2003 FCA 157, 2003 FCA 157

A-313-02 2003 FCA 157 Attorney General of Canada ( Applicant ) v. Loreto Scarola ( Respondent ) Indexed as: Canada (Attorney General) v. Scarola (C.A.) Court of Appeal, Létourneau, Nadon and Sharlow JJ.A. -- Toronto, March 13; Ottawa, March 26, 2003. Judges and Courts -- Tax Court of Canada -- Inherent jurisdiction to set aside notices of discontinuance -- EI benefits case -- Appeal deemed dismissed under Tax Court of Canada Act , s. 16.2(2) after counsel advised Court appeal abandoned -- T.C.C. later allowing withdrawal to be set aside -- T.C.C.

Judges not unanimous on issue, never before determined by F.C.A. -- Reasons for enactment of s. 16.2 explained -- Public interest in finality to litigation -- S. 16.2 deeming provision creating legal fiction -- Explanations by learned authors of purpose, operation of legal fictions, referred to -- S. 16.2 turns filing of discontinuance into constructive dismissal -- Court's power spent, is functus officio absent vitiating circumstance such as fraud -- Tax Court of Canada Rules (General Procedure), s. 172 ("slip" rule) allows judgment to be varied in certain circumstances not existing herein -- S. 16.2 removed any inherent, residual jurisdiction in T.C.C. to permit withdrawal of notices of discontinuance.

This was an application for the judicial review of a Tax Court of Canada decision allowing a notice of withdrawal to be set aside and an appeal reinstated. At issue was the Tax Court's inherent jurisdiction to set aside notices of discontinuance. The respondent had received $17,000 in EI benefits but Canada Customs and Revenue Agency later demanded a refund of that amount plus penalties and interest, respondent's employment not having been such as to qualify him for benefits. Respondent appealed the ineligibility finding.

The Minister subsequently advised respondent that his employment was insurable after all, but that his contract of service had been valid for just 18 weeks. When counsel wrote the Minister appealing that decision, it was redirected to the Tax Court which accepted it as an appeal. Counsel later notified the Court that the appeal was abandoned and so the appeal was deemed by the Registry to have been dismissed: Tax Court of Canada Act , subsection 16.2(2) .

Counsel subsequently wrote to the Court on three occasions: (1) seeking permission to proceed with the appeal; (2) asking that the previous letter be disregarded; (3) once again asking that the appeal be reinstated. The Attorney General then sought judicial review of the Tax Court's decision allowing the notice of withdrawal to be set aside. Held , the application should be allowed. There have been conflicting views among Tax Court Judges as to whether that Court possesses an inherent jurisdiction to set aside a notice of discontinuance and, if it does, whether

section 16.2 of the Act constitutes a bar to the exercise of such discretion. This issue was before the Tax Court in Bogie v. Canada and the decision in that case was appealed to this Court, but Robertson J.A. left it open for consideration.

Section 16.2 of the Act reflects the necessity for finality of decisions to ensure the efficient and proper administration of justice. It was enacted in response to the judgment of Heald J.A. in McCambridge v. R. The Tax Review Board had held that there was no appeal to be heard where a notice of appeal had been withdrawn. This marked a departure from previous Board policy of issuing judgments in respect of abandoned appeals. Heald J.A. held, however, that, as the legislation then stood, Board action was required for disposition of an appeal.

Section 16.2 dispensed with the necessity of issuing a formal judgment when a proceeding was discontinued. This eased the burden on judicial resources at a time of ever-increasing litigation. Its intent was also to impart finality to tax litigation.

