Date: 20030612
Docket: T-2165-02
Citation: 2003 FCT 730
Ottawa, Ontario, this 12th day of June, 2003
PRESENT: THE HONOURABLE MR. JUSTICE BLANCHARD
IN THE MATTER OF THE INCOME TAX ACT
AND IN THE MATTER of an assessment or assessments by the
Canada Customs and Revenue Agency by virtue of the
Income Tax Act, the Canada Pension Plan and the
Unemployment Insurance Act and the
Employment Insurance Legislation
AGAINST:
144 945 CANADA INC.
5730 Upper Lachine North, Suite 100
Montreal, (Quebec), H4A 2B2
REASONS FOR ORDER AND ORDER
Introduction
[1] This is an application for review of the "Authorization to proceed forthwith and to be relieved of the obligation set forth in ss. 70(4), 301, 304, 359 and 395 of the Federal Court Rules, 1998", SOR/98-106, as amended, granted on ex parte order by Justice Martineau on December 24, 2002. The applicant seeks an order that the above authorization (the "jeopardy order") be set aside, with costs. A jeopardy order allows for the Canada Customs and Revenue Agency ("CCRA") to undertake execution procedures for the collection of taxes assessed against the applicant. The respondent asks that the application be dismissed, with costs.
Background
[2] On December 30, 2002, the applicant, 144945 Canada Inc., was served with the above-noted jeopardy order.
[3] On December 30, 2002, the applicant was also served with a "notice of assessment" dated December 20, 2002, bearing the number 31231. The notice of assessment states:
The liability under subsection 160(1) of the Income Tax Act, Canada Pension Plan and Unemployment Insurance Act 1971 in the amount of $89,000.00 in respect of a transfer on or about June 4, 1996 from Sam Stein to Donald Davis "in trust" for 144 945 Canada Inc.
[4] The total amount assessed is $89,000.00. The applicant has also applied for judicial review of this assessment.
Legislative scheme
[5] The collection scheme relevant to this motion is found in subsection 225.2 of the Income Tax Act, R.S.C. 1985,, c. 1 (5th Supp.), (the Act):
| (1) In this section, "judge" means a judge or a local judge of a superior court of a province or a judge of the Federal Court.
(2) Notwithstanding section 225.1, where, on ex parte application by the Minister, a judge is satisfied that there are reasonable grounds to believe that the collection of all or any part of an amount assessed in respect of a taxpayer would be jeopardized by a delay in the collection of that amount, the judge shall, on such terms as the judge considers reasonable in the circumstances, authorize the Minister to take forthwith any of the actions described in paragraphs 225.1(1)(a) to 225.1(1)(g) with respect to the amount.
(3) An authorization under subsection 225.2(2) in respect of an amount assessed in respect of a taxpayer may be granted by a judge notwithstanding that a notice of assessment in respect of that amount has not been sent to the taxpayer at or before the time the application is made where the judge is satisfied that the receipt of the notice of assessment by the taxpayer would likely further jeopardize the collection of the amount, and for the purposes of sections 222, 223, 224, 224.1, 224.3 and 225, the amount in respect of which an authorization is so granted shall be deemed to be an amount payable under this Act.
(4) Statements contained in an affidavit filed in the context of an application under this section may be based on belief with the grounds therefor.
(5) An authorization granted under this section in respect of a taxpayer shall be served by the Minister on the taxpayer within 72 hours after it is granted, except where the judge orders the authorization to be served at some other time specified in the authorization, and, where a notice of assessment has not been sent to the taxpayer at or before the time of the application, the notice of assessment shall be served together with the authorization.
(6) For the purposes of subsection 225.2(5), service on a taxpayer shall be effected by (a) personal service on the taxpayer; or (b) service in accordance with directions, if any, of a judge.
(7) Where service on a taxpayer cannot reasonably otherwise be effected as and when required under this section, the Minister may, as soon as practicable, apply to a judge for further direction.
(8) Where a judge of a court has granted an authorization under this section in respect of a taxpayer, the taxpayer may, on 6 clear days notice to the Deputy Attorney General of Canada, apply to a judge of the court to review the authorization.
(9) An application under subsection 225.2(8) shall be made (a) within 30 days from the day on which the authorization was served on the taxpayer in accordance with this section; or (b) within such further time as a judge may allow, on being satisfied that the application was made as soon as practicable.
