T-556-86
Robert Hart and Gunther's Building Centre Ltd.
(Applicants)
v.
Minister of National Revenue (Respondent)
INDEXED AS: HART V. CANADA (M. N. R.)
Trial Division, Walsh J.—Calgary, May 8; Van-
couver, May 20, 1986.
Income tax — Practice — Standing — Whether judgment
creditors have standing to oppose assessment of judgment
debtor by Minister and collection proceedings pursuant thereto
— Income Tax Act, S.C. 1970-71-72, c. 63, s. 195 (as
re-enacted by S.C. 1984, c. 1, s. 95; c. 45, s. 83) — Execution
Creditors Act, R.S.A. 19$0, c. E-14.
Judicial review — Prerogative writs — Certiorari —
Whether, in view of Federal Court Act s. 29, prerogative writs
available to oppose tax assessments, including Minister's au
thority to make, where Act providing for appeal — Federal
Court Act, R.S.C. 1970 (2nd Supp.), c. 10, ss. 18, 29 — Income
Tax Act, S.C. 1970-71-72, c. 63, s. 195 (as re-enacted by S.C.
1984, c. 1, s. 95; c. 45, s. 83).
Polar Safety-Corn Ltd. was a company against which notices
of assessment dated April 19 and June 3, 1985 were issued in
respect of taxes allegedly owing by it on approximately two
million dollars' worth of scientific research tax credits sold to
investors.
On June 28, 1985, applicant Hart sued the company for
wrongful dismissal, as a result of which an amount of $148,000
was paid into Court by way of garnishee before judgment. Hart
obtained judgment and filed a writ for $149,152.29. Revenue
Canada subsequently caused a certificate and writ of fieri
facias to issue against the company for $1,092,000 pursuant to
an assessment of its scientific research tax credit sales. A
judgment was secured ordering the garnishee monies to be
distributed in accordance with the Execution Creditors Act of
Alberta.
Hart and the other applicant, both judgment creditors of
Polar Safety-Com Ltd., seek writs of certiorari to quash the
company's tax assessments, the "requirement to pay", the
certificate and writ of fieri facias, and also, a writ of prohibi
tion to stop any assessment or collection proceedings against
Polar Safety-Com Ltd.
The applicants contend that the respondent acted without
jurisdiction in reassessing taxes against the company and that
the Minister's actions have adversely affected the applicants'
rights to funds available upon execution of their judgments.
Held, the motion should be dismissed.
The first issue is whether the applicants have status to
intervene in the assessment of taxes against the taxpayer
company.
Applicant Hart argues that he has a distinct financial inter
est in the monies seized by the Minister since these monies were
already under seizure in satisfaction of his and other creditors'
judgments. He and other creditors stand to suffer a loss if the
assessment is not quashed.
The respondent argues that applicant Hart is not an
aggrieved party as he himself had no proprietary interest in the
money. To decide that he has a proprietary interest in the funds
would involve a decision that the seizure by the Minister was
unlawful, and applicant Hart cannot acquire standing on the
basis of an assumption that it was unlawful. Such proprietary
interest as he may have had would only revert to him if the
seizure were quashed.
In any event, there is another issue upon which the applica
tion must fail although the law on the matter is not yet settled.
It is whether, as was decided by the Federal Court of Appeal in
the Parsons case, section 29 of the Federal Court Act prohibits
proceedings under section 18 challenging assessments under the
Income Tax Act, including the Minister's legal authority to
make the assessment, when the latter Act provides for an
appeal. There have been two recent conflicting Federal Court,
Trial Division judgments involving scientific research tax cred
its. In W.T.C. Western Technologies Corp., it was held that
Parsons could be distinguished and that certiorari was avail
able to challenge tax assessments. In Bechthold Resources Ltd.,
Parsons was seen as a binding decision and the Court held that
prerogative writs were not available to challenge tax assess
ments. Both decisions are now under appeal. In view of the
Parsons judgment, it may well be that, pursuant to section 29
of the Federal Court Act, prerogative writs cannot issue.
