Abuse of Process

Table of Contents


Canada v. ACI Properties Ltd., 2014 DTC 5036 [at 6718], 2014 FCA 45

trumping of tactical advantage not an abuse of process

Another taxpayer ("AFT") made a payment to the appellant ("ACI") of $1.95 million, which it characterized as a deductible management fee and ACI characterized as a capital receipt. A reassessment of ACI treated the fee as income to it. Following ACI's appeal of the reassessment, the Minister brought an application under s. 174 to determine the characterization of the $1.95 million payment.

ACI was concerned that distinct s. 174 proceedings would cause it to lose a tactical advantage relating to the particular assumptions previously made (and pleaded) by the Minister. After noting (at para. 25) that "the fact that steps taken by the Minister…deprive the appellant of a tactical advantage is not, in and of itself, an abuse of process," Pelletier JA indicated that while s. 174(3)(a) appeared to contemplate such a distinct proceeding, this case instead fell under s. 174(3)(b), where such advantage would not be lost.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 174 - Subsection 174(1) Minister need not have uncertainty in her views 137
Tax Topics - Income Tax Act - Section 174 - Subsection 174(3) 3rd party added to existing appeal under s. 174(3)(b) 193

Canada (National Revenue) v. RBC Life Insurance Company, 2013 FCA 50

statutory scope of judicial discretion
see also Lordco)

The taxpayers offered "10-8" insurance plans to their customers, which generated exempt income and deductible interest. Under a 10-8 plan, the customer borrows money at 10% tax-deductible interest, and uses the borrowed amount to obtain an investment vehicle that returns 8% tax-exempt interest. After the Minister obtained authorizations from the Federal Court under s. 231.2(3) requiring the taxpayers to disclose customer lists, the taxpayers successfully applied under s. 231.2(6) to have those prior authorizations cancelled. The Minister had withheld significant information on the original application, including that CRA was deliberately engaging in an "audit blitz" so as to have a chilling effect on the 10-8 plans, notwithstanding that they were acknowledged to technically work.

The Court affirmed the cancellation of the authorizations. In response to a submission that a judge reviewing such authorization under s. 231.2(6) may only consider specifically whether the conditions in s. 231.2(3)(a) and (b) are satisfied, Stratas J.A. stated that the existence of judicial discretion is essential to the constitutional validity of an authorization in the first place under s. 231.2(3) (para. 23), that the "review under subsection 231.2(6) must include a discretionary element and is not limited to verifying that the two statutory preconditions are met" (para. 27), and that the alternative would render the Court "powerless" to address an abuse of process (para. 28): such as the withholding of relevant information - for example "the Minister could misinform the judge about the inconvenience and cost to persons who will be subject to the authorization" (para. 30); or even "bald lies" (para. 29).

Since Canada (Human Rights Commission) v. Canadian Liberty Net, [1998] 1 S.C.R. 626 at paras. 35-38, the Federal Courts have had "plenary powers" analogous to the inherent powers of a provincial superior court (para. 35), which include the power to address abuse of process.

Special Risks Holdings Inc. v. The Queen, 84 DTC 6054, [1984] CTC 71 (FCTD), aff'd 84 DTC 6215, [1984] CTC 563 (FCA)

extremely late motion for further discovery

"It is inherent in the good faith application of the Rule that further discoveries of documents will not be sought or further investigations made thereafter, save in preparation for trial, but not of a nature to require postponement of same." A motion for further discovery that was filed only 6 days before the day that had been set for trial, and which consequently would have delayed the trial if successful, was dismissed as being an abuse of the process of the Court.

Medicine Hat Greenhouse Ltd. and German v. R., 79 DTC 5091, [1980] CTC 114 (Alta. C.A.)

delay in initiating a prosecution

Assuming the absence of fraudulent intent or improper motive involved in specifying the date contained in the certificate, the certificate is conclusive evidence as to the date upon which the evidence justifying a prosecution came to the attention of the Minister. In addition, delay in initiating a prosecution which is not barred by a limitation period does not constitute an abuse of process.

