Date: 20021210
Docket: T-2299-00
Neutral citation: 2002 FCT 1282
Ottawa, Ontario, this 10th day of December, 2002
BEFORE: THE HONOURABLE MADAM JUSTICE HENEGHAN
BETWEEN:
CHARLES WEBSTER
Applicant
- and -
THE MINISTER OF NATIONAL REVENUE and
THE ATTORNEY GENERAL OF CANADA
Respondents
INTRODUCTION
[1] Mr. Charles Webster (the "Applicant") brings this application for judicial review pursuant to the Federal Court Act, R.S.C. 1985, c. F-7 as amended, section 18.1. The Applicant seeks a declaration, injunction and writ of prohibition enjoining the Minister of National Revenue (the "Minister") from taking any of the actions set out in sections 225.1(1)(a) to (g) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1 as amended (the "Act").
FACTS
[2] The Applicant is a chartered accountant and a Canadian taxpayer. In his 1991 income tax return, he claimed an addition to his "cumulative Canadian exploration expense" account as defined in section 66.1(6)(a) of the Act relative to an investment in an oil and gas exploration and development business. In his income tax returns for 1991, 1992 and 1993, he claimed certain deductions relative to the cumulative Canadian exploration expense account including, in 1992 and 1993, deductions for interest charged on a promissary note used to finance his investment and further deductions for general and administrative expenses related to the operation of the oil and gas business.
[3] In 1995, the Minister issued Notices of Reassessment dated April 11, 1995 in which he was refused the deductions referred to above, except for some minor amounts claimed for general and administrative expenses in the 1992 and 1993 income tax returns. The Applicant objected to the reassessments by Notices of Objection dated June 30, 1995.
[4] Subsequently, on or about March 22, 1996, the Applicant signed a letter agreeing to have the objections to the Notices of Reassessment held in abeyance pending delivery of judgment by the Tax Court of Canada in the case of Global Communications v. The Queen, [1997] 3 C.T.C. 2499 (T.C.C.), (1999), 99 D.T.C. 5377 (F.C.A.). The letter dated March 22, 1996 was also signed by a Mr. G.E.S. Flemming on behalf of the Minister.
[5] The taxpayers' appeal in Global Communications, supra, was allowed in part by a decision dated May 27, 1997. A further appeal in that case was dismissed and cross-appeal allowed by the Federal Court of Appeal in its decision dated June 18, 1999. On October 27, 2000, the Canada Customs and Revenue Agency issued the Applicant a Notice of Confirmation relative to the taxation years for 1991, 1992 and 1993.
[6] By letter dated November 7, 2000, the Agency stated its intention to proceed with collection actions relative to the amounts in issue in the reassessment, plus subsequent interest. As of November 7, 2000, the amount in issue was $98,251.78.
[7] On December 7, 2000, the Applicant filed a Notice of Appeal to the Tax Court of Canada relative to the Reassessments.
[8] On December 13, 2000, the Applicant filed this application for judicial review. The application provides in part as follows:
The Applicant makes application for a declaration that the Minister is not entitled to take any of the collective actions set out in paragraphs 225.1(a) to 225.1(g) of the Act while the Applicant's on-going appeal to the Tax Court of Canada is pending, and for an injunction and a writ of prohibition enjoining the Minister from taking any such collections actions until the appeal to the Tax Court of Canada is determined.
APPLICANT'S SUBMISSIONS
[9] The Applicant argues that the Minister has no authority to proceed with collections action against him since he has appealed to the Tax Court of Canada from the assessments against him and pursuant to section 225.1(3), an appeal to the Tax Court operates to stay collections actions. That statutory stay is not overridden by section 225.1(5) since that section requires the issues in an appeal to the Tax Court to be the same or substantially the same as the issue or issues raised in a test case where the taxpayer agrees that the outcome in that case shall be determinative of his situation.