CASES JUDICIALLY CONSIDERED
FOLLOWED:
Minister of National Revenue v. Parsons, [1984] 2 F.C.
331; 84 DTC 6345 (C.A.).
APPLIED:
Bechthold Resources Ltd. v. Canada (M.N.R.), [1986] 3
F.C. 116 (T.D.).
NOT FOLLOWED:
W.T.C. Western Technologies Corp. v. M.N.R., [1986] 1
C.T.C. 110; 86 DTC 6027 (F.C.T.D.).
CONSIDERED:
Inland Revenue Comrs v National Federation of Self-
Employed and Small Businesses Ltd, [1981] 2 All ER 93
(H.L.); Rothmans of Pall Mall Canada Limited v. Min
ister of National Revenue (No. 1), [1976] 2 F.C. 500
(C.A.); Solosky v. The Queen, [1978] 1 F.C. 609 (C.A.);
Regina v. Paddington Valuation Officer, Ex parte Pea-
chey Property Corpn. Ltd., [1966] 1 Q.B. 380 (C.A.);
Reg. v. Thames Magistrates' Court, ex parte Greenbaum
(1957), 55 L.G.R. 129 (C.A.).
REFERRED TO:
Canadians for the Abolition of the Seal Hunt v. Minister
of Fisheries and the Environment, [1981] 1 F.C. 733
(T.D.); Thorson v. Attorney General of Canada et al.,
[1975] 1 S.C.R. 138; Nova Scotia Board of Censors v.
McNeil, [1976] 2 S.C.R. 265; Kiist v. Canadian Pacific
Railway Co., [1980] 2 F.C. 650 (T.D.); R. v. Simard-
Beaudry Inc., [1971] F.C. 396; 71 DTC 5511 (T.D.);
Lambert v. The Queen, [1977] 1 F.C. 199; 76 DTC 6373
(C.A.); Abrahams, Coleman C. v. Minister of National
Revenue (No. 2), [1967] Ex.C.R. 333; 66 DTC 5451; R.
v. Cyrus J. Moulton Ltd., [1977] 1 F.C. 341; 76 DTC
6239 (T.D.).
COUNSEL:
Michael A. Wedekind for applicants.
Patrick G. Hodgkinson for respondent.
SOLICITORS:
Foster Wedekind, Calgary, for applicants.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for order ren
dered in English by
WALSH J.: The applicants move for:
1. A Writ of Certiorari or an Order for Relief in the nature
thereof to quash the determination by the Respondent, The
Minister of National Revenue, to assess tax as owing by Polar
Safety-Com Ltd. and the issuance of documents headed
"Notice of Assessment" dated April 19, 1985, and June 3,
1985, as well as any other such documents as may be dis
covered through these proceedings, in respect of those taxes
allegedly owing by Polar Safety-Com Ltd.;
2. A Writ of Certiorari or an Order for Relief in the nature
thereof to quash the decision by the Respondent to issue a
"requirement to pay" pursuant to Section 224 of the Income
Tax Act respecting taxes allegedly owing by Polar Safety-Com
Ltd.;
3. A Writ of Certiorari or an Order for Relief in the nature
thereof to quash the decision by the Respondent to issue a
Certificate dated December 10, 1985 pursuant to Section 223
of The Income Tax Act respecting taxes allegedly owing by
Polar Safety-Corn Ltd., and to vacate the said Certificate, and
the Writ of Fieri Facias dated December 10, 1985 based upon
it;
4. A Writ of Prohibition or relief in the nature thereof or an
Order of Injunction prohibiting or restraining the Respondent
and anyone under his direction and control from continuing
with assessment or collection proceedings against Polar Safety-
Com until it is lawful to do so ....
It is their contention that the grounds on which
relief is sought are that the respondent acted with
out jurisdiction to reassess taxes against Polar
Safety-Corn Ltd. and that the applicants are judg
ment creditors of the said company so that the
actions have adversely affected the applicants'
rights to funds available to them upon execution of
their respective judgments.
