COURT FILE NO.: 604/07
DATE: 20080221
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
JOE HESTER
Plaintiff/Moving Party
- and -
HER MAJESTY THE QUEEN IN RIGHT OF CANADA, MINISTER OF NATIONAL REVENUE, MINISTER OF INDIAN AFFAIRS, COMMISSIONER OF CUSTOMS AND REVENUE, BILL McCLOSKEY, ROBERT FRAPPIER, MICHAEL COX, WINFORD SMITH, DENIS LEFEBVRE, K.M. BURPEE, KEN FOX, JOHN FENNELLY, JEANNE FLEMING, LUISA GUYAN, RUBY HOWARD, KEN McCUAIG, AILEEN CONWAY, PIERRE GRAVELLE and BRIAN DAWE
Defendant/Respondents
Counsel: G. James Fyshe, for the Plaintiff/Moving Party John N. B. Birch, for the Defendants/Respondents
HEARD at Toronto: February 12, 2008
M. DAMBROT J.
[1] The Plaintiff seeks leave to appeal two interlocutory orders made by Lax J. on December 4, 2007 arising out of a motion brought by the Plaintiff for leave to amend the Plaintiff’s statement of claim pursuant to R.26.01 of the Rules of Civil Procedure, and a motion brought by the Defendants to stay this action. There were other matters decided by Lax J. arising out of the same hearing but these are not of concern on this motion.
[2] In respect of the first motion, Lax J. ordered that:
the claims of conspiracy and abuse of power/misfeasance of public office pleaded in the Fresh as Amended Statement of Claim are hereby struck with leave to amend.
[3] In respect of the second motion, Lax J. ordered that:
this action be and the same is hereby stayed in its entirety until
(a) all proceedings in the Tax Court of Canada brought by the plaintiff and the prospective class members; and
(b) the Federal Court actions by Sandra Williams and Margaret Horn (Federal Court file Nos. T-2242-95 and T-2241-95)
are all finally determined (including any appeals).
[4] I will begin with the stay.
THE STAY
[5] In respect of the stay, Lax J. stated:
Motion to Stay
[53] Each of the causes of action advanced in this action is, in one way or another, founded on the entitlement of the plaintiff and class members to tax exemption rights under s. 87 of the Indian Act. The plaintiff seeks to distinguish this action from the test cases and the individual tax appeals of the plaintiff and class members on the basis that the crux of the present case is mistreatment at the hands of the Crown and CRA in the manner of their tax assessments rather than the correctness of the assessments. In my view, this is a distinction without a difference.
[54] It is clear from the pleading that the plaintiff and class members would have no objection to the manner of their treatment if CRA had continued to administer their tax exemption rights in accordance with Novegijick rather than through the application of the ‘connecting factors’ test in Williams. The torts and equitable claims have no independent foundation: they are advanced in this action on the assumption that the tax exemption rights exist. The alleged wrongdoing of the defendants flows from this. If some or all of the class members ultimately prevail in their tax appeals, they will not be liable for tax under their assessments. If the Horn and/or Williams test cases are successfully appealed and the individual circumstances of some or all class members are analogous, they will similarly not be liable to pay tax. The only damages that can conceivably result on the pleading as it stands are damages for taxes that have been incorrectly assessed. The plaintiff has not particularized in this action any other kind of loss.
[55] It is true that the Tax Court has no jurisdiction to adjudicate tort and equitable claims. Claims for breach of fiduciary duty and breach of the duty to consult and accommodate were advanced in the Horn and Williams actions in the Federal Court, but not pursued at trial. In my view, this action represents an attempt by Hester and NLS employees to turn a question of tax liability into a mass tort claim against the Crown and 15 of its employees when two other courts – the Federal Court and the Tax Court – are already adjudicating the real dispute between the parties.
[56] Nonetheless, the defendants do not meet the test under Rule 21.01(3) for a stay. Rule 21.01(3)(c) requires another proceeding pending between the same parties in respect of the same subject matter. The tax appeals are between the same parties, but the Tax Court of Canada does not have jurisdiction over the subject matter of the tort and equitable claims. The power to stay an action under Rule 23.01(3)(d) should only be used in the clearest of cases and, despite the inadequacies of the pleading, I am not satisfied that the action is frivolous or vexatious or otherwise an abuse of process of the court. Accordingly, the defendants cannot invoke this Rule to stay the action.