Section 16.2 is a deeming provision which creates a legal fiction consisting of a misrepresentation of the facts and extracting therefrom the legal consequences that would flow from the dissembled truth, if that truth existed beyond the cloak of external appearances. Such fictions reveal our limited ability to create concepts fully adapted to realities. By virtue of

section 16.2, a discontinuance takes on all of the properties of a dismissal. The Court's powers are spent: it is functus officio barring fraud or some statutory authority allowing the Court to recapture its lost authority. The latter is provided by

section 172 of the Tax Court of Canada Rules (General Procedure) (the "slip" rule) which allows that Court to set aside or vary a judgment in limited circumstances (where it contains an error due to accidental slip or omission or if amendment is required because the Court failed to adjudicate on some matter). Legal fictions often do not fully integrate with other relevant legislation. Adjustments are sometimes needed to obviate potential injustices.

Section 172 of the Rules would apply to a dismissal under subsection 16.2(2) where the conditions are met. But, in the instant appeal, there was no suggestion of fraud and no facts that arose or were discovered after the dismissal.

Section 16.2 removed any inherent or residual jurisdiction to permit the withdrawal of a notice of discontinuance. statutes and regulations judicially considered Tax Court of Canada Act , R.S.C., 1985, c. T-2, ss. 13 (as am. by S.C. 2002, c. 8 , s. 67), 16.2(2) (as enacted by R.S.C., 1985 (4th Supp.), c. 51, s. 5). Tax Court of Canada Rules (General Procedure) , SOR/90-688, s. 172 (as am. by SOR/96-503, s. 4). cases judicially considered

applied: Laskaris v. Minister of National Revenue (1990), 90 DTC 1364 (T.C.C.) ; Baker v. Canada , 1999 CanLII 36546 (TCC) , [1999] 2 C.T.C. 2388 (T.C.C.); Roberts v. Canada , [2001] T.C.J. No. 866 (QL) ; Sixgraph Informatique Ltée v. Canada , [2000] T.C.J. No. 720 (QL) ; R. v. Verrette , 1978 CanLII 208 (SCC) , [1978] 2 S.C.R. 838; (1978), 85 D.L.R. (3d) 1; 40 C.C.C. (2d) 273; 3 C.R. (3d) 132; 21 N.R. 571. considered: Bogie v. Canada (1997), 97 DTC 1079 (T.C.C.) ; Bogie v. Canada , 1998 CanLII 8427 (FCA) , [1998] 4 C.T.C. 195; (1998), 98 DTC 6679 ; 233 N.R. 163 (F.C.A.) ; Rutledge v.

Canada , 2000 CanLII 481 (TCC) , [2001] 1 C.T.C. 2569; (2000), 2001 DTC 65 (T.C.C.) ; McCambridge v. R. , 1979 CanLII 4128 (FCA) , [1980] 2 F.C. 142; 1979 CanLII 4499 (FCA) , [1979] CTC 473; (1979), 79 DTC 5412 ; 36 N.R. 299 (C.A.) . referred to: Lehner v. M.N.R. , 1997 CanLII 4994 (FCA) , [1997] 2 C.T.C. 309; (1997), 97 DTC 5270 (F.C.A.) . authors cited Jacob, I. H. "The Inherent Jurisdiction of the Court" (1970), 23 Current Legal Problems 23. Létourneau, G. "Les fictions en droit public" in Les fictions du droit . Montréal: Éditions Thémis, 2001. Thomas, Yan. " Fictio Legis.

L'empire de la fiction romaine et ses limites médiévales" (1995), 21 Droits -- Revue française de théorie juridique 17. Wicker, G. Les fictions juridiques -- Contribution à l'analyse de l'acte juridique . Paris: L.G.D.J., 1994. APPLICATION for judicial review of a Tax Court of Canada decision ( Scarola v. Canada (Minister of National Revenue -- M.N.R. ), [2002] T.C.J. No. 189 (QL) ) allowing a notice of withdrawal of an appeal to be set aside. Application allowed. appearances: J. Paul Malette, Q.C. and Brent E. Cuddy for applicant.