Applicants' motion is supported by an affidavit
of Robert Hart that sets forth that he was an
employee and officer of Polar Safety-Corn Ltd.
during the relevant times. The company's fiscal
year ended November 30th each year. During the
early part of 1985 the company sold scientific
research tax credits to investors, some $2,184,000
of such credits having been sold on or about
March 15, 1985, 32% of the monies being
advanced to the company. Designations pursuant
to Part VIII of the Income Tax Act [R.S.C. 1952,
c. 148 (as am. by S.C. 1970-71-72, c. 63, s. 1)]
were filed with Revenue Canada Taxation but as
of June 16, 1985 when applicant Hart left the
company's employ, no income tax return for 1985
had been filed by the company under Part VIII of
the Act, so no assessment had of course been
made.
On June 28, 1985 Hart commenced action in
the Court of Queen's Bench of Alberta against the
company for wrongful dismissal, as a result of
which some $148,000 was paid into Court by way
of garnishee before judgment. He obtained judg
ment against the company and filed a writ with the
Sheriff of the Judicial District of Calgary in the
amount of $149,159.29. Subsequent to this writ,
however, Revenue Canada caused a certificate and
writ of fieri facias to issue against the company in
the amount of $1,092,000 pursuant to an assess
ment of the company's scientific research tax
credit sale. This writ was filed with the Sheriff of
the Judicial District of Calgary and by judgment
of Mr. Justice O'Leary in the Alberta Court pro
ceedings, dated January 15, 1986 monies paid into
Court through the garnishee before judgment pro
ceedings were directed to be paid to the sheriff of
the Judicial District of Calgary and be distributed
in accordance with the Execution Creditors Act
[R.S.A. 1980, c. E-14] of Alberta.
On or about February 13, 1986 Hart's solicitors
received a statement of proposed distribution from
the Sheriff. It is his contention that the actions of
Revenue Canada and the Minister have adversely
affected his status as a creditor and jeopardized
the successful execution of his judgment, which
induced him to bring the present proceedings
although the Court was informed at the hearing of
the motion that the distribution has now been
made. Gunther's Building Centre Ltd., another
creditor of the company, Polar Safety-Com Ltd.,
has been joined as applicant.
These proceedings raise some interesting issues
which it is contended have never been definitively
determined by this Court in other proceedings.
The first question to be determined is whether the
applicants, third parties having a financial interest
in the distribution of monies seized by judgment in
favour of applicant Hart, have any status to inter
vene in the assessment of taxes by the Minister
against the taxpayer, Polar Safety-Corn Ltd. In
this connection applicants referred to the text book
H.W.R. Wade, Administrative Law, Fourth Edi
tion, 1977, in which at page 544 he states:
Every citizen has standing to invite the court to prevent some
abuse of power, and in doing so he may claim to be regarded
not as a meddlesome busybody but as a public benefactor.
Referring to the judgment of Parker L.J. on the
law of certiorari in Reg. v. Thames Magistrates'
Court, ex parte Greenbaum (1957), 55 L.G.R. 129
(C.A.), he quotes:
Anybody can apply for it—a member of the public who has
been inconvenienced, or a particular party or a person who has
a particular grievance of his own. If the application is made by
what for convenience one may call a stranger, the remedy is
purely discretionary. Where, however, it is made by a person
who has a particular grievance of his own, whether as a party
or otherwise, then the remedy lies ex debito justitiae... .
The footnote at page 544, however, referring to
this case states:
The law as thus stated was not mentioned in Durayappah v:
Fernando [1967] 2 A.C. 337, where the Privy Council denied
certiorari to a mayor who had lost office when the municipal
council was dissolved by a ministerial order made in breach of
natural justice. The decision may be justified on the ground
that failure to give a hearing is a wrong which is strictly
personal to the party entitled to be heard.
At page 544 Wade refers to a judgment in Regina
v. Paddington Valuation Officer, Ex parte Pea-
chey Property Corpn. Ltd., [ 1966] 1 Q.B. 380
(C.A.) in which Lord Denning stated at page 400:
A ratepayer, likewise, has a particular grievance if the rating
list is invalidly made, even though the defects will make no
difference to him financially.
and at page 401:
The court would not listen, of course, to a mere busybody who
was interfering in things which did not concern him. But it will
listen to anyone whose interests are affected by what has been
done.
