A-138-74
Oneil Lambert (Appellant)
v.
The Queen (Respondent)
Court of Appeal, Jackett C.J., Pratte J. and Hyde
D.J.—Montreal, June 16, 1976; Ottawa, Septem-
ber 7, 1976.
Income tax—Reassessment—Registration of certificate cov
ering tax, penalties and interest—Minister collecting against
taxpayer's assets—Whether s. 223 of the Income Tax Act
violates audi alteram partem rule, and is ultra vires—Whether
s. 223 contrary to s. 2(e) of the Canadian Bill of Rights, and is
null and void—Income Tax Act, R.S.C. 1952, c. 148; S.C.
1970-71-72, c. 63, ss. 158(2), 165, 223—Canadian Bill of
Rights, S.C. 1960, c. 44, s. 2(e).
The Minister reassessed appellant's income, and, though
appellant filed a contesting notice, the Minister registered a
judgment in the Federal Court for tax, penalties and interest
due. Appellant brought an action in the Trial Division seeking a
declaration that section 223 of the Income Tax Act is ultra
vires as it offends the audi alteram partem rule, or that section
223, in permitting the issuing and registration of a certificate is
null and void because it is contrary to section 2(e) of the
Canadian Bill of Rights. The Trial Division dismissed the
action holding that the audi alteram partem rule applies only
to questions of final determination but not in matters such as
tax matters where, if assets are seized and it is later established
that there is no tax liability, the taxpayer would be entitled to
restitution. Public policy is to prevent dissipation or removal of
assets and the powers of the Minister to collect taxes speedily
and effectively do not infringe on the audi alteram partem rule
or the Canadian Bill of Rights.
Held, the appeal is dismissed. The appellant's position was
that the original assessments having been nullified by the new
assessments, it follows that the section 223 certificate became
null and the Court orders and processes based thereon also
became null and that the appellant having 30 days to pay the
amounts fixed by the new assessments, no amounts were pay
able at the time the application was made. The Trial Judge
rejected these contentions on the ground that the new assess
ments were not reassessments but further assessments.
Although the Court is inclined to the view that they were
reassessments, the question does not have to be decided because
they do not, in themselves, affect the 223 certificate or operate
to confer a right to have the certificate nullified. There is a
difference between the liability under the Act to pay the tax
and an "assessment" (including a reassessment or a further
assessment) which is a determination or calculation of the tax
liability. The reassessment of tax does not nullify the liability to
pay the tax covered by the previous tax so long as that tax is
included in the amount reassessed. There can be no basis for
the appellant's contention unless the "amount payable" on
which the certificate was based had ceased to be "payable" but
there was no material here to show that it had ceased to be
payable.
APPEAL.
COUNSEL:
G. R. Tremblay and C. P. Desaulniers for
appellant.
J. Ouellet, J. Potvin and J. Delage for
respondent.
SOLICITORS:
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for appellant.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment of
the Court rendered in English
This is an appeal from a judgment of the Trial
Division' disposing of three interlocutory motions.
At the conclusion of the appellant's argument, we
dismissed the appeal with costs, without calling on
counsel for the respondent. When we did so, we
indicated that we would subsequently give written
reasons for dismissing the appeal in so far as it
related to the third motion. These are the reasons
so promised.
The facts, in so far as relevant, as set out in the
application to the Trial Division, may, as we
understand the application, be summarized as
follows:
a. New assessment notices for the 1968 to 1971
taxation years were issued in respect of the
appellant on October 30, 1973, adding $450,000
to his income;
b. a certificate having the same effect as a
Federal Court judgment was issued requiring
the appellant to pay $209,020.36 of which
$205,985.51 remained unpaid;
c. based on that certificate, the Trial Division
ordered the appellant to appear April 1, 1974,
for examination in aid of execution;
' [1975] F.C. 548.
d. under the authority of the certificate
(i) shares belonging to the appellant were
seized,
(ii) a charge was imposed on land belonging
to the appellant,
(iii) goods and documents of the appellant
were seized; 2
e. on or about May 10, 1974, the appellant
received new assessment notices dated May 7,
1974, for the same taxation years.
The application contained, in conclusion, two para
graphs concerning the legal consequences contend
ed for, which paragraphs read as follows:
[TRANSLATION] 10. Since the first assessments were cancelled
by reassessments, the certificate under which all the execution
proceedings, including the attachments and establishment of
liens ... were carried out, is null and void;
11. Since applicant has thirty days in which to pay the taxes
set in the reassessment, it follows that no amount is yet payable
by him, because these reassessments were dated May 7, 1974.
The application, which was dated May 22, 1974,
asked that the Court, inter alia,
[TRANSLATION] (a) DECLARE VOID the certifi
cate obtained against applicant, if such a certifi
cate exists, by virtue of the assessments dated
October 30, 1973;
(b) DECLARE THAT the order made pursuant to
the said certificate by Walsh J., ordering appli
cant to appear to be questioned about his assets,
is now without purpose and inoperative;
(c) SET ASIDE all the attachments ... and es
tablishments of liens made or carried out under
the said certificate, and remove the attachment.
