Stare Decisis

CIBC realized an FX loss of C$126.4 million in 2007 when shares of a US subsidiary for which it had subscribed US$1 billion were redeemed for US$1 billion. Owen J rejected the CIBC position - that such loss was deemed by s. 39(2) to be a capital loss from foreign currency and therefore was excluded from the application of the s. 40(3.6) stop-loss rule, which applied only if the loss were viewed as having arisen from the disposition of the subsidiary’s shares – indicating that this position was inconsistent with a statement in the BMO case that: “[t]he gain or loss arising as a result of a disposition of a particular property was (and still is) determined under subsection 40(1)” before any application of s. 39(2).

He further stated (at para. 23) that this statement was not obiter because it was “an essential part of the Court’s conclusion that there is no conflict between subsections 39(2) and 40(1.” He thus was bound to follow that statement, although he was also entitled to state his own opinion, which he did.

In briefly disposing of the taxpayer's Charter arguments, Russell J stated (at para. 64):

The issues raised by the Applicant on this point were addressed … by the Quebec Court of Appeal [Berger, 2016 QCCA 226].

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.

Before going on to confirm the finding below that it represented an abuse of process for essentially the same issue to be relitigated in the Court of Quebec respecting the availability of input tax refunds under the parallel provisions under the Quebec Sales Tax Act and Regulations, Thibault JCA stated (at para. 32, TaxInterpretations translation) that “the Court of Quebec is not bound under the …stare decisis rule by a judgment rendered by the Tax Court of Canada.” Thibault JCA also quoted (at para. 29) with approval statements in Toronto (City) v. C.U.P.E., Local 79, [2003] 3 S.C.R. 77, 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.

The Court disagreeing with the Court's prior finding in Masa Sushi and subsequent cases that Tax Court Rule 30(2) conflicted with section 17.1 of the Tax Court of Canada Act, and the latter section did not allow a corporation to be represented other than by counsel.

Two Caymans investment LPs (“RCF IV” and RCF V”) whose limited partners were mostly U.S. residents, realized gains from the disposal of significant shareholdings in a TSX-listed Australian corporation. An earlier decision of the Full Federal Court had proceeded on the basis that a similar partnership (“RCF III”) was a corporation for Australian income tax purposes. In finding that this did not preclude him from considering (and then concluding) that RCF IV and RCF V were to be treated as partnerships for such purposes (so that its partners were the relevant taxpayers), Pagone J first noted (at para. 6) that

It is important to the issues in this proceeding that at no stage had it been contended by either party in the RCF III proceedings that Division 5A did not constitute or contemplate RCF III to be a limited partnership able to be taxed as a taxable entity separately from the partners.

He then quoted the statement in Re Hetherington (deceased) [1990] Ch 1 that “even where a decision of a point of law in a particular sense was essential to an earlier decision of a superior court, but that superior court merely assumed the correctness of the law on a particular issue, a judge in a later case is not bound to hold that the law is decided in that sense,” and then concluded (at para. 8):

It follows from those observations, and from the way in which the issue of RCF III as a taxable entity was considered in RCF III, that the view in RCF III that the partnership in that case was a taxable entity is not binding in these proceedings.

After quoting with approval the statement in R. v Prokofiew, 2010 ONCA 423, ¶21 that:

The orderly and rational development of the jurisprudence is not served if lower courts are too quick to strike out in legal directions different than those signalled in obiter from the Supreme Court of Canada.

Sommerfeldt J stated (at para. 95):

The comments made by Charron J in Tsiaprailis about the non-taxability of the future component of Ms. Tsiaprailis’ settlement payment were not integral to the result or the analysis that underlay the determination of the matter before the Supreme Court of Canada in that case, given that the appeal dealt only with the taxability of the arrears component of the settlement payment. … Thus, even if the obiter dicta is binding, it is not determinative of these Appeals.

After discussion the leading cases on point, Lord Drummond Young noted (at para. 20) that additional cases raised by counsel for HMRC “were relied on in large measure because they appeared to provide analogies to the factual situation found in the present case,” and stated (also at para. 20):

It seems to us that the application of tax law is through principle rather than analogy; in every case the underlying basis of the court’s reasoning must be discovered, and it is the principles contained in that reasoning that govern future cases.

The taxpayer suffered from severe chronic pain. On the advice of her doctor, she helped alleviate the pain by wintering with her husband in warm climates. She claimed medical expense tax credits in respect of her travel and meal expenses.

Woods J found that the facts were materially identical to a 2008 case, decided by Lemarre J, involving the same taxpayer, medical condition and treatment. Therefore, although the Minister identified a 2001 decision that would potentially undermine the taxpayer's METC claim, Woods J stated (at para. 15):

There would be nothing wrong with this if the reasons of Justice Lemarre were provided to me so that I could consider them. But they were not, and no explanation was provided for failing to provide a transcript of these reasons. I find this situation to be very unfair to the taxpayer. If Ms. Tallon is to be deprived of the benefit of the prior decision for a subsequent year, it is only fair to her that the Court give careful consideration to the reasons in the prior case. I was not able to do this.

