Canada v. Garber

Canada v. Garber
Court (s) Database
Federal Court of Appeal Decisions
Date
2008-02-12
Neutral citation
2008 FCA 53
File numbers
A-112-07, A-113-07, A-114-07
Notes
Reported Decision
Decision Content
Date: 20080212
Dockets: A-112-07
A-113-07
A-114-07
Citation: 2008 FCA 53
CORAM: NADON J.A.
SEXTON J.A.
PELLETIER J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
ALLAN GARBER
GEOFFREY BELCHETZ
LINDA LECKIE MOREL
Respondents
Heard at Toronto, Ontario, on December 10, 2007.
Judgment delivered at Ottawa, Ontario, on February 12, 2008.
REASONS FOR JUDGMENT BY: SEXTON J.A.
CONCURRED IN BY: PELLETIER J.A.
CONCURRING REASONS BY: NADON J.A.
Date: 20080212
Dockets: A-112-07
A-113-07
A-114-07
Citation: 2008 FCA 53
CORAM: NADON J.A.
SEXTON J.A.
PELLETIER J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
ALLAN GARBER
GEOFFREY BELCHETZ
LINDA LECKIE MOREL
Respondents
REASONS FOR JUDGMENT
SEXTON J.A.
INTRODUCTION
[1] These appeals, concerning the invocation of the abuse of process doctrine against individuals litigating a matter for the very first time, involve the sometimes conflicting interests of the finality and authority of judicial decisions and the right to be heard in a proceeding. Ultimately, it is the integrity of the judicial process which should be the court’s fundamental concern and these conflicting interests must be balanced to produce a result conducive to that end.
[2] This is an appeal from the judgment of Justice Bowie (the “Motions Judge”) of the Tax Court of Canada in Morel v. Canada 2007 TCC 109, in which he determined 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.
[3] For the reasons that follow, I would dismiss these appeals.
FACTS
[4] Between November 28, 1984 and January 27, 1986, Overseas Credit Guarantee Corporation (“OCGC”), acting as General Partner, registered 79 partnerships with the Ontario Ministry of Consumer and Commercial Relations in the Province of Ontario as limited Partnerships. In its filings, OCGC represented the purpose of the partnerships to be the carrying on of charter operations of luxury yachts and cruiseships. From 1985 – 1987, OCGC, either directly or indirectly through enterprises, sold 36 limited partnerships to approximately 600 individual investors.
[5] Allan Garber, Geoffrey D. Belchetz, and Linda Leckie Morel (collectively, the “respondents” or “taxpayers”) each entered into an arrangement with OCGC in which they acquired 1 unit in one of the limited partnerships.
[6] Each of the respondents made certain deductions from their income arising from their participation as one of the limited partners in their respective limited partnership. The deductions were disallowed by Notices of Reassessment. By Notices of Objection the respondents objected to the reassessments. The Minister confirmed the reassessments. The taxpayers each appealed by Notice of Appeal.
[7] Einar Bellfield, the President, controlling and sole shareholder of OCGC (“Bellfield”), was charged along with two associates of two counts of fraud contrary to section 380(1)(a) of the Criminal Code R.S.C. 1985, c. C-46, as am. (the “Criminal Code”) and two counts of uttering forged documents contrary to section 368(1) of the Criminal Code. In December of 1999, following a trial comprised of a judge and jury, Bellfield and one of his associates Osvaldo Minchella (“Minchella”) were convicted on the charges that, together with OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A, they:
unlawfully did, by deceit, falsehood or other fraudulent means, defraud the public of tax revenues owing to Her Majesty in right of Canada by making false claims to Revenue Canada in relation to approximately $110,000,000.00 in losses claimed on behalf of thirty-six limited Partnerships, including the limited partnerships in question managed by OCGC; unlawfully did, by deceit, falsehood or other fraudulent means, defraud investors in thirty-six limited Partnerships, including the limited partnerships in question managed by OCGC, of cash deposits paid, the value of promissory notes, and interest payments paid in respect of the said promissory notes to the said OCGC in respect of units purchased by investors in each of the said limited Partnerships; knowing that documents were forged, unlawfully did cause or attempt to cause Her Majesty in right of Canada to use, deal with, or act on said documents, namely, limited Partnership financial statements, invoices and other documents relating to thirty-six limited Partnerships, including the limited partnerships in question managed by the said OCGC as if they were genuine; and knowing that documents were forged, unlawfully did cause or attempt to cause investors in thirty-six limited Partnerships, including the limited partnerships in question to use, deal with, or act on said documents, namely, limited Partnership financial statements and other documentation, as if they were genuine.
