Taxation law

Dismissal of an Appeal and the Notion of an Abuse of Procedure in Tax Matters

Jan 18th, 2021

By Frédéric Delisle

On December 3, 2020, the Honourable Éric Dufour of the Court of Québec rendered a very interesting decision regarding an application for the dismissal of an appeal and the finding of an abuse of procedure in a tax file, namely the decision TricomCanada Inc. v. Québec Revenue Agency, 2020 QCCQ 8827 (the decision can be consulted here).

This short decision provides a succinct reminder of the rules applicable in cases of "estoppel" and abuse of procedure.

In the case at bar, the Taxpayer was appealing the QST reassessments issued to it by the Agency. Similar reassessments had been issued in respect of GST. These were appealed before the Tax Court of Canada and, following the hearing of that appeal, the GST reassessments were upheld.

In its own proceedings, and at various times over the course of the files, the Taxpayer had acknowledged that the GST and QST reassessments had the same basis, raised the same questions of facts and law, and that, overall, its arguments against same were similar, mutatis mutandis.

Despite the unfavourable decision rendered by the Tax Court of Canada, the Taxpayer decided to continue its proceedings before the Court of Quebec, stating:

"... that different evidence will be presented on the merits that could not be presented in the federal proceeding, criticizing in passing the poor strategic choices made by counsel representing him there. » (our translation)

The Agency, for its part, requested that the appeal be dismissed on the grounds that the issues raised were essentially the same as those subject to a final decision rendered by the Tax Court of Canada and that the continuation of the appeal before the Court of Québec constituted an abuse of procedure.

In rendering its decision, the Court was careful to consider the applicable tests for "estoppel", which imply that three conditions must be met:

  1. The same issue was decided in an earlier proceeding;
  2. The previous court decision is final;
  3. The parties are the same in both instances.

The Court went on to note that where the doctrine of "estoppel" cannot be applied, particularly in the absence of one of the above-mentioned conditions (in this case, the parties were not the same since the respondent before the Tax Court of Canada was Her Majesty the Queen and not the Agency), the doctrine of abuse of procedure may take over:

"... it [the doctrine of abuse of procedure] involves the power of the court to prevent the abuse of its procedure in a manner that would bring the administration of justice into disrepute.” (our translation)

Furthermore, the Court added:

  • that it enjoyed a discretionary power to prevent a litigant from abusing its procedure by challenging a final judgment, and that "[t]he foregoing does not affect the fact that the Court of Quebec is not bound by a decision of the Tax Court of Canada, and vice versa, the stare decisis rule does not apply between these two jurisdictions" (our translation);
  • "... even if rightfully introduced in the first place, a procedure can become abusive if it is kept artificially alive when it is doomed to fail, following the occurrence of subsequent events such as, in this case, a final judgment of the Tax Court of Canada" (our translation).

The arguments invoked by the Taxpayer as to the need to continue its procedure before the Court of Quebec were essentially related to the perceived deficiencies in the representations made on its behalf by the Taxpayer’s former representative. However, the Court noted that:

34 It is true that courts are sympathetic to a poorly represented litigants and avoid same having to carry the burden of "counsel error".

35 Here, however, Tricomcanada is the one that mandated its then lawyer. It was in a position to know whether witnesses existed and were available. To blame its former lawyer for ifs choices, which it says are questionable, is tantamount to allowing it a supernumerary attempt to make a game, a second kick at the can, by simply firing its former representative. Such an approach, if endorsed by the Tribunal, would quickly become a strategy available to any party in similar circumstances. It would suffice to express ex post facto regret about the deficient representation of an attorney to challenge the factual findings of a court of law or to fill in the gaps identified in a first final judgment. This would run counter to the procedural rules set out above, which concern, in particular, the finality of judgments, their stability, the credibility of the justice system and the economy of judicial resources. (our translation)

In addition to providing a quick overview of the rules applicable to the notions of “estoppel” and abuse of procedure in tax matters, this decision also serves as a warning about the need for full, consistent and transparent cooperation between a taxpayer challenging reassessments issued against it and the taxpayer’s representative.

If you are facing assessments or reassessments and want to make sure that you are invoking all relevant arguments in your favor, do not hesitate to contact one of the members of Spiegel Sohmer's tax team.