[10] Briefly put, the Applicant submits that he agreed to hold his Notice of Objection to the Notice of Assessment in abeyance, pending the adjudication in another case pending before the Tax Court, that is Global Communications, but he did not agree to hold his appeal to the Tax Court in abeyance. Furthermore, he argues that the issues raised in his appeal differ from those raised in the Global Communications case.
[11] In his materials and in his submissions, the Applicant referred to the legislative history of section 225.1. One purpose of this section was to provide a taxpayer with an impartial hearing prior to payment of taxes where the assessment was disputed.
[12] The Applicant argues that there are two pre-conditions for the operation of section 225.1(5). The first is an agreement in writing between the taxpayer and the Minister to delay proceedings on an appeal to the Tax Court of Canada pending the disposition of another specific case under appeal to the Tax Court of Canada. The second condition is that both cases, that is the pending case to the Tax Court and the outstanding taxpayer's appeal to the Tax Court, raise the same or substantially the same issues.
[13] The Applicant points out that the issues raised in his Notice of Appeal differ significantly from those considered by the Tax Court and subsequently by the Federal Court of Appeal in Global Communications, supra. For example, the Applicant points out that the decision of the Tax Court in that case dealt with the allowability of a deduction for Canadian exploration expenses as the result of the purchase of seismic data. The Tax Court decision was factually based and it was upheld, in part, with the cross-appeal of the Minister being allowed by the Federal Court of Canada. In its decision, the Federal Court of Appeal dealt with the issue of contingent liability which it decided in favour of the Crown. That issue was not raised in the case before the Tax Court.
[14] The Applicant submits that the issues raised in his Notice of Appeal are different from those considered by the Tax Court of Canada and the Federal Court of Appeal. Accordingly, they are not the same or substantially the same issues.
RESPONDENT'S SUBMISSIONS
[15] The Respondent argues that the interpretation of section 225.1(5) urged by the Applicant is contrary to the scheme of section 225.1, as a whole. Furthermore, the Respondent argues that an assessment of the similarity of issues between an appeal filed by an individual taxpayer and the issues raised in a test case, is to be conducted on a subjective basis. The point of the statutory provision is to allow a taxpayer to agree that the issues are similar for the purpose of delaying pursuit of a Notice of Objection or an appeal, as the case may be.
[16] Next, the Respondent argues that section 225.1(5) does not give a taxpayer the right to delay pursuit of monies owing at both the Notice of Objection and appeal to the Tax Court stages. The effect of the section is to give a taxpayer an election between delaying either pursuit of a Notice of Objection or pursuit of an appeal to the Tax Court.
[17] The Respondent also refers to the background of section 225.1 and agrees with the Applicant that its purpose was to provide a taxpayer with the opportunity to access an independent tribunal for a trial on the merits of a dispute related to the assessment of tax payable, without necessarily incurring his own costs for pursuing such an independent hearing when another case, based on the same or similar issues, is proceeding before the independent tribunal.
[18] The Respondent argues that the words "as the case may be" mean that an agreement with the Minister to delay proceedings must relate to a delay either in relation to a Notice of Objection or to an appeal, but not to both. In this regard, the Respondent relies on R. v. R.D.F., [1997] N.W.T.R. 244, [1997] N.W.T.J. No. 34 (Q.L.) at paragraph 31.
[19] The Respondent further relies on Doyle v. M.N.R., 89 D.T.C. 5483 (F.C.T.D.) to argue that execution of this abeyance letter means that the Minister is free to pursue collection activity once a decision was made in the test case.
[20] The Respondent acknowledges that the Applicant still has a right to pursue an appeal to the Tax Court of Canada, pursuant to the Notice of Appeal filed in December 2000. However, since he had previously signed an agreement with the Minister pursuant to section 225.1(5) he is no longer entitled to the statutory stay against collections activity, which section 225.1(3) provides when a Notice of Appeal is filed to the Tax Court.
ANALYSIS
[21] This application raises the issue whether section 225.1(5) of the Act overrides the statutory stay against collections activity by the Minister when an appeal has been filed to the Tax Court of Canada.
