Top 5 Civil Appeals From The Court Of Appeal - November 2017

Holterman v. Fish, 2017 ONCA 769 (Feldman, Cronk and Miller JJ.A.), October 5, 2017 Reeb v. The Guarantee Company of North America, 2017 ONCA 771 (Sharpe, Lauwers and Roberts JJ.A.), October 5, 2017 North v. Metaswitch Networks Corporation, 2017 ONCA 790 (Feldman, Sharpe and Roberts JJ.A.), October 16, 2017 Airia Brands Inc. v. Air Canada, 2017 ONCA 792 (Gillese, MacFarland and Pepall JJ.A.), October 17, 2017 Jay-Pee Drycleaners Inc. v. 2321324 Ontario Inc., 2017 ONCA 798 (Pepall, van Rensburg and Trotter JJ.A.), October 18, 2017 1. Holterman v. Fish, 2017 ONCA 769 (Feldman, Cronk and Miller JJ.A.), October 5, 2017

The appellants, Marc Holterman and Thomas Tiffin, commenced an action for misfeasance in public office against the respondents, the Attorney General of Canada and Andrew Fish, a Canada Revenue Agency (CRA) investigator. The action was discontinued on consent. After discovering new information, the appellants sought to have the discontinuance set aside. The Court of Appeal heard the appellants' appeal from the decision dismissing that motion.

The CRA investigated the appellants for fraud on the suspicion that they had underreported their incomes for the years 1995 through 1999. In 2002, Fish swore an Information to Obtain (ITO) in support of an application for search warrants in which he stated that he had reasonable grounds to believe that the appellants were in breach of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp) (ITA). Following the execution of the search warrants, the appellants were charged with fraud and tax evasion.

The following year, the appellants filed Notices of Objection with the Minister of National Revenue (MNR), challenging the CRA's conclusion that monies they had received were payments rather than loans and were therefore subject to income tax.

At the appellants' criminal trial, the trial judge found that the ITO contained misstatements of fact and that Fish had been "intentionally misleading". He quashed the search warrants and excluded evidence obtained pursuant to their execution. The Court of Appeal allowed the Crown's appeal from that decision, but did not overturn the trial judge's finding that Fish had been intentionally misleading.

The appellants commenced a civil action against the respondents for misfeasance in public office, claiming that Fish had intentionally sworn a false ITO with the intent to injure them. The Attorney General was alleged to be vicariously liable for Fish's actions.

After they had closed their case in the civil trial, the judge alerted the appellants that the onus was on them to prove that the monies they had received were in fact loans and therefore not taxable. The appellants had not led any evidence to establish this. The trial judge had refused to admit Fish's evidence or accept that the findings at the criminal trial were binding. Faced with this "potentially insurmountable obstacle", the appellants decided to pursue a discontinuance of the action. The action was discontinued on consent.

In January 2016, around a month after the discontinuance, the appellants received Notices of Reassessment from the MNR in response to the Notices of Objection that they had filed in 2003. The money that was the subject of the investigation had been reassessed as non-taxable. No explanation for this reversal 13 years after the Objection was given.

The appellants then brought a motion to set aside the discontinuance on the basis of "exceptional circumstances", arguing that if the reassessments were available at trial, it would have likely changed the result. The appellants took the position that the reassessments proved that Fish had acted in bad faith when he swore in the ITO that he had reason to believe that they had undisclosed taxable income.

The motion judge concluded that the reassessments could not help prove what Fish knew 12 years earlier, at a time before the search warrants were executed, before the CRA investigation was complete, and before the Notices of Objection setting out the appellants' argument had been received. The motion judge also found that this evidence could have been obtained by the appellants had they exercised proper diligence. He noted that the appellants could have exercised their right of appeal under s. 169 of the ITA to apply for an order vacating or varying the original assessment.

The Court of Appeal dismissed the appeal, holding that the appellants fell far short of meeting the high bar for setting aside a consent discontinuance.

In considering whether there were exceptional circumstances for setting aside the discontinuance, the motion judge had applied the test outlined by the Supreme Court in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59. This test is often distilled to two questions: (i) whether the new evidence, if presented at trial, would probably have changed the result; and (ii) whether the evidence could have been obtained before trial by the exercise of reasonable diligence. Miller J.A. noted, however, that the test is not that simplistic. As the Court of Appeal explained not long ago in Mehedi v. 2057161 Ontario Inc., 2015 ONCA 670, the test includes "considerations of finality, the apparent cogency of the evidence, delay, fairness and prejudice", as well as a consideration of the importance of deferring to trial judges, who are "in the best position to decide whether, at the expense of finality, fairness dictates that the trial be reopened".

Applying the Sagaz test, Miller J.A. upheld...

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