Minister of National Revenue v. Garber et al., (2008) 375 N.R. 94 (FCA)

• Judge: Nadon, Sexton and Pelletier, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: December 10, 2007
• Jurisdiction: Canada (Federal)
• Citations: (2008), 375 N.R. 94 (FCA);2008 FCA 53

MNR v. Garber (2008), 375 N.R. 94 (FCA)

MLB headnote and full text

Temp. Cite: [2008] N.R. TBEd. AP.014

Her Majesty the Queen (appellant) v. Allan Garber, Geoffrey Belchetz and Linda Leckie Morel (respondents)

(A-112-07; A-113-07; A-114-07; 2008 FCA 53)

Indexed As: Minister of National Revenue v. Garber et al.

Federal Court of Appeal

Nadon, Sexton and Pelletier, JJ.A.

February 12, 2008.

Summary:

Overseas Credit Guarantee Corp. (OCGC), acting as general partner, registered 79 limited partnerships in Ontario to carry on charter operations for luxury yachts and cruise ships. Three taxpayers acquired one unit in one of the limited partnerships from OCGC and made deductions from income arising from their participation in the partnership. The president and controlling and sole shareholder of OCGC and his associate were convicted by a jury of fraud and uttering forged documents. The taxpayers were not parties to the criminal proceedings, were not represented by counsel in those proceedings and, although aware of the criminal proceedings, were not given formal notice. Notices of Reassessment were issued against the taxpayers disallowing their deductions relating to the partnership. The taxpayers objected, but the Minister of National Revenue confirmed the reassessments. The taxpayers appealed. Preliminary issues arose respecting whether, in light of the criminal convictions, the doctrine of abuse of process prevented the taxpayers from alleging on their appeals that the representatives of OCGC were not guilty of fraud and forgery or from asserting facts contrary to the findings of fact made by the trial judge in the criminal prosecution.

The Tax Court of Canada (Bowie, J.), in a decision with neutral citation 2007 TCC 109, held that it would not be an abuse of process for the taxpayers in this particular tax appeal to assert facts that would, it was speculated, run contrary to a criminal conviction involving third parties. The Minister of National Revenue appealed.

The Federal Court of Appeal dismissed the appeals.

Courts - Topic 2015

Jurisdiction - General principles - Controlling abuse of its process (incl. abuse of process by relitigation) - The Federal Court of Appeal discussed the doctrine of abuse of process by relitigation and distinguished that doctrine from the concept of issue estoppel - The court stated that issue estoppel was more concerned with the principle that no one should be twice vexed by the same cause (i.e., the focus was primarily on the interests of litigants) - While the policy grounds supporting abuse of process by relitigation and issue estoppel were similar, the main focus of the abuse of process doctrine was to preserve the integrity of the entire legal system especially with respect to the prospect of conflicting decisions which could bring the administration of justice into disrepute - The doctrine of abuse of process was flexible and unencumbered by the specific requirements of issue estoppel and involved a judicial balance between finality, fairness, efficiency and authority of judicial decisions - In terms of determining how to apply the doctrine of  abuse of process, the court quoted the Supreme Court of Canada in Toronto v. CUPE (2003) wherein it was stated that: "there may be instances where relitigation will enhance, rather than impeach, the integrity of the judicial system, for example: (1) when the first proceeding is tainted by fraud or dishonesty; (2) when fresh, new evidence, previously unavailable, conclusively impeaches the original results; or (3) when fairness dictates that the original result should not be binding in the new context" -  See paragraphs 33 to 41.

Courts - Topic 2015

Jurisdiction - General principles - Controlling abuse of its process (incl. abuse of process by relitigation) - The Federal Court of Appeal rejected the notion that the doctrine of abuse of process by relitigation could never apply against a litigant who was not a party to the original proceeding, nor a privy to a party to those proceedings - The court stated that it would not be appropriate to apply this "bright line test" so as to limit the abuse of process doctrine in such a manner because it was not possible to foresee all potential fact situations - The court stated that "it would be unwise for this court to lay down such a rule, only to have to revoke or revise it because of an unforeseen situation. The balancing test as outlined by Justice Arbour [in Toronto v. CUPE (SCC 2002)] is sufficiently flexible to accommodate changing situations by keeping the focus of the analysis on the integrity of the judicial system" - See paragraphs 55 to 61.