[8] Justice Chaplik of the Ontario Superior Court of Justice made a number of findings of fact in her reasons for sentence (R. v. Bjellebo [2000] O.J. No. 478 (S.C.J.) (QL)). Those findings will be discussed later.
[9] The convictions and sentences were affirmed by the Ontario Court of Appeal (R. v. Bjellebo [2003] O.J. No. 3946 (C.A.) (QL)) and applications for leave to the Supreme Court of Canada were dismissed ([2003] S.C.C.A. No. 541 (Bellfield) and [2004] S.C.C.A. No. 69 (Minchella)).
[10] The respondents were not parties to the criminal proceedings, were not represented by counsel in the criminal proceedings and, although aware of the criminal proceedings, were not given formal notice.
[11] Pursuant to Rule 58(1)(a) of the Tax Court of Canada Rules (General Procedure), the Motions Judge was asked to answer the following questions before trial:
1) Where convictions have been entered, does the doctrine of abuse of process prevent the Appellant from alleging that Einar Bellfield and Osvaldo Minchella together with OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A. did not unlawfully, by deceit, falsehood or other fraudulent means, defraud the public of tax revenues owing to Her Majesty in right of Canada by making false claims to Revenue Canada in relation to approximately $100,000,000.00 in losses claimed on behalf of thirty six limited Partnerships, including the S/Y Close Encounters Limited Partnership, managed by the said OCGC?;
2) Where convictions have been entered, does the doctrine of abuse of process prevent the Appellant from alleging that Einar Bellfield, and Osvaldo Minchella together with OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A. did not unlawfully, by deceit, falsehood or other fraudulent means, defraud investors, including Belchetz, in thirty-six limited Partnerships managed by the said OCGC, of cash deposits paid, the value of promissory notes, interest payments paid in respect of the said promissory notes to the said OCGC in respect of units purchased by the investors, including Belchetz, in each of the said limited Partnerships?;
3) Where convictions have been entered, does the doctrine of abuse of process prevent the Appellant from alleging that Einar Bellfield and Osvaldo Minchella together with OCGC, Neptune Marine Resources S.A. and Starlight Charters S.A. did not, knowing that documents were forged, unlawfully cause or attempt to cause Her Majesty n [sic] right of Canada to use, deal with, or act on said documents, namely limited Partnership financial statements, invoices and other documentation relating to thirty-six limited partnerships, including the S/Y Close Encounters Limited Partnership, managed by the said OCGC as if they were genuine?;
4) Where convictions have been entered, does the doctrine of abuse of process prevent the Appellant from alleging that Einar Bellfield and Osvaldo Minchella together with OCGC, Neptune Marine Resources S.A and Starlight Charters S.A. did not, knowing that documents were forged, unlawfully cause or attempt to cause investors including Belchetz, to use, deal with or act on said documents, namely limited Partnership financial statements, invoices and other documentation relating to thirty-six limited partnerships, including the S/Y Close Encounters Limited Partnership, managed by the said OCGC as if they were genuine?;
5) Does the doctrine of abuse of process prevent Belchetz from asserting in this appeal facts contrary to the findings of fact made by the trial judge in the prosecution of Bellfield and Minchella which findings form part of her Reasons for Sentence?;
6) If the answer to any of 1), 2), 3), 4) or 5) is yes, should the appeal be dismissed as an abuse of process?; and
7) If the answer to any of 1), 2), 3), 4) or 5) is yes but the answer to 6) is no, what is the appropriate remedy, if any, respecting the hearing of the appeal?
DECISION BELOW
[12] In the Court below, Bowie J. answered questions one through five in the negative, and thus did not need to answer questions six or seven.
