Tax Court of Canada Judgments

Docket: 2000-4164(GST)G

BETWEEN:

ROGER OBONSAWIN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Motions heard on November 4, 2003, at Toronto, Ontario

By: The Honourable Justice Campbell J. Miller
Appearances:
Counsel for the Appellant:	Barry S. Wortzman and Sean Lawler
Counsel for the Respondent:	Gordon Bourgard

____________________________________________________________________

ORDER

          UPON motion by the Appellant for an Order amending the Notice of Appeal; and for an Order staying the appeal pending the final disposition of the Ontario Superior Court of Justice action with Court File No. 03-CV-246581-CM3;

          AND UPON motion by the Respondent for an Order striking out certain paragraphs of the purported Amended Notice of Appeal pursuant to paragraphs 53(a) and (b) the Tax Court of Canada Rules (General Procedure);

          AND UPON reading the affidavit and cross-examination of Roger Obonsawin, filed;

          AND UPON hearing counsel for the parties;

          IT IS ORDERED that:

1.        The Appellant's motion to stay the appeal is denied;

2.        The following paragraphs in the Appellant's Amended Notice of Appeal are accepted as amended: 13, 14, 15, 16, 28, 29, 32 (but deleting the last phrase "and in breach of his employee's tax exemption rights"), 56, 57 and 58(a); and

          3.        As a result of paragraph 2, the Respondent's motion is granted.

Costs shall be in the cause.

Signed at Ottawa, Canada, this 6th day of February, 2004.

Miller J.

Citation: 2004TCC3

Date: 20040206

Docket: 2000-4164(GST)G

BETWEEN:

ROGER OBONSAWIN,

Applicant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR ORDER

Miller J.

[1]      The Appellant, Mr. Roger Obonsawin, brings a motion for an Order amending the Notice of Appeal and temporarily staying the appeal pending the final disposition of the Ontario Superior Court of Justice action with Court File No. 03-CV-246581-CM3 ("OSCJ action"). The Respondent brings a motion for an Order striking out portions of the Appellant's amended Notice of Appeal. The conundrum in these applications arises as a result of the Appellant, by necessity, seeking different remedies in different courts.

[2]      Mr. Obonsawin commenced two actions: this Tax Court of Canada matter filed September 28, 2000 appealing from a goods and services tax assessment (the "GST Assessment"); the OSJC action, first commenced June 21, 2000 as part of a class action, and subsequently pursued as an independent action filed April 3, 2003, raising claims by Mr. Obonsawin against the Government of Canada, Government Ministers and Government officials. It is useful to identify the relief sought by Mr. Obonsawin in the OSJC action:[1]

CLAIM

1.          The Plaintiff claims the following relief:

            (a)         Damages for breach of fiduciary obligations;

(b)         A declaration, pursuant to s. 52(1) of the Constitution Act, 1982 and s. 24(1) of the Charter of Rights and Freedoms, that some or all of the Defendants have violated the constitutional rights of the Plaintiff guaranteed by s. 35 of the Constitution;

(c)         Damages for breach of constitutional rights pursuant to the Charter of Rights and Freedoms, s. 24(1);

(d)         Damages for abuse of power in the exercise of statutory powers and duties;

(e)         An interim and permanent injunction enjoining the Defendants from breaching the Test Case agreement;

(f)          An interim and permanent mandatory injunction requiring the Defendants to honour and perform the Test Case agreement;

(g)         An interim and permanent injunction enjoining the Defendants from discriminating against the Plaintiff with respect to the tax exemption rights of the employees of the plaintiff;

(h)         A declaration that the GST Assessment against the plaintiff that is described, and defined, at sub-paragraph 59(a) below, is null and void, and of no force or effect;

            (i)          Punitive, aggravated and/or exemplary damages;

            (j)          Costs on a substantial indemnity scale; and

(k)         Such further and other relief as to this Honourable Court may seem meet and just.

