Cases
Tuccaro v. The Queen, 2014 DTC 5103 [at 7210], 2014 FCA 184
The taxpayer's tax appeal was based on an alleged exemption, in an aboriginal treaty ("Treaty 8"), from all taxation. The motions judge found that he was bound by the legal finding in Benoit that there was no such exemption in Treaty 8, and granted the Minister's motion to strike references to Treaty 8 from the taxpayer's pleadings.
Webb JA reversed the motion judge's decision. Benoit made a factual conclusion, on whether "the Aboriginal signatories understood that they would be exempted from taxation for any reason," finding that there was "insufficient evidence" to support this view - therefore, the question was not whether stare decisis applied on the findings of law in Benoit, but rather whether issue estoppel applied on the findings of fact (para. 21).
Issue estoppel did not apply. Although the issue was the same, there was no evidence that any litigant in Benoit was the present taxpayer or his privy.
Ludmer v. The Queen, 95 DTC 5311 (FCA)
The taxpayers sought to show that the Minister's decision to allow an interest deduction for their taxation years prior to 1981 constituted an admission that was binding respecting the subsequent taxation years, and that in reliance on this initial approach of the Minister the taxpayers organized their affairs so as to continue to benefit from the interest deduction. The Court of Appeal affirmed the finding of the trial judge that evidence of these facts was not admissible on the ground that they did not disclose a reasonable cause of action. Chevalier D.J. noted (at p. 5314) that "the situation here is not one in which before doing something, namely obtaining an interest-bearing loan, the appellant sought and obtained from the Department a formal assurance that they would benefit from deductibility of that interest".
Duthie Estate v. The Queen, 95 DTC 5376 (FCTD)
The taxpayer was not estopped from taking the position, for the first time, in his 1984 return that personal-use real estate had been converted into real estate inventory in 1981 (with the result that the taxpayer was able to deduct subsequently incurred expenses and a loss attributable to a decline in the property's value between the 1981 and 1984) given that at the time of filing the taxpayer's 1984 return, the Minister still had 14 months in which to consider the taxpayer's position and reassess 1981 if he choose to do so.
The Queen v. Jasper, 94 DTC 6519 (FCTD)
After noting that no argument had been raised concerning possible estoppel against the Crown arising from a letter provided by the Winnipeg Taxation Centre of Revenue Canada in respect of a prior taxation year of the taxpayer, MacKay J. stated (p. 6524):
"It is clear that no estoppel arises in relation to the discharge of statutory responsibilities, and even where an officer of the department concerned has given advice in writing, that may not be relied upon as the basis for a claim of estoppel. Particularly is this so in regard to income tax assessments, for the Act itself provides for assessment and later variations by the Minister by reassessments."
Optical Recording Corp. v. The Queen, 86 DTC 6465, [1986] 2 CTC 454 (FCTD), aff'd 87 DTC 5248, [1987] 1 CTC 417
Revenue Canada illegally told the taxpayer that collection of the amount payable by the taxpayer pursuant to s. 195(2) would not be attempted provided that the taxpayer was able to satisfy Revenue Canada that its liability would be eliminated at the end of the year by virtue of making eligible expenditures. Later, while the taxpayer was demonstrating to Revenue Canada that it had fulfilled this requirement, the Crown commenced collection proceedings without warning. It was held that "the respondents, by illegal abuse of authority and false inducements, [were] clearly estopped from taking any benefit from their sudden garnishments of the applicant's accounts".
The Queen v. Metropolitan Properties Co. Ltd., 85 DTC 5128, [1985] 1 CTC 169 (FCTD)
The fact that prior to the 1974 taxation year, the Department had permitted the taxpayer's predecessor corporations to deduct certain types of development expenses did not establish that this was normal commercial and business practice, nor did it estop the Department from adopting a different position for the 1974 taxation year.
384238 Ontario Limited v. The Queen, 84 DTC 6101, [1984] CTC 523 (FCA)
The appellant and its shareholder, by continuing to indicate to the public at large that the shareholder rather than the appellant was the owner of horses, were later estopped from suing for damages for wrongful seizure of those horses by the Department of National Revenue which honestly but mistakenly believed, in reliance on those public representations, that the horses were owned by the shareholder and other judgment debtors of the Crown and were thus available for seizure.