[13] The Motions Judge began by considering the leading cases on abuse of process and issue estoppel, including Hunter v. Chief Constable of the West Midlands Police [1982] A.C. 529 (H.L.) (“Hunter”), Danyluk v. Ainsworth Technologies Inc. [2001] 2 S.C.R. 460 (“Danyluk”), and Toronto (City) v. Canadian Union of Public Employees (C.U.P.E.) local 79 [2003] 3 S.C.R. 77 (“CUPE”). After considering these cases, he relied significantly on the following passage written by Justice Arbour in CUPE at paragraph 52:
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. This was stated unequivocally by this Court in Danyluk, supra, at para. 80.
[14] Justice Bowie concluded, at paragraph 6 of his decision, that fairness dictated that it would not be an abuse of process for the taxpayers to be allowed to proceed with their appeals:
In the present case, there is no suggestion before me that the trial of Bellfield and Minchella was in any way tainted. The appellants were not called to give evidence, nor did they have the opportunity to do so had they so wished, but they may do so on their tax appeals before this Court. Most importantly, however, considerations of fairness dictate that the appellants should not be bound in this litigation by the convictions of Bellfield and Minchella. The appellants do not seek to relitigate anything. The validity of the assessments against them has never been litigated, except in these appeals. They did not litigate the guilt or innocence of Bellfield and Minchella, nor could they have done so. They are quite different parties from the accused persons, and their purpose is not to impeach the convictions but simply to be heard in their own income tax appeals. In my view, it would not be fair in this context to deny the appellants the opportunity to be heard as to the issue whether the partnerships in question in these appeals qualify as sources of income for the purpose of section 3 of the Income Tax Act, although that is the result that the respondent contends would flow from affirmative answers to the first five questions. [footnote omitted] It is noteworthy in this connection that in those cases where the doctrine of abuse of process has been applied to prevent relitigation, it is invariably the party that lost the first litigation that seeks to gain through the relitigation.
The Motions Judge also found that his conclusion was supported by the right to a hearing under paragraphs 1(a) and 2(e) of the Canadian Bill of Rights, R.S.C. 1985 (Appendix III).
[15] Her Majesty the Queen (the “appellant”) has appealed against the three respondents. The three respondents’ cases were consolidated by order of Sharlow J.A., with the lead file to be Queen v. Allan Garber (A-112-07).
ISSUES
[16] There are two issues in these appeals, namely:
· Did the Motions Judge err in answering the first four questions in the negative?
· Did the Motions Judge err in the exercise of his discretion in deciding that there was no abuse of process to make allegations contrary to the findings of fact during sentencing by Justice Chapnik?
STANDARD OF REVIEW
[17] The determination as to whether the relitigation of issues and material facts constitutes an abuse of process is a discretionary matter (CUPE at paragraph 35). When the lower court judge has made a discretionary decision, it will usually be afforded deference by the appellate court. However, the latter will be entitled to substitute the lower court judge’s discretion for its own if the appellate court clearly determines that the lower court judge has given insufficient weight to relevant factors or has made an error of law (Elders Grain Co. v. Ralph Misener (The), [2005] 3 F.C. 367 (C.A.) at paragraph 13).
ANALYSIS
The Underlying Context of these Appeals
[18] It is helpful to begin by elucidating the ultimate issues to be resolved between the parties. As stated earlier, the taxpayers hope to deduct expenditures they undertook in the partnerships commenced by OCGC. In order to be deductible, the expenses have to be incurred for the purposes of earning income from a business pursuant to paragraph 18(1)(a) of the Income Tax Act R.S.C. 1985, c. 1 (5th Supp.) (the “Act”).
[19] In Hammill v. The Queen, 2005 FCA 252, 257 D.L.R. (4th) 1 (leave to appeal to the S.C.C. refused [2005] S.C.C.A. No. 451) (“Hammill”) the taxpayer wished to deduct expenses paid to an admittedly fraudulent selling agent for the purpose of selling precious gems the taxpayer had accumulated. Despite paying numerous fees to the selling agent, no sales ever ultimately transpired. In that case the Tax Court Judge made a finding of fact that the taxpayer had been the victim of substantial fraud from beginning to end, and that the whole transaction in question was a fraud from its inception. As a result, this Court, per Noel J.A., concluded at paragraphs 27-8:
This finding by the Tax Court Judge that the appellant was the victim of a fraud from beginning to end, if supported by the evidence, is incompatible with the existence of a business under the Act. […]
A fraudulent scheme from beginning to end or a sting operation, if that be the case, cannot give rise to a source of income from the victim's point of view and hence cannot be considered as a business under any definition.