[3]      Counsel for Mr. Obonsawin, Mr. Wortzman, argues that the Tax Court of Canada has no jurisdiction to adjudicate the tort of abuse of power or abuse of process and certainly cannot make any award of damages in that regard. But, he goes on, the OSCJ cannot only make a finding on the tort of abuse of power or abuse of process, but can grant the Appellant a declaration that the GST Assessment is null and void. However, states Mr. Wortzman, it would then be necessary for the Appellant to return to the Tax Court of Canada armed with the OSCJ's findings, and get the Tax Court of Canada to vacate the assessment, as only the Tax Court of Canada has the jurisdiction to provide that remedy. If the Tax Court of Canada went ahead prior to the OSCJ findings and simply heard the substantive tax issues, and found that the assessment was correct, the Appellant would then be faced with collection actions from Canada Customs and Revenue Agency (CCRA) on an approximate $7 million GST liability. This would effectively bankrupt the Appellant, according to Mr. Wortzman. This is the possible prejudice Mr. Wortzman maintains Mr. Obonsawin faces, if I do not grant the stay.

[4]      Mr. Obonsawin also wishes to amend the pleadings to set up this stay application and to leave the door open for obtaining the Tax Court of Canada's vacating of the assessment in the event the OSCJ finds an abuse of power and makes a declaration the assessment is null and void. Most of the amendments therefore go to the background of the Government's alleged egregious behaviour.

[5]      The Respondent opposes the stay application. Mr. Bourgard initially argued that the Tax Court of Canada is the proper forum to hear the issue of abuse of process, which he distinguishes from the tort of abuse of power. Mr. Bourgard relied on the recent decision in Dwyer v. The Queen[2] to suggest that the Tax Court of Canada can vacate a GST Assessment on the basis of an abuse of process. Further, as the substance of this case is Mr. Obonsawin's tax assessment, it is the Tax Court of Canada that is best equipped to get at the core matter. Only once the Tax Court of Canada has ruled on vacating the assessment, and, if not vacating the assessment, then determining the correctness of the amount of the assessment, would the OSCJ be in a position to fully rule on the damages action in the tort of abuse of power or abuse of process. Mr. Bourgard concedes only those amendments to the Notice of Appeal which would permit the Appellant to seek a remedy of vacating the assessment for abuse of process.

[6]      Some time after oral argument, Mr. Bourgard notified the Court of a shift in the Respondent's position. This arose after the Respondent's review of this Court's decision in Main Rehabilitation Co. Ltd. v. The Queen[3] and Pintendre Autos Inc. v. The Queen[4] and the recent decision of the Federal Court of Appeal's in Webster v. The Queen.[5] It is now conceded by the Respondent that this Court does not have the jurisdiction to vacate a correct assessment on the basis of abusive government behaviour. The difference between the Appellant's and the Respondent's position in this regard is that the Respondent argues the Tax Court of Canada cannot be directed to vacate an assessment on the basis of another Court (in this case the OSCJ) declaring an assessment null and void, due to government abuse of power. (The Respondent suggests an Ontario Court would be unlikely to entertain such a declaration in any event.) The Appellant maintains that, although the Tax Court of Canada cannot adjudicate the issue of abuse of power, it can, and must, vacate an assessment, if a Court with the appropriate jurisdiction declares an assessment null and void.

[7]      The change in the Respondent's argument limits the issue in the Tax Court of Canada, in the Government's view, to solely that of the correct determination of the quantum of the assessment. Yet, I did not receive, presumably because I did not ask for them, any further submissions from the Government regarding the Appellant's request to amend the pleadings. I will have more to say on this shortly.

[8]      Clearly the Tax Court of Canada has exclusive jurisdiction to vacate a GST assessment. Just as clearly, the OSCJ has jurisdiction to award damages in a tort action of abuse of power or abuse of process. What is not so clear is who has jurisdiction to give declaratory relief. It is helpful to clarify certain concepts in considering this issue, before proceeding to address the stay application. What is abuse of power? What is abuse of process?

Abuse of power

[9]      Abuse of power is a tort described in Remedies In Tort[6] as follows:

60.1      The tort has been recognized as having two branches or forms: (1) where the public official possesses the legal power or authority to act but intentionally exercises that power or authority for the predominant and improper purpose of injuring the plaintiff, commonly referred to as "targeted malice"; (2) where the public official acts knowing he has no legal power or authority to do the act complained of and that the act will probably injure the plaintiff. The existence of two branches to the tort was confirmed by the House of Lords in Three Rivers District Counsel v. Bank of England (No. 3).