Cornforth v. The Queen, 82 DTC 6058, [1982] CTC 45 (FCTD)
Although the taxpayer represented in his returns that no partnership existed between him and his wife, the Minister in assessing on the basis that no partnership existed, did not rely on that representation. The taxpayer accordingly was not estopped from contending that a partnership existed.
Wilchar Construction Ltd. v. The Queen, 81 DTC 5318, [1981] CTC 415 (FCA)
The taxpayer was estopped from changing its method of accounting for holdbacks and uncertified progress claims after the taxation year in question had become statute-barred. The principle that estoppel cannot override a statutory provision, did not apply because both accounting methods were permitted by the Act.
Brown v. The Queen, 79 DTC 5421, [1979] CTC 476 (FCTD)
A trustee gave evidence that he was assured by Departmental "officials that if the estate did not deduct from its income [pursuant to s. 104(6)] the amount paid to the beneficiary then the beneficiary would not be liable therefor and that he acted upon that advice and assurance." It was noted that "estoppel was not pleaded but in any event it is not open to the plaintiff to set up an estoppel to prevent the operation of a statute."
The Queen v. Moulds, 78 DTC 6068, [1978] CTC 146 (FCA)
The taxpayer, in 1966, agreed to withdraw his notice of objection in relation to his 1964 taxation year provided that the Minister reduce the portion of 1964 sales proceeds of $70,500 allocated to building from $46,625 to $44,625. The taxpayer was not estopped with respect to later taxation years from taking the position for capital cost allowance and terminal loss purposes that the full $70,500 purchase price should have been allocated to the land. It had not been proven that the taxpayer had made any representations of fact to the Minister, and the Minister had not acted to his detriment as a result of the alleged representations of the taxpayer.
Hnatiuk v. The Queen, 76 DTC 6376, [1976] CTC 632 (FCTD)
The partnership in which the taxpayer was a partner terminated on May 31, 1969, but in his 1970 return he reported income from the partnership on the basis that it had continued. Mahoney, J. held:
"This is a text book example of estoppel by representation. The Plaintiff having represented that the partnership income was distributed in a certain way, the Minister of National Revenue having acted on that representation and, by so doing, is now finding himself statute barred from taxing the partnership income as the Plaintiff now says it was distributed, the Plaintiff cannot deny the truth of his original representation."
See Also
Harvest Operations Corp v. A.G. (Canada), 2015 ABQB 327
A debtor transferred assets to an affiliated creditor in order to repay debt of approximately $170 million owing by it. However, the conveyance only included partnership interests worth $158 million and did not include the balance of the debtor's assets of $12 million (the "Other Assets"). CRA assessed on the basis that the debt forgiveness rules applied to the debtor in the amount of $12 million as its debt had been settled in full on the repayment of an inadequate amount.
Dario J declined to issue a rectification order to have the assets transferred retroactively. After finding that rectification would be inappropriate in any event (see summary under General Concepts - Rectification), Dario J stated (at para. 93):
The Applicant had been relying on the non-transfer of the Other Assets to seek a tax benefit, and now seeks the transfer of such assets to obtain a different one. Rectification is a discretionary equitable remedy… . "He who seeks equity must do equity"…[B]y taking advantage of the capital cost allowance of the Other Assets, instead of immediately seeking a rectification order, I find [the debtor] undertook a course of conduct akin to acquiescence, precluding the remedy it now seeks.
Szymczyk v. The Queen, 2014 TCC 380
The taxpayer's employer, General Motors of Canada Limited, assigned a new vehicle to the taxpayer and about 350 other senior managers or executives no less frequently than every three months for their personal and business use, but on the basis that they would identify shortcomings in the models and promote them to friends and acquaintances. The Director of Accounting and Collections Division of Revenue Canada, Taxation authorized GM in 1982 to use a simplified method for calculating the value of employee benefits, based on the average cost of all GM passenger vehicles sold in Canada and assuming 50% personal use of all vehicles in the pool. The Minister reassessed the taxpayer for 2008 and 2009 on a basis less favourable than the method in the 1982 authorization.