[22] This application raises a question of statutory interpretation. What is the meaning of section 225.1(5) of the Act? Does it override section 225.1(3)?
[23] Section 225.1(3) provides as follows:
| 225.1(3) Where a taxpayer has appealed from an assessment of an amount payable under this Act to the Tax Court of Canada, the Minister shall not, for the purpose of collecting the amount in controversy, take any of the actions described in paragraphs 225.1(1)(a) to 225.1(1)(g) before the day of mailing of a copy of the decision of the Court to the taxpayer or the day on which the taxpayer discontinues the appeal, whichever is the earlier.
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225.1(3) Dans le cas où un contribuable en appelle d'une cotisation pour un montant payable en vertu de la présente loi, auprès de la Cour canadienne de l'impôt, le ministre, pour recouvrer la somme en litige, ne peut prendre aucune des mesures visées aux alinéas (1)a) à g) avant la date de mise à la poste au contribuable d'une copie de la décision de la cour ou la date où le contribuable se désiste de l'appel si celle-ci est antérieure. |
[24] Section 225.1(5) provides as follows:
| 225.1(5) Notwithstanding any other provision in this section, where a taxpayer has served a notice of objection under this Act to an assessment or has appealed to the Tax Court of Canada from an assessment and agrees in writing with the Minister to delay proceedings on the objection or appeal, as the case may be, until judgment has been given in another action before the Tax Court of Canada, the Federal Court of Appeal or the Supreme Court of Canada in which the issue is the same or substantially the same as that raised in the objection or appeal of the taxpayer, the Minister may take any of the actions described in paragraphs 225.1(1)(a) to 225.1(1)(g) for the purpose of collecting the amount assessed, or a part thereof, determined in a manner consistent with the decision or judgment of the Court in the other action at any time after the Minister notifies the taxpayer in writing that (a) the decision of the Tax Court of Canada in that action has been mailed to the Minister, (b) judgment has been pronounced by the Federal Court of Appeal in that action, or (c) judgment has been delivered by the Supreme Court of Canada in that action, as the case may be. |
225.1(5) Malgré les autres dispositions du présent article, lorsqu'un contribuable signifie, conformément à la présente loi, un avis d'opposition à une cotisation ou en appelle d'une cotisation devant la Cour canadienne de l'impôt et qu'il convient par écrit avec le ministre de retarder la procédure d'opposition ou la procédure d'appel jusqu'à ce que la Cour canadienne de l'impôt, la Cour d'appel fédérale ou la Cour suprême du Canada rende jugement dans une autre action qui soulève la même question, ou essentiellement la même, que celle soulevée dans l'opposition ou l'appel par le contribuable, le ministre peut prendre les mesures visées aux alinéas (1)a) à g) pour recouvrer tout ou partie du montant de la cotisation établi de la façon envisagée par le jugement rendu dans cette autre action, à tout moment après que le ministre a avisé le contribuable par écrit que, selon le cas: a) le jugement de la Cour canadienne de l'impôt dans l'action a été posté au ministre; b) la Cour d'appel fédérale a rendu jugement dans l'action; c) la Cour suprême du Canada a rendu jugement dans l'action. |
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[25] According to the Supreme Court of Canada in Rizzo & Rizzo Shoes Ltd. (Bankrupt) Re, [1998] 1 S.C.R. 27 the preferred approach to statutory interpretation is the purposive approach. I refer to the remarks of Justice Iacobucci at paragraph 21 where he says as follows:
Although much has been written about the interpretation of legislation (see, e.g., Ruth Sullivan, Statutory Interpretation (1997); Ruth Sullivan, Driedger on the Construction of Statutes (3rd ed. 1994) (hereinafter"Construction of Statutes"); Pierre-André Côté, The Interpretation of Legislation in Canada (2nd ed. 1991)), Elmer Driedger in Construction of Statutes (2nd ed. 1983) best encapsulates the approach upon which I prefer to rely. He recognizes that statutory interpretation cannot be founded on the wording of the legislation alone. At p. 87 he states:
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
Recent cases which have cited the above passage with approval include: R. v. Hydro-Québec, [1997] 3 S.C.R. 213 2 ; Royal Bank of Canada v. Sparrow Electric Corp., [1997] 1 S.C.R. 411; Verdun v. Toronto-Dominion Bank, [1996] 3 S.C.R. 550; Friesen v. Canada, [1995] 3 S.C.R. 103.
