Date: 20041224
Docket: T-89-04
Citation: 2004 FC 1779
BETWEEN:
DONALD FABI
Applicant
and
THE MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
LEMIEUX J.
[1] The only issue raised by this application for judicial review involves the legality of two requirements to provide documents and information issued by the Minister of National Revenue (the Minister) on December 15, 2003, pursuant to paragraphs 231.2(1)(a) and (b) of the Income Tax Act.
[2] The applicant Donald Fabi is the person concerned in the Minister's two requirements: he claimed that they were null and void because they were issued when a stay of proceedings was in effect pursuant to the provisions of subsection 69.1(1) of the Bankruptcy and Insolvency Act (the BIA).
[3] Subsection 231.2(1) of the Act reads:
| Requirement to provide documents or information 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 a supplementary return; or (b) any document.
[Emphasis added.] |
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Production de documents ou fourniture de renseignements 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. |
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[4] Paragraph 69.1(1)(a) of the BIA reads as follows:
| Stay of proceedings - Division I proposals 69.1 (1) Subject to subsections (2) to (6) and sections 69.4 and 69.5, on the filing of a proposal under subsection 62(1) in respect of an insolvent person, (a) no creditor has any remedy against the insolvent person or the insolvent person'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 or the insolvent person becomes bankrupt . . .
[Emphasis added.] |
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Suspension des procédures en cas de dépôt d'une proposition 69.1 (1) Sous réserve des paragraphes (2) à (6) et des articles 69.4 et 69.5, entre la date de dépôt d'une proposition visant une personne insolvable et : a) soit sa faillite, soit la libération du syndic, les créanciers n'ont aucun recours contre elle 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 . . . |
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[5] Section 69.4 of the BIA provides that at the request of a creditor the Court may declare that sections 69 to 69.31 no longer operate in respect of it.
FACTS
[6] On August 7, 2003, Donald Fabi filed a bankruptcy proposal authorized by the BIA with the office of the trustee Raymond Chabot Inc. (the trustee), and a notice of this proposal dated August 11, 2003, was served on the creditors.
[7] On August 27, 2003, through Daniel Phaneuf, collection officer with the Canada Customs and Revenue Agency (the Agency), the agency sent the trustee proof of a claim amounting to $183,621.09, representing taxes owed for 1991, 1992, 1993, 1994, 1995, 2001 and 2002.
[8] Despite the fact that the Agency refrained from voting on Mr. Fabi's amended proposal, it was approved by the creditors and subsequently homologated by the Quebec Superior Court on October 27, 2003.
[9] The proposal sanctioned by the Quebec Superior Court provided that a sum of $ 134,000 would be paid to the trustee for the payment of ordinary claims in full and final settlement, without interest or penalty, as follows:
(a) $50,000 no later than thirty days after homologation of the proposal;
(b) the balance of $84,000 over five years payable in equal and consecutive monthly instalments of $600.
[10] To date, Mr. Fabi has complied with all the obligations of his proposal.
[11] In the statutory balance sheet attached to his proposal, Donald Fabi reported only one immovable asset, a residence located in Sherbrooke.
[12] In his affidavit dated February 12, 2004, in support of the Minister, Daniel Phaneuf indicated that in his investigation into recovering the applicant's debt he had learned that during the 1990s Donald Fabi, with two other shareholders, purchased a large seaside lot in Florida for $1,500,000 and also owned a condo, which was also in Florida.
[13] Mr. Phaneuf also informed the Court that at the creditors' meeting he asked Donald Fabi what had become of his properties and Mr. Fabi told him he had not bought the lot and had cancelled the purchase of the condo. Daniel Phaneuf stated that he then asked him what had become of the money advanced by the Canada HSBC Bank (the Bank), and he [TRANSLATION] "told me he had used it to live on during annual vacations in Florida. However, he did not remember any details".
