A QUANTITATIVE EXPLORATION OF JUDICIAL DECISION MAKING IN CANADIAN INCOME TAX CASES Thaddeus Hwong A dissertation submitted to the Faculty of Graduate Studies and Osgoode Hall Law School in partial fulfillment of the requirements for the degree of Doctor of philosophy in Law Graduate Program in Law Osgoode Hall Law School York University Toronto, Ontario March 2006 iv Abstract The dissertation explores the influences of socio-demographic characteristics of judges on their decision making in Canadian income tax cases. In analyzing historical data on judges and judicial decision making in income tax cases decided by the Supreme Court of Canada in 1920-2003 and Tax Court of Canada in 1983-2004, socio- demographic characteristics of judges are found to have influenced their decision making in income tax cases. However, the decision-influencing socio-demographic characteristics are found to steer judges to vote in different directions in the two courts. The differences are interpreted to be hints of the presence of influences other than those from socio-demographic variables on decision making in the two courts. Based on the findings on the influences of socio-demographic characteristics on the historical voting patterns, voting scenarios are constructed to show different and varied propensities to vote for taxpayers of judges of the two courts. The voting scenarios suggest that taxpayers may be more likely to win in the current Supreme Court of Canada than in the current Tax Court of Canada. The dissertation adds to the understanding of judicial decision making in income tax cases with three ideas. First, socio-demographic characteristics of judges are decision- influencing variables. Thus, a court with judges sharing similar socio-demographic characteristics are expected to exhibit similar judicial behavior and thus in the deliberation of cases in which a wider range of perspectives is needed such a court may not be able to deliberate issues as comprehensively as a more diverse court could have v done so. Second, the socio-demographic variables behave differently in the two courts, signaling the presence of influences of variables other than socio-demographic characteristics of judges on judicial decision making. The interpretation of the finding suggests that neither socio-demographic variables nor non-socio-demographic variables alone can paint the complete picture of judicial decision making. Both types of variables are needed for a deeper understanding of judicial decision making. Third, quantitative analysis can generate findings that can advance knowledge on judicial decision making. However, future qualitative analysis is required to understand more of the empirical findings generated by the exploratory data analyses in the dissertation. Therefore, a mixed approach of research is proposed to capitalize on the strengths of quantitative and qualitative analysis. In sum, the dissertation finds that not having socio-demographic diversity on the bench may cause problems in judicial decision making, socio-demographic characteristics can provide partial explanations of judicial decision making and a mixed approach of quantitative and qualitative analyses may shed more light on judicial decision making in future research. vi Acknowledgements As research is a social enterprise, I would like to thank everyone who has kindly given me a lift along the way to completion. Here is only a partial list of them. I would like to thank the sponsors and participants of the Canadian Law Forum 2004 at University of Manitoba and the 2005 Tax Policy Research Symposium: Perspectives from Law & Accounting for comments on parts of the dissertation. The Law Forum presentation led to the publication of “A Review of Quantitative Studies of Decision Making in the Supreme Court of Canada” (2004) 30 Manitoba Law Journal 353. Materials from the article are used liberally in the dissertation. In addition, I would like to thank Denise Elliott, Erin Rechtsman and Susan Tomic, members of the 2003 LL.B Class of Osgoode Hall Law School for their work done for the Winter 2003 Tax Law and Policy Colloquium. Their work made the development of earlier versions of the literature review and the Supreme Court of Canada datasets used in this dissertation a less daunting task. Moreover, I would like to thank the supervisory committee of Professor Neil Brooks, Professor Anthony Doob and Professor Ian Greene for their generous advice and encouragement. I am especially indebted to Professor Brooks, who has led me to discover this project and spent countless hours working with me every step of the way. Last but not least, I would like to thank the supervisory committee members, external examiner Professor Tim Edgar as well as Professor Toni Williams and Professor Amin Mawani for making the oral examination an invaluable learning experience. vii Table of Contents 1 JUDGES AND JUDICIAL DECISION MAKING .......................................................................... 