Mitchell Worsoff for respondent. solicitors of record: Deputy Attorney General of Canada for applicant. Worsoff, Silver , Toronto, for respondent. The following are the reasons for judgment rendered in English by [ 1 ]Létourneau J.A.: This application for judicial review raises the question of the inherent jurisdiction of the Tax Court of Canada (Court) to set aside notices of discontinuance filed with the Court in respect of proceedings before it [ [2002] T.C.J. No. 189 (QL) ]. Facts [ 2 ]The background facts in this matter are not in dispute.

The respondent had been paid employment insurance (EI) benefits in the amount of $17,000. Subsequently, it was decided that his employment did not qualify him for benefits as he was a new entrant to the labour force. Consequently, the Canada Customs and Revenue Agency sought return of the $17,000 plus the payment of penalties and interest bringing the total in issue to about $41,000. Respondent's counsel was successful in having the penalties and interest dropped.

The respondent proceeded to appeal the ineligibility finding. [ 3 ]By letter dated January 23, 2001, the respondent was informed by the Minister of National Revenue (Minister) that his employment was insurable, but that his contract of service "was only valid for 18 weeks from August 10, 1992 to December 11, 1992." Counsel wrote to the Minister on his client's behalf to appeal this decision.

The Minister redirected this letter to the Court which, on February 12, 2001, acknowledged receipt of the letter and treated it as a valid appeal. [ 4 ]On February 20, 2001, counsel for the respondent informed the Court by fax that his client was abandoning his appeal. The Registry deemed the appeal dismissed pursuant to subsection 16.2(2) [as enacted by R.S.C., 1985 (4th Supp.), c. 51, s. 5] of the Tax Court of Canada Act , R.S.C., 1985, c.

T-2 as amended ( Act ) in its letter of February 21, 2001. [ 5 ]On April 26, 2001, counsel for the respondent wrote the Court asking that it disregard his February 20 letter and that his client be permitted to continue with his appeal. On May 9, the applicant opposed the request. A motion to hear this request was set down for June 20, 2001. [ 6 ]On June 14, 2001, counsel again wrote to the Registrar of the Court, this time asking that the April 26, 2001 letter that his client be permitted to continue with his appeal be disregarded.

On August 28, 2001, he informed the Court in a lengthy letter that his client once again wished to have his appeal reinstated. The applicant opposed the reinstatement of the appeal. A hearing was set down for November 6, 2001, and after an adjournment, was finally heard on March 21, 2002. [ 7 ]On April 15, 2002 [ [2002] T.C.J. No. 189 (QL) ], the Court allowed that the notice of withdrawal be set aside and gave the respondent

60 days in which to file a reply to the notice of appeal. Hence, the application for judicial review by the Attorney General of Canada against that decision. The decision of the Tax Court of Canada [ 8 ]Relying upon the well-established principle that every court has the authority required to govern its own proceedings, the Court claimed an inherent jurisdiction to set aside a notice of discontinuance and concluded that the facts of this case warranted the exercise of that jurisdiction. So it authorized the withdrawal of the notice.

At paragraph 46 of the decision, the Court wrote: This is in my view a case where the relief sought should be granted. The withdrawal was hasty and was based on confusion about the requirements under the Employment Insurance Act . The complexity of the Act and the rules and regulations under it is compounded by the split jurisdiction under that Act between this court and the Board of Referees. While I cannot condone the lawyer's rash withdrawal of the appeal without having his client's success with the Board of Referees clearly nailed down his actions were carried out in good faith, albeit rather inexpertly.

Analysis of the decision [ 9 ]There are conflicting views among the judges of the Court as to whether the Court possesses an inherent jurisdiction to set aside a notice of discontinuance and, if so, whether

section 16.2 of the Act is a bar to the exercise of that jurisdiction.

Section 16.2 deems a discontinued proceeding to be a dismissal of that proceeding. It reads: 16.2

(1) A party who instituted a proceeding in the Court may, at any time, discontinue that proceeding by written notice.