After quoting (at para. 36) a statement in Ryan v. Moore, 2005 SCC 38, that "estoppel by convention operates where the parties have agreed that certain facts are deemed to be true and to form the basis of the transaction," and stating (at para. 37) "that estoppel will not apply if an approval given by a tax authority is contrary to law," Woods J rejected the taxpayer's argument that the Minister was estopped from assessing contrary to the 1982 authorization. She stated (at para. 38):
...[A]n approval should not be set aside by the courts too readily on grounds that it is contrary to law. Latitude should be given to the approval unless it is clearly not supportable by the law. The administration of the tax system would be significantly adversely affected if this were not the case.
The authorization when made in 1982 was not contrary to law, as it "provided a reasonable determination of employee benefits" (para. 41). However, it was clearly invalidated by the enactment of s. 6(1)(k) in 1993 "to provide a specific rule for operating expenses" (para. 47). Furthermore, there had been a material change in factual circumstances (i.e., the turnover of vehicles in 1982 had been more frequent) (para. 49).
Yourkin v. The Queen, 2014 DTC 1071 [at 3032], 2014 TCC 48
The taxpayer argued that he was not bound by a consent judgment divorce settlement because he had not signed the underlying minutes of settlement, nor authorized his counsel to do the same. Masse DJ stated (at paras. 17-18):
This is not the first time Mr. Yourkin has been before this Court on this very same issue. He unsuccessfully challenged his assessments for his 2001, 2002, 2003, 2005, 2006 and 2009 taxation years. In all these prior appeals, the parties were the same, the issues were exactly the same, and the facts relied upon were the same except for the taxation years and perhaps the amount in dispute. ...
Whether one looks at this situation through the lens of res judicata or issue estoppel, the result is the same. ... The matter has been finally decided.
Mosher v. The Queen, 2014 DTC 1026 [at 2654], 2013 TCC 378
The taxpayer's husband was reassessed in 2002 to include $500,000 in income, but died intestate in 2007 before his appeal was heard. His estate discontinued the appeal, and the taxpayer was assessed personally in 2011 to give effect to the $500,000 inclusion. One of the taxpayer's grounds for appeal was essentially to challenge the initial $500,000 assessment. The Minister moved to strike those arguments from pleadings, as the appeal of that assessment was abandoned in 2008.
C Miller J declined to strike the pleadings challenging the initial assessment. It was not plain and obvious that they would fail - it was unclear that issue estoppel would apply (stating, at para. 8, that there was "a contentious issue as to whether a discontinuance of a matter, without further judicial determination, meets one of the requirements") and, even if it did, a judge would still have discretion to hear the issue for reasons of justice and fairness (para. 8).
Klundert v. The Queen, 2013 DTC 1166 [at 910], 2013 TCC 208, aff'd 2014 DTC 5087 [at 7098], 2014 FCA 155
The taxpayer had been convicted of tax evasion by the Ontario Superior Court. He appealed his assessment of those same taxation years to the Tax Court, arguing on Charter grounds that the evidence against him had been collected in an unconstitutional manner. Pizzitelli J granted the Minister's motion to dismiss the appeal because, among other reasons, issue estoppel applied. Agreeing to hear the Charter arguments would put the Tax Court in the "ridiculous" position of essentially hearing an appeal from the Ontario Superior Court (para. 34).
Kreuz v. The Queen, 2012 DTC 1201 [at 3514], 2012 TCC 238
The taxpayer had succeeded in an appeal from a prior taxation year, in which the taxpayer's motor vehicle expenses were deductible under s. 8(1)(h.1) in respect of his substitute teaching job. D'Auray J. found that neither the res judicata doctrine nor issue estoppel could block the Minister from denying the taxpayer's s. 8(1)(h.1) deductions in subsequent years. Res judicata cannot apply between appeals involving different taxation years because each taxation year is a different cause of action.
Issue estoppel did not apply because the Minister had new evidence (a witness for the school board). D'Auray J. noted that, "since in income tax appeals we often deal with recurring issues," it would be inappropriate to apply issue estoppel to prevent the Minister (or the taxpayer) from introducing new evidence simply because a deduction was allowed or disallowed previously (para. 80).
