Date: 20031201
Docket: T-1606-03
Citation: 2003 FC 1403
Ottawa, Ontario, this 1st day of December, 2003
PRESENT: The Honourable Mr. Justice Michel Beaudry
BETWEEN:
CARREFOUR LANGELIER INC.
Applicant
and
THE CANADA CUSTOMS
AND REVENUE AGENCY
Respondent
REASONS FOR ORDER AND ORDER
(Section 18.2 of the Federal Court Act
and Sections 231.2, 230(1) and 238 of the Income Tax Act)
[1] This is a motion on behalf of the applicant for an interim order suspending the effect of a requirement to provide information issued under section 231.2 of the Income Tax Act (the "Act") pending final determination of the application by the applicant to set aside the requirements to provide information.
[2] The applicant is contesting the legality of the requirement to provide information by means of an application for judicial review filed under section 18.1 of the Federal Court Act.
[3] The letter dated August 20, 2003 to the applicant under paragraph 231.2 (1)(b) of the Act requires that the applicant provide amongst others:
- the minute book of Langelier Inc.;
- a copy of the partnership agreement related to the investment in partnership mentioned in the financial statements of 2002;
- financial statements of that partnership, from 1997 to 2002; and
- details (copy of the contract, name of the individual, name of the Company, which is controlled by that individual, description of securities involved ) regarding the balance of sale receivable mentioned in the financial statements of 2002.
[4] To obtain such a relief, the applicant must meet the tripartite test laid down in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 :
- is there a serious issue to be determined?
- would the applicant suffer irreparable prejudice if the applicant were refused?
- which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits?
BACKGROUND
[5] Harry Glassman is indebted towards the respondent for $1,284,052.19. He filed for bankruptcy on August 9, 2002. In his statement of affairs, he declared to be the owner of one class B share of Grands Horizons and 166,250 class F shares of Grands Horizons. Part of the value of Grands Horizons comes from its shareholding in Moncan Inc. To establish the value of Moncan Inc., the respondent needs to value its underlying investments in Carrefour Langelier Inc. This is the reason of the issuance of the requirement letter of August 2003.
[6] The applicant submits that there are four serious issues to be tried. Since the shares of Mr. Glassman are « grevées » (encumbered), the respondent has no interest in determining their values. On the other hand, the respondent argues that a requirement was issued according to subsection 231.2 (1) of the Act, which reads as follows:
| 231.2 (1) Notwithstanding any other provision of this Act, the Minister may, subject to subsection(2), for any purpose related to the administration or enforcement of this Act, including the collection of any amount payable under this Act by any person, by notice served personally or by registered or certified mail, require that any person provide, within such reasonable time as is stipulated in the notice,
a) any information or additional information, including a return of income or supplementary return; or
b) any document. [emphasis added] |
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231.2. (1) Malgré les autres dispositions de la présente loi, le ministre peut, sous réserve du paragraphe (2) et, pour l'application et l'exécution de la présente loi, y compris la perception d'un montant payable par une personne en vertu de la présente loi, par avis signifié à personne ou envoyé par courrier recommandé ou certifié, exiger d'une personne, dans le délai raisonnable que précise l'avis:
a) qu'elle fournisse tout renseignement ou tout renseignement supplémentaire, y compris une déclaration de revenu ou une déclaration supplémentaire;
b) qu'elle produise des documents. [je souligne] |
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The requirement is valid because it is in the course of a genuine and serious inquiry (James Richardson & Sons, Limited v. Canada (Minister of National Revenue), [1984] 1 S.C.R. 614).
[7] After a careful review of the affidavits of Messrs. Guay and Feher, I am satisfied that this is not a fishing expedition and that the required information is essential to establish the fair market value of the shares owned by Mr. Glassman in Grands Horizons. Even though the shares are encumbered, the respondent has the right to ask for the information he requires.
[8] Section 69.3 of the Bankruptcy and Insolvency Act provides:
| Stays of proceedings - bankruptcies
69.3 (1) Subject to subsection (2) and sections 69.4 and 69.5, on the bankruptcy of any debtor, no creditor has any remedy against the debtor or the debtor's property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy, until the trustee has been discharged.
[emphasis added] |
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Suspension des procédures en cas de faillite
69.3 (1) Sous réserve du paragraphe (2) et des articles 69.4 et 69.5, à compter de la faillite d'un débiteur, les créanciers n'ont aucun recours contre le débiteur ou contre ses biens et ne peuvent intenter ou continuer aucune action, exécution ou autre procédure en vue du recouvrement de réclamations prouvables en matière de faillite, et ce jusqu'à la libération du syndic.