To understand the contention of the appellant,
and to explain why it is not, in our view, sound,
some reference must be made to the provisions of
2 Third party attachment notices are also alleged by the
applications to have been served under the authority of the
certificate but the request for relief in respect of such notices
was dropped during argument of the appeal.
the Income Tax Act. 3
Restricting such references to the situation of an
individual under the Act, it is to be noted that
(a) . a liability is imposed on a resident of
Canada to pay income tax upon his taxable
income for each taxation year (section 2);
(b) the amount of that annual tax may be
"assessed" by the Minister; and he may, within
certain limited periods, "reassess or make addi
tional assessments" (section 152(4)); but the
"Liability for the tax ... is not affected ... by
the fact that no assessment has been made"
(section 152(3));
(c) parts of the tax are payable before the
taxpayer makes an annual income tax return
that he is required to make (section 151) but the
balance is payable
(i) in part, on or before April 30 in the year
following the taxation year (section 153(2)
and section 156(1)), and
(ii) as to the rest, within 30 days of being
assessed for it (section 158(1));
(d) a taxpayer may appeal to the Courts from
any assessment and the Courts may correct an
assessment;
(e) the liability to pay the "assessed" tax within
30 days applies whether or not an appeal from
the assessment is outstanding (section 158(1))
subject, of course, to the right of a successful
appellant to recover an overpayment (section
164);
(f) among the remedies provided to the Minis
ter to enforce the obligation of the taxpayer to
pay an amount "payable" under the Act is that
provided by section 223 which is the section the
meaning of which had to be determined on this
appeal; it reads in part:
223. (1) An amount payable under this Act that has
not been paid ... may be certified by the Minister
(b) ... upon the expiration of 30 days after the default.
3 While the substantive law for the years in question is in the
old Act, it is common ground that the appeal turns on the Act
as adopted for 1972 and subsequent taxation years.
(2) On production to the Federal Court ... a certificate
made under this section ... has the same force and effect,
and all proceedings may be taken thereon, as if the certifi
cate were a judgment obtained in the said Court....
With that much of the statute in mind, refer
ence must be made to a line of jurisprudence in the
Exchequer and Federal Courts—not because it is
pertinent but because it has given rise to some
confusion—that has held that where there has
been a reassessment for a taxation year as opposed
to a further assessment—i.e., a re-determination of
the total amount payable for the year as opposed
to a determination of an additional amount pay
able for the year—the reassessment displaces the
previous assessment so as to nullify from that time
forward the previous assessment and, consequent
ly, any appeal from that previous assessment. (See,
for example, Abrahams v. M.N.R. (No. 2) 4 .)
As appears from the above quotations from the
application to the Trial Division, the appellant's
position was that
(a) the original assessments having been nulli
fied by the new assessments, it follows that the
section 223 certificate became null and that the
Court orders and processes based thereon also
became null, and
(b) that the appellant having 30 days to pay the
amounts fixed by the new assessments, no
amounts were payable at the time the applica
tion was made.
The learned Trial Judge appears to have rejected
these contentions on the ground that the new
assessments were not reassessments but were fur
ther assessments.
On examining the new assessments, we are
inclined to the view that they are not further
assessments but are reassessments. This question
did not, however, have to be decided because, in
our view, which ever they are, they do not, in
themselves, affect the validity of the section 223
certificate or operate automatically to confer on
the appellant a right to have the section 223
certificate nullified.
4 [1967] 1 Ex.C.R. 333.
As appears from our review of the provisions of
the Act, there is a difference between
(a) a liability under the Act to pay tax, and
(b) an "assessment" (including a reassessment
or a further assessment), which is a determina
tion or calculation of the tax liability.
It follows that a reassessment of tax does not
nullify the liability to pay the tax covered by the
previous tax as long as that tax is included in the
amount reassessed.' As there can be no basis for
the appellant's contention on this motion unless
the "amount payable" on which the certificate was
based had ceased to be "payable" and as the
material before us does not show that it had ceased
to be payable, in our view, the appeal had to be
dismissed. Indeed, the appeal was argued, as we
understood the argument, on the assumption that
the amounts on which the certificate was based
were carried forward into the new assessments.
Counsel for the appellant placed special empha
sis on two provisions, which should be mentioned.
The first of those provisions is section 248(2),
which reads in part:
(2) In this Act, the tax payable by a taxpayer ... means the
tax payable by him as fixed by assessment or reassessment
subject to variation on objection or on appeal ....
This provision does not, in itself, have any substan
tive operation. As we read it, it fixed the amount
of the "tax payable" for the purpose of any provi
sion of the Act where that expression is found.
Counsel did not, as we understand him, refer us to
any provision that would have the effect for which
he was contending if it were read with section
248(2).
The other provision on which counsel put special
emphasis was section 158(1), which reads, in part:
158. (1) The taxpayer shall, within 30 days from the day of
mailing of the notice of assessment, pay ... any part of the
assessed tax, ... then remaining unpaid.....
A reassessment might, of course, reduce or eliminate the
tax payable, in which event, the taxpayer would, of course, have
an appropriate recourse.
As we understood counsel, he asked us to read this
provision as saying, in effect, that, where unpaid
tax was included in an assessment, it ceased to be
payable for the period of 30 days following the
assessment even though it was already payable
prior to the assessment. In our view, it says no
such thing. What it does is impose a liability to
pay tax within 30 days. It operates only to create
such a liability to pay in respect of tax that had
not previously been payable because it had not
previously fallen within any provision of the Act
making it payable and it had not previously
become payable by being the subject matter of a
previous assessment.
For the above reasons, we dismissed the appeal
with costs.
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