Courts - Topic 2015

Jurisdiction - General principles - Controlling abuse of its process (incl. abuse of process by relitigation) - Three taxpayers invested in limited partnerships and deducted expenses accordingly - The general partner who had registered the limited partnerships was convicted by a jury of fraud and forgery - The taxpayers were not parties to the criminal proceedings, were not represented by counsel in those proceedings and, although aware of the criminal proceedings, were not given formal notice - The taxpayers' deductions relating to the partnership were disallowed - The taxpayers appealed - Issues arose as to whether the doctrine of abuse of process by relitigation prevented the taxpayers from alleging on their appeals that the general partner and its principals were not guilty of fraud and forgery or from asserting facts contrary to the findings of fact made by the trial judge in the criminal prosecution - A motions judge held that it would not be an abuse of process for the taxpayers in this particular tax appeal to assert facts that would, it was speculated, run contrary to a criminal conviction involving third parties - The Crown appealed - The Federal Court of Appeal dismissed the appeals.

Estoppel - Topic 376

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - General principles - [See first Courts - Topic 2015 ].

Cases Noticed:

R. v. Bjellebo, [2000] O.T.C. 119 (Sup. Ct.), refd to. [para. 9].

R. v. Bjellebo (E.S.) et al. (2003), 177 O.A.C. 378 (C.A.), leave to appeal dismissed (2004), 330 N.R. 198; 330 N.R. 398 (S.C.C.),  refd to. [para. 9].

Hunter v. Chief Constable of the West Midlands Police, [1982] A.C. 529 (H.L.), refd to. [paras. 13, 83].

Danyluk v. Ainsworth Technologies Inc. et al., [2001] 2 S.C.R. 460; 272 N.R. 1; 149 O.A.C. 1, refd to. [paras. 13, 95].

Toronto (City) v. Canadian Union of Public Employees, Local 79 et al., [2003] 3 S.C.R. 77; 311 N.R. 201; 179 O.A.C. 291; 2003 SCC 63, refd to. [paras. 13, 68].

Elders Grain Co. et al. v. Ship Ralph Misener et al., [2005] 3 F.C. 367; 334 N.R. 1 (F.C.A.), refd to. [para. 17].

Hammill v. Minister of National Revenue (2005), 338 N.R. 162; 257 D.L.R.(4th) 1; 2005 FCA 252, leave to appeal refused (2006), 350 N.R. 198 (S.C.C.), refd to. [para. 19].

R. v. Alexander Street Lofts Development Corp. et al. (2007), 224 O.A.C. 41; 86 O.R.(3d) 710 (C.A.), refd to. [para. 27].

Ontario (Minister of Community and Social Services) et al. v. Ontario Public Service Employees Union, [2003] 3 S.C.R. 149; 311 N.R. 189; 179 O.A.C. 201; 2003 SCC 64, refd to. [para. 33].

Toronto (City) et al. v. Canadian Union of Public Employees, Local 79 et al. (2001), 149 O.A.C. 213; 55 O.R.(3d) 541; 205 D.L.R.(4th) 280 (C.A.), refd to. [para. 46].

Polgrain Estate v. Toronto East General Hospital et al., [2007] O.T.C. 2227; 87 O.R.(3d) 55 (Sup. Ct.), refd to. [para. 54].

Blencoe v. Human Rights Commission (B.C.) et al., [2000] 2 S.C.R. 307; 260 N.R. 1; 141 B.C.A.C. 161; 231 W.A.C. 161; 2000 SCC 44, refd to. [para. 59].

R. v. Conway, [1989] 1 S.C.R. 1659; 96 N.R. 241; 34 O.A.C. 165, refd to. [para. 59].

Johnson v. Gore Wood & Co., [2001] 2 W.L.R. 72 (H.L.), refd to. [para. 81].

McIlkenny v. Chief Constable of the West Midlands et al., [1980] 1 Q.B. 283 (C.A.), refd to. [para. 87].

Laboratoires Servier et al. v. Apotex Inc. et al. (2007), 370 N.R. 200; 2007 FCA 350, refd to. [para. 101].

Counsel:

John Shipley, for the appellant;

Howard Winkler, for the respondents.

Solicitors of Record:

John H. Sims, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the appellant;

Aird & Berlis LLP, Toronto, Ontario, for the respondents.

This appeal was heard at Toronto, Ontario, on December 10, 2007, before Nadon, Sexton and Pelletier, JJ.A., of the Federal Court of Appeal. The following judgment of the Federal Court of Appeal was delivered at Ottawa, Ontario, on February 12, 2008, and the following opinions were filed:

Sexton, J.A. (Pelletier, J.A., concurring)  - see paragraphs 1 to 63;

Nadon, J.A., concurring in the result - see paragraphs 64 to 103.