741290 Ontario Inc. v. The Queen, 2011 DTC 1089 [at 489], 2011 TCC 91, aff'd 2012 DTC 5025 [at 6665], 2011 FCA 361
In a prior decision, the Tax Court had found that the taxpayer's directors were protected from liability for unremitted source deductions under s. 227.1(1) because they had a due diligence defence under s. 227.1(3). The question in the present case was whether the taxpayer would be liable under s. 227(9)(b). The taxpayer argued that its reassessment should be barred, because the question of source deduction liability on the present facts had already been settled by the prior Tax Court decision.
Bowie J. found that the Minister's reassessment was not barred by issue estoppel. In issue estoppel, the case must involve the same parties and the same issue. The present case engaged a different party (the taxpayer rather than its directors) and a different issue (s. 227(9) liability rather than s. 227.1(1) liability). Neither did the doctrine of res judicata bar the Minister's reassessment - the change in issues and parties meant that the present case could not be construed as a relitigation of the prior decision.
742190 Ontario Inc. (Cob van Del Manor Nursing Home) v. CCRA, 2010 DTC 5104 [at 6945], 2010 FCA 162
The doctrine of issue estoppel barred the Minister from asserting in the Federal Court that Ministerial review requests made by the taxpayer were filed late, given that the Tax Court had already found that the requests for Ministerial review of assessments were not filed late.
Cranston v. The Queen, 2010 TCC 414, 2010 DTC 1280 at 3948
The taxpayer was convicted by the Ontario Court of Justice under s. 239 for misrepresenting his income. The Minister then reassessed the taxpayer's tax under s. 163(2). The taxpayer brought an appeal against the reassessment.
Lamarre J. granted the Minister's motion to quash the appeal. The taxpayer had introduced no new evidence that would undermine the conclusions reached by the Ontario Court of Justice. Applying Golden, Lamarre J. found that the taxpayer was estopped from relitigating the Ontario court's findings.
Golden v. The Queen, 2008 DTC 3363, 2008 TCC 173
Issue estoppel applied to preclude the taxpayer from litigating before the Tax Court the question whether an amount of $34,000 should have been included in his income. Although the finding of a jury that he had committed tax evasion in respect of this amount did not turn on the particular quantum of the amount that he had failed to report, that quantum was part of the sentencing process made by the judge in that criminal proceeding. Furthermore, given that there had been proof of criminal mens rea beyond a reasonable doubt, this satisfied the onus on the Crown respecting the s. 163(2) gross negligence penalty.
It also would have been an abuse of process for the taxpayer's wife to re-litigate whether a $217,000 shareholder loan should be included in her income given that the only alleged unfairness was that in the criminal proceedings, there had been an agreement that Mr. and Mrs. Golden would be treated as one taxpayer, so that no particular finding was made as to whose income the amount should be included in.
Beauchamp v. The Queen, 2006 DTC 3173, 2004 TCC 371
Before going on to reject the taxpayer's argument respecting estoppel, Tardif J. found (at p. 3179) that the doctrine of estoppel cannot be applied to cases from Quebec, and that the case before him was to be reviewed instead in light of Article 1457 of the CCQ (which was essentially to the same effect as the doctrine of estoppel in Pais).
Humphrey v. The Queen, 2006 DTC 2730, 2006 TCC 168
After referring to the principle that no estoppel can arise where representations made are not in accordance with the law, Bowman C.J. found that advice given to the taxpayer by officials in the local office could not bind the Court.
Stremler v. The Queen, 2000 DTC 1757, Docket: 97-1490-IT-G (TCC)
The Crown was unsuccessful in a submission that the taxpayers were estopped from alleging that properties held by them were inventory rather than being held on capital account as originally characterized in their income tax returns. McArthur TCJ. stated (at p 1760):
"... Appellants' description of the properties as capital is a statement of law and not fact. A representation of law is not grounds for estoppel."