60.2      The House of Lords identified the elements of the tort as follows: (1) the defendant must be a public officer; (2) there must be an exercise of power as a public officer; (3) the sate of the mind of the defendant (relating to one or the other branch of the tort); (4) duty to the plaintiff; (5) causation; and (6) damages as a result. Following from that decision, the British Columbia courts have set out the following ingredients of the tort: (1) the defendant must be a public officer; (2) there must be exercise of power as a public officer; (3) there must be a state of mind of the defendant that is either targeted malice or he must have acted in the knowledge of, or with reckless indifference to, the legality of his act and in the knowledge of, or with reckless indifference to, the probability of causing injury to the plaintiff; (4) there must be a duty to the plaintiff or sufficient interest in the plaintiff to found a legal standing to sue; and (5) the exercise of power must have caused loss to the plaintiff.

The authors go on to indicate that punitive damages are particularly appropriate in such abuse cases. There is no dispute that it is the OSCJ, and not the Tax Court of Canada, that is the appropriate court to hear this aspect of the Appellant's claim.

Abuse of process

[10]     This concept becomes somewhat trickier as it is used in a number of different contexts.

(i)       Tort. Again relying on comments in Remedies In Tort,[7] Mr. Lewis Klar and Justice Linden summarized this tort as originating in Grainger v. Hill[8] as follows:

4. ... It is an action for abusing the process of law, by employing it to extort property to which the Defendants had no right: that is of itself a sufficient cause of action, without alleging that there was no reasonable or probable cause for the suit itself" (per Vaughan J.). "This is not an action for a malicious arrest or prosecution, or for maliciously doing that which the law allows to be done: the process was enforced for an ulterior purpose; to obtain property by duress to which the Defendants had no right. The action is not for maliciously putting process in force, but for maliciously abusing the process of the Court" (per Bosanquet J.).

...

14. To establish abuse of process, the plaintiff must prove that the defendant resorted to a legal process against him solely for a purpose other than that which it was designed to serve. In other words, the proceedings were "merely a stalking-horse to coerce the defendant in some way entirely outside the ambit of the legal claim upon which the court is asked to adjudicate". It is immaterial to the action whether the process is well founded if it was taken for an improper purpose collateral to the ostensible purpose of the proceeding. The collateral advantage sought, to be improper, must be one not reasonably related to the litigation and but for which the defendant would not have commenced the action.

Damages for this tort liability also are not within the purview of the Tax Court of Canada.

(ii)       Court's inherent jurisdiction over its own process. The Tax Court of Canada is no different from other Superior Courts in having an inherent power to prevent abuse of its own process. The Tax Court of Canada rules are full of examples, the clearest perhaps represented in Rule 53, which allows the Court to strike out all of a pleading on the grounds that it is an abuse of process of the Court.

[11]     This, however, is not the abuse of process at issue in this case, as the abuse of process, if any, was not an abuse of the Court's own procedure, but of the assessment procedure and the assessment itself.

(iii)      Abuse of process in the administrative or public law context of a breach of principles of natural justice.

[12]     This appears to be the abuse Mr. Bourgard was referring to when he first suggested the Court could vacate an assessment if there is something about the Minister's assessing actions that shocks the conscience of the community. Although dealing with a delay issue, the Supreme Court of Canada in Blencoe v. British Columbia (Human Rights Commission)[9] discussed this concept of abuse of process in some detail. Justice Bastarache indicated at paragraph 105:

It is trite law that there is a general duty of fairness resting on all public decision-makers. ... Perhaps the best illustration of the traditional meaning of this duty of fairness in administrative law can be discerned from the following words of Dickson J. in Martineau,[10] at page 631:

            In the final analysis, the simple question to be answered is this: Did the tribunal on the facts of the particular case act fairly toward the person claiming to be aggrieved? It seems to me that this is the underlying question which the courts have sought to answer in all the cases dealing with natural justice and with fairness.

