Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on the fair market value (FMV) of two real estate transactions assessed for GST/HST purposes.

• The plaintiff sought to introduce new witnesses and evidence not presented during prior federal tax court proceedings.

• The defendant relied on judicial comity, arguing the Tax Court of Canada had already ruled on identical facts and legal issues.

• The court examined whether the new evidence constituted valid exceptions to the application of judicial comity.

• It was found that the proposed witnesses were known and available during the prior hearing but were deliberately not called.

• The court held that reopening the issue would undermine finality, judicial efficiency, and the integrity of justice.

Facts and procedural background

9310-1731 Québec inc. challenged tax assessments issued by the Agence du revenu du Québec (ARQ) for the years 2016, 2017, and 2018. The assessments pertained to the fair market value of two lots transferred to related parties, which triggered self-supply rules under Part IX of the Excise Tax Act. The plaintiff previously appealed the same assessments before the Tax Court of Canada, which held a hearing in July 2023 and rendered its judgment in October 2023, setting the fair market value of each lot at $90,000.

The plaintiff later initiated a parallel case in the Court of Québec, Small Claims Division, seeking to relitigate the fair market value using testimony from three new witnesses who had not testified at the earlier hearing: the notary who drafted the deeds of sale, a property evaluator, and an engineer from the City of Longueuil. The defendant filed a preliminary motion to dismiss, arguing that the principle of judicial comity required the court to adopt the findings already made by the Tax Court of Canada.

Legal analysis and findings

The central legal question was whether the principle of judicial comity prevented the Court of Québec from reconsidering the fair market value of the lots, an issue already adjudicated by a competent federal court. Judicial comity, a doctrine promoting respect between courts of concurrent jurisdiction, allows one court to defer to the findings of another when the legal and factual issues are substantially identical.

The court analyzed whether the proposed witnesses and their testimonies constituted truly new evidence that could justify a departure from the principle of judicial comity. It found that all three individuals were known to the plaintiff at the time of the federal proceedings. The plaintiff admitted he chose not to call the notary, while the evaluator's report had already been submitted to the Tax Court and considered in its judgment. The city engineer’s testimony on infrastructure costs was likewise deemed neither new nor previously unavailable.

The court emphasized that the new testimonies appeared to be strategic responses to the Tax Court’s unfavorable ruling rather than legitimate new evidence. As such, they did not meet the legal threshold required to override judicial comity. Relying on precedents such as Toronto (Ville) c. SCFP and Dundurn Street Lofts Inc. c. Canada, the court concluded that relitigating the issue would contravene the principles of coherence, judicial economy, and finality.

Judgment and outcome

The Court of Québec granted the ARQ’s preliminary motion and dismissed the plaintiff’s case. It accepted in part the plaintiff’s arguments only to the extent already reflected in the Tax Court of Canada’s decision, thereby adopting its findings and ordering reassessment based on a fair market value of $90,000 per lot. No further modifications to the assessment were allowed. Each party was ordered to bear its own costs.