[26] The primary section of the Act that is under consideration here is section 225.1(5). In my opinion, the provision is to be interpreted in the context of section 225.1 as a whole. The general title for section 225.1 is "Collection Restrictions". Each sub-section provides for limitations and restrictions on collection activities, beginning with a ninety-day stay following the mailing of a notice of assessment, pursuant to sub-section 1 unless an assessment has been made pursuant to certain specified sections of the Act.
[27] Section 225.1(2) specifically provides that when a taxpayer has served a Notice of Objection to an assessment under the Act the Minister shall refrain from taking collection actions until ninety days after the Minister mails the notice of confirmation or variation of the assessment to the taxpayer.
[28] Similarly, section 225.1(3) imposes a stay of collection actions when a taxpayer has appealed from an assessment of tax payable to the Tax Court of Canada..
[29] Section 225.1(4) grants a stay when a question has been submitted for determination by the Tax Court of Canada, upon request of either the taxpayer or the Minister.
[30] Section 225.1(5), however, opens with the words "Notwithstanding any other provision in this section". In my opinion, these words show that sub-section (5) is meant to give a taxpayer, like the Applicant, a choice in the grounds upon which he seeks a deferment of collection activity by the Minister. The taxpayer can seek a statutory stay in relation to either a Notice of Objection or a Notice of Appeal to the Tax Court of Canada, but not for both.
[31] I am persuaded that the words "as the case may be" in section 225.1(5) further support this interpretation since they sensibly modify "objection" or "appeal". As noted by the Court in R. v. R.D.F., supra, those words imply that a choice must be made. In that case, the Court was considering section 259(1) of the Criminal Code, R.S.C. 1985, c. C-46, as amended which provides as follows:
| 259(1) When an offender is convicted of an offence committed under section 253 or 254 or discharged under section 730 of an offence committed under section 253 and, at the time the offence was committed or, in the case of an offence committed under section 254, within the three hours preceding that time, was operating or had the care or control of a motor vehicle, vessel or aircraft or of railway equipment or was assisting in the operation of an aircraft or of railway equipment, the court that sentences the offender shall, in addition to any other punishment that may be imposed for that offence, make an order prohibiting the offender from operating a motor vehicle on any street, road, highway or other public place, or from operating a vessel or an aircraft or railway equipment, as the case may be,
(a) for a first offence, during a period of not more than three years plus any period to which the offender is sentenced to imprisonment, and not less than one year; (b) for a second offence, during a period of not more than five years plus any period to which the offender is sentenced to imprisonment, and not less than two years; and (c) for each subsequent offence, during a period of not less than three years plus any period to which the offender is sentenced to imprisonment. |
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259(1) Lorsqu'un contrevenant est déclaré coupable d'une infraction prévue à l'article 253 ou 254 ou absous sous le régime de l'article 730 d'une infraction prévue à l'article 253 et qu'au moment de l'infraction, ou dans les trois heures qui la précèdent dans le cas d'une infraction prévue à l'article 254, il conduisait ou avait la garde ou le contrôle d'un véhicule à moteur, d'un bateau, d'un aéronef ou de matériel ferroviaire, ou aidait à la conduite d'un aéronef ou de matériel ferroviaire, le tribunal qui lui inflige une peine doit, en plus de toute autre peine applicable à cette infraction, rendre une ordonnance lui interdisant de conduire un véhicule à moteur dans une rue, sur un chemin, une grande route ou dans un autre endroit public, un bateau, un aéronef ou du matériel ferroviaire_:
a) pour une première infraction, durant une période minimale d'un an et maximale de trois ans, en plus de la période d'emprisonnement à laquelle il est condamné; b) pour une deuxième infraction, durant une période minimale de deux ans et maximale de cinq ans, en plus de la période d'emprisonnement à laquelle il est condamné; c) pour chaque infraction subséquente, durant une période minimale de trois ans, en plus de la période d'emprisonnement à laquelle il est condamné. |
[32] I refer to paragraphs 31 and 34 of R. v. R.D.F., supra, as follows:
In my view, the words "as the case may be" do not add anything to subparagraphs (a), (b) and (c), which are clear standing on their own. This suggests to me that the words in question must refer back to the type of vehicle to be prohibited, which in turn must have a connection with the type of vehicle involved in the commission of the offence.