[14] Paragraph 10 of Mr. Phaneuf's affidavit reads:
[TRANSLATION]
10. As his replies were incomplete, on or about December 15, 2003, I sent Donald Fabi two requirements to provide documents and information issued pursuant to subsection 231.2(1) of the Income Tax Act, so as to obtain information and/or documents relating to the hypothecary loans and purchase of a lot and condominium in Florida . . .
[15] Mr. Phaneuf informed the Court that the purpose of one of the two requirements was meant to cast some light on a financing application made to the Bank by Mr. Fabi in July 1998 in order to purchase and/or make a new outlay on a condominium in Florida, and the purpose of the other was to cast some light on a financing application made to the Bank by Mr. Fabi in July 1998 in order to purchase the seaside lot in Florida with other individuals.
[16] At paragraph 13 of his affidavit, Mr. Phaneuf stated that [TRANSLATION] "in the course of my collection investigation, I need to obtain the documents and information requested . . . in order to determine whether the applicant is in fact the owner of a building and/or lot in Florida". According to Mr. Phaneuf, he also needed to [TRANSLATION] "know whether he was the owner of or had transferred the building and/or lot in Florida" and [TRANSLATION] "this information will allow me to determine the value of his assets and, if necessary, what has become of the proceeds of a possible sale", and he also [TRANSLATION] "need[ed] to know what has become of the money expended by the Bank".
[17] He concluded his affidavit:
[TRANSLATION]
17. Thus, the requirements to provide documents and information which are the subject of the application for judicial review were sent in the course of the collection investigation and were in no way part of an investigation or prosecution for criminal offences.
[18] He ended by stating [TRANSLATION] "that the Agency has not instituted any criminal investigation involving Donald Fabi".
ANALYSIS
[19] I will not dwell at length on what should be the applicable standard of review for a decision by the Minister to issue the two requirements at issue, to provide documents and information.
[20] The parties did not discuss this issue of the applicable standard of review before this Court. The applicant is seeking a ruling that the Minister's decision is null and void and is asking the Court to quash the two requirements on the ground that they were issued contrary to subsection 69.1(1) of the BIA.
[21] Before this Court, the two parties argued that in this case it was the Minister's powers which were at issue, and consequently the standard of review was that of correctness. I agree with this point of view, since the question is one of jurisdiction. In support of this, I cite the reasons for judgment of Bastarache J. in Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982, at paragraph 28:
¶ 28 Although the language and approach of the "preliminary", "collateral" or "jurisdictional" question has been replaced by this pragmatic and functional approach, the focus of the inquiry is still on the particular, individual provision being invoked and interpreted by the tribunal. Some provisions within the same Act may require greater curial deference than others, depending on the factors which will be described in more detail below. To this extent, it is still appropriate and helpful to speak of "jurisdictional questions" which must be answered correctly by the tribunal in order to be acting intra vires. But it should be understood that a question which "goes to jurisdiction" is simply descriptive of a provision for which the proper standard of review is correctness, based upon the outcome of the pragmatic and functional analysis. In other words, "jurisdictional error" is simply an error on an issue with respect to which, according to the outcome of the pragmatic and functional analysis, the tribunal must make a correct interpretation and to which no deference will be shown.
[22] Mr. Fabi's counsel argued that the two requirements to provide documents and information issued by the Minister pursuant to subsection 231.2(1) of the Act are subject to the stay mentioned in subsection 69.1(1) of the BIA.
[23] That provision states that, subject to subsections (2) to (6), on the filing of a proposal in respect of an insolvent person, no creditor has any remedy against the insolvent person or the insolvent person's property, or shall commence or continue any action, execution or other proceeding, for the recovery of a claim provable in bankruptcy, until the trustee has been discharged or the insolvent person becomes bankrupt.
[24] In the case at bar, in the submission of Mr. Fabi's counsel, the two requirements issued against his client are a "remedy" against him or against his property, or an "action . . . or other proceeding" for the recovery of the claim the Minister established before the trustee.