See Also

Stewart v. The Queen, 2018 TCC 75

abuse of process for partners to raise arguments that could have been raised by their partnership prior to its filing a discontinuance

The appellants were partners of a limited partnership (“TSI”). On March 29, 2006, the Minister issued Notices of Determination pursuant to s. 152(1.4) disallowing losses claimed by TSI for its 2000 and 2001 taxation years, respectively. Both TSI and each partner filed a Notice of Appeal. However, TSI filed a Notice of Discontinuance on May 2, 2016 and the appeal was deemed to be dismissed on June 24, 2016 pursuant to s. 16.2(2) of the Tax Court of Canada Act (the “TCC Act”). The appellants were now arguing that the Notices of Determination had been statute-barred. In allowing the Crown’s motion to strike the Notices of Appeal of the appellants on the basis that it would be an abuse of the Court’s process to allow the appellants to continue with their appeals, D’Auray J stated (at paras 52 - 53):

According to Scarola [2003 FCA 157], barring some vitiating circumstances such as fraud or some statutory authority allowing the decision maker to retain or recapture the lost authority, a dismissal under section 16.2 of the TCC Act carries the same effect as a judgment of dismissal by the Court. As a result, since in this motion, no vitiating circumstances were advanced by the appellants, they are effectively trying to re-argue an issue that is deemed to have been adjudicated and dismissed by the Court at the partnership level. ...

[T]he issue of whether the determinations are statute-barred could have been raised and argued by TSI in its appeal which was to be heard on May 2, 2017, as the statutory bar issue present in the TSI appeal is identical to the issue that the partners would now like to proceed with in their appeals. Instead, TSI chose to discontinue its appeal. It would be an abuse of process if the partners of TSI were now allowed to raise the same issue that TSI itself could have raised but chose not to.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1.7) partners were not necessarily precluded under the s. 152(1.7) “binding” rule from arguing that a partnership determination of loss was statute-barred 189
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 16.2 - Subsection 16.2(2) discontinuance has equivalent effect to dismissal by court itself 195

Construction S.Y.L. Tremblay Inc. v. Agence du revenu du Québec, 2018 QCCA 552

taxpayer’s attempt to relitigate an adverse TCC decision in the Court of Quebec was an abuse of process given that the new evidence to be tendered did not address its defective invoices

In the federal Construction S.Y.L. Tremblay case, Bédard J found that house-repair invoices, that did not give the house address or describe the precise nature of the work performed (and that were rendered in the name of entities that did not remit the GST), failed to satisfy the requirements of s. 3 of the Input Tax Credit Information (GST/HST) Regulations, so that the appellant’s related input tax credit claims were properly denied. Prior to that decision, the appellant in that case had appealed the denial by the ARQ of the input tax refunds claimed by it for QST on those invoices under the equivalent provisions under the Quebec Sales Tax Act, to the Court of Quebec – and also stated that (at para. 25) “I am convinced that the appellant did not truly acquire the supplies for which it claimed ITCs in its net tax calculation.” After the ARQ then made a motion for the Quebec appeal to be dismissed as an abuse of process, the appellant filed a declaration that it intended to file more numerous documents and produce 19 witnesses in support of its appeal.

Before going on to affirm the finding of the Court of Quebec that allowing this (Quebec) appeal to proceed would constitute an abuse of process, Thibault JCA quoted (at para. 29) with approval statements in Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, paras. 52-53 (extract from para. 53 quoted below):

… 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. … An inadequate incentive to defend, the discovery of new evidence in appropriate circumstances, or a tainted original process may all overcome the interest in maintaining the finality of the original decision … .

After noting that the Court of Quebec judge had found at that the proposed new evidence of the appellant “will not provide anything new as to the conformity of the invoices to the prescribed [QSTA and Regulation] requirements,” she stated (at para. 39) that this finding was “conclusive” and (at para. 42):

Even with the additional evidence, the appellant cannot demonstrate the validity of the claimed input tax refunds. The appellant’s provision of numerous witnesses cannot remedy this deficiency since those documents do not satisfy the requirements for obtaining input tax refunds.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Stare Decisis Court of Quebec not bound by Tax Court decisions/stare decisis does not preclude relitigation where unfairness would otherwise result 208
Tax Topics - Excise Tax Act - Regulations - Input Tax Credit Information (GST/HST) Regulations - Section 3 - Paragraph 3(c) - Subparagraph 3(c)(iv) failure of invoices to describe the supplies could not be remedied by testimony 397
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(4) failure of invoices to describe supply was in itself sufficient to deny credit 168