These comments were in the context of the Court exercising its supervisory function over a tribunal, the B.C. Human Rights Commission, though I see no reason why it cannot similarly pertain to any government official. Justice Bastarache went on to say at paragraph 120:

            In order to find an abuse of process, the court must be satisfied that, "the damage to the public interest in the fairness of the administrative process should the proceeding go ahead would exceed the harm to the public interest in the enforcement of the legislation if the proceedings were halted". According to L'Heureux-Dubé J. in Power,[11] supra, at p. 616, "abuse of process has been characterized in the jurisprudence as a process tainted to such a degree that it amounts to one of the clearest of cases. In my opinion, this would apply equally to abuse of process in administrative proceedings. For there to be abuse of process, the proceedings must, in the words of L'Heureux-Dubé J. be "unfair to the point that they are contrary to the interests of justice" (p. 616). "Cases of this nature will be extremely rare" (Power, supra, at p. 616). In the administrative context, there may be abuse of process where conduct is equally oppressive.

[13]     Does this concept, although in large measure derived from criminal proceedings, have application to public servants in the government department whose role it is to assess quantum of a taxpayer's tax liability? A duty of fairness surely extends to a Minister determining an assessment. As described in Judicial Review of Administrative Action in Canada[12] by Donald J.M. Brown and John M. Evans, the duty of fairness attaches to every public authority making an administrative decision not of a legislative nature which effects the rights, privileges or interest of an individual. The parties agree, however, that this Court has no authority or jurisdiction to hear representations with respect to this form of abuse of process and to provide an appropriate remedy. That certainly appears to be the common thinking supported by the cases of Webster, Main Rehabilitation and Pintendre cited earlier. They appear to have shut the jurisdictional door left slightly ajar by the recent Federal Court of Appeal decision in Dwyer. I hope there might be some opportunity in the future for the Federal Court of Appeal to hear a full debate on this Court's jurisdiction.

[14]     Does the OSCJ have jurisdiction to offer a public law remedy in this context? The Appellant argues, yes, it can give declaratory relief. The Respondent suggests, though without delving deeply into this matter, as it was not necessary to do so, that no, the remedy available to the Appellant in the OSCJ is the private law tort of abuse of process or abuse of power: a remedy that is not available in the Tax Court of Canada. Mr. Wortzman argues that this leaves no control over Government conduct. I disagree. Without having to decide another court's jurisdiction, there may well be a public law remedy available - it is simply not available in the Tax Court of Canada.[13] There is also some control over government conduct in the availability of the tort action of abuse of power. If the Court with jurisdiction of such a tort action takes the view that the appropriate damages should relate entirely to the correct quantum of tax, wrongfully assessed, then its award can be structured to achieve that result. The practical effect would be similar to a declaration the assessment is null and void.

[15]     I do not intend to tell another Court what its jurisdiction is, notwithstanding recent comments from Courts about deference to the Tax Court of Canada on tax matters.[14] If the OSCJ assumes the public law jurisdiction, and grants declaratory relief, it does not follow that this Court automatically implements that decision by vacating the assessment. If we cannot hear the abuse of power matter directly with a view to vacating an assessment, I fail to see how we have jurisdiction to vacate an assessment based on another Court's finding of abuse of power. If the Government attempts to pursue collection of its assessment in light of such a declaration from the OSCJ, the Appellant might seek injunctive relief in the Federal Court. Again, that is not a matter for the Tax Court of Canada.

[16]     To conclude on the jurisdictional issue, I accept counsels' position that the Tax Court of Canada cannot hear the public law issue of abuse of power with a view to vacate an assessment. I reject the Appellant's position that we can, however, vacate an assessment if the OSCJ grants a declaration the assessment is null and void on the grounds of Government abuse of power. I need not decide what authority the OSCJ has in that regard. The matter in this Court is limited to the determination of the correctness, quantum-wise of the GST Assessment. With that background I now turn to the applications before me.

Application for temporary stay

[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.