[25] In support of his argument, Mr. Fabi's counsel cited extensive case law, which I summarize:
(1) The Supreme Court of Canada's judgment in R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627. The Supreme Court concluded that although a requirement for information or documents issued pursuant to the Income Tax Act constitutes a seizure within the meaning of section 8 of the Charter, it is not an unreasonable seizure.
(2) The Supreme Court of Canada's judgment in Vachon v. Canada (Employment and Immigration Commission), [1985] 2 S.C.R. 417. In that case, the Supreme Court held that the recovery of an overpayment by source deduction from unemployment insurance benefits payable is a remedy or proceeding against the debtor or his property within the meaning of the former subsection 49(1) of the Bankruptcy Act.
(3) The Supreme Court of Canada's judgment in M & D Farm Ltd. v. Manitoba Agricultural Credit Corporation, [1999] 2 S.C.R. 961. In that case, the appellant had obtained a stay of proceedings from a tribunal pursuant to the federal Farm Debt Review Act, after being informed by the Corporation that it intended to commence proceedings to recover amounts owed under a mortgage. Despite the stay, the Corporation obtained an order under a provincial Act to commence foreclosure proceedings, but took no action until the federal stay had expired. The Supreme Court held that the application for leave based on the provincial Act was a "proceeding within the meaning of s. 23 of the federal Act". In his reasons, Binnie J. considered other means of collection used by creditors while the section 23 stay was in effect and concluded that the courts have generally held them to be invalid. He mentioned Davies v. Canadian Imperial Bank of Commerce, [1987] B.C.J. No. 632, which involved an examination for discovery on a farm foreclosure, and Nelson's Lazy H Ranches (1984) Ltd. v. Canadian Imperial Bank of Commerce, [1992] 3 W.W.R. 574 (Alta. C.A.), in which an order affirming an order of sale and vesting made during a stay pursuant to section 23 of the federal Act was held to be void.
(4) Bisaillon v. Canada, [1999] F.C.J. No. 898. In that case, Létourneau J.A. granted a stay of a requirement to provide documents and information until judgment was rendered by the Court of Appeal. At paragraph 27 of his reasons, he writes:
¶ 27 However, I am far from persuaded that, as the applicants maintained, first, the strict rules applicable to the description of the content of search warrants are those that should govern the content of a requirement of information such as the one at issue, and second, that the instant requirement is illegal because it is nothing less than a fishing expedition. While a search warrant is most intrusive and invasive of taxpayer's privacy, the requirement of information in the case at bar is clearly analogous to the procedure for examining a debtor after judgment, similar to that mentioned in arts. 543 et seq. of the Code of Civil Procedure, which authorizes the examination of a third party able to supply information on a debtor's assets and income and compulsion of the third party to produce documents relating to those assets (art. 281): but I do not have to decide that point. [Emphasis added.]
(5) The judgment of the Ontario Court of Appeal in Jones v. Ontario, O.N.C.A. C38961. Mr. Jones had filed a bankruptcy proposal approved by the Ontario Supreme Court. The question before the Court of Appeal was whether the periodic tax payments made by Mr. Jones after the date of his proposal under the BIA could be applied to reduce his tax obligations incurred before the said proposal. The Court of Appeal held that they could not.
(6) Sabey (Trustee of), [1996] B.C.J. No. 2820, is similar to Jones, supra. The Court did not allow Revenue Canada to reimburse itself, after notice of a bankruptcy proposal, from a tax refund payable to Mr. Sabey. The Court reasoned that allowing such reimbursement would give Revenue Canada preference at the expense of other creditors.
(7) Similar circumstances can be found in Condominium Plan No. 78R15349 v. Fayad, 2001 SKQB 104. The heart of the judgment of Dawson J. is found at paragraphs 23 and 24 of his reasons, which I quote:
¶ 23 The courts have consistently given a very broad meaning to both "remedy" and "proceedings" as used in s. 69. The words have been interpreted to include any kind of attempt at recovery, judicial or extrajudicial. In this case, without the registered caveat there is no security. Without security the applicant cannot foreclose on the condominium to collect its levy. The registration of the caveat is a process taken relative to or for the purpose of execution. The registration of the caveat is the means by which the applicant's rights are enforced. Section 69 is sufficiently broad to include the registration of a caveat, registered as security for the unpaid levy.