It should be emphasized that, as opposed to this case, in Hamill there had been a clear finding of fact by the Tax Court Judge that there was a fraudulent scheme in place. Given that the finding was made by the Tax Court Judge, and not in another proceeding in which the taxpayers were not present, no issues of fairness arose. No such finding has yet been made in the case of the respondents.
[20] Ultimately the case between the parties will centre on whether or not the investments of the taxpayers into the partnerships can be classified as expenses for the purposes of earning income from a business. Put simply, were they legitimate business expenses? This in turn will demand an examination of whether the partnerships were legitimate businesses, an issue that was to some extent explored in the criminal proceedings against Bellfield and Minchella. However, as will be explained below, the jury never made an explicit finding on whether there was a legitimate business.
Did the Motions Judge err in answering the first four questions in the negative?
What do the first four questions mean?
[21] There was much argument between the parties regarding what would be the implications of answering any of the first four questions in the affirmative. The reason for such confusion lies in the broadness of the questions. The questions do not simply ask whether it would be an abuse of process for the taxpayers to contest the convictions of Bellfield and Minchella. Rather, to use question one as an example, it asks whether it would be an abuse of process for the taxpayers to “allege that [Bellfield and Minchella] did not unlawfully, by deceit, falsehood, or other fraudulent means, defraud the public of tax revenues owing to Her Majesty in right of Canada by making false claims to Revenue Canada in relation to approximately $100,000,000.00 in losses…”. The appellant argues that the questions do not speak simply to challenging the criminal convictions of Bellfield and Minchella but also challenging the fundamental issues and material facts underlying those convictions. I would agree with this characterization. But this simply begs another question: what were the material facts underlying the convictions?
[22] First and foremost, Bellfield and Minchella were convicted by a jury. As the respondents argue in their Memorandum of Fact and Law, “In rendering its verdict, the jury did not express any reasons for judgment, nor did the jury ever inform the court as to which findings of fact it had believed the Crown had proved beyond a reasonable doubt.” In addition, the record does not indicate whether the jury was posed any questions by Justice Chaplik. However, through analysis of the criminal charges, it is possible to discern what was necessary for the jury to find in order to convict Bellfield and Minchella.
[23] Discerning what it was necessary for the jury to find in order to convict the accused is easiest with respect to questions three and four, which refer to the charges of uttering forged documents. The respondent rightfully points out in their Memorandum of Fact and Law that “the Crown was only obliged to have proved beyond a reasonable doubt that the accused uttered one or more forged documents in order for the jury to find the accused guilty of the two uttering charges” (emphasis in original). Indeed, Justice Chapnik represented as such in her charge to the jury.
[24] Thus, it is only evident that, with respect to the charges of uttering forged documents, the jury concluded that Bellfield and Minchella uttered at least one false document. However, from the conviction I am unable to discern how many documents were false, nor which documents were false.
[25] The analysis is much more complicated when one looks at the convictions of fraud which are the subject of questions one and two. The criminal offence of fraud was described in Justice Chapnik’s charge to the jury as an intentional deception resulting in deprivation or the risk of deprivation or prejudice to another, or a false representation of a fact that is intended to deceive another person, and causes that person deprivation or a risk of deprivation. Based on this definition by Justice Chapnik, it is logical to conclude that the jury found that there was both an intentional deception, and that there was a deprivation or a risk of deprivation or prejudice to the Crown and to the investors. However, that is the extent to which one can discern a definite conclusion by the jury with respect to the fraud convictions. It is impossible to know what constituted the deception necessary for a conviction of fraud. It is important to note that the Crown alleged six different acts of deceit as outlined in Justice Chapnik’s charge to the jury:
According to the Crown, the overall false representation as to the validity of the limited partnerships is the product of many component acts of deception and misrepresentation. The key ones were as follows:
1. That many boats existed or were being built when they were not;
2. That Neptune had millions of dollars when, in fact, it did not;
3. That the soft costs for services were paid to Starlight in the amount of approximately $60 million, when they were not;