Reference was also made to the Federal Court of
Appeal judgment in the case of Rothmans of Pall
Mall Canada Limited v. Minister of National
Revenue (No. 1), [ 1976] 2 F.C. 500 in which the
issue was the classification of the length of ciga
rettes for excise tax purposes in which appellants
did not contend that they had any interest in
marketing a cigarette with the tobacco portion of
less than four inches but an overall length, includ
ing the filter tip, of more than four inches, but did
seek an interpretation which they contended to be
the correct one, not in order to permit them to do
anything in particular that they were not now able
to do but rather to prevent respondent companies
from doing something which was thought would
give the latter a commercial advantage. At page
506 Justice Le Dain, rendering the judgment of
the Federal Court of Appeal states:
I am in agreement with the learned Trial Judge that such an
interest is not sufficient to give the appellants the required
status or locus standi to obtain any of the relief sought in their
application. The appellants do not have a genuine grievance
entitling them to challenge by legal proceedings the interpreta
tion which the respondent officials have given to the definition
of "cigarette" in section 6 of the Excise Act for purposes of
their administrative application of the Act. Such interpretation
does not adversely affect the legal rights of the appellants nor
impose any additional legal obligation upon them. Nor can it
really be said to affect their interests prejudicially in any direct
sense.
This was followed by the Court of Appeal in the
case of Solosky v. The Queen, [1978] 1 F.C. 609,
in which the Criminal Lawyers' Association of
Ontario sought standing to intervene as amicus
curiae in an appeal by a prisoner dealing with his
right to send mail to his solicitor without inspec
tion. At pages 611-612 the judgment reads:
Applying that test to the circumstances of this case, it is my
view that the result of this appeal cannot adversely affect, in
any way, the legal rights of the members of the applicant
association nor can it possibly impose any additional legal
obligation upon those members, nor can it really be said to
affect their interests prejudicially in any direct sense.
I reached a similar conclusion in the case of
Canadians for the Abolition of the Seal Hunt v.
Minister of Fisheries and the Environment, [1981]
1 F.C. 733 (T.D.). After examining the jurispru
dence respecting the right of individuals to bring
proceedings seeking the issue of a prerogative writ
or even of declaratory judgment when they are not
personally affected other than in their sensibilities,
including the cases of Thorson v. The Attorney
General of Canada et al., [1975] 1 S.C.R. 138;
Nova Scotia Board of Censors v. McNeil, [1976]
2 S.C.R. 265 and Kiist v. Canadian Pacific Rail
way Co., [ 1980] 2 F.C. 650 (T.D.), I concluded
that the applicants had no locus standi to bring
the proceedings.
Applicant's counsel distinguishes these cases,
however, arguing that his client has a distinct
financial interest in that the monies subsequently
seized as a result of the certificate by the Minister
making the assessment were already under seizure
in satisfaction of his judgment and any other
claimants such as that of Gunther's Building
Centre Ltd. and he stands to personally suffer a
loss if the assessment by the Minister for a much
greater amount for taxes allegedly due by Polar
Safety-Com Ltd. is not quashed as the distribution
directly affects his financial interest.
Reference was made by respondent to the Brit-
ish case of Inland Revenue Comrs v National
Federation of Self-Employed and Small Busi
nesses Ltd, [1981] 2 All ER 93 (H.L.), in which
Lord Wilberforce stated at pages 98-99:
The position of other taxpayers, other than the taxpayers
whose assessment is in question, and their right to challenge the
Revenue's assessment or non-assessment of that taxpayer, must
be judged according to whether, consistently with the legisla
tion, they can be considered as having sufficient interest to
complain of what has been done or omitted. I proceed thereto
to examine the Revenue's duties in that light.
These duties are expressed in very general terms and it is
necessary to take account also of the framework of the income
tax legislation. This establishes that the commissioners must
assess each individual taxpayer in relation to his circumstances.