1 2 REVIEW OF QUANTITATIVE RESEARCH ON JUDICIAL DECISION MAKING .............. 6 2.1 FIVE MODELS OF JUDICIAL DECISION MAKING............................................................................ 7 2.2 MAPPING VOTING PATTERNS OF SUPREME COURT OF CANADA JUSTICES ................................. 14 2.3 DESCRIBING JUDICIAL DECISION MAKING IN SUPREME COURT OF CANADA ............................. 22 2.4 EXPLAINING JUDICIAL VOTING PATTERNS OF SUPREME COURT OF CANADA ............................ 27 2.5 EXPLAINING JUDICIAL DECISION MAKING IN U.S. AND CANADIAN TAX CASES ........................ 40 2.5.1 Peck on Consistent Patterns in Judicial Decision Making in Supreme Court of Canada Tax Cases.................................................................................................................... 41 2.5.2 Altieri and Company on Ideology and Personal Backgrounds in Judicial Decision Making in U.S. Tax Cases........................................................................................... 41 2.5.3 Ostberg and Wetstein’s Recent Attempt in Analyzing Judicial Decision Making in Supreme Court of Canada Tax Cases ......................................................................... 42 2.5.4 Schneider on the Importance of Personal Backgrounds of Judges in Judicial Decision Making in U.S. Tax Cases........................................................................................... 44 3 LINKING SOCIO-DEMOGRAPHIC CHARACTERISTICS OF SUPREME COURT OF CANADA JUSTICES TO THEIR DECISIONS............................................................................ 53 3.1 AN INITIAL LOOK AT THE DATA AVAILABLE FOR ANALYSIS OF JUDICIAL DECISION MAKING IN SUPREME COURT OF CANADA INCOME TAX CASES ................................................................... 56 3.1.1 Case Data.................................................................................................................... 59 3.1.2 Vote Data .................................................................................................................... 61 3.2 BIVARIATE ANALYSIS OF JUDICIAL DECISION MAKING IN SUPREME COURT OF CANADA INCOME TAX CASES................................................................................................................................. 71 3.2.1 Votes Cast by Justices and Prior Taxpayer Wins........................................................ 73 viii 3.2.2 Votes Cast by Justices and When the Votes Were Cast............................................... 76 3.2.3 Votes Cast by Justices and Political Party of Prime Ministers Who Appointed the Justices........................................................................................................................ 78 3.2.4 Votes Cast by Justices and Where Justices Built Their Careers ................................. 83 3.2.5 Votes Cast by Justices and Their Prior Judicial Experience ...................................... 87 3.2.6 Votes Cast by Justices and Their Law Teaching Experience ...................................... 90 3.2.7 Votes Cast by Justices and Their Experience in Founding Their Own Law Firms..... 93 3.2.8 Votes Cast by Justices and Their International Education ......................................... 95 3.2.9 Summary of Findings of Bivariate Analysis................................................................ 98 3.3 MULTIVARIATE ANALYSIS OF JUDICIAL DECISION MAKING IN SUPREME COURT OF CANADA INCOME TAX CASES ................................................................................................................... 99 3.3.1 Full Model: Influences of Socio-demographic Characteristics of Supreme Court of Canada Justices on Decision Making in Income Tax Cases..................................... 104 3.3.1.1 Prior Taxpayer Win and Judicial Decision Making in Supreme Court of Canada Income Tax Cases ........................................................................107 3.3.1.2 Post-Charter Era and Judicial Decision Making in Supreme Court of Canada Income Tax Cases ........................................................................108 3.3.1.3 Political Ties and Judicial Decision Making in Supreme Court of Canada Income Tax Cases......................................................................................110 3.3.1.4 Regional Ties and Judicial Decision Making in Supreme Court of Canada Income Tax Cases......................................................................................113 3.3.1.5 Judicial Experience and Judicial Decision Making in Supreme Court of Canada Income