4. That the documents created to show the legitimacy of the scheme were valid when, in fact, they were false documents;
5. That Mr. Bellfield did not control Neptune and Starlight when he did, in fact, control these companies;
6. That the investor tax losses were valid when they were not.
[26] While the Crown maintained in the criminal proceedings that the false representation constituted many acts of deception, Justice Chapnik made it clear throughout her charge to the jury that only one act of deceit had to occur in order to convict Bellfield and Minchella:
The Crown need only prove that the accused told one material lie that put the economic interests of the investors and/or the government at risk. [Emphasis in original.]
[…]
Ask yourselves this question in respect of count 1 and count 2: Did Mr. Bellfield and/or Mr. Minchella knowingly tell one or more falsehoods that they knew could put the economic interest of the investors and/or the public at risk of deprivation? [Emphasis added.]
[…]
I will go back over that because you only need one. Did Mr. Bellfield and/or Mr. Minchella knowingly tell one falsehood that they knew could put the economic interest of the investors and/or the public at risk of deprivation? [Emphasis added.]
[…]
If, on the totality of the evidence, you are satisfied beyond a reasonable doubt that one or both accused knowingly committed one material or significant act of deception by words or actions which put the investors and/or CCRA at risk of deprivation, then you will find that accused guilty of the fraud offences. [Emphasis added.]
Thus, it is unclear which of the six alleged acts were found to be acts of deceit for the purposes of convicting Bellfield and Minchella of fraud.
[27] It is also impossible to discern the extent of the risk of deprivation to the investors and the Crown. While the charges refer to Minchella and Bellfield “making false claims to Revenue Canada in relation to approximately $110,000,000.00 in losses claimed” it was not necessary for the jury to find that the fraud perpetrated related to that full amount. Indeed, the amounts alleged in a count in an indictment “are not essential elements of the offences charged” (R. v. Alexander Street Lofts Development Corp. (2007) 86 O.R. (3d) 710 (C.A.) at 714).
[28] It is also impossible to discern the quality of the deprivation; that is, whether the investors and the Crown actually lost money, were simply prejudiced, or whether there was simply a risk of deprivation. As put in her charge to the jury, Chapnik J. explained:
The word “deprivation” has a special meaning in criminal law; it means to place the economic interests of another person at risk. Therefore, the victim does not actually have to lose any money, et cetera, as long as there was a risk to his or her economic interests.
[…]
[An] example might be as follows – a seller of oil shares induces the purchaser to buy them at market value by falsely representing that the company has recently struck new oil. The victim suffers no economic loss since the shares are worth what he paid for them, but the seller obtained the purchaser’s money and induced him to buy something which lacked the quality it was purported to have. Thus, the element of deprivation is satisfied on proof of detriment, prejudice or risk of prejudice to the economic interests of the victim. It is not essential that there be actual economic loss as the outcome of the fraud.
[29] In appealing the conviction and the sentence, Bellfield and Minchella alleged that they had a legitimate business. This was rejected by the Ontario Court of Appeal in R. v. Bjellebo [2003] O.J. No. 3946 (QL) at paragraph 12:
In his oral presentation, Bellfield tried to persuade us that the scheme that gave rise to these charges was a legitimate business arrangement. I am satisfied that Bellfield’s position in that regard was fully and fairly put to the jury. The jury did not accept his explanation and he has failed to persuade us that there is any basis for us to interfere with the jury’s verdict.
However, this conclusion does not necessarily preclude the taxpayers from alleging that the partnerships had legitimate business expenses. Neither the Ontario Court of Appeal nor the jury could have been directing themselves to the taxpayers’ argument. Indeed, in her reasons for sentence Chapnik J. did find that two of the ships actually ended up being built through investor funds (R. v. Bjellebo [2002] O.J. No. 478 (S.C.J.) (QL) at paragraph 34). Without commenting on the merits of the taxpayers’ case, there might arguably have been some sort of business.