McIntyre v. The Queen, 2014 DTC 1116 [at 3258], 2014 TCC 111

confining the Minister to a prior plea bargain would be an abuse

Two of the taxpayers were convicted based on a plea-bargain. The Minister's subsequent assessments of the taxpayers was based on amounts greater those in the plea bargain. After finding that neither the issue estoppel nor abuse of process doctrines applied to prevent the reassessment (see summary under General Concepts - Res Judicata), Campbell J stated (at para. 46):

Finally, I conclude that to restrict the Minister in the civil tax appeals before this Court to the Agreed Facts, established pursuant to a plea bargain, would constitute an abuse of process. Otherwise, unfairness would result because the parties would effectively be prohibited from tendering evidence in the appeals before this Court when no evidence was tendered or weighed in the prior criminal proceedings and no judicial findings of fact were made.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Res Judicata criminal convictions establish only a floor on tax liability; plea bargains aren't dispositive 224

Congiu v. The Queen, 2013 TCC 271, aff'd 2014 FCA 73

judicial comity re Quebec decision

The appellant was appealing an assessment made by Revenue Quebec on behalf of the (federal) Minister under s. 270(4) of the Excise Tax Act in respect of a debt of a corporation of which she had been a receiver. Angers J noted (at para. 4) that (TaxInterpretations translation):

The issues before me are essentially the same as those put before Justice Lareau of the Court of Quebec and on which he has already pronounced. Only the legislative provisions on which the assessments rest are different ... .

There was an agreed statement of facts based on the findings of Lareau J.

In finding that the issues before him were not res judicata, Angers J stated (at para. 8) that it was difficult to conclude:

that the provincial and federal assessments have the same subject. Their amounts and legal basis are different. Finally ... there is not an identity of the parties, as the federal and Quebec governments are not the same person.

However, it would constitute an abuse of process to consider the issues in the present appeal given their similarity to those disposed of by Lareau J. A different outcome in this appeal would be viewed as contradictory to the earlier decision (para. 13), whereas the objective instead was for judicial comity and that "judgments on the same question be coherent" (para. 16).

In the Federal Court of Appeal (also dealing with an appeal on an ETA s. 325 issue), Blais CJ stated (at (para. 7) that "the decision of Justice Angers applying the principles of judicial comity [courtoisie judiciaire] was quite justified in the particular circumstances" and further noted the the Court of Quebec decision had since been affirmed in the Quebec Court of Appeal.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Res Judicata not res judicata where two different government litigants 246
Tax Topics - General Concepts - Stare Decisis 246
Tax Topics - General Concepts - Judicial Comity judicial comity re Quebec decision 207

Houda International Inc. v. The Queen, [2011] GSTC 8, 2010 TCC 622

relitigation of same appeal extension ruled on in Quebec would be abuse of process

The taxpayer was granted an extension from the Court of Quebec in its QST appeal on the basis that it was not at fault for its lawyer’s failure to timely file an appeal. Its parallel application in the Tax Court of Canada from a GST assessment, was granted on the basis that the two statutory extension tests were essentially the same, and the doctrine of abuse of process prevented relitigation of an issue already decided in another court. Boyle J stated (at para. 21):

I am satisfied that the matter before this Court has already been addressed by the Cour du Quebec and should not be relitigated before this forum as that might result in a different outcome.

He further found (at para. 22) that “judicial comity” would be further grounds to avoid duplicating the litigation.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 305 - Subsection 305(5) relitigation of same appeal extension ruled on in Quebec would be abuse of process and contrary to judicial comity 221
Tax Topics - General Concepts - Judicial Comity relitigation of same appeal extension ruled on in Quebec would be contrary to judicial comity 125

Golden v. The Queen, 2008 DTC 3363, 2008 TCC 173

relitigating an amount determined in criminal sentencing

Issue estoppel applied to preclude the taxpayer from litigating before the Tax Court the question whether an amount of $34,000 should have been included in his income. Although the finding of a jury that he had committed tax evasion in respect of this amount did not turn on the particular quantum of the amount that he had failed to report, that quantum was part of the sentencing process made by the judge in that criminal proceeding. Furthermore, given that there had been proof of criminal mens rea beyond a reasonable doubt, this satisfied the onus on the Crown respecting the s. 163(2) gross negligence penalty.

It also would have been an abuse of process for the taxpayer's wife to re-litigate whether a $217,000 shareholder loan should be included in her income given that the only alleged unfairness was that, in the criminal proceedings, there had been an agreement that Mr. and Mrs. Golden would be treated as one taxpayer, so that no particular finding was made as to whose income the amount should be included in.