incriminating questions
that could be used in a subsequent criminal proceeding” (para. 45). In that
regard, C. Miller J. concluded that the risk of harm was minimal and that the
appellant would benefit from the “protective provisions of the Charter [of
Rights and Freedoms] and the Evidence Act” (para. 52). He also
explained that a stay of the tax appeal would cause prejudice to the Crown and
to “the administration of Justice” (para. 55).
[19] There
are a few relevant Federal Court of Appeal decisions that must be examined in
this appeal, but I will first examine certain cases brought to this Court’s
attention by the respondent that involved a stay of civil proceedings pending
the conclusion of criminal proceedings.
[20] In
Obadia c. Sam Levy & Associés Inc., 1997 CanLII 10483 (QC C.A.), the
appellant had asked for a stay of bankruptcy proceedings, alleging that his
right to a fair criminal trial could be jeopardized. Regarding the appellant’s
submissions, the Quebec Court of Appeal stated as follows:
[translation]
[11]
At the hearing, counsel for the appellants acknowledged that it is incumbent
on them to demonstrate the risk of jeopardizing the right to a fair trial. To
that end, the Court is of the opinion that general allegations are not
sufficient and that it is incumbent on the party seeking a stay, even if the
cases are connected by identical factual contexts, to state the grounds for the
prejudice in the conduct of the criminal defence.
.
. .
[16]
In short, granting a stay is not always the rule, and the person seeking a
stay must show that the circumstances could jeopardize his or her right to a
fair criminal trial. A mere possibility that the defence will be revealed is
not enough in itself and does not give the circumstances the required
exceptional character. Finally, it is appropriate in this case to cite
section 11 of the Criminal Code:
No
civil remedy for an act or omission is suspended or affected by reason that the
act or omission is a criminal offence.
and
to consider in this case that the goal of bankruptcy proceedings is not the
collection of evidence for the criminal proceedings, but the legitimate purpose
of realizing the bankrupt’s assets.
[Emphasis
added]
[21] Subsequently,
the Court of Quebec relied on Obadia, cited above, in Aviva Compagnie
d’assurance du Canada c. Barbeau, 2011 QCCQ 15355, where the Court also
denied a motion to stay civil proceedings pending the conclusion of criminal
proceedings. After reviewing the appellant’s reasons, and on the basis of Obadia,
cited above, the Court stated:
[translation]
[8] In
short, the civil and criminal proceedings are independent and [translation] “function in parallel”. As
a well-known rule, the criminal process does not stay the civil process. To
obtain a stay of civil proceedings, the applicant cannot simply present a
series of general, theoretical or vague allegations. The applicant must
demonstrate that his or her fundamental rights could be jeopardized in the
criminal proceedings if the stay of the civil proceedings is not granted.
[9] In
this case, regarding both the motion to stay the proceedings and the
alternative relief sought, the Court finds that the defendant’s motion does
not satisfy the criteria defined by the case law. In reality, in the current
context, the elements raised by the defendant are primarily a hypothetical or
theoretical fear, and the real potential risk is not shown.
[Emphasis
added]
[22] In
Bergeron c. Tremblay, 2012 QCCA 1301 (“Bergeron”), the applicant
was seeking a stay of his examination after defence in a civil case, as he felt
that the measures imposed by the trial judge to protect his rights were
insufficient and that there was a [translation]
“significant risk that information could be disclosed”. The Quebec Court of
Appeal, however, ruled that the measures were sufficient to protect the
applicant’s fundamental rights:
[translation]
[8] Under
section 11 of the Criminal Code, no civil remedy for an act or omission
is suspended or affected by reason that the act or omission is a criminal
offence. Consequently, the rule is that [translation]
“the criminal process does not stay the civil process”; to be exempted
from that rule, the applicant must show that, unless the civil case is
stayed, his or her fundamental right to make full answer and defence would
necessarily be threatened or compromised.
[9] In
principle, the rights of the applicant in criminal proceedings brought against
him or her are protected by the constitutional provisions of sections 7, 11 and
13 of the Canadian Charter of Rights and Freedoms. The current case law
of the Supreme Court recognizes in particular three procedural guarantees
regarding self-incrimination to prevent testimony that the accused must give in
a civil case from then being used against him or her in criminal proceedings:
Use
immunity serves to protect the individual from
having the compelled incriminating testimony used directly against him or her
in a subsequent proceeding. The derivative use protection insulates the
individual from having the compelled incriminating testimony used to obtain
other evidence, unless that evidence is discoverable through alternative means.
