2017 QCCA 445, 2017 QCCA 445

Groupon Canada inc. c. Agence du revenu du Québec 2017 QCCA 445 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-026207-167 (500-17-091733-157) MINUTES OF THE HEARING DATE: March 23, 2017 THE HONOURABLE ROBERT MAINVILLE, J.A. PETITIONERS COUNSEL GROUPON CANADA INC. GROUPON INC. Mtre JOANNA LOZOWIK (ABSENT) Mtre MARTHA MACDONALD (ABSENT) (Société d'avocats Torys s.e.n.c.r.l.) RESPONDENT COUNSEL AGENCE DU REVENU DU QUÉEBC Me CATHERINE-A.

BOISVERT (ABSENT) (Revenu Québec) DESCRIPTION: Application for leave to appeal from a judgment rendered in the course of the proceeding on June 10, 2016 by Lucie Fournier of the Superior Court, District of Montreal Clerk: Adam Scott Courtroom: RC.18

HEARING Continuation of the hearing of March 22, 2017. 9:38 Commencement of the hearing. Counsel were excused from appearing. BY THE JUDGE: Judgment – see page 3. Conclusion of the hearing. (

s) Adam Scott Clerk BY THE JUDGE JUDGMENT [ 1 ] Groupon Canada Inc. and Groupon Inc. (collectively the “ Applicants ”) seek leave to appeal from a judgement dated June 10, 2016 rendered by the Honourable Lucie Fournier of the Superior Court, District of Montreal (the “ motion judge ”) dismissing a motion dated May 31, 2016 (the “ Motion ”) to stay the proceedings they undertook on December 4, 2015 (the “ Rectification Proceedings ”). [ 2 ] Groupon Inc. is incorporated in Delaware and operates in the United States of America since 2008 as a third party advertising and marketing services enterprise.

Groupon Canada Inc. is its wholly owned Canadian subsidiary. By their Rectification Proceedings, they are seeking (

a) the rectification of certain agreements made in Canada so as to substitute Groupon Inc. to Groupon Canada Inc. as a party thereto, and (

b) a declaration that Groupon Inc. and not Groupon Canada Inc. carried out the business contemplated by those agreements for the period from January 26, 2011 to March 31, 2014. [ 3 ] These Rectification Proceedings were instituted in response to tax assessments issued to Groupon Canada Inc. by the respondent Agence du revenue du Québec (“ ARQ ”) for taxes, interests and penalties under the Excise Tax Act (Canada), the Act Respecting the Quebec Sales Tax , the Tax Administration Act (Quebec) and the Taxation Act (Quebec), exceeding $5.8 million. [ 4 ]

Section 156 of the Code of civil procedure (“ C.C.P ”) allows for a stay of proceedings if it can be shown that they are of a conservatory nature, that a settlement is possible, that the effort required to prepare the case for trial would be wasted or disproportionate in the circumstances and if the judge is convinced of the seriousness of the steps taken. [ 5 ] A stay of the proceedings was requested by the Applicants on the principal ground that Groupon Canada Inc. was pursuing discussions concerning related claims under the Income Tax Act (Canada) with the Canada Revenue Agency (“ CRA ”).

By their Motion, the Applicants sought a stay effective “until 60 days after a final resolution by the CRA of the Plaintiff Groupon Canada Inc.’s income tax payable for the taxations years ending in 2011 to 2014 under the Income Tax Act (Canada) to allow Defendant l’Agence du Revenu du Québec to determine its position on Plaintiff’s contentions.” [ 6 ] The motion judge dismissed the Motion on the ground that the Applicants did not meet any of the criteria for a stay set out in art. 156 C.C.P .

She added that what the Applicants were really seeking was to subordinate the Rectification Litigation to a process involving the CRA in which the respondent ARQ would have no say or control. [ 7 ] An application for leave to appeal was filed by the Applicants on July 11, 2016. The hearing has been since postponed as a result of an unrelated labour dispute between the attorneys representing the ARQ and their employer.

The matter was finally set before me on March 22, 2017. [ 8 ] A stay of proceedings is a case management measure. [1] In principle, a judgement granting or refusing such a stay cannot be appealed. [2] However, in rare and exceptional circumstances a judge of the Court may grant leave to appeal if an applicant can demonstrate that the ruling appears unreasonable in light of the guiding principles of civil procedure and that a serious prejudice results from the decision. [3] [ 9 ] In this case, the Applicants submit that the motion judge erred by misconstruing the purpose of the stay.

They further submit that she erred by not taking into account the provisions of the C.C.P. emphasizing that litigation should only be considered as a last resort

and favoring alternative dispute resolutions processes. They add that the Rectification Proceedings were instituted as a conservatory measure so as to avoid a prescription deadline.

The vigorous pursuit of these proceedings would therefore be premature until all relevant tax authorities, including the CRA and the ARQ, have completed their review and all administrative tax dispute resolution mechanisms have been exhausted. [ 10 ] However, the Applicants make vague allegations as to the possibility of reaching an administrative resolution with the CRA and no allegation as to any settlement discussion, alternative dispute resolution mechanism or other administrative mechanism with the ARQ.

In fact, the only pertinent allegations made by the Applicants are in par. 4 and 7 of their Motion, where they refer to “contacts” and vague “ongoing discussions” with the CRA to ascertain the “possibility” of an administrative solution. [ 11 ] There is no evidence of settlement discussions with the ARQ which could reasonably allow a judge to conclude that the tax dispute may be resolved between the Applicants and the ARQ without pursuing the Rectification Litigation. There is no evidence that different courts or tribunals are exercising concurrent jurisdiction over the same dispute.

The Applicants do not claim that another body or court would have the authority to grant the contractual rectification relief they seek. [ 12 ] Though it is not uncommon in tax matters for the ARQ to await the result of closely related litigation in the Tax Court of Canada or the Federal Court of Appeal involving the same taxpayer and the CRA, this is not such a case.

The rectification relief sought by the Applicants is under the jurisdiction of the Superior Court [4] . [ 13 ] Moreover, though the Applicants may be pursuing discussions with the CRA for tax relief on an administrative basis, these discussions do not bind the ARQ. If a resolution is reached with the CRA, this would be a fact which the ARQ could take into account in assessing its own tax claims, but it does not bind the ARQ. [ 14 ] Consequently, the Applicants did not convince the motion judge that the Rectification Litigation should be stayed. That discretionary decision was reasonable in the circumstances.

It would be useless to grant leave to appeal since the appeal would be fated to fail. FOR THESE REASONS , the undersigned judge: [ 15 ] DISMISSES the application for leave to appeal; [ 16 ] DENIES leave to appeal the judgement dated June 10, 2016 of the Superior Court, District of Montreal; [ 17 ] ORDERS the Applicants to pay costs on the motion. ROBERT MAINVILLE, J.A.