10) An application under subsection 225.2(8) may, on the application of the taxpayer, be heard in camera, if the taxpayer establishes to the satisfaction of the judge that the circumstances of the case justify in camera proceedings.
(11) On an application under subsection 225.2(8), the judge shall determine the question summarily and may confirm, set aside or vary the authorization and make such other order as the judge considers appropriate.
(12) Where any question arises as to the course to be followed in connection with anything done or being done under this section and there is no direction in this section with respect thereto, a judge may give such direction with regard thereto as, in the opinion of the judge, is appropriate.
(13) No appeal lies from an order of a judge made pursuant to subsection 225.2(11). (Emphasis added.)
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225.2. (1) Au présent article, "juge" s'entend d'un juge ou d'un juge local d'une cour supérieure d'une province ou d'un juge de la Cour fédérale.
(2) Malgré l'article 225.1, sur requête ex parte du ministre, le juge saisi autorise le ministre à prendre immédiatement des mesures visées aux alinéas 225.1(1)a) à g) à l'égard du montant d'une cotisation établie relativement à un contribuable, aux conditions qu'il estime raisonnables dans les circonstances, s'il est convaincu qu'il existe des motifs raisonnables de croire que l'octroi à ce contribuable d'un délai pour payer le montant compromettrait le recouvrement de tout ou partie de ce montant.
(3) Le juge saisi peut accorder l'autorisation visée au paragraphe (2), même si un avis de cotisation pour le montant de la cotisation établie à l'égard du contribuable n'a pas été envoyé à ce dernier au plus tard à la date de la présentation de la requête, s'il est convaincu que la réception de cet avis par ce dernier compromettrait davantage, selon toute vraisemblance, le recouvrement du montant. Pour l'application des articles 222, 223, 224, 224.1, 224.3 et 225, le montant visé par l'autorisation est réputé être un montant payable en vertu de la présente loi.
(4) Les déclarations contenues dans un affidavit produit dans le cadre de la requête visée au présent article peuvent être fondées sur une opinion si des motifs à l'appui de celle-ci y sont indiqués.
(5) Le ministre signifie au contribuable intéressé l'autorisation visée au présent article dans les 72 heures suivant le moment où elle est accordée, sauf si le juge ordonne qu'elle soit signifiée dans un autre délai qui y est précisé. L'avis de cotisation est signifié en même temps que l'autorisation s'il n'a pas été envoyé au contribuable au plus tard au moment de la présentation de la requête.
(6) Pour l'application du paragraphe (5), l'autorisation est signifiée au contribuable soit par voie de signification à personne, soit par tout autre mode ordonné par le juge.
(7) Lorsque la signification au contribuable ne peut par ailleurs être raisonnablement effectuée conformément au présent article, le ministre peut, dès que matériellement possible, demander d'autre instructions au juge.
(8) Dans le cas où le juge saisi accorde l'autorisation visée au présent article à l'égard d'un contribuable, celui-ci peut, après avis de six jours francs au sous-procureur général du Canada, demander à un juge de la cour de réviser l'autorisation.
(9) La requête visée au paragraphe (8) doit être présentée: a) dans les 30 jours suivant la date où l'autorisation a été signifiée au contribuable en application du présent article; b) dans le délai supplémentaire que le juge peut accorder s'il est convaincu que le contribuable a présenté la requête dès que matériellement possible.
(10) Une requête visée au paragraphe (8) peut, à la demande du contribuable, être entendue à huis clos si le contribuable démontre, à la satisfaction du juge, que les circonstances le justifient.
(11) Dans le cas d'une requête visée au paragraphe (8), le juge statue sur la question de façon sommaire et peut confirmer, annuler ou modifier l'autorisation et rendre toute autre ordonnance qu'il juge indiquée.
(12) Si aucune mesure n'est prévue au présent article sur une question à résoudre en rapport avec une chose accomplie ou en voie d'accomplissement en application du présent article, un juge peut décider des mesures qu'il estime les plus aptes à atteindre le but du présent article.
(13) L'ordonnance rendue par un juge en application du paragraphe (11) est sans appel. (Mon emphase.)
