Case: Holterman v. Fish, 2017 ONCA 769 (CanLII)
Keywords: CRA; Fraud; “Sagaz test”; Rule 59.06(2)(a); Rules of Civil Procedure, R.R.O. 1990, Reg. 194
Canada Revenue Agency (“CRA”) suspects the Appellants are underreporting income. Mr. Andrew Fish, the Respondent CRA investigator, swears an Information to Obtain (“ITO”) in support of an application for search warrants. Fraud and tax evasion charges are laid against the Appellants.
At the Appellants’ criminal trial, the Trial Judge finds the Respondent “intentionally misleading” in swearing an ITO containing “numerous misstatements of facts”. These findings are subsequently upheld by the Court of Appeal and the Attorney General stays the charges against the Appellants. (See para. 5).
The Appellants next commence a civil action against the Respondent for misfeasance in public office, alleging that the Respondent had intentionally sworn a false ITO with intent to injure. After the Trial Judge reminds the Appellants of their onus to prove monies received were not taxable, the Appellants approach the Respondents and agree to discontinuance of the action on consent. (See para. 7).
Approximately one month after the discontinuance, the Appellants receive Notices of Reassessment stating the money CRA had originally assessed as taxable income was now reassessed as non-taxable. (See para. 8). The Appellants bring a motion to set aside the consent on the basis of “exceptional circumstances” – the facts that had arisen since the discontinuance which the Appellants contend vindicated their original position and provide evidence the Respondent acted in bad faith. (See para. 9).
The Motions Judge declines to set the discontinuance aside. The Court of Appeal dismisses the Appellants’ appeal, finds the fresh evidence could not have affected the result (had the matter proceeded to judicial determination). (See para. 30).
Rule 59.06(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 sets out the procedure for setting aside or varying an order due to fraud or facts arising or discovered after the order has been made. Citing 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,  2 SCR 983, 2001 SCC 59 (CanLII), the Motions Judge determined there were no exceptional circumstances to justify setting aside the discontinuance. (See para. 12).
In confirming the decision of the Motions Judge, the Court of Appeal described the test from Sagaz as a dual inquiry as to whether the new evidence, if presented at trial, would probably have changed the result, and whether the evidence could have been obtained before trial by the exercise of reasonable diligence. (See para. 18).
Going further, the Court of Appeal indicated that, as per the decision in Mehedi v. 2057161 Ontario Inc., 2015 ONCA 670 (CanLII), at para. 20, the Sagaz test necessarily “includes considerations of finality, the apparent cogency of the evidence, delay, fairness and prejudice” and that an appellate court must consider 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”. (See para. 18).
The Court determined the Sagaz test and associated factors provide an appropriate structure for determining whether to set aside a notice of discontinuance. Citing Yancey v. Neis, 1999 ABCA 272 (CanLII), 250 A.R. 19, at para. 25 and Philipos v. Canada (Attorney General), 2016 FCA 79 (CanLII), 483 N.R. 328, at paras. 17-20, the Court of Appeal emphasized that “significant and considered measures” to terminate litigation should not be “lightly undone”. (See para. 19).
In the present case, the Court of Appeal determined the fresh evidence in question “sheds no light” on the pivotal issue in the case which was whether the Respondent knowingly engaged in unlawful conduct he knew would likely injure the Appellants. Rather, for the Court of Appeal, the “equivocal” nature of the evidence prevents it from meeting the high standard of “probably changing the result” of the action. (See para. 24).
Counsel for the Appellants: F. Marc Holterman and Thomas S. Tiffin (acting in person)
Counsel for the Respondents: Helen Daley and Simon Bieber (Wardle Daley Bernstin Bieber LLP, Toronto)