[57] However, section 106 of the Courts of Justice Act permits the court on its own initiative, or on motion by any person, to stay any proceeding on such terms as are just. Section 138 of the Courts of Justice Act states that “as far as possible, a multiplicity of proceedings should be avoided”. This action is dependent on and derivative of the determination of whether Hester and class members are liable for tax. Parliament has created a comprehensive scheme of review of tax matters and the Tax Court and Federal Court are the proper fora in which to adjudicate this: Reza v Canada, [1994] 2 S.C. R. 394 at 405. I therefore order a stay of this action until the tax court proceedings and the test cases are finally determined, including all appeals. The plaintiff is not required to deliver a pleading in proper form until that time.
[58] I am mindful that my colleague, Belobaba J., came to a different conclusion in respect of claims advanced by Mr. Obonsawin against the same defendants. Matlow J. provided no reasons for refusing leave to appeal. Belobaba J. reached his conclusion on a different pleading than the one that is before me. I would simply point out that while the narrative portion of both pleadings is the same, the pleadings are not identical. To the extent that they are similar, I respectfully disagree with the conclusion reached.
[6] The plaintiff seeks leave to appeal this order on the basis that either:
- there appears to be good reason to doubt the correctness of the order temporarily staying this action, and the proposed appeal involves matters of such importance that leave to appeal should be granted (Rule 62.04(4)(d)); or
- there is a conflicting decision by another judge or court on the matter involved in the proposed appeal and it is desirable that leave to appeal be granted (Rule 62.04(4)(c)).
[7] With respect to the first basis for leave to appeal, I see no reason to doubt the correctness of the decision.
[8] The plaintiff says that Lax J. erred in concluding that these claims are entirely dependent on the non-existence of tax exemption rights being litigated in the Tax Court. The focus of this claim, he says, is on official conduct, not on legal rights. To quote his factum, he says that these claims “could in theory succeed, in the absence of the rights themselves.” (Emphasis added.)
[9] He finds support for this position in the judgment of Belobaba J. in the companion action brought by Obonsawin, referred to above.
[10] In my view, this provides no basis to doubt the correctness of this aspect of the judgment of Lax J. First, as Lax J. noted, Belobaba J. reached his conclusion on different pleadings in a different, albeit related action. Second, I note that Belobaba J. was not considering a motion for a stay. Rather, he was addressing a motion to strike the statement of claim on the basis that the Tax Court and the Federal Court had exclusive jurisdiction to hear the matter. In that context, the argument that these claims could “in theory” succeed in the face of decisions against the plaintiff in the Tax Court and Federal Court was decisive. Here it is not.
[11] I say this because, even if the plaintiff is right that his claim could “in theory” succeed in face of decisions against the plaintiff in the Tax Court and Federal Court, this would not give rise to reason to doubt the correctness of the decision of Lax J. to grant a temporary stay. The fact remains that the tax issue is a major issue in the action in this court, and if not decisive, would still need to be determined and would have a profound effect on the shape and scope of the litigation in this court and how it should be managed. The stay would still accomplish what Lax J. intended it to accomplish: the avoidance of a multiplicity of proceedings, at least on the tax issue.
[12] In any event, the proposed appeal on this issue involves a matter that is of significance only to the parties, and that is not of such importance that leave to appeal should be granted.
[13] With respect to the second basis for leave to appeal the stay, I am not of the view that there are conflicting decisions on the matter involved in the proposed appeal.
[14] The Plaintiff points to two decisions that, he says, establish two preconditions to the granting of a stay pursuant to s.106 of the Courts of Justice Act that were not met here, namely:
- that continuance of the action would work an injustice because it would be oppressive or vexatious or an abuse of process of the Court; and
- that the stay would not cause an injustice to the plaintiff.
[15] In the first of these two cases, Gruner v. McCormack, [2002] O.J. No. 789 (Sup. Ct.), Epstein J. deduced this test from a series of cases considering when a civil court should defer to an ecclesiastical court, the very issue she was considering. I do not read her judgment to purport to be announcing a test that must be met in every motion for a stay regardless of the circumstances. The second case, Audziss v. Santa, [2002] O.J. No. 396 (Supp. Ct.), is of little assistance, since the court merely adopted the test in Gruner v. McCormack without analysis. The fact is that s.106 gives the court a broad discretion to stay proceedings, unfettered by any specific test. Stays have been granted in many cases without reference to the test in Gruner v. McCormack, and subject only to the overriding constraint that the circumstances must be extraordinary. Finally, I note that the two cases in question involved the granting of permanent stays, while in this case, Lax J. ordered a temporary stay. It seems obvious to me that the court would approach a temporary stay differently than a permanent stay.