It was inappropriate, especially in an informal procedure case, to order a subsequent hearing to review the prior decision. Therefore, the taxpayer's METC claims were allowed.

Before finding that the taxpayers' argument was contradicted by the "authoritative obiter" in S.T.B. that s. 245(7) applied to third parties only, Hogan J paraphrased (at para. 28) R. v. Henry, [2005] 3 S.C.R. 609 for the proposition "that obiter dicta move along a continuum and diminish in weight the further they stray from the dispositive point of judicial opinion," and noted (at para. 29) that in S.T.B. "the third party application of subsection 245(7)…was fully argued."

Before finding that the taxpayers' argument was contradicted by the "authoritative obiter" in S.T.B. that s. 245(7) applied to third parties only, Hogan J paraphrased (at para. 28) R. v. Henry, [2005] 3 S.C.R. 609 for the proposition "that obiter dicta move along a continuum and diminish in weight the further they stray from the dispositive point of judicial opinion," and noted (at para. 29) that in S.T.B. "the third party application of subsection 245(7)…was fully argued."

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….[T]he decision…which dismissed the appeals, is under appeal before the Quebec Court of Appeal….

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, and after noting that both cases dealt with a sale of assets without a clearance certificate, Angers J stated (at para. 8):

It is more difficult for me 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 that "judgments on the same question be coherent" (para. 16).

Jorré found that the taxpayers' flight simulators could be depreciable property in a taxation year where the taxpayer rented the simulator out (thereby allowing the taxpayer to deduct capital cost allowance), but also be inventory in the year the simulator is sold (thus forcing the taxpayer to treat the resulting gain as business income rather than a capital gain). In reaching this conclusion, Jorré J. noted that the Court in Friesen ([1995] 3 S.C.R. 103) made a comment indicating that his approach might be "inconsistent with the basic division in the Income Tax Act between business income and capital gain." Although he ultimately concluded that his findings did not contradict Friesen, he stated (at para. 139):

Does the excerpt from Friesen that I just quoted [regarding the income/capital gain division] apply? We are no longer in the era where Lord Halsbury stated that a judgment is authoritative solely for the issue it decides and nothing more. Ever since the Supreme Court's decision in Sellars v. The Queen [[1980] 1 S.C.R. 527], it has been clear that the Supreme Court's decisions have broader scope than they would under Lord Halsbury's classic approach.

In refusing to follow the decision in the Terra Mining Exploration case (84 DTC 6185) Hershfield J. stated (at p. 2326):

"While I am loathe to cast aside a precedent as long-standing as the Federal Court, Trial Division's decision in Terra, it is necessary to consider the issue at hand now, some 20 years later, in the light of more recent jurisprudence. While I would not advocate reconstructing the meaning of a statutory provision as and when the judicial thinking of the day changes, in this case, the express language of the Act was not, in my view, given effect in Terra."

Bowman TCJ. adopted the "illuminating discussion of the principle of stare decisis [in] the judgment of Master Funduk in Southside Woodwork v. R.C. Contracting et al. (1989) 95 A.R. 161 at pp. 166-167, paragraphs 51 and 53".

The Minister reassessed the taxpayer in accordance with a Federal Court judgment issued pursuant to a consent to judgment (as subsequently varied). The taxpayer objected to the reassessment on the basis that it did not properly compute its logging tax credit. In dismissing the taxpayer's appeal, Garon TCJ. noted that the reassessment accorded in every respect with the consent judgment and (at p. 433):

"If this Court were permitted to consider and decide a question that has not been examined and the decision rendered following a consent to judgment by the parties, it would follow that this Court would have the power vary its own judgment. We know that it is clearly recognized that a court of justice may vary one of its judgments only in certain quite specific circumstances that are described in ... Gunnar Mining ..."

S.18.28 of the Tax Court of Canada Act merely indicates that the rules of stare decisis do not apply to the informal procedure decisions of the Tax Court and does not preclude the Tax Court from citing, analysing or following such decisions if it is disposed to do so.

In applying obiter dicta of Pigeon J. in the Cewe case, Rip J. applied the following statement in Ottawa v. Nepean, [1943] O.W.N. 352:

"What was said there may be obiter, but it was the considered opinion of the Supreme Court of Canada, and we should respect it and follow it, even if we are not strictly bound by it."

Although Lamarre Proulx J. was inclined to interpret s. 62(1) differently than in the Haines and Bracken decisions, and although under the rule of stare decisis she was not bound by those decisions if they were not decisions of a higher court, nonetheless because "stability and consistency in the decisions of a Court are important" (p.1223), those decisions were followed by her. She also quoted the following passage from Stewart v. Bank of Montreal (1909), 41 SCR 516 at 534:

"'It is', said Lord Macnaghten, in New South Wales Taxation Commissioners v. Palmer, [1907] A.C. 179 at p. 184, 'impossible to treat a proposition which the court declares to be a distinct and sufficient ground for its decision as a mere dictum because there is another ground upon which, standing alone, the case might have been determined.'"