(2) Where a proceeding is discontinued under subsection (1), it is deemed to be dismissed as of the day on which the Court receives the written notice. The

section was enacted on September 22, 1988. It came into force on January 1, 1991. [ 10 ]In Bogie v. Canada (1997), 97 DTC 1079 (T.C.C.), at paragraph 2 , the Court concluded that, as a statutory creation, it did not possess such inherent jurisdiction. The case was appealed to us [ 1998 CanLII 8427 (FCA) , [1998] 4 C.T.C. 195 (F.C.A.)], but Robertson J.A. did not decide this issue and left it open for future consideration. In another decision rendered after the enactment of

section 16.2 but prior to its coming into force, the Court found that it did not have the authority to grant a relief against a dismissal based on a withdrawal of the appeal: see Laskaris v. Minister of National Revenue (1990), 90 DTC 1364 (T.C.C.) . [ 11 ]The Court in Baker v. Canada , 1999 CanLII 36546 (TCC) , [1999] 2 C.T.C. 2388 (T.C.C.) relied upon

section 16.2 to refuse to set aside the deemed dismissal of the proceedings. In Roberts v. Canada , [2001] T.C.J. No. 866 (QL) , the Chief Judge of the Court followed the decision in Baker as he was of the opinion that, in view of the terms of

section 16.2 , "the discontinuance of an appeal ends the appeal": see paragraph 7 of the decision. [ 12 ]However, in Rutledge v.

Canada , 2000 CanLII 481 (TCC) , [2001] 1 C.T.C. 2569 (T.C.C.), at paragraph 14 , the Court assumed an inherent jurisdiction to "set aside a dismissal of an appeal on the basis of erroneous advice, such dismissal not have [ sic ] been created by a judgment of this Court". [ 13 ]It is fair to say that most of the cases that I have referred to, and the list is not exhaustive, brought to light sympathetic circumstances from the taxpayer's perspective, ranging from understandable confusion generated by the complexity of the law to erroneous advice from the Tax Department, all leading to the filing of a notice of discontinuance.

However, there is more at stake here on this issue than sympathy: finality of decisions and efficiency of the administration of justice. I believe these fundamental concerns relating to a proper administration of justice are reflected in

section 16.2 of the Act . I now turn to the origin, scope and effect of this section. The origin of

section 16.2 of the Act [ 14 ]There seems to be a consensus that the decision of Heald J.A. in McCambridge v. R. , 1979 CanLII 4128 (FCA) , [1980] 2 F.C. 142 (C.A.) is at the origin of the enactment of

section 16.2 . The Assistant Chairman of the Tax Review Board had held that there was no appeal to be heard by the Board when the notice of appeal had been withdrawn by the appellant. At the time, the Board had departed from its previous policy of issuing a judgment in appeals withdrawn, discontinued or abandoned. The Assistant Chairman was of the view that a formal judgment of dismissal was not necessary. Heald J.A. reviewed the relevant provisions governing the powers of the Board.

He concluded that there were only two ways in which the then legislation provided for disposing of appeals to the Board and, in both cases, the legislation required action by the Board itself. At page 145 of the decision, he wrote: If Parliament had intended to provide that one means of disposing of an appeal could be by way of filing a notice of discontinuance, it would have been an easy matter to so provide in the statute. [ 15 ]Section 16.2 was consequently enacted. One obvious reason for this was efficiency.

It was to dispense with the need for members of the Board or judges of the Court to issue a formal judgment each time a proceeding was discontinued: hence, the deemed dismissal as if a judgment of dismissal had been issued.

With an ever-increasing volume of litigation, the deeming provision carried significant impact in terms of relief on the judicial resources available. [ 16 ]The terms of subsection 16.2(2) which introduced the notion of a deemed dismissal also reveal a legislative intent to bring clarity as regards the effect of a notice of discontinuance as well as an intent to bring finality to tax litigation. [ 17 ]In Sixgraph Informatique Ltée v. Canada , [2000] T.C.J.