[16] In any event, given the temporary nature of this stay, and the rationale for granting it, I do not consider it to be desirable to grant leave on this issue on the basis of a perceived conflict with other judgments.
THE PLEADINGS
[17] I next turn to the order of Lax J. that the claims of conspiracy and abuse of power/misfeasance of public office pleaded in the Fresh as Amended Statement of Claim be struck with leave to amend.
[18] With respect to the conspiracy claim, she stated:
[49] The essential elements for pleading the tort of conspiracy are that it should describe the parties and their relationship to one another. It should allege the agreement between the defendants to conspire and state precisely the purpose or objects of the alleged conspiracy. It must set forth with clarity and precision the overt acts which are alleged to have been done by each of the alleged conspirators in pursuance of and in furtherance of the conspiracy. Finally, it must provide particulars of the resulting damages: H.A. Imports of Canada Ltd. v. General Mills Inc. et al. (1983), [42 O.R. (2d) 645] (Ont. H.C.) at 646; see also, Title Estate v. Harris, (1990), [72 O.R. (2d) 468] (Ont. H.C.) at 475.
[50] In its current proposed form, the conspiracy claim is deficient for the following reasons:
(a) although there are 19 defendants (15 of whom are individuals sued in their personal capacity), none of the allegations is advanced against any particular defendant;
(b) there are no particulars of which specific class members the conspiracy was directed against;
(c) there is no detail as to what alleged agreement was reached by the conspirators or at what time: paragraph 62 simply alleges that there was an agreement sometime in the last 13 years (“in and after 1994”);
(d) paragraph 63 alleges a conspiracy against Obonsawin, a claim that cannot be made in this action;
(e) the unlawful acts that are alleged in paragraph 64 (which incorporates by reference paragraphs 24 to 39 and 44 to 59 of the Statement of Claim) cannot form the basis of a conspiracy claim in that:
(i) paragraphs 24 to 39 are founded on legally untenable claims or on claims that are not justiciable;
(ii) the allegations in paragraphs 44 and 45 that NLS was a sham employer relate to Obonsawin and, even if true, do not constitute an unlawful act or cause injury to the plaintiff and class members;
(iii) paragraphs 54 to 57 relate to Obonsawin’s GST issues and are not properly part of this action; and
(iv) paragraphs 46 to 53 relate to alleged breaches of the test case agreement, but no reasonable level of particulars is provided, especially regarding alleged intimidation and harassment of Hester and the class members.
[51] In summary, the claim makes unparticularized allegations against 15 individuals over a 13-year period and asserts unparticularized damages in paragraph 61 alleging “financial loss and “losses resulting from impairment of tax exemption rights and losses resulting from the loss of opportunity to earn income”. I would strike the conspiracy claim, but with leave to amend and order further particulars of the claim for damages.
[19] With respect to the abuse of power/misfeasance of public office claim, Lax J. stated:
[52] The tort of misfeasance in public office or abuse of power is an intentional tort. It requires deliberate unlawful conduct in the exercise of public functions and an awareness that the conduct is unlawful and likely to injure the plaintiff: Odhavji Estate v. Woodhouse, [2003 SCC 69], [2003] 3 S.C.R. 263 (S.C.C.) at para. 32. The pleading alleges that, “In and after 1994, the defendants embarked on a deliberate course of conduct (“the impugned conduct”) calculated to harm the Plaintiff, the Class Members and Obonsawin”. It further alleges that “ … the defendants were utilizing the powers of their respective offices when they undertook the impugned conduct, that conduct was nonetheless unlawful … and was intended to injure the Plaintiff and Class Members or, in the alternative, the Defendants knew that the impugned conduct would cause injury … and the Defendants knew that they lacked legal authority for the impugned conduct.” The pleading does not identify which conduct was unlawful except to say that “particulars of the impugned conduct are set out in the following paragraphs”. These paragraphs include allegations of sham employer (44 and 45); breach of the test case agreement (46 to 53); GST issues (54 to 59); damages (61); and conspiracy (62 to 64). It is far from clear how allegations of sham employer or alleged breaches of the test case agreement as described earlier can give rise to a claim for misfeasance in public office. Clearly, allegations relating to Obonsawin’s GST claim do not give rise to such a claim in this action. I would strike the claim for abuse of power, but with leave to amend.