[30] From the foregoing analysis, it is clear that the jury’s convictions leave numerous questions to be answered. It is impossible to know the extent to which the taxpayers would be arguing facts inconsistent with the criminal convictions, even if the entire case of the taxpayers was before the Court. This is due to the broad nature of the criminal acts of fraud and uttering forged documents, as well as the fact that Bellfield and Minchella were convicted by a jury.
[31] The appellant will argue, and indeed, has argued before Bowie J., that answering any of the first four questions in the affirmative will preclude the taxpayers from making any allegation that their expenses were legitimate business expenses. There is a possibility that the taxpayers may allege facts that would run contrary to the convictions of Bellfield and Minchella, but it is impossible to conclude that it would be an inevitability.
[32] The difficulties in discerning the implications of answering questions one through four in the affirmative point to the vagueness of the questions and the difficulties in answering them in the abstract. It is difficult to answer them because of the problem in ascertaining what is a fundamental issue or material fact underlying the convictions of Bellfield and Minchella. Such difficulties, as will be explained below, constitute a factor militating against invoking the abuse of process doctrine in this instance.
The Doctrine of Abuse of Process by Relitigation
[33] The law with respect to the abuse of process by relitigation was recently clarified by the Supreme Court of Canada in the companion cases of CUPE, supra, and Ontario v. Ontario Public Service Employees Union (O.P.S.E.U.) 2003 SCC 64 , [2003] 3 S.C.R. 149 (“OPSEU”). Both of these cases concerned individuals who were convicted of sexual assault upon persons under their care, and who were then fired from their employment on the basis of the convictions. Both of the defendants wished to contest their dismissal by alleging that they did not commit the assaults, running contrary to the criminal convictions.
[34] In CUPE, Justice Arbour elucidated the principles underlying the doctrine of abuse of process by relitigation. Admittedly, the case of CUPE did not concern individuals who were strangers to the original proceedings. Thus, the reasoning of Justice Arbour did not contemplate a situation such as the one before this Court; this is clear in numerous statements in that case. Nevertheless, the principles ascertainable from the thorough reasons in CUPE can, in my opinion, still be applied to the context at bar. It should be pointed out that at paragraph 19 of the decision, Justice Arbour stated in obiter, “There are circumstances in which evidence will be admissible to rebut the presumption that the person convicted committed the crime, in particular where the conviction in issue is that of a non-party.” Contrary to the concurring reasons of Justice Nadon, infra, I do not think that paragraph 19 of the CUPE decision necessarily precludes the application of the abuse of process doctrine to non-parties.
[35] The doctrine of abuse of process is a flexible one whose origins are derived from the inherent jurisdiction of the court to control its own process and ensure the integrity of the justice system. Justice Arbour explained at paragraphs 37-8:
In the context that interests us here, the doctrine of abuse of process engages “the inherent power of the court to prevent the misuse of its procedure, in a way that would . . . bring the administration of justice into disrepute” (Canam Enterprises Inc. v. Coles (2000), 51 O.R. (3d) 481 (C.A.), at para. 55, per Goudge J.A., dissenting (approved [2002] 3 S.C.R. 307, 2002 SCC 63)). Goudge J.A. expanded on that concept in the following terms at paras. 55-56:
The doctrine of abuse of process engages the inherent power of the court to prevent the misuse of its procedure, in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute. It is a flexible doctrine unencumbered by the specific requirements of concepts such as issue estoppel. See House of Spring Gardens Ltd. v. Waite, [1990] 3 W.L.R. 347 at p. 358, [1990] 2 All E.R. 990 (C.A.).
One circumstance in which abuse of process has been applied is where the litigation before the court is found to be in essence an attempt to relitigate a claim which the court has already determined. [Emphasis added.]