No. 720 (QL) , 2000, Lamarre T.C.J. refused to grant a motion, dated April 7, 2000, for the withdrawal of notices of discontinuances filed almost three years before, on April 14, 1997. She endorsed the concerns expressed by the respondent for an efficient and proper administration of justice as well as the finality of dismissals of appeals. The Sixgraph Informatique Ltée case, is a good example of the need, in the public interest, to put an end to litigation. A party is certainly

entitled to assume as a general rule that litigation has been brought to an end when an appeal is deemed to be dismissed. It is entitled to assume that the dead proceeding will not be resurrected some 14 months, as in the present case, or three years, as in the Sixgraph case, after its burial. [ 18 ]Instead of leaving the issue of discontinuance of a proceeding to the discretion of the Court, Parliament has chosen to legislatively determine the legal consequences of a notice of discontinuance. This brings me to an analysis of the scope and effect of

section 16.2 of the Act and its resulting consequences. The scope and effect of

section 16.2 of the Act [ 19 ]

Section 16.2 of the Act is a deeming provision which creates a legal fiction. In the words of Beetz J. in R. v. Verrette , 1978 CanLII 208 (SCC) , [1978] 2 S.C.R. 838, at page 845, "[a] deeming provision is a statutory fiction; as a rule it implicitly admits that a thing is not what it is deemed to be but decrees that for some particular purpose it shall be taken as if it were that thing although it is not or there is doubt as to whether it is". The purpose and operation of a legal fiction has also been described eloquently by Yan Thomas in an

article entitled: " Fictio Legis. L'empire de la fiction romaine et ses limites médiévales" (1995), 21 Droits--Revue française de théorie juridique 17: [translation] Fiction is a process that, as repeatedly noted, is part of the pragmatics of law.

It consists first in misrepresenting the facts, stating them to be other than what they really are and extracting from that very adulteration and that false supposition the legal consequences that would flow from the dissembled truth, if that truth existed beyond the cloak of external appearances. [ 20 ]Fictions reveal " l'infirmité de notre esprit impuissant à créer sans cesse des concepts parfaitement adéquats aux réalités " ([translation] "the limited ability of our mind to unceasingly create concepts which are fully adapted to realities"). G.

Wicker, Les fictions juridiques--Contribution à l'analyse de l'acte juridique , Paris: L.G.D.J., 1997, at page 14. They are often used to obtain or avoid a legal consequence, circumvent or avoid a legal rule or bring about needed reforms of a legislative nature that the legislature has omitted to do: G. Létourneau, "Les fictions en droit public" in Les fictions du droit , Montréal: Éditions Thémis, 2001, at pages 14-15. [ 21 ]An appeal discontinued is, pursuant to subsection 16.2(2), an appeal dismissed.

An appeal dismissed is an appeal disposed of, and an appeal which has been disposed of no longer exists: see Lehner v. M.N.R. , 1997 CanLII 4994 (FCA) , [1997] 2 C.T.C. 309 (F.C.A.), at paragraph 2 per Pratte J.A. Subsection 16.2(2) operates to turn the filing of a discontinuance into a constructive dismissal akin to an actual dismissal. In other words, the discontinuance of an appeal, as a result of that subsection, takes on all of the properties of a dismissal. It produces the same effect as a judgment of dismissal by the Court, albeit that effect is obtained by sheer operation of the legal fiction.

In either case, the powers of the Court are spent: the decision maker is functus officio . A dismissal, deemed or actual, is a final determination which closes the matter, barring some vitiating circumstances such as fraud or some statutory authority allowing the decision maker to retain or recapture the lost authority. [ 22 ]Section 172 [as am. by SOR/96-503, s. 4] of the Tax Court of Canada Rules (General Procedure) [SOR/90-688], often referred to as the "slip" rule, provides such authority.

It allows the Court to set aside, vary or amend judgments when the conditions provided therein are met: Setting Aside, Varying or Amending Accidental Errors in Judgments--General 172.

