Words and Phrases - "issue estoppel"

After President's Choice Bank (the “2009 Decision”) determined that services supplied by a subsidiary of Loblaw (“PC Bank”) to another bank (“CIBC”) were exempt arranging-for “financial services” under para. (l) of the ETA definition. The definition was then retroactively amended (through the addition of paras. (r.4) and (r.5)) to narrow its scope. CIBC nonetheless applied for a refund of GST that PC Bank had commenced charging to it on the basis that the supplies made continued to be exempt. In connection with its appeal of the denial of its rebate claims (and PC Bank’s appeal of assessments of other periods for its failure to charge GST on such supplies) CIBC brought this motion that its appeal be allowed on the basis that the substance of the supply was already determined in the 2009 Decision (or an order precluding the Respondent from introducing evidence inconsistent with the 2009 Decision regarding the substance of the supply).

Before dismissing the motion, Hogan J first found (at para. 19) that cause of action estoppel could not apply as:

[C]ause of action estoppel does not apply to an appeal of a tax assessment arising from two different taxation years even if the facts, parties and issues are substantially the same.

Regarding application of the three-part test under Angle for determining whether issue estoppel applied, the third requirement of “mutuality of the parties and their privies” was established as CIBC was a privy of PC Bank given that PC Bank had been reassessed for failure to collect GST from the CIBC and remit it on CIBC’s behalf (para. 33).

Furthermore, the “same issue” test was not satisfied since the scope of the exemption had “been narrowed by virtue of these new exclusions” in paras. (r.4) and (r.5). Hogan J stated (at para. 49):

I fail to see how the doctrine of res judicata can apply when the provision of the law previously considered in an earlier decision no longer applies.

He further stated (at paras. 64, 66):

[T]he doctrines of issue estoppel and abuse of process will rarely find application with respect to transactions or arrangements carried out in different taxation years. This is particularly true when a provision of the law has been amended in an attempt to nullify the impact of a precedent which the government has taken issue with. Income and value added taxes are imposed in respect of a tax period. The circumstances surrounding the parties’ agreement often change when key agreements have been amended.

… I [also] do not believe it is in the public interest that I decide on an issue without hearing evidence that is relevant to the determination as to whether or not the exclusions apply. While some may view retroactive legislation as being manifestly unfair, it is not the court’s role to limit Parliament’s legislative authority to adopt retroactive legislation that is validly enacted.