As Goudge J.A.’s comments indicate, Canadian courts have applied the doctrine of abuse of process to preclude relitigation in circumstances where the strict requirements of issue estoppel (typically the privity/mutuality requirements) are not met, but where allowing the litigation to proceed would nonetheless violate such principles as judicial economy, consistency, finality and the integrity of the administration of justice. (See, for example, Franco v. White (2001), 53 O.R. (3d) 391 (C.A.); Bomac Construction Ltd. v. Stevenson, [1986] 5 W.W.R. 21 (Sask. C.A.); and Bjarnarson v. Government of Manitoba (1987), 38 D.L.R. (4th) 32 (Man. Q.B.), aff’d (1987), 21 C.P.C. (2d) 302 (Man. C.A.).) This has resulted in some criticism, on the ground that the doctrine of abuse of process by relitigation is in effect non-mutual issue estoppel by another name without the important qualifications recognized by the American courts as part and parcel of the general doctrine of non-mutual issue estoppel (Watson, supra, at pp. 624-25).
It is true that the doctrine of abuse of process has been extended beyond the strict parameters of res judicata while borrowing much of its rationales and some of its constraints. It is said to be more of an adjunct doctrine, defined in reaction to the settled rules of issue estoppel and cause of action estoppel, than an independent one (Lange, supra, at p. 344). The policy grounds supporting abuse of process by relitigation are the same as the essential policy grounds supporting issue estoppel (Lange, supra, at pp. 347-48):
The two policy grounds, namely, that there be an end to litigation and that no one should be twice vexed by the same cause, have been cited as policies in the application of abuse of process by relitigation. Other policy grounds have also been cited, namely, to preserve the courts' and the litigants' resources, to uphold the integrity of the legal system in order to avoid inconsistent results, and to protect the principle of finality so crucial to the proper administration of justice.
[36] While the policy grounds supporting abuse of process by relitigation and issue estoppel can be similar, Justice Arbour has emphasized that the main focus of the abuse of process doctrine is to preserve the integrity of the legal system in order to avoid inconsistent results. In CUPE she stated, at paragraph 43, that “In all of its applications, the primary focus of the doctrine of abuse of process is the integrity of the adjudicative functions of courts.” She later added at paragraph 44:
The adjudicative process, and the importance of preserving its integrity, were well described by Doherty J.A. He said, at para. 74:
The adjudicative process in its various manifestations strives to do justice. By the adjudicative process, I mean the various courts and tribunals to which individuals must resort to settle legal disputes. Where the same issues arise in various forums, the quality of justice delivered by the adjudicative process is measured not by reference to the isolated result in each forum, but by the end result produced by the various processes that address the issue. By justice, I refer to procedural fairness, the achieving of the correct result in individual cases and the broader perception that the process as a whole achieves results which are consistent, fair and accurate.
[37] In this sense, Justice Arbour has explained that this focus in the abuse of process doctrine can be distinguished from issue estoppel, which is more concerned with the principle that no one should be twice vexed by the same cause. She stated at paragraph 12 of OPSEU, supra:
Although both doctrines promote the better administration of justice, issue estoppel is a more appropriate doctrine to use when the focus is primarily on the interests of litigants. Abuse of process, on the other hand, transcends the interests of litigants and focuses on the integrity of the entire system.
[38] Indeed, when Justice Arbour applied the doctrine of abuse of process to the facts on appeal, it is clear that she was mostly concerned with maintaining the integrity of the judicial system, especially with respect to the prospect of conflicting decisions bringing the administration of justice into disrepute. She stated at paragraph 57:
As a result of the conflicting decisions, the City of Toronto would find itself in the inevitable position of having a convicted sex offender reinstated to an employment position where he would work with the very vulnerable young people he was convicted of assaulting. An educated and reasonable public would presumably have to assess the likely correctness of one or the other of the adjudicative findings regarding the guilt of the convicted grievor. The authority and finality of judicial decisions are designed precisely to eliminate the need for such an exercise. [Emphasis added.]
[39] In terms of how to exercise one’s discretion in applying the abuse of process doctrine, Justice Arbour provided a number of considerations in deciding when it would not be an abuse of process to relitigate a matter in CUPE at paragraphs 51-2:
Rather than focus on the motive or status of the parties, the doctrine of abuse of process concentrates on the integrity of the adjudicative process. Three preliminary observations are useful in that respect. First, there can be no assumption that relitigation will yield a more accurate result than the original proceeding. Second, if the same result is reached in the subsequent proceeding, the relitigation will prove to have been a waste of judicial resources as well as an unnecessary expense for the parties and possibly an additional hardship for some witnesses. Finally, if the result in the subsequent proceeding is different from the conclusion reached in the first on the very same issue, the inconsistency, in and of itself, will undermine the credibility of the entire judicial process, thereby diminishing its authority, its credibility and its aim of finality.