¶ 24 Section 69 of the Bankruptcy Act requires a creditor who wishes to seek a remedy or commence a proceeding despite the s. 69 stay, to apply to the Bankruptcy court to have the stay removed in relation to their action. Without doing this, any prior proceeding or remedy violates s. 69. The levy against Mr. Fayad was unsecured at the time of his filing for bankruptcy. The Applicant's actions of registering the caveat violates s. 69. The applicant is not entitled to enforce the caveat.
[26] Counsel for the Minister responded by putting forward two major points:
(1) the cases referred to by the applicant were cited out of their legislative context; and
(2) this Court has already decided the point at issue in two cases.
[27] There is no question that the context - the legislative background surrounding the problems of an issue and the purpose of the legislation - are essential factors in correctly interpreting Act.
[28] In this regard, I have only to cite the following passage from the reasons for judgment of Iacobucci J. in Re Rizzo & Rizzo Shoes Ltd., [1998] 1 S.C.R. 27:
¶ 20 At the heart of this conflict is an issue of statutory interpretation. Consistent with the findings of the Court of Appeal, the plain meaning of the words of the provisions here in question appears to restrict the obligation to pay termination and severance pay to those employers who have actively terminated the employment of their employees. At first blush, bankruptcy does not fit comfortably into this interpretation. However, with respect, I believe this analysis is incomplete.
¶ 21 Although much has been written about the interpretation of legislation (see, e.g., Ruth Sullivan, Statutory Interpretation (1997); Ruth Sullivan, Driedger on the Construction of Statutes (3rd ed. 1994) (hereinafter "Construction of Statutes"); Pierre-André Côté, The Interpretation of Legislation in Canada (2nd ed. 1991)), Elmer Driedger in Construction of Statutes (2nd ed. 1983) best encapsulates the approach upon which I prefer to rely. He recognizes that statutory interpretation cannot be founded on the wording of the legislation alone. At p. 87 he states:
Today there is only one principle or approach, namely, the words of an act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
Recent cases which have cited the above passage with approval include: R. v. Hydro-Québec, [1997] 1 S.C.R. 213, Royal Bank of Canada v. Sparrow Electric Corp., [1997] 1 S.C.R. 411; Verdun v. Toronto Dominion Bank, [1996] 3 S.C.R. 550; Friesen v. Canada, [1995] 3 S.C.R. 103.
¶ 22 I also rely upon s. 10 of the Interpretation Act, R.S.O. 1980, c. 219, which provides that every Act "shall be deemed to be remedial" and directs that every Act shall "receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Act according to its true intent, meaning and spirit".
¶ 23 Although the Court of Appeal looked to the plain meaning of the specific provisions in question in the present case, with respect, I believe that the court did not pay sufficient attention to the scheme of the ESA, its object or the intention of the legislature; nor was the context of the words in issue appropriately recognized. I now turn to a discussion of these issues.
[29] Counsel for the Minister also properly raised two recent judgments of this Court, in particular the judgment of Beaudry J. in Carrefour Langelier Inc. v. Canada (Customs and Revenue Agency), 2003 FC 1403, and that of Blais J. in Canada (Minister of National Revenue - M.N.R.) v. Stern, 2004 FC 763.
[30] In Carrefour Langelier, supra, Beaudry J., ruling on a motion for an interim stay of a requirement to provide pursuant to section 231.2 of the Act, concluded that the argument made by the applicant, namely that a requirement under section 231.2 of the Act is "another proceeding" within the meaning of subsection 69.3(1) of the BIA, raises no serious issue to be tried. At paragraph 9 of his reasons, he wrote this:
¶ 9 The applicant urges that the requirement letter is a proceeding and therefore there is a serious issue 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. [Emphasis added.]
[31] In Stern, supra, the respondent relied on section 69.3 of the BIA to oppose to the Minister's efforts to investigate his sources of income before his bankruptcy. Blais J. dismissed this argument, relying on the judgment of Beaudry J. in Carrefour Langelier, supra. He wrote:
¶ 6 The Respondent suggests that, given the effect of section 69.3 of the Bankruptcy and Insolvency Act, sources of income of Mr. Stern in the pre-bankruptcy period could not possibly be relevant to the Minister's enforcement or collection of his tax liability.
¶ 7 With all due respect, I disagree. In my view, the Minister is entitled to issue a letter pursuant to section 231.2 of the Act even if the taxpayer has filed a proposal under the Bankruptcy and Insolvency Act.
¶ 8 Tremblay-Lamer J. [sic] [Beaudry J.], in Carrefour Langelier Inc. v. Canada (Customs and Revenue Agency) 2003 FC 1403, wrote at paragraph [9]:
The applicant urges that the requirement letter is a proceeding and therefore there is a serious issue 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
¶ 9 In the present case, the Minister is exercising his power to investigate under 231.2 of the Act, and the lack of co-operation by the taxpayer over the years justifies this investigation. The Respondent admits in his affidavit that the CCRA provable claim is substantial. The effect of subsection 69.3(1) is to impede independent action by any creditor against the debtor or his property, now vested in the trustee. It has no effect on the right of the Minister under section 231.2 of the Act to obtain further information relevant to the tax debt of the Respondent. As stated by Justice Nadon in Vancouver Trade Mart Inc. (Trustee of) v. Canada (Minister of National Revenue - M.N.R.), [1997] F.C.J. No. 1467 (paragraph 28):
Section 231.2(1) of the Act simply allows the Minister, in proper circumstances, to obtain production of relevant information and documents so as to properly administer and enforce the provisions of the Income Tax Act. [Emphasis added.]
[32] I concur in the observations of both of my collegues. I feel that each of their judgments is correct and founded on the case law cited by counsel for the Minister.
[33] Under subsection 231.2(1) of the Act, the Minister is authorized to issue requirements to provide information and documents "related to the administration or enforcement of this Act".
[34] In Slattery (Trustee of) v. Slattery, [1993] 3 S.C.R. 430, the Supreme Court of Canada noted that a civil proceeding brought by a trustee in bankruptcy against the wife of a bankrupt to obtain a judgment declaring that certain property registered in the wife's name was part of the bankrupt's estate, or held in trust for that estate, was a proceeding relating to the administration and enforcement of the Act, the exception contained in subsection 241(3), and consequently the testimony of two Revenue Canada employees who had participated in an investigation into the bankrupt's affairs was authorized in connection with the trustee's action.
[35] That case also responds to an argument by counsel for Donald Fabi, that with the Court's leave pursuant to subsection 163(2) of the BIA the Minister could question Donald Fabi, who if so ordered had to provide documents. At page 454 of the report, Iacobucci J. considered that the possible existence of an alternative procedure did not disentitle the Minister to the right he had under another Act.
[36] At page 450 of the report Iacobucci J. wrote that the purposes of the Act include a desire to permit an effective and fair distribution of the assets of a bankrupt person and a desire to protect creditors of insolvent persons. He noted that the bankruptcy process is aimed at the proper protection of debtor, creditor and public interests. He noted that the ultimate purpose and result of prosecution of the trustee was to increase the estate of the bankrupt taxpayer, and this provided the relation or connection with enforcement of the Income Tax Act.
[37] I refer to the Federal Court of Appeal judgment in Tower v. Canada (Minister of National Revenue - M.N.R.), 2003 FCA 307, dealing once again with a requirement under section 231.2 of the Income Tax Act. Malone J.A. wrote the following at paragraph 29:
¶ 29 A number of cases have dealt with the scope of subsection 231.2(1) (see R. v. McKinlay Transport Ltd., supra; James Richardson & Sons, Ltd. v. Minister of National Revenue et al., supra; AGT Ltd. v. Canada (Attorney General), supra; and R. v. Jarvis, [2002] 3 S.C.R. 757 at paragraph 51). The relevant principles from these authorities establish that the determination of a taxpayer's tax liability is a purpose related to the administration and enforcement of the Act. A requirement is valid if the requested information may be relevant in the determination of the tax liability of the named taxpayer. This is a low threshold. Subsection 231.2(1) gives the Minister a broader authority to obtain information than would be the case if, for example, the Minister were conducting pre-trial examinations for discovery in the context of an income tax appeal.
[38] In McKinlay Transport, supra, the Supreme Court of Canada noted that the Income Tax Act was based on the principle of self-reporting and self-assessment. In such a scheme, the Court acknowledged that in supervising the scheme, the Minister had to be given "broad powers . . . to audit taxpayers' returns and inspect all records which may be relevant to the preparation of these returns".
[39] Wilson J. wrote the following, concerning subsection 231(3) of the Income Tax Act:
¶ 35 In my opinion, s. 231(3) provides the least intrusive means by which effective monitoring of compliance with the Income Tax Act can be effected. It involves no invasion of a taxpayer's home or business premises. It simply calls for the production of records which may be relevant to the filing of an income tax return. A taxpayer's privacy interest with regard to these documents vis-à-vis the Minister is relatively low. The Minister has no way of knowing whether certain records are relevant until he has had an opportunity to examine them. At the same time, the taxpayer's privacy interest is protected as much as possible since s. 241 of the Act protects the taxpayer from disclosure of his records or the information contained therein to other persons or agencies.
[40] R. v. Fitzgibbon, [1990] 1 S.C.R. 1005, also supports the arguments of counsel for the Minister. In that case, the issue was whether it was necessary to obtain the Bankruptcy Court's consent pursuant to subsection 49(1) of the Bankruptcy Act (now subsection 69.1(1)) in order to legally make a compensation order under the Criminal Code as part of the penalty imposed on an undischarged bankrupt. The Supreme Court of Canada concluded that the Bankruptcy Court's authorization was not required, but the beneficiaries of the compensation order had to obtain its consent when they sought to file the order in the Superior Court in order to apply or execute it. Cory J. gave the Court's reasons.
[41] In the view of Cory J., such an order is not a remedy or an order for recovery against the property of the bankrupt offender within the meaning of subsection 49(1) of the Bankruptcy Act. He wrote:
¶ 23 In contrast, a compensation order is an order made against the person of the offender, imposing upon him or her an obligation to pay the amount ordered. It is only when the compensation order is filed with the Superior Court of the province that it becomes an order enforceable against the person and property of the offender. There is a fundamentally important distinction between the original compensation order, which is an order against the person by which the court recognizes an acknowledged indebtedness, and the subsequent filing in the Superior Court which can convert that personal order into an order against the property of the accused.
¶ 24 Section 49(1) of the Bankruptcy Act would preclude the enforcement of the latter. This is because such an enforcement would result in the granting of the very priorities which the Bankruptcy Act seeks to avoid. However, the original compensation order made at the time of sentencing is an order against the offender personally recognizing an acknowledged indebtedness and is not immediately enforceable. Until the order is filed with the Superior Court, it simply imposes a future obligation upon the offender to pay. It is neither a remedy nor an order for recovery against the property of the bankrupt offender within the meaning of s. 49(1). Thus s. 49(1) does not prohibit the making of a compensation order. [Emphasis added.]
[42] Cory J. also considered that such a result did not undermine the integrity of the Act, because the net effect of the compensation order was simply to prove that the victims had a valid claim as unsecured creditors in the bankrupt's estate. It did not give the victims priority over the other unsecured creditors. Priority would only arise if the beneficiaries of the order sought to execute the order and attach the property of the bankrupt, pursuant to the provisions of the Criminal Code. Cory J. concluded that the trustee in bankruptcy would then have to be notified and the consent of the Bankruptcy Court obtained pursuant to subsection 49(1) before execution of the order could proceed. That is why he concluded that the integrity of the Bankruptcy Act was maintained.
[43] Counsel for Mr. Fabi argued that the requirements to provide under section 231.2 of the Income Tax Act did not enjoy any exemption under the BIA, such as that Act provides in section 69.42 for the Minister of Finance, the Governor in Council and the Attorney General of Canada.
[44] He also relied on two new legislative provisions in support of his argument that the Minister's requirements in the case at bar are recovery proceedings covered by subsection 69.1(1) of the BIA.
[45] The first, providing for a new prescription period, is an amendment to section 222 of the Income Tax Act following the Supreme Court of Canada's judgment in Markevich v. Canada, [2003] 1 S.C.R. 94. "Action" is defined as "an action to collect a tax debt of a taxpayer and includes a proceeding in a court and anything done by the Minister under . . . any provision of this Part", which is Part XV containing section 231.
[46] The second amendment which concerns us is in section 231.2. As mentioned, that section authorizes the Minister to issue requirements "for any purpose related to the administration or enforcement of this Act". In 2000, Parliament specified that the administration and enforcement of the Act included "the collection of any amount payable under this Act".
[47] In my opinion, the arguments of counsel for Mr. Fabi cannot be accepted. The argument based on section 69.42 of the BIA would only be valid if this Court were to find that a requirement under section 231.2 of the Income Tax Act was a "action, execution or other proceeding" within the meaning of subsection 69.1(1) of the BIA of this Act.
[48] In my view, the arguments of counsel for Mr. Fabi cannot be accepted. The validity of his argument relies on an acknowledgement by this Court that a requirement issued under section 231.2 of the Income Tax Act is covered by subsection 69.1(1) of the BIA, which is not the case.
[49] Further, the legislative amendments mentioned do not have the effect of altering the Minister's investigative power under section 231.2 in a recovery proceeding.
CONCLUSION
[50] In my view, case law indicates that the provisions of subsection 69.1(1) of the B.I.A. are intended to stay any proceeding whose effect would be to undermine the scheme or purpose of the Act, and in particular, give an ordinary creditor an advantage when a bankruptcy proposal is in effect.
[51] In my opinion, that the requirements to provide issued by the Minister in this case under section 231.2 of the Act do not have that effect, and for that reason the cases cited by counsel for Mr. Fabi must be disregarded.
[52] The effect of the requirements to provide in the case at bar is not to materially facilitate the seizure of Mr. Fabi's property or to create a preference for the Agency. From this standpoint, the requirements are neutral: they simply require information or documents to determine whether property of Mr. Fabi exists or has been transferred. At this stage, these requirements are simply investigative tools.
[53] The co-operation of the trustee and/or the Quebec Superior Court will be necessary for the recovery of the property mentioned in the requirements, if it exists, and if recovery is proper under the BIA.
[54] For all of these reasons, this application for judicial review is dismissed with costs.
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"François Lemieux"
Judge |
Ottawa, Ontario
December 24, 2004
Certified true translation
K. Harvey
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-89-04
STYLE OF CAUSE: DONALD FABI
Applicant
and
THE MINISTER OF NATIONAL REVENUE
Respondent
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: December 2, 2004
REASONS FOR ORDER BY: THE HONOURABLE MR. JUSTICE LEMIEUX
DATED: December 24, 2004
APPEARANCES:
Richard Généreux Applicant
Chantal Comtois Respondent
SOLICITORS OF RECORD:
Richard Généreux Applicant
Généreux, Côté, Attorneys
673, rue St-Pierre
Drummondville, Quebec
J2C 3W6
Morris Rosenberg Respondent
Deputy Attorney General of Canada
Montréal, Quebec