Date: 20030211
Docket: T-221-03
Neutral citation: 2003 FCT 148
IN THE MATTER OF 514659 B.C. LTD.
and an application by the Minister of National Revenue
under section 225.2 of the Income Tax Act
BETWEEN:
THE MINISTER OF NATIONAL REVENUE
Applicant
- and -
514659 B.C. LTD.
Respondent
REASONS FOR ORDER
LEMIEUX J.
[1] These reasons support the ex parte order I made yesterday, pursuant to section 225.2(2) of the Income Tax Act (the "Act"). This section provides where:
... 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(a) to (g) with respect to the amount.
[2] Section 225.2(2) of the Act is an exception to section 225.1(1) of the Act which imposes collection restrictions on the Minister until after the day that is 90 days after the day of the mailing of a notice of assessment.
[3] The respondent 514659 B.C. Ltd. (the numbered company) has but one asset: the residential home of Leslie and Donald Rutledge. It's sale has been authorized under foreclosure proceedings. The asking price is $3.2 million and it has been up for sale since April 2002. Current equity, after deduction of total mortgage balances, is estimated to be $464,089.74 as at January 29, 2003.
[4] On February 5, 2003, the numbered company was assessed by the Minister the amount of $73,733.34, pursuant to section 224 of the Act, arising out of its non-compliance with an August 1, 2002 Requirement to Pay (the "RTP"). That RTP was in respect of a debt owned by the numbered company to Woodstock Products Inc. ("Woodstock") which then had an income tax debt in the same amount in respect of its 1994, 1995 and 1997 taxation years.
[5] The numbered company and Woodstock are related. Leslie Rutledge is the sole officer, director and shareholder of both companies. Woodstock was struck from the British Columbia Corporate Registry on August 23, 2002, for failure to file corporate returns.
[6] I interpret the words "reasonable grounds to believe" to mean a standard of proof that "while falling short of a balance of probabilities, nevertheless connotes a bona fide belief in a serious possibility based on credible evidence" (see para. 24 in The Minister of Citizenship and Immigration v. Qu, [2002] 3 F.C. 3 (C.A.)).
[7] I examined, in particular, Exhibit "K" to the affidavit of Angus Ito dated February 5, 2003. Exhibit "K" is Woodstock's general ledger report from March 3, 1999 to February 28, 2000. I focussed on ledger account 1670 labelled "Due from 514659 B.C. Ltd.". The total amount shown is $487,795.28.
[8] Scrutinizing the individual items posted in that ledger account against the numerous legal actions in which Mr. and Mrs. Rutledge, the numbered company and Fleming Financial Corp. (related to Mr. Rutledge) were involved as defendants, I have reasonable grounds to believe Woodstock was stripping its assets by making payments to third parties to settle legal proceedings for the benefit of the numbered company and the Rutledges for the preservation of its only asset: the Rutledge residence.
[9] I also have reasonable grounds to believe the collection of the Minister's debt will be jeopardized if the Minister is not allowed to certify her debt in respect of the numbered company pursuant to section 223 of the Act and to participate in the distribution of the proceeds of the sale of the Rutledge home. The ex parte order signed yesterday accomplishes this limited purpose by lifting the restriction contained in paragraph 225.1(a) and (b) of the Act.
[10] The basis for my belief that delay in the collection of the Minister's debt will be jeopardized is founded on the following facts: (1) the numbered company's only asset is for sale; (2) it is unknown when the sale of the property will occur and the foreclosure proceedings concluded; (3) Leslie Rutledge, in a sworn affidavit in the British Columbia Supreme Court opposing the conduct of the sale of the residence, indicated it is her intention the numbered company will purchase another house with the remaining equity but where that will be is unknown, i.e. in British Columbia or elsewhere where the Rutledges may have offshore assets (see CIBC Mortgage Application, p. 166 of Angus Ito's affidavit); (4) the numbered company is a defendant in current litigation.
[11] In my view, these circumstances described above weighed against the history outlined in Mr. Ito's affidavit meet the criteria of the Act for jeopardy orders as the jurisprudence the Minister's counsel referred me to explains it.
(Sgd.) "F. Lemieux"
Judge
Vancouver, B.C.
February 11, 2003
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-221-03
STYLE OF CAUSE: THE MINISTER OF NATIONAL REVENUE
v. 514659 B.C. LTD.
PLACE OF HEARING: Vancouver, B.C.
DATE OF HEARING: February 10, 2003
REASONS FOR ORDER: LEMIEUX J.
DATED: February 11, 2003
APPEARANCES:
Ms. Nicole S. Johnston for Applicant
SOLICITORS OF RECORD:
Morris A. Rosenberg for Applicant
Deputy Attorney General of Canada