[je souligne] |
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[9] The applicant urges that the requirement letter is a proceeding and therefore there is a serious issued to be tried. I share the respondent's view that section 231.2 of the Act is a power to investigate, which is devolved to the Minister and it is not a "proceeding" within the meaning of section 69.3 of the Bankruptcy and Insolvency Act. Once the information is obtained, the respondent will be in a position to establish the fair market value of Mr. Glassman's shares and may share the information with the trustee for the benefit of the other creditors in the bankruptcy.
[10] The applicant also maintains that a judicial authorization as provided in subsection 231.2 (3) of the Act was necessary before the issuance of the requirements. Subsection 231.2 (2) and (3) state as follows:
| 231.2 (2)Unnamed persons
(2) The Minister shall not impose on any person (in this section referred to as a "third party") a requirement under subsection 231.2(1) to provide information or any document relating to one or more unnamed persons unless the Minister first obtains the authorization of a judge under subsection 231.2(3).
231.2 (3) Judicial authorization
(3) On ex parte application by the Minister, a judge may, subject to such conditions as the judge considers appropriate, authorize the minister to impose on a third party a requirement under subsection 231.2(1) relating to an unnamed person or more than one unnamed person (in this section referred to as th "group") where the judge is satisfied by information on oath that
a) the person or group is ascertainable; and
b) the requirement is made to verify compliance by the person or persons in the group with any duty or obligation under this Act.
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231.2.(2) Personnes non désignées nommément
(2) Le ministre ne peut exiger de quiconque -- appelé "tiers" au présent article -- la fourniture de renseignements ou production de documents prévue au paragraphe (1) concernant une ou plusieurs personnes non désignées nommément, sans y être au préalable autorisé par un juge en vertu du paragraphe (3).
231.2.(3) Autorisation judiciaire
(3) Sur requête ex parte du ministre, un juge peut, aux conditions qu'il estime indiquées, autoriser le ministre à exiger d'un tiers la fourniture de renseignements ou production de documents prévue au paragraphe (1) concernant une personne non désignée nommément ou plus d'une personne non désignée nommément -- appelée "groupe" au présent article --, s'il est convaincu, sur dénonciation sous serment, de ce qui suit:
a) cette personne ou ce groupe est identifiable;
b) la fourniture ou la production est exigée pour vérifier si cette personne ou les personnes de ce groupe ont respecté quelque devoir ou obligation prévu par la présente loi; |
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[11] I do not agree that we are dealing with an unnamed person in the case at bar. The debtor is Mr. Harry Glassman. Mr. Danny Guay's affidavit shows that Mr. Glassman is the director, Secretary and « principal dirigeant » (officer of the company) of Carrefour Langelier Inc. He has an interest in that company via Grands Horizons and Moncan Inc. Therefore, the tax debtor is clearly identified. The third party here is Carrefour Langelier Inc.
[12] The applicant also argues that the use of the requirement to provide information is a recourse by the respondent to lift the corporate veil of the applicant, and as such is a serious issue. He supports this allegation with Bâtiment Fafard International Inc. v. Canada (Minister of National Revenue), [1995] F.C.J. No. 1090 (T.D.) (QL). The facts in this case are not the same here. In the case cited it was a formal demand for payment under subsection 224. In the case at bar, the only evidence adduced is by way of paragraph 9 of Marla Glassman who is a director of Carrefour Langelier Inc. who states:
[...] because of the probable disruption of its relationship with its partners in a shopping center, serious prejudice will be caused to the applicant if the 10th of September 2003 passes and the information is not provided or if it is required to provide information before that date based on a requirement issued illegally [...]
[13] With all due respect, I do not find that the requirement issued would have the effect of lifting the corporate veil of Carrefour Langelier Inc. Again I agree with the respondent that it is related to the administration or enforcement of the Act including the collection of an amount payable under the Act.
[14] In conclusion, since there are no serious issues to be tried. Therefore, it is not necessary for me to analyze the other two elements : irreparable harm and balance of convenience.
[15] This motion is dismissed with cost to the respondent.
ORDER
THIS COURT ORDERS that this motion is dismissed with cost to the respondent.
____________________________
Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1606-03
STYLE OF CAUSE: CARREFOUR LANGELIER INC.
and
THE CANADA CUSTOMS AND REVENUE
AGENCY
PLACE OF HEARING: Montreal, Quebec
DATE OF HEARING: November 17, 2003
REASONS FOR ORDER
AND ORDER BY : The Honourable Mr. Justice Michel Beaudry
DATED: December 1, 2003
APPEARANCES:
Me Aaron Rodgers FOR APPLICANT
Me Chantal Comtois FOR RESPONDENT
SOLICITORS OF RECORD:
Me Aaron Rodgers
Spiegel Sohmer
Montreal, Quebec FOR APPLICANT
Mr. Morris Rosenberg
Deputy Attorney General of Canada
Montreal, Quebec FOR RESPONDENT