...
Had Parliament felt it necessary to qualify subsections (a), (b) and (c) of s. 259(1), no doubt it would have done so in the same fashion, rather than by using the words "as the case may be". For that reason, and because, in my view, a less awkward reading of s. 259(1) follows, I conclude that the words "as the case may be" refer back to what it is that the order shall prohibit.
[33] In my opinion, the same reasoning applies here. If Parliament did not intend that a taxpayer make an election, then the words "as the case may be" are superfluous.
[34] The purpose of this provision is to provide taxpayers with the benefit of a hearing on the merits of an objection or appeal, as the case may be, without individually incurring the costs of such a hearing. That purpose was identified in the background information materials that accompanied the introduction of section 225.1.
[35] In the present case, the Applicant availed of the opportunity provided by section 225.1(5). He agreed with the Minister that further steps relative to his Notice of Objection would be postponed until the outstanding appeal in the Global Communications case was determined by the Tax Court. The agreement made by the Applicant and the Minister related to the Notice of Objection and not to his Notice of Appeal.
[36] In any event, section 225.1(5) requires that the parties, that is the taxpayer and the Minister, agree in writing that a stay will apply pending receipt of judgment in another action before the Tax Court of Canada, the Federal Court of Appeal or the Supreme Court of Canada where the same, or substantially the same, issue is raised either by a Notice of Objection or a Notice of Appeal.
[37] A notable difference between sections 225.1(2) and (3), and section 225.1(5) is that the former provide a statutory stay against collection activities when a Notice of Objection or a notice of appeal, respectively, has been filed independently of an agreement with the Minister, and the latter requires a written agreement between the taxpayer and the Minister.
[38] The Applicant entered into such an agreement with the Minister. In that agreement, he agreed to be bound by the decision in another case. The similarity of the present case with the "test" case was a matter to be agreed upon by the Applicant and the Minister. I agree with the Respondent that the applicable test of "similarity" is a subjective one; otherwise, the Court would be reviewing an agreement between the parties and that is not contemplated by section 225.1(5), in my opinion.
[39] The application is dismissed with costs to the Respondent.
ORDER
The application is dismissed, with costs to the Respondent.
"E. Heneghan"
_____________________________
J.F.C.C.
OTTAWA, Ontario
December 10, 2002
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
DOCKET: T-2299-00
STYLE OF CAUSE: CHARLES WEBSTER
Applicant
- and -
THE MINISTER OF NATIONAL REVENUE and
THE ATTORNEY GENERAL OF CANADA
Respondent
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: JUNE 12, 2002
REASONS FOR ORDER AND ORDER BY: HENEGHAN, J.
DATED: DECEMBER 10, 2002
APPEARANCES BY:
Mr. Al Meghji For the Applicant
Mr. Edward Rowe
Mr. Kevin Dias For the Respondents
SOLICITORS OF RECORD:
Donahue LLP for Applicant
Ernst & Young Tower
222 Bay Street
Suite 1800, P.O. Box 197
Toronto, ON, M5K 1H6
Morris Rosenberg
Deputy Attorney General of Canada for Respondents