Date: 20010209
Docket: T-1082-00
Neutral Citation: 2001 FCT 49
Ottawa, Ontario, Friday the 9th day of February 2001
PRESENT: The Honourable Madam Justice Dawson
BETWEEN:
RACHEL LEAH MOSS
Applicant
- and -
THE MINISTER OF NATIONAL REVENUE and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
DAWSON J.
[1] The applicant seeks a mandatory injunction directing that certain Requirements to Pay issued pursuant to the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.) ("Act") be withdrawn or reduced so that the total amount attached does not exceed $119,762.95.
THE FACTS
[2] In January of 1997, the applicant was assessed under the provisions of the Act and the Excise Tax Act, R.S.C. 1985, c. E-15 both in her personal capacity and for the tax obligation of her husband arising from a number of non-arm's-length transactions whereby property was transferred from her husband to her. The total tax assessed against the applicant was $301,956.21.
[3] The Minister of National Revenue ("Minister") obtained what is known as a "jeopardy order" pursuant to section 225.2 of the Act. This order permitted the Minister to pursue collection action against the applicant prior to the completion of the tax appeals process.
[4] Pursuant to the jeopardy order, Requirements to Pay were issued by the Minister to three insurance companies, NN Life, Manulife, and Equitable Life, all of which held contracts in the applicant's name.
[5] The applicant applied to this Court pursuant to subsection 225.2(8) of the Act to review the jeopardy order. By order dated November 19, 1997, the Court dismissed her application and confirmed the original jeopardy order. In the course of giving reasons for that order Muldoon J., noted as follows:
| No one seems to dispute that the amount of equity in the accounts [held by NN Life, Manulife and Equitable Life] is a far higher amount than $337,591.46. If the figures Mr. Moss deposes to are correct, the current value is over $600,000.00. It has been said in the cases that the department should not seize (or freeze) more than is necessary to satisfy the debt (Satellite Earth, supra at C.T.C. p. 298; Laframboise v. The Queen [1986] 2 C.T.C. 274). This is absolutely correct. Section 225.2 does not give the department the ability nor the Court the jurisdiction to authorize seizure of "all or any part of an amount assessed" if delay would jeopardize collection action. Thus, if the order is to be continued, it can authorize only seizure of an amount which could satisfy the respondent's debt. |
[6] As a result of those comments the applicant requested that the Court reconsider or clarify the terms of its order so as to restrict the collection activity to the amount of the outstanding debt. By order dated December 24, 1997, Muldoon J., noting that the parties were unable or unwilling to resolve their dispute, ordered that "for now" the jeopardy order should stand as confirmed.
[7] On March 29, 1999, the applicant brought a further motion seeking an order that the jeopardy order be vacated in whole or in part on the ground that the applicant's assets in the hands of the three insurance companies were effectively "frozen". Those assets were then said to have a value of $525,939.78 while the assessed tax debt was said to be, as a result of collection efforts, only $176,026.67. That motion was dismissed by Campbell J., who concluded that he had no jurisdiction to grant the relief claimed.
[8] As to the Requirements to Pay, initially each insurance company took the position that the contracts were annuities and as such were exempt from seizure or execution. Each company therefore took the position that it would not pay to Revenue Canada the amount shown in the Requirement to Pay served upon it but would instead hold the contract, not allowing the applicant to withdraw any funds therefrom, pending determination of either the status of the annuity contracts or the applicant's tax liability.
[9] In December of 1997, NN Life did collapse the contract it held in the approximate amount of $287,000. From those proceeds Revenue Canada was paid the sum of $270,000 while the balance was taken as a penalty for early redemption. This was said by the applicant to reduce her indebtedness to Revenue Canada from the amount previously assessed to $119,762.95.
ANALYSIS
[10] In this application, the applicant alleges that because she is unable to access any of the funds held pursuant to the contracts with the various insurers she is forced to live in serious financial and personal circumstances. The cumulative total of the amounts frozen is said to approximate $526,000 which significantly exceeds the applicant's outstanding tax liability.