[20] Once again, the Plaintiff seeks leave to appeal this order on the basis that either:
- there appears to be good reason to doubt the correctness of the order temporarily staying this action, and the proposed appeal involves matters of such importance that leave to appeal should be granted (Rule 62.04(4)(d)); or
- there is a conflicting decision by another judge or court on the matter involved in the proposed appeal and it is desirable that leave to appeal be granted (Rule 62.04(4)(c)).
[21] With respect to the first basis for leave to appeal, I see no reason to doubt the correctness of the decision.
[22] The plaintiff points out that the only motion before Lax J. in respect of this pleading was a motion to amend the Plaintiff’s Statement of Claim in the manner requested by the Plaintiff. The Plaintiff says that on such a motion, Lax J. had no jurisdiction to strike his pleading, and erred in doing so.
[23] In assessing this argument, it is important to examine the reality of the motion before Lax J. While the motion was a motion to amend the Plaintiff’s Statement of Claim as the Plaintiff suggests, he actually sought an order amending his admittedly flawed original statement of claim by substituting a proposed Fresh as Amended Statement of Claim.
[24] Lax J. did not purport to strike the Plaintiff’s existing pleading. She obviously knew that she had no jurisdiction to do so. Instead, she “struck” “the claims of conspiracy and abuse of power/misfeasance of public office pleaded in the Fresh as Amended Statement of Claim” with leave to amend. While, Lax J. could have worded her order in a manner more clearly in conformity to the language of Rule 26.01, her intent was clear, and what she ordered was clearly within her jurisdiction. She granted the motion to replace the existing statement of claim with the Fresh as Amended Statement of Claim, but only after it is redrafted in accordance with this and several other orders that are not in issue before me.
[25] In addition, the Plaintiff characterized the approach of Lax J. to the pleadings in respect of the conspiracy and abuse of power claims as erroneous because she misapplied the governing test. In essence, he says that she should have been more cautious in reaching the conclusion that the proposed pleadings were untenable, and that she should have given greater weight to the fact that in this case, the informational balance of power favours the Defendants.
[26] I do not share the Plaintiff’s view that Lax J. misapplied the governing test for review of the adequacy of pleadings by being insufficiently cautious or by failing to give sufficient weight to the informational power imbalance. But even if she did err in her application of the law in this manner, her mere misapplication of the law on this narrow procedural point could hardly be a matter of such importance that leave to appeal should be granted.
[27] With respect to the second basis for leave to appeal, I am not of the view that there are conflicting decisions on this issue which make it desirable that leave to appeal be granted.
[28] The essence of the argument made by the Plaintiff on this point is that the Plaintiff’s claims of conspiracy and abuse of power have already been scrutinized by this Court and the pleadings found to be legally adequate. (See Obonsawin v. Canada, [2001] O.J. No. 369 (Sup. Ct.) and Obonsawin v. Canada, [2006] O.J. No. 3809 (Sup. Ct.).)
[29] With respect to these decisions, I note that they relate to different, albeit similar pleadings, and that the scrutiny arose in different contexts. More importantly, however, Lax J. considered the adequacy of the pleadings on well-settled principles, and made no pronouncement on the law that is inconsistent with what was said in the earlier two cases. The reason for the availability of leave to appeal on the basis of conflicting decisions is so that controversies in the law can be resolved. Where the inconsistency amounts to nothing more than different judges reaching a different conclusion in similar circumstances, it is not desirable that leave be granted on that basis.
DISPOSITION
[30] The motion for leave to appeal is dismissed. The parties may file brief submissions on costs within 14 days of the release of this judgment.
M. DAMBROT J.
Released: February 21, 2008
COURT FILE NO.: 604/07
DATE: 20080221
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
JOE HESTER
Plaintiff/Moving Party
- and –
HER MAJESTY THE QUEEN IN RIGHT OF CANADA, MINISTER OF NATIONAL REVENUE, MINISTER OF INDIAN AFFAIRS, COMMISSIONER OF CUSTOMS AND REVENUE, BILL McCLOSKEY, ROBERT FRAPPIER, MICHAEL COX, WINFORD SMITH, DENIS LEFEBVRE, K.M. BURPEE, KEN FOX, JOHN FENNELLY, JEANNE FLEMING, LUISA GUYAN, RUBY HOWARD, KEN McCUAIG, AILEEN CONWAY, PIERRE GRAVELLE and BRIAN DAWE
Defendants/Respondents
REASONS FOR JUDGMENT
M. DAMBROT J.
Released: February 21, 2008