A-277-72
Frank H. Galway (Appellant) (Plaintiff)
v.
Minister of National Revenue (Respondent)
(Defendant)
Court of Appeal, Jackett C.J., Thurlow and
Pratte JJ.—Ottawa, June 3 and 6, 1974.
Income tax—Application by appellant for consent judg-
ment—No jurisdiction in Court to refer matter back for
re-assessment to implement a compromise settlement by way
of consent judgment.
Application for consent judgment, the effect of which
would be that the judgment of the Trial Division would be
set aside and there would be a judgment of this Court
whereby the appellant's assessment for the 1961 taxation
year would be referred back to the respondent "to re-assess
the appellant's tax and interest in the total amount of
$100,000 in accordance with the Amended Minutes of Set
tlement filed".
Held, the Court cannot grant a judgment on consent that it
could not grant after the trial of an action or the hearing of
an appeal. It follows that, as the Court cannot, after a trial
or hearing, refer a matter back for assessment except for
assessment in the manner provided by the statute and
cannot therefore, at such stage, refer a matter back for
re-assessment to implement a compromise settlement, the
Court cannot refer a matter back by way of a consent
judgment for re-assessment for such a purpose.
APPLICATION in writing under Rule 324.
COUNSEL:
Richard R. Walker for appellant.
W. J. Hobson and N. A. Chalmers, Q.C.,
for respondent.
SOLICITORS:
Wilson, Barnes, Walker, Montello, Beach &
Perfect, Windsor, for appellant.
Deputy Attorney General of Canada for
respondent.
REASONS FOR JUDGMENT OF THE COURT—
This is an application in writing under Rule 324
for a consent judgment, the effect of which
consent judgment would be that the judgment of
the Trial Division would be set aside and there
would be a judgment of this Court whereby the
appellant's assessment under Part I of the
Income Tax Act for the 1961 taxation year
would be referred back to the respondent "to
re-assess the appellant's tax and interest in the
total amount of $100,000 in accordance with
the Amended Minutes of Settlement filed".
When this application was first considered, as
we had doubt that the application should be
granted, we gave reasons for judgment on April
22 last setting out our difficulties and we gave
counsel an opportunity to speak to the matter.
Counsel , took advantage of that opportunity.
At the resulting hearing, it was, in effect,
conceded that judgment could not go in the
terms that had been consented to but it was
sought to persuade the Court that judgment
could be granted in other terms that would
accomplish what the parties had actually had in
mind when the Minutes of Settlement were
agreed upon.
In support of submissions made at the oral
hearing, an affidavit was filed by counsel for the
respondent and reference was made during
argument to some of the evidence that was
before the learned trial judge. In that connec
tion, it should be emphasized that there is, as far
as we know, no way in which this Court can be
put into a position to exercise its powers to
dispose of an appeal from a judgment of the
Trial Division by setting aside or varying such
judgment other than by a hearing of the appeal
on the merits or a consent to judgment. Further
more, where a consent judgment can be given,
the judgment should, in our view, be based
exclusively on the consent. It is no part of the
Court's function, on an application for consent
judgment, to examine the issues, either of fact
or of law, involved in the appeal except in so far
as may be necessary for the Court to satisfy
itself that the judgment sought is within the
jurisdiction of the Court and is one that can
legally be granted. For the latter purpose, there
may be occasions when affidavit evidence may
be appropriate but, generally speaking, the
papers should be so drawn that such evidence is
not necessary.
Leaving aside the difficulties raised by our
Reasons of April 22 last that have been accept-
ed by counsel as barring a consent judgment in
the terms originally agreed upon by the parties,
we shall endeavour to indicate the remaining
problem as briefly as possible.
The reasons for judgment of the learned trial
judge disclosed that what was in issue in the
proceeding before that Court, which was an
attack on the appellant's 1961 assessment, was
whether an amount of $200,500 had been
received in such circumstances as to require
that it be included in computing the appellant's
income for the 1961 taxation year for the pur
poses of Part I of the Income Tax Act and that
there was no dispute as to the amount of the
alleged benefit. The amount of additional tax
involved, if that amount was properly included
in income, was $133,381.58. The Trial Division
held that the amount was properly included in
computing income and did not, therefore, inter
fere with the assessment. The judgment origi
nally sought, on consent, was a judgment that
would have reduced the amount of tax flowing
from the transaction in question without elimi
nating it. Having regard to the fact that there
had been no issue between the parties as to
quantum, the proposed judgment appeared to be
intended to implement a compromise settlement
rather than to implement an agreement between
the parties as to how the assessment should
have been made by application of the law to the
true facts. That being so, there was, in our view,
doubt as to whether the Court had jurisdiction
to grant the proposed judgment.
The reason for that doubt, as indicated by our
Reasons of April 22, was that, in our view, the
Minister has a statutory duty to assess the
amount of tax payable on the facts as he finds
them in accordance with the law as he under
stands it. It follows that he cannot assess for
some amount designed to implement a compro
mise settlement and that, when the Trial Divi
sion, or this Court on appeal, refers an assess
ment back to the Minister for re-assessment, it
must be for re-assessment on the facts in
accordance with the law and not to implement a
compromise settlement.
Is the position any different where the parties
consent to a judgment? In ordinary litigation
between private persons of full age and mental
ly sound, the Court has not, in normal circum
stances, any duty to question a consent by the
parties to judgment. We should have thought
that the same statement applies where the
Crown, represented by its statutory legal advi
sors, is one of the parties. There is, however, at
least one exception to the unquestioning grant
ing of consent judgments, regardless of who the
parties are, namely, that the Court cannot grant
a judgment on consent that it could not grant
after the trial of an action or the hearing of an
appeal. It follows that, as the Court cannot,
after a trial or hearing, refer a matter back for
assessment except for assessment in the manner
provided by the statute and cannot therefore, at
such a stage, refer a matter back for re-assess
ment to implement a compromise settlement,
the Court cannot refer a matter back by way of
a consent judgment for re-assessment for such a
purpose.
We did not understand counsel to make any
submission inconsistent with this view. What
they did indicate was that, notwithstanding the
appearances flowing from the circumstances to
which we have referred, in fact, the Minutes of
Settlement were designed to give effect to an
agreement reached by the parties as to what the
assessment should be when the law is applied to
the actual facts. In the circumstances, there is
no reason why the parties cannot re-apply on
the basis of a consent to a judgment designed to
implement an agreement of the parties as to
how the assessment should have been made by
application of the law to the true facts. If there
should be such a further application, we suggest
that, having regard to the history of the matter,
there should be an express recital in the consent
that it is designed to implement such an agree
ment. We also suggest, in the circumstances of
this case, that the appropriate judgment would
be a judgment that sets the judgment of the
Trial Division aside and refers the assessment
back for re-assessment on the basis of the fact
agreed upon without attempting to determine
the amount of tax or interest payable.
We have concluded that the application for
consent judgment should be dismissed without
costs and without prejudice to the right of either
or both parties to make an application for judg
ment on consent in terms that are different from
the terms of the judgment sought on this
application.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.