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Ex parte order
[6] In his ex parte order Mr. Justice Martineau stated that he was "in fact satisfied that there are reasonable grounds to believe that the collection of all or any of the amount assessed in respect to the tax payer, 144 945 Canada Inc., would be jeopardized by a delay in the collection of that amount." The order further states that the judge was of the opinion that if the notice of assessment [in respect of the $89,000.00 owing] were sent to the taxpayer before the authorization were delivered, it would jeopardize even more the collection of the amount owed by 144 945 Canada Inc.
Issue
[7] Should this Court set aside or vary the jeopardy order granted on December 24, 2002 by Justice Martineau?
Standard of review
[8] Subsection 225.2(8) requires that the judge "review the authorization". In Canada v. Satellite Earth Station Technology Inc., (1989) 30 F.T.R. 94, [1989] F.C.J. No. 912 (QL), MacKay J. set out the appropriate approach to this review:
In an application to review a "jeopardy order" originally granted under paragraph 225.2(2) the issue will be whether that Order will now be set aside or varied. In this, an applicant under paragraph 225.2(8) has the initial burden to muster evidence, whether by affidavits, by cross-examination of affiants on behalf of the Crown, or both, that there are reasonable grounds to doubt that the test required by paragraph 225.2(2) has been met. Thus the ultimate burden on the Crown established by paragraph 225.2(2) continues when an order granted by the court is reviewed under paragraph 225.2(8). (Emphasis added.)
[9] In Canada (Minister of National Revenue) v. Moss, [1997] F.C.J. No. 1583 (QL), Muldoon J. stated, at para. 10-11, that (i) the taxpayer has the initial onus to show reasonable grounds the Minister did not satisfy her onus before the Court in the ex parte hearing; and (ii) if so, the Court must consider the evidence before the authorizing judge and additional evidence to find whether on a balance of probability the collection would be jeopardized by the delay.
Analysis
[10] The applicant, in support of his motion, argues that the Minister did not have reasonable grounds to believe that collection of all or any part of the amount assessed would be jeopardized by the delay in the collection thereof. The applicant contends that the respondent, on the ex parte application for the jeopardy order, did not make full disclosure to the Court with respect to the value of the applicant's assets. The applicant further contends, that there is no evidence to support the conclusion that the applicant's assets could be liquidated in the meantime or be seized by other creditors and not made available to the Minister.
[11] The respondent submits that the Minister fulfilled his evidentiary onus in the ex parte hearing arguing that the evidence established on a balance of probabilities that the collection was in jeopardy.
[12] The evidence adduced by the respondent in the ex parte hearing can be summarized as follows:
(1) The applicant has, since 1994, failed to file income tax returns within the delay periods prescribed by the Act.
(2) The applicant's filed tax returns, do not include any significant financial information and were not accompanied by any balance sheet.
(3) On March 25, 2002, the CCRA issued a requirement that the applicant provide documents and information pursuant to s. 231.2 of the Act. The applicant did not comply with this request.
(4) The only persons who have formally acted as officers and shareholders of the applicant company are David Stein and his wife Sandra Stein. David Stein is Sam Stein's son.
(5) Between 1987 and 1998, David Stein refused or neglected to pay personal income tax and has, since his assignment into personal bankruptcy on April 4, 2000, refused or neglected to offer "any significant collaboration" to the CCRA regarding tha applicant's debt obligations to the CCRA.
(6) David Stein has been found in contempt of Court by the Federal Court Trial Division for failing to provide requested information concerning his refusal to answer questions and produce documents relating to his financial affairs.
(7) David Stein had to resign as director of the applicant company due to his bankruptcy, but that that does not prevent him from "running the company through the intermediary of his wife".
(8) Pierre Léger, the CCRA agent charged with the investigation, was informed that a payment of $66,000 was to be made to the applicant company by a company called "Grand Boisé de Laprairie Inc." pursuant to an agreement. This information was received from an officer of the debtor, Jo-Ann Mauro, and was considered to be reliable.
(9) The $66,000 referred to above is the applicant company's only significant, seizable asset.
(10) The other officer of the applicant, Sandra Stein, has also seriously neglected her duties and obligations under the Act.
[13] The Minister argued that the applicant's fiscal behaviour and that of its directors in the last 8 years left him with uncertainty concerning the identification and net value of seizable assets, capacity to meet financial obligation, and willingness to comply with the Act. The Minister convinced Mr. Justice Martineau of this Court, on the above summarized evidence, to issue the jeopardy order which I am called upon to review in this motion.