[11] While conceding that the Minister was entitled to proceed as he has done, the applicant says that the law is clear that the respondent should not seize more funds than are necessary to satisfy the debt. In so asserting the applicant relies upon the remarks of Muldoon, J. and the authorities he cited. The applicant also says that in the particular circumstances of this case, the Minister must be taken to know that the effect of the respondent's actions is not only to attach sufficient money, but to attach an amount far in excess of that required. Finally, the applicant complains that efforts to reach a settlement of this issue with the respondent have been unsuccessful and that the respondent has acted in a fashion which is deliberately punitive.
[12] In response, the respondent submits that there is no justiciable issue before the Court because the matter is res judicata and that, in any event, the Minister cannot be restrained from pursuing lawful collection activity authorized by statute.
[13] I have concluded, in spite of the able argument of counsel for the applicant, that the application must be dismissed on the ground that the applicant failed to establish that the respondent exceeded his jurisdiction or acted contrary to law.
[14] I have noted the comments of Muldoon, J. to the effect that the respondent should not seize more funds than are necessary to satisfy the debt. However, I have not been satisfied on the evidence that the Minister has seized more funds than are necessary to satisfy the debt.
[15] While the Requirements to Pay were not in evidence before the Court, it was conceded that each was validly issued for what was then the amount of the monies assessed to be owing. The fact that the entire proceeds held in what are alleged to be annuity contracts were frozen resulted not from any impropriety in the Requirements to Pay or their issuance, but because in each case the insurer took the position that the insurance contracts were exempt from seizure or execution. It is the result of that position that, as noted by the applicant in her affidavit, the insurers would "not pay over to Revenue Canada the amount of the Requirements to Pay but would instead hold the contracts and refuse to permit" any withdrawal of funds.
[16] With respect to the remaining funds so frozen, the issue as to whether each policy is in fact exempt from seizure or execution remains outstanding, and is not before me. So long as that is the case the possibility exists that if found to be exempt the respondent will recover nothing pursuant to the Requirements to Pay. In that circumstance the Minister, in my view, cannot be said to be acting in a punitive or wrongful fashion by not withdrawing or reducing the Requirements to Pay.
[17] Finally, to the extent that the applicant complains that she has not been able to conclude a settlement of these issues with the respondent so that the actions of the Minister's department "belie" any good faith, I have not been persuaded on the record before me that the respondent's position was based on any improper consideration or that the Court should dictate or restrict how the respondent exercises lawful collection activities.
[18] In view of this conclusion it is unnecessary for me to consider the respondent's alternate submission that this matter is res judicata.
[19] The respondent sought the costs of this application on a solicitor and client basis.
[20] As recently noted by the Federal Court of Appeal in Apotex Inc. v. Canada (Minister of National Health and Welfare), [2000] F.C.J. No. 1919, A-684-99 (November 23, 2000) (F.C.A.) at paragraph 8 "[c]osts as between solicitor and client are exceptional and generally to be awarded only on the ground of misconduct connected with the litigation". The Federal Court of Appeal further noted that in Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817, at page 864, the Supreme Court of Canada applied the traditional principle that "[s]olicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties".
[21] Notwithstanding the forceful submission of counsel for the respondent, I have not been persuaded that the applicant's conduct warrants the disapproval of the Court as manifested in an order of solicitor-and-client costs.
[22] In the result, for the reasons set out above, this application is dismissed. The respondent is entitled to its costs to be assessed in the usual course.
JUDGMENT
[23] IT IS HEREBY ORDERED AND ADJUDGED THAT:
| 1. The application is dismissed. |
| 2. The applicant shall pay to the respondent the costs of the application to be assessed in accordance with Column III of the table to Tariff B of the Federal Court Rules, 1998. |
"Eleanor R. Dawson"
Judge