(1) A judgment that, (

a) contains an error arising from an accidental slip or omission, or (

b) requires amendment in any matter on which the Court did not adjudicate, may be amended by the Court on application or of its own motion.

(2) A party who seeks to, (

a) have a judgment set aside or varied on the ground of fraud or of facts arising or discovered after it was made, (

b) suspend the operation of a judgment, or (

c) obtain other relief than that originally directed, may make a motion for the relief claimed. [ 23 ]In Roberts , supra , at paragraph 11, Chief Judge Garon assumed reluctantly without deciding that a discontinuance pursuant to

section 16.2 of the Act was equivalent to a judgment dismissing the appeal. Although he doubted whether this was the correct approach, nevertheless, he proceeded, pursuant to subsection 172(2), to determine if the judgment could be set aside or varied on the ground of fraud or on account of facts arising or discovered after the judgment was made. [ 24 ]As is often the case with legal fictions, they do not integrate well or fully with other existing relevant legislation. Necessary adjustments are sometimes needed to fill gaps or obviate disparities or potential injustices.

Section 172 gives the Court jurisdiction to vary or set aside any of its judgments, including a judgment of dismissal. As previously mentioned, the legal fiction turns a discontinuance into a dismissal. Such dismissal carries the same effect as a judgment of dismissal by the Court. It is, indeed, tantamount to a judgment of dismissal on consent. [ 25 ]For the purpose of allowing the limited remedial provisions of

section 172 to apply, I am willing to give full and consistent effect to the legal fiction created by subsection 16.2(2) and to fill the gap created by the wording of the subsection and of

section 172. I do not think that it does violence to Parliament's intent to find that the dismissal under subsection 16.2(2) ought to be treated as a judgment of

dismissal to which

section 172 will apply if and when the conditions are met. [ 26 ]In practice, it is paragraph 172(2)(

a) which is more likely to be invoked where the deemed dismissal has been obtained by fraud or where facts have arisen or have been discovered after the dismissal took effect. I hasten to add that, in the present case, there is no allegation of fraud and, although invited by us to do so, counsel for the applicant has been unable to point to facts discovered or that have arisen after the dismissal which would warrant the application of

section 172. [ 27 ]The applicant submitted that the Court possessed and could exercise an inherent jurisdiction to allow the withdrawal of a notice of discontinuance. I cannot accept that submission in view of subsection 16.2(2) . As properly stated by I. H. Jacob in an

article entitled "The Inherent Jurisdiction of the Court" (1970), 23 Current Legal Problems 23, at page 24: . . .the court may exercise its inherent jurisdiction even in respect of matters which are regulated by statute or by rule of court, so long as it can do so without contravening any statutory provision . [Emphasis added.] I believe

section 16.2 by its plain meaning took away any inherent or residual jurisdiction in the Court to allow for withdrawals of notices of discontinuance. Both law and logic suggest that there is no more scope or authority for doing so than there is for reopening a matter after the Court has rendered its judgment. [ 28 ]In Rutledge , previously cited, the Court appears in paragraph 13 of its decision to have relied upon

section 13 of the Act as legislative authority to set aside a deemed dismissal. That

section gave the Court with respect to the attendance and examination of witnesses and other matters necessary for the due exercise of its jurisdiction the powers, rights and privileges that are vested in a superior court of record. That

section has now been replaced [ S.C. 2002, c. 8 , s. 67] by a

section which gives the Court the power to punish for contempt of court. In any event, that provision had been interpreted in McCambridge , previously cited, at page 146, as not conferring upon the Board added jurisdiction: it merely gave the Board the ancillary powers of a superior court to exercise the jurisdiction conferred upon it by the Act . Conclusion [ 29 ]For these reasons, I would allow the application for judicial review, set aside the decision of the Tax Court of Canada and restore the deemed dismissal of the respondent's appeal. Nadon J.A.: I agree. Sharlow J.A.: I agree.