[14] The applicant argues that the "notice of assessment" on which the jeopardy order was premised, is invalid. During oral argument it was generally conceded by the parties that this issue is best left to be considered during the judicial review of the said "notice of assessment", and I agree.
[15] I am therefore left to consider, in this motion for review of the jeopardy order, whether on a balance of probabilities the evidence leads to the conclusion that it is more likely than not that collection would be jeopardized by the delay. I will also consider whether the Minister has observed the high standard of disclosure to the court that is required on ex parte application, when he avails himself of these rather extraordinary provisions of the Act.
[16] In essence, the applicant contends that insufficient evidence has been provided with respect to delay jeopardizing the collection of the amount assessed against the applicant. It is the applicant's position that it has not been shown to be without assets and that the respondent has not shown that there is a real risk that the applicant's property will be dissipated if collection is delayed because of the appeal process provided for under the Act. The applicant further argues that the respondent has failed to establish that the applicant would attempt to evade its fiscal obligations. The applicant also submits, that the affairs of David Stein are irrelevant to the present matter because he is no longer a director of the applicant company.
[17] I do not agree with the applicant's submission respecting the sufficiency of its asset base to satisfy its obligation to the respondent. On cross-examination, Sandra Stein alleged that the company had assets, but when asked what these were, she was unable to provide a satisfactory answer. She said there were assets from other companies that could satisfy debts, if need be. Further, Pierre Léger, in fulfilment of an undertaking given March 25 at his cross-examination, stated that CCRA was aware that the applicant is 14% owner of two numbered companies. One of the said numbered companies, namely 142550 Canada Inc. owns properties valued in excess of one million dollars. The evidence also shows that 142550 Canada Inc. owes $1,144,000 to "Le Grand Boisé de Laprairie." Further, the applicant's balance sheet as at July 31, 1993, the only financial statement in evidence, shows liabilities exceeding assets by an amount in excess of 3.7 million dollars.
[18] The above evidence respecting the applicant's assets, notwithstanding its sparsity, is sufficient, in my view, to reasonably establish that the applicant's asset base may not be sufficient to satisfy its obligations. I am also of the view that this evidence coupled with the evidence reviewed above and considered by Martineau J. in the ex parte hearing, is sufficient to establish on a balance of probabilities that the collection was jeopardized by the delay. I give particular weight to the evidence of the history of non-compliance by current and/or former directors of the applicant with respect to information requests and duties imposed by the Act,
[19] I have carefully considered the submissions of the applicant with respect to the high standard of disclosure to the Court that is required on ex parte applications. I am satisfied that the Minister acted in good faith in the ex parte application and did not fail to adhere to and respect the standard. It would have been preferable, however, had the respondent's affiant, Mr. Leger, alerted the Court to the fact that assessments issued against Sandra Stein were subsequently cancelled by the CCRA. In the end, I do not find this deficiency to be sufficiently material to justify a finding that the Minister failed to meet his disclosure obligation.
Conclusion
[20] I conclude that the Minister has fulfilled his evidentiary onus in the ex parte hearing and that the evidence established on a balance of probabilities that the collection was in jeopardy by the delay.
[21] In the circumstances, I am of the view that the applicant has not demonstrated reasonable grounds to doubt that the December 24, 2002, order of Martineau J. was properly issued. Accordingly, the judicial review is dismissed.
ORDER
THIS COURT ORDERS that:
1. The application for review of the "Authorization to proceed forthwith and to be relieved of the obligation set forth in ss. 70(4), 301, 304, 359 and 395 of the Federal Court Rules, 1998" granted on ex parte order by Justice Martineau on December 24, 2002, is dismissed.
"Edmond P. Blanchard"
Judge
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-2165-02
STYLE OF CAUSE: Income Tax Act v. 144945 Canada Inc.
PLACE OF HEARING: Montréal, Québec
DATE OF HEARING: May 13, 2003
REASONS FOR ORDER AND ORDER: Blanchard J.
DATED: June 12, 2003
APPEARANCES:
Mr. Daniel Beauchamp FOR APPLICANT
Mr. Denis Lapierre FOR RESPONDENT
Mr. Konstantinos Voggas
SOLICITORS OF RECORD:
Morris Rosenberg FOR APPLICANT
Deputy Attorney General of Canada
Montréal, Québec, H2Z 1X4
Mr. Denis Lapierre FOR RESPONDENT
Mr. Konstantinos Voggas