[18]     What is the appropriate test to apply in determining the stay application? In the case of Varnam v. Canada[15] it was put as follows:

A stay of proceedings is never granted as a matter of course. The matter is one calling for the exercise of a judicial discretion in determining whether a stay should be ordered in the particular circumstances of the case.    The power to stay should be exercised sparingly and a stay will only be ordered in the clearest cases.    In an order to justify a stay of proceedings two conditions must be met, one positive and the other negative:    (a) the defendant must satisfy the court that the continuance of the action would work an injustice because it would be oppressive or vexatious to him or would be an abuse of the process of the court in some other way; and (b) the stay must not cause an injustice to the plaintiff.    On both the burden of proof is on the defendant.    Expense and inconvenience to a party or the prospect of the proceedings being abortive in the event of a successful appeal are not sufficient special circumstances in themselves for the granting of a stay: Communications Workers of Canada v. Bell Canada, [1976] 1 F.C. 282 (T.D.); Weight Watchers Int'l Inc. v. Weight Watchers of Ontario Ltd. (1972), 25 D.L.R. (3d) 419 (F.C.T.D.); Baxter Travenol Laboratories Ltd. v. Cutter (Canada), Ltd. (1981), 54 C.P.R. (2d) 218 (F.C.T.D.).

[19]     Other decisions of the Federal Court of Appeal follow this two-prong approach: an injustice to the defendant and no injustice to the plaintiff. Ontario Courts have also considered the convenience factor, as indicated in Sportmart, Inc. v. Toronto Hospital Foundation:[16]

            Among the factors that the court should consider in determining whether to stay one of two actions are: which action was commenced first; who has the chief burden of proof; which is the more comprehensive action in scope; and the balance of convenience.

Convenience has likewise been referred to in cases in British Columbia (Amchem Products Inc. v. British Columbia (Workers' Compensation Board)[17]where the recommended test is whether justice can be done at substantially less inconvenience or expense, and the stay does not prejudice the other side of a legitimate personal or jurisdictional advantage.

[20]     In summary, the test I adopt in the temporary stay application in this Court is:

-         Firstly, would the continuance of the action be oppressive, vexatious or harmful to the Appellant, or an abuse of the Court's process? This first condition must always be met or no stay should be granted.

-         Second, if there is harm to the Appellant in proceeding, is there prejudice to the Respondent by not proceeding?

-         Third, if there is harm or prejudice to the Respondent as well, then the Court must balance the respective injuries in determining how justice is best served. In this final analysis, it is appropriate to consider factors such as convenience, expense, the law of the transaction, parties' location and any special circumstances of the particular case.

[21]     Applying this approach to this case, what is the harm or oppression that Mr. Obonsawin would suffer should the Tax Court of Canada matter proceed? Mr. Wortzman emphasized that the prejudice to Mr. Obonsawin is the risk of financial ruin, should the Tax Court of Canada uphold the multi-million dollar GST Assessment, before Mr. Obonsawin has had any opportunity to argue in another Court that the abusive behaviour of the Government is such that the GST Assessment should be declared null and void, or damages equivalent to the assessment should be awarded.

[22]     To be clear, the oppression or harm does not flow as a result of the determination of a correct assessment by the Tax Court of Canada. Nor do I accept that the financial consequences to Mr. Obonsawin arising from such a determination by the Tax Court of Canada are any more oppressive than any other taxpayer facing a significant tax bill. The harm or prejudice only arises because CCRA may attempt to collect the tax bill prior to a determination as to an underlying validity of the assessment itself. But how is this any different from a normal appeal of a Tax Court of Canada GST decision to the Federal Court of Appeal. There is no automatic stay of collection.[18] Mr. Obonsawin, like any other taxpayer who continues to pursue a claim, has available whatever relief from collection he might seek in a court of appropriate jurisdiction. In this situation he happens to be pursuing a claim in the Ontario Superior Court. To halt the Tax Court of Canada proceedings, which deal solely with the determination of the correct quantum of tax, is not an appropriate remedy for dealing with a collection problem, which only arises after the Tax Court of Canada decision.

