A Polite Bench Slap from the Supreme Court of Canada

The Supreme Court of Canada in Canada v. Craig, 2012 SCC 43 reminds lower courts how the principle of “stare decisis‘ works:

[18] There is no doubt that Dickson J.’s interpretation of s. 13(1) in Moldowan, is a precedent binding on the Federal Court of Appeal and the Tax Court of Canada. While Gunn agreed with much of what Dickson J. wrote in Moldowan, on the crucial question of whether farming as a source of income could be subordinate to another source and still avoid the loss deduction limitation of s. 31(1), Gunn departed from Moldowan, a precedent binding on the Federal Court of Appeal.

[19] One of the fallouts from Gunn is that it left the Tax Court of Canada and the Federal Court of Appeal itself in the difficult position of facing two inconsistent precedents and having to decide which one to follow. The uncertainty which the application of precedent is intended to preclude is seen in the decisions since Gunn, in which the Tax Court has acknowledged Moldowan as the leading case while also feeling bound to follow Gunn: Stackhouse v. R., 2007 TCC 146, [2007] 3 C.T.C. 2402, Falkener v. R., 2007 TCC 514, [2008] 2 C.T.C. 2231, Loyens v. R., 2008 TCC 486, [2009] 1 C.T.C. 2547, Johnson v. The Queen, 2009 TCC 383, 2009 D.T.C. 1245, Scharfe v. The Queen, 2010 TCC 39, 2010 D.T.C. 1078, and Turbide v. The Queen, 2011 TCC 371, 2011 D.T.C. 1347. And of course the Federal Court of Appeal followed Gunn in the instant case.

[20] It may be that Gunn departed from Moldowan because of the extensive criticism of Moldowan. Indeed, Dickson J. himself acknowledged that the section was “an awkwardly worded and intractable section and the source of much debate”. Further, that provision had not come before the Supreme Court for review in the three decades since Moldowan was decided.

[21] But regardless of the explanation, what the court in this case ought to have done was to have written reasons as to why Moldowan was problematic, in the way that the reasons in Gunn did, rather than purporting to overrule it.

[22] The Federal Court of Appeal, on the basis of its prior decision in Miller v. Canada (Attorney General), 2002 FCA 370, 220 D.L.R. (4th) 149, in which that court reaffirmed the rule that it would normally be bound by its own previous decisions, followed Gunn, and not Moldowan. The application of Miller and the question of whether the Federal Court of Appeal should have followed Gunn simply did not arise, in view of the Moldowan Supreme Court precedent.

 [23] The Federal Court of Appeal’s purported overruling of Moldowan does not, however, affect the merits of this appeal or the core question of whether Moldowan should in fact be overruled. [emphasis added]

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4 Responses to “A Polite Bench Slap from the Supreme Court of Canada”

  1. jpbauer Says:

    Excellent blog posting – Thank you for sharing

  2. Antonin I. Pribetic Says:

    Thanks for your kind comment. Best, Antonin

  3. Kevin Bessant Says:

    It seems to me that the Supreme Court and the Federal Court of Appeals would have taken more time attempting to distinguish or flush out the inconsistent precedents before it made its ruling in this case. What do you think?

  4. Antonin I. Pribetic Says:

    Makes sense to me. Canadian appellate courts sometimes overrule their prior precedents, but in this case, the Supreme Court of Canada made it clear that as the nation’s highest court, it is the final arbiter of what the law is. An inferior appellate court or lower court may question a binding judgment, but it is bound to follow it, unless it is distinguishable.

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