Such assessments and all information regarding taxpayers'
affairs are strictly confidential. There is no list or record of
assessments which can be inspected by other taxpayers. Nor is
there any common fund of the produce of income tax in which
income taxpayers as a whole can be said to have any interest.
The produce of income tax, together with that of other inland
revenue taxes, is paid into the Consolidated Fund which is at
the disposal of Parliament for any purposes that Parliament
thinks fit.
The position of taxpayers is therefore very different from
that of ratepayers. As explained in Arsenal Football Club Ltd y
Ende [1977] 2 All ER 267, [1979] AC 1, the amount of rates
assessed on ratepayers is ascertainable by the public through
the valuation list. The produce of rates goes into a common
fund applicable for the benefit of the ratepayers. Thus any
ratepayer has an interest, direct and sufficient, in the rates
levied on other ratepayers; for this reason, his right as a `person
aggrieved' to challenge assessments on them has long been
recognised and is so now in the General Rate Act 1967, s 69.
This right was given effect to in Ende's case.
The structure of the legislation relating to income tax, on the
other hand, makes clear that no corresponding right is intended
to be conferred on taxpayers. Not only is there no express or
implied provision in the legislation on which such a right could
be claimed, but to allow it would be subversive of the whole
system, which involves that the commissioners' duties are to the
Crown, and that matters relating to income tax are between the
commissioners and the taxpayer concerned. No other person is
given any right to make proposals about the tax payable by any
individual; he cannot even inquire as to such tax. The total
confidentiality of assessments and of negotiations between
individuals and the Revenue is a vital element in the working of
the system. As a matter of general principle I would hold that
one taxpayer has no sufficient interest in asking the court to
investigate the tax affairs of another taxpayer or to complain
that the latter has been underassessed or overassessed; indeed
there is a strong public interest that he should not.
At pages 107-108 of the same report Lord Fraser
of Tullybelton states:
The rules of court give no guidance as to what is a sufficient
interest for this purpose. I respectfully accept from my noble
and learned friends who are so much more familiar than I am
with the history of the prerogative orders that little assistance
as to the sufficiency of the interest can be derived from the
older cases. But while the standard of sufficiency has been
relaxed in recent years, the need to have an interest has
remained and the fact that r 3 of Ord 53 requires a sufficient
interest undoubtedly shows that not every applicant is entitled
to judicial review as of right.
and again at page 108:
The correct approach in such a case is, in my opinion, to look
at the statute under which the duty arises, and to see whether it
gives any express or implied right to persons in the position of
the applicant to complain of the alleged unlawful act or omis
sion. On that approach it is easy to see that a ratepayer would
have a sufficient interest to complain of unlawfulness by the
authorities responsible for collecting the rates. Even if the
General Rate Act 1967 had not expressly given him a right to
propose alteration in the valuation list if he is aggrieved by any
entry therein, he would have an interest in the accuracy of the
list which is the basis for allocating the total burden of rates
between himself and other ratepayers in the area. The list is
public and is open for inspection by any person. The position of
the taxpayer is entirely different. The figures on which other
taxpayers have been assessed are not normally within his
knowledge and the Commissioners of Inland Revenue and their
officials are obliged to keep these matters strictly confidential:
see the Inland Revenue Regulation Act 1890, ss 1(1) and 39
and the Taxes Management Act 1970, ss 1 and 6 and Sch 1.
The distinction between a ratepayer and a taxpayer that was
drawn in Arsenal Football Club Ltd y Ende [1977] 2 All ER
267, [1979] AC 1 for the purposes of defining a person
aggrieved under the General Rate Act 1967 is also relevant to
the present matter.
The facts of that case, of course, are not the
same as the present case where what is eventually
sought is not disclosure of the details of a tax
return for Polar Safety-Corn Ltd. but rather the
right of applicants to challenge the assessment
made by the Minister which is a challenge which
normally would be made by the company pursuant
to procedures set out in the Income Tax Act.