[23]     Mr. Obonsawin is attempting to put the cart before the horse. This Court should proceed to determine the correctness of the GST Assessment. The OSCJ action has no bearing on that determination. If the timing is such that Mr. Obonsawin receives a decision from the Tax Court of Canada, before a decision in the OSCJ action, then he could consider the legal options available to him vis-à-vis CCRA's collection actions. To grant a stay in these circumstances would be ignoring the caution cited in earlier cases to exercise this power sparingly. Where there is no concurrent jurisdiction between the Tax Court of Canada and the OSCJ, where the concern is one of collection, where the Appellant's concerns can be addressed by legal options available at the time it arises, where there may be some benefit to the OSCJ in knowing the decision of the Tax Court of Canada on the correctness of the assessment, I find Mr. Obonsawin is not oppressed by the matter proceeding in the Tax Court of Canada.

[24]     Having made that determination it is unnecessary to pursue the second or third steps in the analysis.

Application to Amend Pleadings

[25]     The Appellant's amendments to the Notice of Appeal reflect almost entirely the Statement of Claim in the OSCJ action. Mr. Wortzman's argument was that this was to ready the Tax Court of Canada for the return of the Appellant from the OSCJ with a declaration in hand that the GST Assessment is null and void. This is no longer necessary given my view of this Court's authority. What is necessary is that the Appellant plead those facts establishing the basis for determining the correct tax liability.

[26]     The Respondent objected to a number of the amendments sought by the Appellant, but did so on the basis that he believed this Court has jurisdiction to deal with the abuse of power issue. He has changed that position and I have accepted that change. The application to amend should be viewed in that context.

[27]     The Appellant's amendments fall under two main headings: Vacating Assessment (paragraphs 13 to 39) and Allegations Concerning Abuse of Power (paragraphs 40 to 61). The headings alone might suggest that all that follows is not relevant to the substantive tax issues left before the Court. Yet, the substantive tax issues include the question of what is exempt from tax pursuant to section 87 of the Indian Act,[19] as well as what is exempt due to pre-existing rights of native people. Some of the paragraphs do appear to have some relevance to those issues, and I will therefore identify them as being acceptable. The headings themselves are not acceptable and neither are paragraphs 62, 72 and 73(a), which relate directly to what this Court cannot do.

[28]     First, paragraphs 13, 14, 15 and 16, though relating to fiduciary duties, can be construed as providing a base for the claim of exemption under either of the above issues. I allow those amendments.

[29]     Second, paragraphs 28, 29 and 32 (but deleting the last phrase "and in breach of his employee's tax exemption rights") deal with the Respondent's administration of tax exemption rights and are relevant. I allow them.

[30]     Third, paragraphs 56, 57 and 58(a) provide background to the GST Assessment and are allowed.

[31]     No amendments other than those I have specifically mentioned are allowed.

Conclusion

[32]     The application by Mr. Obonsawin to stay is denied on the grounds that he suffers no prejudice if the Tax Court of Canada matter proceeds. The risk of a speculative, negative result from collection proceedings, flowing from an assessment judicially quantified, does not create a prejudice for which a stay in this Court is appropriate. Other remedies may be available to deal with collection actions.

[33]     With respect to Mr. Obonsawin's application to amend pleadings, only the following amendments are granted: paragraphs 13, 14, 15, 16, 28, 29, 32 (with a part deleted as indicated), 56, 57 and 58(a). The impact of this is that the Respondent's motion is granted. Costs shall be in the cause.

Signed at Ottawa, Canada, this 6th day of February, 2004.

"Campbell J. Miller"

Miller J.

CITATION:

2004TCC3

COURT FILE NO.:

2000-4164(GST)G

STYLE OF CAUSE:

Roger Obonsawin

PLACE OF HEARING:

Toronto, Ontario

DATE OF HEARING:

November 4, 2003

REASONS FOR ORDER BY:

The Honourable Justice Campbell J. Miller

DATE OF ORDER:

February 6, 2004

APPEARANCES:

Counsel for the Appellant:

Barry S. Wortzman

Counsel for the Respondent:

Gordon Bourgard

COUNSEL OF RECORD:

For the Appellant:

Name:

Barry S. Wortzman and Sean Lawler

Firm:

Shibley Righton LLP

For the Respondent:

Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada

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