Mosher v. R. – TCC: Court Refuses to Strike Pleadings Based on Issue Estoppel Where Prior Appeal Discontinued

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Mosher v. The Queen[1] (November 28, 2013) arose out of a tax liability of the taxpayer’s deceased husband.  The husband (Mr. Kuczer) had filed an appeal with the Tax Court but after his death the taxpayer, in her capacity as executrix of his estate, discontinued the appeal.  She was assessed in her capacity as executrix for having distributed the estate without satisfying the outstanding tax liability.  She appealed that assessment and part of her appeal challenged the original assessment of her late husband.  The Crown moved to strike that pleading on the basis of issue estoppel or abuse of process.  The court dismissed the Crown’s motion:

[7]             I would therefore redraft the issue as being whether it is plain and obvious that either the doctrine of issue estoppel or abuse of process precludes the Appellant from challenging the underlying assessment. Put another way, does the Appellant have no hope of convincing a trial judge that she can attack the underlying Kuczer assessment? I find it is not plain and obvious.

[8]             It is unnecessary for me to go through the law of issue estoppel as enunciated by the Supreme Court of Canada in Danyluk v. Ainsworth Technologies Inc. and tweaked by subsequent cases (see for example Penner v Niagara (Regional Police Services Board)) and its application to the circumstances before me. I would need to take the time to reflect on these arguments, read in detail the law as to how issue estoppel has evolved, and then attempt to apply it to Ms. Mosher’s circumstances. Only then would I be comfortable providing an answer. What this tells me is that it is not plain and obvious the doctrine applies. For example, there is, I would suggest, a contentious issue as to whether a discontinuance of a matter, without further judicial determination, meets one of the requirements of the three-pronged test for issue estoppel, that there has been a “judicial decision”. Also, even if the three‑pronged test is met, the law provides that a judge can exercise his or her discretion balancing finality of litigation versus the public interest in ensuring justice is done “and other considerations of fairness to the parties”. It is not plain and obvious how a judge might exercise such discretion in these circumstances.

[9]             With respect to the doctrine of abuse of process, it may be applicable to prevent re-litigation where the conditions for issue estoppel do not apply. But, again, it is not plain and obvious that it does or does not apply in this case.

[10]        In the case of Toronto (City) v C.U.P.E., Local 79, Justice Arbour explained:

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.

She went on to give the following example:

If for instance, the stakes in the original proceeding were too minor to generate a full and robust response, while the subsequent stakes were considerable, fairness would dictate that the administration of justice would be better served by permitting the second proceeding to go forward than by insisting that finality should prevail.

[11]        Would allowing Ms. Mosher to attack the Kuczer assessment in the circumstances of this case bring the administration of justice into disrepute? That is not an easy question that, I would suggest, every judge would answer in the same way by the exercise of his or her discretion, especially where that discretion is based on principles such as judicial economy, consistency, finality, fairness and the integrity of the administration of justice. The circumstances surrounding Ms. Mosher’s actions as executor and the need to have a full debate on the application of the concepts of issue estoppel and abuse of process make it clear to me that a Rule 53 application to strike pleadings is not the appropriate course of action.

[Footnotes omitted]

The court did however invite the parties to make an application under Rule 58 (Question of Law, Fact or Mixed Law and Fact) in the interests of judicial economy:

[12]        Having said that, and therefore dismissing the Respondent’s Motions, I am not implicitly condoning the Parties march relentlessly on to trial, presuming that the Kuczer assessment is a live issue. It is my impression that a lot of work would be required for litigation on that issue. It strikes me the appropriate course is a determination pursuant to Rule 58, answering the question the Respondent has attempted to pose in this Rule 53 application. Does either issue estoppel or abuse of process preclude Ms. Mosher from raising this issue at the trial of her own assessment? If it is determined that either concept applies to preclude Ms. Mosher from raising the underlying Kuczer assessment, then some considerable litigation economy will have been achieved. If found not to apply, then the Parties will know they have to proceed to fully litigate that earlier assessment.

[13]        Clearly the Parties have researched the application of these doctrines and it would therefore take little in the way of further preparation for a determination, other than perhaps a flushing of more details of Ms. Mosher’s discontinuance of the earlier litigation. If both sides are agreed that a determination would be in order, I am prepared to order such on a timely basis, foregoing the need for an application to a judge to consider whether a determination is called for (the usual first step in the Rule 58 determination process). If the Parties are not agreed and only one side believes it is of benefit then that first step would be necessary.

[1] 2013 TCC 378.