The constitutional exemption provides a form of complete immunity from
testifying where proceedings are undertaken or predominately used to obtain
evidence for the prosecution of the witness. Together these necessary
safeguards provide the parameters within which self‑incriminating
testimony may be obtained.
[Emphasis
added]
[23] To
the cases that were brought to the Court’s attention, I would add Ludmer v.
Attorney General of Canada and Canada Revenue Agency, 2015 QCCS 1218; Ungava
Mineral Exploration Inc. c. Procureure générale du Québec, 2016 QCCS 4711;
and more specifically Gravel c. Agence du revenu du Québec, 2016 QCCS
3578 (“Gravel”), where the Court found that there was no need to stay
the proceedings, as [translation] “the
objective of ensuring the accessibility and
promptness of justice favours refusing the stay of
proceedings” (para. 40).
[24] To
complete my analysis of the case law, I will now review the relevant cases of the
Federal Court of Appeal.
[25] In
Jolly Farmer Products Inc. v. The Queen, 2007 FCA 8, several
shareholders had sought a stay of their appeal pending the outcome of one of
the appeals involving the corporation. At trial, the Court had ordered that the
shareholders’ appeals be heard immediately after that of the corporation and
that all examinations for discovery be completed before a certain date.
[26] The
decision was appealed to the Federal Court of Appeal, and Richard C.J. (as
he then was) noted that it was an appeal from an interlocutory
order on procedural matters, not a substantive matter
involving the shareholders and the corporation. He added:
[13] The
relevant test to be applied to an application for a stay is set out in RJR-MacDonald
Inc. v. Canada (A.G.), [1994] 1 S.C.R. 311. The onus lies with the
Appellants to show that there is a serious issue to be tried, that they
will suffer irreparable harm and that the balance of convenience
favours the granting of a stay.
[Emphasis
added]
[27] The
Court then examined each element of the analysis before concluding that it had
to dismiss the stay motion. It added that there was “also a public interest
that judicial proceedings be completed within a reasonable period of time”
(para. 24).
[28] More
recently, in Mylan Pharmaceuticals ULC v. AstraZeneca Canada, Inc., 2011
FCA 312 (“Mylan”), the respondent had sought a stay of the appeal before
the Federal Court of Appeal until the Supreme Court of Canada ruled on an
appeal involving various pharmaceutical companies. The application for the stay
was dismissed.
[29] At
the Federal Court of Appeal, Stratas J.A. stated that a distinction must be
made between a situation in which the Court is “forbidding another body from
going ahead and exercising the powers granted by Parliament that it normally
exercises” and one in which the “Court [is] deciding not to exercise its
jurisdiction until some time later” (para. 5). In the former case, the criteria
set out by the Supreme Court of Canada in RJR-MacDonald, cited above,
must be met.
[30] However,
according to Strata J.A., when delaying a hearing to a later date, there is no
need to apply those rigid criteria:
[5] .
. . When we do this, we are exercising a jurisdiction that is not unlike
scheduling or adjourning a matter. Broad discretionary considerations come to
bear in decisions such as these. There is a public interest consideration - the
need for proceedings to move fairly and with due dispatch – but this is
qualitatively different from the public interest considerations that apply when
we forbid another body from doing what Parliament says it can do. As a result, the
demanding tests prescribed in RJR-MacDonald do not apply here.
This is not to say that this Court will lightly delay a matter. It all depends
on the factual circumstances presented to the Court. In some cases, it will
take much to convince the Court, for example where a long period of delay is
requested or where the requested delay will cause harsh effects upon a party or
the public. In other cases, it may take less.
[6] The
conclusion that the RJR-MacDonald test does not apply in cases
where the Court is deciding not to exercise its jurisdiction until some time
later is supported by other cases in this Court: Boston Scientific Ltd.
v. Johnson & Johnson Inc., 2004 FCA 354; Epicept Corporation v.
Minister of Health, 2011 FCA 209.