In contrast, proper review by way of appeal increases confidence in the ultimate result and affirms both the authority of the process as well as the finality of the result. It is therefore apparent that from the system's point of view, relitigation carries serious detrimental effects and should be avoided unless the circumstances dictate that relitigation is in fact necessary to enhance the credibility and the effectiveness of the adjudicative process as a whole. 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. This was stated unequivocally by this Court in Danyluk, supra, at para. 80.
[40] It ought to be emphasized that Justice Arbour in CUPE explicitly makes reference to the comments of Justice Binnie in Danyluk, supra, to inform the considerations of “fairness” when deciding whether or not to invoke the abuse of process doctrine. Justice Binnie, writing for the Court with respect to issue estoppel, made it abundantly clear that considerations of fairness include the right to be heard. He stated, at paragraph 80:
As a final and most important factor, the Court should stand back and, taking into account the entirety of the circumstances, consider whether application of issue estoppel in the particular case would work an injustice. Rosenberg J.A. concluded that the appellant had received neither notice of the respondent’s allegation nor an opportunity to respond. He was thus confronted with the problem identified by Jackson J.A., dissenting, in Iron v. Saskatchewan (Minister of the Environment & Public Safety), [1993] 6 W.W.R. 1 (Sask. C.A.), at p. 21: [Emphasis added.]
The doctrine of res judicata, being a means of doing justice between the parties in the context of the adversarial system, carries within its tenets the seeds of injustice, particularly in relation to issues of allowing parties to be heard. [Emphasis added.]
Whatever the appellant’s various procedural mistakes in this case, the stubborn fact remains that her claim to commissions worth $300,000 has simply never been properly considered and adjudicated.
[41] The final relevant factor to consider in analyzing the abuse of process doctrine for the purposes of these appeals is the gravity of casting doubt over the validity of a criminal conviction. Doing so has been deemed by the Supreme Court of Canada to be “a very serious matter” (CUPE, supra, at paragraph 54).
Application of the abuse of process doctrine to the facts
[42] First and foremost, the application of the abuse of process doctrine involves a balancing exercise. As explained by Justice Arbour in CUPE at paragraph 15:
Properly understood and applied, the doctrines of res judicata and abuse of process govern the interplay between different judicial decision makers. These rules and principles call for a judicial balance between finality, fairness, efficiency and authority of judicial decisions.
[Emphasis added.]
[43] Justice Bowie applied one of the instances Justice Arbour envisioned where it may not be appropriate for the abuse of process doctrine to be invoked, namely “when fairness dictates that the original result should not be binding in the new context” (CUPE at paragraph 52). He found that, given that the assessments had never been litigated, and given that the taxpayers did not litigate the guilt or innocence of Bellfield and Minchella, it would not be fair to deny the taxpayers the opportunity to be heard with respect to whether the partnerships qualified as sources of legitimate business income.
[44] The Motions Judge explicitly balanced the two relevant factors in these appeals – the right to be heard and the gravity of casting doubt on a criminal conviction – at paragraph 8 of his decision: “In my view, this is a case in which the quasi constitutional rights of the appellants to a fair hearing must take precedence over finality and the potential for conflicting results.”
[45] The appellant argues that the Motions Judge erred by placing emphasis upon the interests of the taxpayers, instead of the judicial system. It is necessary to point out, however, that when it comes to the right to be heard, the interests of the taxpayers and the integrity of the judicial system are not mutually exclusive. That litigants have the opportunity to make their case in court for the first time is an interest that ought to be maintained in any judicial system. The right to be heard – the audi alteram partem rule – is a principle of natural justice. The right to be heard is also a quasi-constitutional right under federal law (paragraphs 1(a) and 2(e) of the Canadian Bill of R