Desrochers v. The Queen, 2000 DTC 962, Docket: 96-2448-IT-G (TCC)
The taxpayer was estopped from disputing the existence of a partnership between her and her husband, having previously induced the Minister to assess on the basis that such a partnership existed.
Goldstein v. The Queen, 96 DTC 1029 (TCC)
The Department was not bound by what was found to be an erroneous interpretation of the definition of "earned income" in s. 146(1)(c). Bowman, TCJ. stated (at p. 1034) that although it was not accurate to say that estoppel does not lie against the Crown and that:
"The question is not whether the Crown is bound by an earlier interpretation upon which a taxpayer has relied. It is more to the point to say that the courts, who have an obligation to decide cases in accordance with the law, are not bound by representations, opinions or admissions on the law expressed or made by the parties."
Taylor v. The Queen, 95 DTC 591 (TCC)
The doctrine of promissory estoppel was found to be inapplicable to supposed agreements of the Minister not to assess penalties and interest, as well as to the taxes themselves.
Byrt v. MNR, 91 DTC 923 (TCC)
In reliance upon a letter of the taxpayer stating that he resigned as director of a corporation on August 1, 1985, the Minister did not assess the taxpayer under s. 227.1 until May 6, 1987, i.e., within the two-year period referred to in s. 227.1(4). In finding that the taxpayer was later estopped from amending his pleadings to allege that he had resigned on January 24, 1985, Rip J. stated (pp. 932-933):
"... A representor need only intend that the representee act upon the representation in some way, and not in any particular way, to plant the seeds of estoppel. In addition, a representation need not be given wilfully as long as the representation is of such a character to induce a reasonable and prudent person to believe that it was meant to be acted on or it was made under such circumstances that he should have known that it was both natural and probable that it would be acted on."
IRC v. Garvin, [1981] 1 WLR 793 (HL)
In obiter dicta, Lord Russell of Killowen "venture[d] to doubt the ability of the Crown ... having levied a tax on the basis that the transaction was a dealing in capital, then to assert that it can indirectly, by counteraction be treated as giving rise to taxable income."
Articles
Timothy Fitzsimmons, "Advanced Warning", CA Magazine, August 2008, p. 30
Discussion of Sentinel Hill Decision.
Commentary
A useful summary of estoppel as it may be applied in tax matters was provided by Bowman TCJ in [pin type="node_head" href="774-Goldstein"]Goldstein[/pin]:
Most practitioners have received incensed comments of clients that an auditor is now proposing to reassess a practice that was unchallenged in a previous taxation year. As noted by Bowman TCJ, the Agency cannot be estopped from applying the Act to a taxpayer notwithstanding that it may have failed to do so on some other occasion or even (it would appear) where it had previously represented that it would not do so in this particular instance ([pin type="node_head" href="774-Jasper"]Jasper[/pin], [pin type="node_head" href="774-Metropolitan"]Metropolitan[/pin], [pin type="node_head" href="774-Brown"]Brown[/pin]). However, there is some suggestion in the English jurisprudence (e.g., MFK) that once the Crown has exercised its determination as to how the taxing statute should be applied to a particular set of facts, it may be precluded from doing so a second time and in a different manner. (There may be a hint of this sort of thinking in the [pin type="node_head" href="774-Ludmer"]Ludmer[/pin] case. See also [pin type="node_head" href="774-Optical"]Optical Recording[/pin].)
Where a taxpayer has made a misrepresentation of fact upon which the Agency has detrimentally relied, the taxpayer will be precluded from resiling therefrom. Examples include representing in a return that a partnership does (or does not) exist ([pin type="node_head" href="774-Hnatiuk"]Hnatiuk[/pin], [pin type="node_head" href="774-Desrochers"]Desrochers[/pin])or failing to disclose an item of income. There is not considered to be detrimental reliance by the Agency where there is a subsequent disclosure of facts that would permit it to reassess within a statute-barred period ([pin type="node_head" href="774-Cornforth"]Cornforth[/pin]). Estoppel also does not apply where the alleged misrepresentation relates to an issue of legal interpretation whose presence should have been apparent to the Agency (e.g., capital gains versus income treatment - [pin type="node_head" href="774-Stremler"]Stremler[/pin]).