[Emphasis
added]
[31] After
concluding that there was no direct nexus between the appeal before the Federal
Court of Appeal and the one before the Supreme Court of Canada, the Federal
Court of Appeal dismissed the application for a stay. According to Stratas J.A.,
the need for a “very direct nexus between the issues” (para. 19) stems from the
fact that there could be a long delay before a decision by the Supreme Court
and that the Supreme Court may never even rule on the specific issue raised by
the respondent before the Federal Court.
[32] A
review of the case law shows that the application for a stay is based on “broad
discretionary considerations” (Mylan, para. 5) and that the Court must
in particular ask itself whether, “in all the circumstances, the interests of
justice support the appeal being delayed” (Mylan, para. 14).
[33] At
the end of the day, a stay of proceedings is the exception, not the rule, and
the dominant criterion remains the best interests of justice (Gravel,
para. 15).
V. Analysis and conclusion
[34] The
appellant submits that there is a factual and temporal nexus between the two
disputes. It is nonetheless undeniable that our Court has exclusive
jurisdiction over the interpretation of the Act and that its jurisdiction in
that area does not at all overlap with that of the Court of Quebec regarding
criminal proceedings. Moreover, as stated in Obadia, cited above, at
paragraphs 11 and 16, the appeal before our Court and the criminal proceedings
can proceed independently and at the same time, [translation] “even if the cases are related to identical
factual contexts” (see also R. v. Jarvis, 2002 SCC 73, [2002] 3 S.C.R.
757, para. 97).
[35] Regarding
the issue of the burden of proof, I cannot agree with the submissions of the
appellant, who relies on Mascouche (Ville) c. Houle, 1999 CanLII 13256 (QC
C.A.) to argue that the presumption of the validity of the assessments, which obliges
him to provide evidence to demolish the Minister’s assumptions, causes him
particularly serious harm. The burden of proof is that of a civil case. It is a
matter of satisfying the Court on a balance of probabilities, which is the
standard for all appeals before this Court.
[36] In
addition, I am not satisfied that the obligation to testify in this case will
infringe on the appellant’s right to not testify in the criminal case. I reach
this conclusion because the appellant’s rights will be [translation] “protected by the constitutional provisions of
sections 7, 11 and 13 of the Canadian Charter of Rights and Freedoms”
and because the case law recognizes several [translation]
“procedural guarantees regarding self-incrimination to prevent testimony that
the accused must give in a civil case from then being used against him or her
in criminal proceedings” (Bergeron, para. 9).
[37] The
appellant brought to the Court’s attention R. v. Nedelcu, 2012 SCC 59,
[2012] 3 S.C.R. 311, where the Supreme Court stated that testimony given in
examination for discovery in a previous civil proceeding cannot be used “to
prove guilt, i.e. to prove . . . one or more of the essential elements of the
offence for which the witness is being tried” (para. 9). The Supreme Court
stated that prior testimony could, however, be used for “impeaching the
witness’s testimony” if the witness chose to testify at his or her criminal
trial, which is a distinct matter from the determination of guilt. In my
opinion, that decision only confirms the principle that prior testimony cannot
be used to establish the guilt of the witness at his or her criminal trial.
[38] For
the same reasons, I do not agree that the Court should order a stay of
proceedings as soon as there is the slightest risk that evidence will be
revealed. The case law in this area is clearly to the effect that a criminal
court has the means to protect the rights of an accused and, in this case,
those of the appellant.
[39] Before
concluding, I note that a trial judge can always impose additional measures
(e.g., confidentiality order and sealing) to [translation]
“further protect the accused’s right to a fair trial and right to make full
answer and defence” (Bergeron, cited above, paras. 4 and 10; and Ménard
c. Matteo, 2012 QCCS 4899, paras. 26 to 28).
[40] Although
Mr. Elbaz did not seek corollary measures in this stay motion, nothing prevents
him from seeking them, at the appropriate time, by applying to the trial judge.
[41]
In my opinion, the appellant has not persuaded
this Court of the merits of his stay motion, and accordingly, for all these
reasons, the motion is dismissed.
Signed at Ottawa,
Canada, this 8th day of September 2017.
“Guy
Smith”
Smith
J.
Translation certified true
on this 12th day of October 2017.
Michael Palles, Revisor
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