Federal Court Decisions

Date: 20060926

Docket: T-1556-06

Citation: 2006 FC 1137

Montreal, Quebec, September 26, 2006

PRESENT:     The Honourable Mr. Justice Harrington

BETWEEN:

742190 ONTARIO INC. COB

VAN DEL MANOR NURSING HOME

Applicant

and

CANADA CUSTOMS AND

REVENUE AGENCY

Respondent

REASONS FOR ORDER AND ORDER

[1]               Van Del Manor Nursing Home has been in trouble with the tax authorities for several years. Its situation has now been straightened out, except with respect to employee deductions at source which it failed to remit many years ago. This led to interest and penalty charges.

[2]               The nursing home, which has not carried out business as such for many years, has asked the respondent, sometimes referred to as Canada Customs, and sometimes as the Agency, six times to exercise its discretion under those portions of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (ITA) popularly coined the Fairness Package, and waive penalties and accumulated interest. It was successful on one occasion in the early 1990s.

[3]               Currently, the nursing home owes more than $300,000 in interest and penalties. Canada Customs was asked to grant interest and penalty relief. Its last negative decision was 22 August 2006, and this was followed up by a garnishment order served on the City of Toronto, which rents the former nursing home and uses it as a shelter for homeless men.

[4]               The nursing home has filed an application for judicial review of that decision, or those two decisions, and in the meantime seeks an interlocutory injunction, or a stay of the direction to pay. That is the issue to be decided in this motion.

[5]               Although the nursing home suggests that it is not indebted in the amount alleged, that issue is beyond this Court’s jurisdiction. Section 152(8) of the ITA provides that an assessment is deemed to be valid and binding notwithstanding any error, defect or omission until it is varied or vacated on objection or appeal therefrom to the Tax Court (The Minister of National Revenue v. MacIver (1999), 99 D.T.C. 5524, Canada(Minister of National Revenue – M.N.R.)  v. Services M.L. Marengère Inc. (1999), 176 F.T.R. 1, 2000 D.T.C. 6032).

[6]               An interlocutory injunction, or a stay, pending the outcome of an underlying court proceeding, is an equitable remedy. In order to succeed, the petitioner must establish a serious issue, irreparable harm, and a favourable balance of convenience (RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311).

[7]               In RJR-MacDonald, above, a serious issue was held to be an issue which was neither frivolous nor vexatious. However, if the effect of the stay would be to grant the very remedy sought in the underlying application, the merits of that application should be more closely examined (Wang v. Canada (Minister of Citizenship and Immigration), 2001 FCT 148, [2001] 3 F.C. 682).

[8]               The Agency’s decision not to exercise its discretion should not be disturbed unless considered to be unreasonable (Lanno v. Canada (Customs and Revenue Agency), 2005 FCA 153, [2005] F.C.J. No. 714 (F.C.) (QL)).

[9]               In this particular case, the Agency has requested corporate returns time and time again, year after year. No returns have been filed since 1997. The onus is on the applicant to provide full and complete disclosure of relevant information. It was not unreasonable for the Agency to refuse to exercise its discretion in the corporation’s favour.

[10]           Furthermore, last year in Court Docket No. T-862-05, the respondent withdrew a requirement to pay which had been served on the City of Toronto on the basis that the nursing home was to promptly file a request for administrative review of its negative fairness decision. It was informed, as turned out to be the case, that it would likely be required to file all outstanding returns. It did not.

[11]           This is the first reason why the present motion should be dismissed. I should add, however, that if, as and when the nursing home ever gets this information to the respondent, it is entitled to demand a seventh waiver of interest and penalties in virtue of the Fairness Package.

[12]           There is a second reason why the application should not be granted. As a court of equity, we should keep in mind the twelve maxims thereof. There are three that are relevant which lead to the conclusion that this motion should be dismissed with costs. They tie in with the balance of convenience:

A.                 He who comes into equity must come with clean hands.

B.                 Delay defeats equities.

C.                 Equity looks on that as done which ought to be done.

[13]           The nursing home, as a corporation, is normally required to be represented by counsel. However, it obtained a special order allowing its director, Mrs. Pinnock, to represent it at this hearing. Nevertheless, it was represented by counsel who was of considerable assistance in deconstructing the application which Mrs. Pinnock had put together. As counsel was authorized to appear on the one motion and so is not solicitor of record, if the corporation wishes to be represented by Mrs. Pinnock at the application for judicial review, as mentioned at the hearing of this motion, it should move the Court prior thereto.

ORDER

THIS COURT ORDERS that this application is dismissed with costs.

“Sean Harrington”

FEDERAL COURT

SOLICITORS OF RECORD

DOCKET:                                          T-1556-06

STYLE OF CAUSE:                          742190 Ontario Inc. COB Van Del Manor Nursing Home v. Canada Customs and Revenue Agency

PLACE OF HEARING:                    Toronto, Ontario

DATE OF HEARING:                      September 18, 2006

REASONS FOR ORDER AND ORDER:        HARRINGTON J.

DATED:                                             September 26, 2006

APPEARANCES:

SOLICITORS OF RECORD: