Date: 20040713
Docket: ITA-8785-00
Citation: 2004 FC 980
Ottawa, Ontario, this 13th day of July, 2004
Present: THE HONOURABLE MR. JUSTICE BLANCHARD
BETWEEN:
In the matter of the Income Tax Act
and
In the matter of an assessment or assessments by
the Minister of National Revenue under one or more of the
Income Tax Act, Canada Pension Plan, Employment Insurance Act,
the Income Tax Act
Against
Swiftsure Taxi Co Ltd
151 Haliburton Street
Nanaimo, BC
V9R 4V9
REASONS FOR ORDER AND ORDER
[1] The Applicant, Swiftsure Taxi Co. Ltd, by this motion seeks an order restraining the Minister of National Revenue (the Respondent) from removing or otherwise physically seizing the assets of the Applicant, pending a trial to determine the amount of certain tax debts owing by the Applicant. The Applicant is seeking a stay of collection action on three certificates in respect of taxation years 1997, 1998, 1999, 2000 and 2001. As of May 20, 2004, the total balance of the Applicant's unremitted payroll deductions for the taxation years in issue was $115,369.00. The certificates were registered in the Federal Court on March 16, 1999, September 25, 2000, and May 20, 2004, respectively. The motion is made pursuant to Rule 398 of the Federal Court Rules, 1998, SOR/98-106 as amended, (the Rules).
[2] Following a consent judgment of the Tax Court of Canada, an order of that Court issued on December 18, 2001, which provided that the 1997 assessment, the 1998 assessment and the 1999 assessment should be referred back for reconsideration and reassessment by the Respondent on the basis that the Applicant was entitled to a calculation of employment insurance premiums based on the Applicant's employees' net rather than gross wages. As a result of the reassessment, the balance of the Applicant's entire source deductions debt was significantly reduced in accordance with the notices sent out in respect of each reassessment.
[3] The Respondent is currently reassessing the Applicant's source deductions debt for the 2000 and 2001 taxation years in accordance with the December 18, 2001, judgment of the Tax Court of Canada, but the finalisation of the reassessments is subject to the Applicant providing any further information by no later than July 10, 2004.
[4] Notwithstanding the significant reduction in source deductions debt following the reassessment for taxation years 1997, 1998 and 1999 and commensurate reductions in applicable penalties and interest, the Applicant still intends to pursue and challenge the penalty and interest charges in the Tax Court of Canada. To this end the Applicant relies on a letter dated November 27, 2001, from counsel for the Department of Justice wherein the writer stated that "...penalties and interest follow the principle [sic]..." and that "...related penalties and interest in this matter should follow the event and will be deleted." The Applicant also contests the Respondent's reassessment for the taxation years 2000 and 2001. The Applicant acknowledges owing a source deductions debt of $13,590.13 and is prepared to pay this amount into Court.
[5] After the hearing of the Applicant's motion, the Respondent moved to adduce in evidence the affidavit of John Bradshaw in response to the affidavit of Anup Sing Keung, which was sworn and filed, on consent of the parties, on the very day of the hearing. The Applicant did not object to the filing of the affidavit of John Bradshaw and it was received.
[6] In his affidavit, John Bradshaw attests that he was the bailiff who executed against the judgment debtor, the Applicant herein, a Federal Court writ of seizure and sale pursuant to the above-mentioned certificates. The seized assets were left with the Applicant upon execution of a certain undertaking by the Applicant to hold the goods on behalf of the bailiff and deliver the said goods on request.
[7] The Bradshaw affidavit put in evidence that the Applicant had disposed of two vehicles listed in the bailee's undertaking without the consent of or notice to the bailiff in violation of the bailee's undertaking.
[8] In response, the Applicant contends that the vehicles were sold as scrap value as the vehicles were at the end of their useful life. The Applicant admits that it was a mistake to sell the vehicles without the consent of the bailiff and contends that the vehicles were replaced with new vehicles of greater value that are also subject to seizure by the Respondent. In consequence, the Applicant argues that the Respondent has not been prejudiced by the sale.
[9] There is jurisprudence of this Court to support the proposition that "The only instance where a stay such as asked for here will be granted is where seizure has been made of property real or personal of the taxpayer, who has, or does within the specified time, objected to the assessment, or taken a proper appeal therefrom, and such sale, prior to final determination of the actual liability, may be prejudicial to the taxpayer [See R. v. Rumball, [1981] C.T.C. 9 (Fed. T.D.)]. I am satisfied, in the circumstances of this case, that the Applicant has, within the required time limitations, objected to the assessment. As will become apparent from my further analysis later in these reasons, I am also satisfied that the seizure and sale of the assets of the Applicant will be prejudicial to the taxpayer prior to the final determination of the actual liability.
[10] In determining whether to grant a stay, the Court applies the three-part test set out in the RJR-MacDonald Inc. v. Canada (A.G.), [1994] 1 S.C.R. 311. The Applicant must demonstrate a serious question to be tried, that irreparable harm will result if the relief is not granted and that the balance of inconvenience lies with the Applicant.
[11] At the hearing, counsel for the Respondent conceded that the Applicant had established a serious issue to be tried in this matter. I am satisfied, on a limited review of the case on the merits, that the question of quantum of source deductions debt owing is indeed a live issue to be determined before the Tax Court of Canada, particularly with respect to taxation years 2000 and 2001. Although the validity of the certificates is not challenged before this Court, at this time, I accept that the final disposition of the issue before the Tax Court of Canada may impact on the quantum of the certificates now registered in the Federal Court.
[12] For the purposes of this motion for interlocutory relief, I will accept the Applicant's undertaking that he will commence a proceeding challenging the validity of the certificates in the Federal Court. Since the Respondent has made it clear he intends to proceed with his collection activity, I am satisfied that there is sufficient urgency to justify proceeding under the provisions of Rules 372 and 373 of the Rules. Upon the Applicant's undertaking, I am satisfied that I have jurisdiction to entertain the motion for interlocutory relief before me.
[13] The certificates are registered in the Federal Court based on assessments by the Minister. The assessments in respect of certain taxation years at issue have been successfully challenged by the Applicant before the Tax Court of Canada. As a result, the certificates that flowed from their reassessments were modified in that the amounts of the certificates were reduced to reflect the reassessments. The remaining taxation years at issue are also being challenged before the Tax Court of Canada. In these circumstances, I am of the view that there is a serious issue to be tried in the intended application challenging the validity of the certificates before this Court.
[14] The Respondent also concedes that the Applicant will suffer harm should the stay not be granted, but argues that the harm suffered would not be irreparable since the Applicant could collect damages and be fully compensated if the eventual decision on the merits does not accord with the result of the interlocutory application. I disagree with the Respondent's contention. The Applicant's evidence is that the assets subject to seizure include office furniture, the building that the business is housed in, radio equipment and motor carrier plates. The motor carrier plates, once lost, are expensive and difficult to obtain. It is argued, and I agree, that seizure of these assets will put the Applicant out of business. In my view, such harm cannot be easily quantified in monetary terms and is harm which cannot be cured by an award of damages. I am satisfied that the Applicant has met the second branch of the tripartite test, and that irreparable harm has been established.
[15] The third test to be applied was described as follows by Beetz J. in Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd., [1987] 1 S.C.R. 110 at page 111 : "...a determination of which of the two parties will suffer the greater harm from the grant or refusal of an interlocutory injunction, pending a decision on the merits."
[16] Under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), (the Act) the public authority, the Minister, is charged with the duty of promoting and protecting the public interest by ensuring that provisions of the Act are applied fairly and consistently. The impugned collection activity by the Respondent was undertaken pursuant to that responsibility. Under the Act, source deductions are required to be withheld and remitted . The drafters of the Act specifically exempted source deductions debt from the 90-day statutory stay provisions ( ss. 225.1(6)). Given the nature of the enactment and the specific treatment of stays in the legislation, I am satisfied that there is clearly a benefit to the public interest arising from the continued application of the legislation.