Defendant argues that the fact that the Minister
obtained possession of funds to which applicant
Hart felt he was entitled does not make him an
aggrieved party as he himself had no proprietary
interest in the money, other creditors including
Gunther Building Centre Ltd. having some inter
est. To decide that he has a proprietary interest in
the funds would involve a decision that the seizure
by the Minister was unlawful and applicant Hart
cannot acquire standing on the basis of an assump
tion that the Minister's action in making the sei-
zure was unlawful. While he had the funds under
seizure first, such proprietary interest as he may
have had would only revert to him in the event of
the seizure being quashed. This alone might decide
the issue on the basis of a finding that applicant
Hart had no status to bring the present
proceedings.
However, there is another issue upon which, I
believe, the application must fail, although the
situation is still controversial and not fully decided.
Reference was made to the case of W. T. C.
Western Technologies Corp. v. M.N.R., [1986] 1
C.T.C. 110; 86 DTC 6027 (F.C.T.D.), a judgment
dated December 18, 1985 of Justice Collier in
which he distinguished a judgment of the Federal
Court of Appeal in the case Minister of National
Revenue v. Parsons, [1984] 2 F.C. 331; 84 DTC
6345 which held categorically that section 29 of
the Federal Court Act [R.S.C. 1970 (2nd Supp.),
c. 10] prohibits any proceedings under section 18
challenging assessments under the Income Tax
Act including the Minister's legal authority to
make the assessment as the Act itself provided for
an appeal.
In the case before Justice Collier the issue was
an assessment by the Minister for taxation under
the scientific research and development section,
Part VIII of the Act, made before the taxpayer
had filed a return. Certiorari was granted by
Justice Collier on the grounds that the issue was
not whether the Minister was right or wrong in
this assessment but whether he had any jurisdic
tion to make the assessment at all, which it was
found he did not. The assessment accordingly was
quashed as well as the certificate resulting from it
and seizure made of funds held in escrow.
However, in the case of Bechthold Resources
Ltd. v. Canada (M.N.R.), [ 1986] 3 F.C. 116
(T.D.), a judgment dated January 16, 1986, Jus
tice Addy had the same issue before him and
disagreed with the judgment of Justice Collier
whose judgment he discussed as well as that of the
Court of Appeal in the Parsons case, by which he
considered himself bound, refusing to accept the
distinction drawn by Justice Collier. He points out
that section 8 of the Act requires the taxpayer to
pay 50% of the amounts received with respect to a
share or debt obligation issued in connection with
the scientific tax credit before the last day of the
following month. He concludes that liability to pay
tax or any amount on account of tax does not
depend on any notice of assessment but is created
by statute, referring to the cases of R. v. Simard-
Beaudry Inc., [1971] F.C. 396; 71 DTC 5511
(T.D.); Lambert v. The Queen, [1977] 1 F.C. 199;
76 DTC 6373 (C.A.); R. v. Cyrus J. Moulton
Ltd., [1977] 1 F.C. 341; 76 DTC 6239 (T.D.) and
Abrahams, Coleman C. v. Minister of National
Revenue (No. 2), [1967] Ex.C.R. 333; 66 DTC
5451. He concludes that while it is true that an
assessment is normally made after an income tax
return has been filed, or should have been filed,
the provisions of section 195 [as re-enacted by S.C.
1984, c. 1, s. 95; c. 45, s. 83] and Part VIII of the
Act justify the assessment by the Minister on the
basis of information provided by the taxpayer by
its designation pursuant to Part VIII of the Act.
Both that case and the case of W. T.C. Western
Technologies Corp. are now under appeal so the
two conflicting judgments have not yet been recon
ciled, but in view of the opinion expressed by the
Court of Appeal in the Parsons judgment it may
well be that the Trial Division is obliged to follow
it as Justice Addy decided and cannot consider the
issue of a prerogative writ by virtue of the provi
sions of section 29 of the Federal Court Act.
For all of the above reasons I conclude that
applicants' motion must be dismissed with costs.
ORDER
Applicants' motion is dismissed with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.