[17] The above public interest must be balanced against the harm to be suffered by the Applicant, namely the likelihood of the Applicant being put out of business should the assets be seized. On the face of the matter, this appears to be "an exemption" case as opposed to a "suspension case" as discussed by Beetz J. in Metropolitan Stores, supra. The Applicant seeks to be exempted from the collection provisions of the Act until the final disposition of the case. The above-cited jurisprudence supports the proposition that public interest considerations will carry less weight in exemption cases than in suspension cases, where the application of the statute or regulatory provision is effectively suspended. This cannot be said in the instant case since the facts are particular to the Applicant. The Respondent has already been ordered by the Tax Court of Canada to reassess the Applicant for three of the taxation years in issue, and these reassessments have resulted in significant reductions in the Applicant's source deductions debt. In my view, exempting the Applicant from the collection activities of the Respondent pending final determination, in such circumstances, will not negatively impact the general application of the law.
[18] On the evidence, I therefore find that the balance of inconvenience lies with the Applicant.
[19] The new evidence adduced by the Respondent in respect of the disposal of two vehicles as scrap metal does not affect my assessment of the circumstances or my conclusion. In any event, this is not the proper forum to address the Applicant's misconduct.
[20] The Applicant having met the three-part test set out in the RJR-MacDonald Inc., supra, I will, in the exercise of my discretion, grant the motion in part. The seized assets and all other assets to be seized under the certificates shall remain seized under the terms and conditions of the bailee's undertaking. The Respondent shall not sell or otherwise dispose of the assets pending disposition of the proceeding to be commenced in this Court by the Applicant challenging the validity of the certificates registered in the Federal Court. The Applicant will have the continued use of the seized assets in its business enterprise as is currently the case. Further, the Order granting the motion, in part, is subject to the following conditions: (1) the Applicant shall, within ten days of the within Order, commence a proceeding before this Court challenging the validity of the certificates registered in the Federal Court and file therewith an undertaking pursuant to Rule 373(2) of the Federal Court Rules, 1998; (2) the Applicant shall move promptly with the proceedings before both the Tax Court of Canada and the underlying proceeding to be commenced in this Court. In the event of undue delay by the Applicant in moving the cases forward, the Respondent may bring a motion before a judge of this Court to have the within interlocutory injunction lifted; and (3) further, the Applicant is to pay the Respondent, within ten days of the within Order, the amount of $13,590.13 towards the Applicant's source deductions debt, this being the amount acknowledged by the Applicant as owing. Failure to certify in writing to the Court that payment has been made within the ten days provided shall cause the injunction to automatically lapse.
ORDER
THIS COURT ORDERS that:
1. The motion is granted in part.
2. The seized assets and all other assets to be seized under the certificates shall remain seized under the terms and conditions of the bailee's undertaking. The Respondent shall not sell or otherwise dispose of the assets pending disposition of the proceeding to be commenced in this Court by the Applicant challenging the validity of the certificates registered in the Federal Court. The Applicant will have the continued use of the seized assets in its business enterprise as is currently the case.
3. This Order is subject to the conditions set out in paragraph [20] of the above Reasons for Order.
"Edmond P. Blanchard"
Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: ITA-8785-00
STYLE OF CAUSE: INCOME TAX ACT
- and -
SWIFTSURE TAXI COMPANY LTD.
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: July 5, 2004
REASONS FOR ORDER AND ORDER: BLANCHARD J.
DATED: July 13, 2004
APPEARANCES:
Mr. Dave Everett FOR PLAINTIFF
Mr. Stanley Foo FOR DEFENDANT
SOLICITORS OF RECORD:
Mr. Morris Rosenberg FOR PLAINTIFF
Deputy Attorney General of Canada
Ottawa, ON
Foo & Company FOR DEFENDANT
Barristers and Solicitors
Vancouver, BC