Date: 20010105
Docket: 1999-3677-IT-G
BETWEEN:
510492 B.C. LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
____________________________________________________________________
Counsel for the Appellant: James W. Mandick
Counsel for the Respondent: Julia S. Parker
____________________________________________________________________
Reasons for Judgment
(Delivered orally from the Bench at Edmonton, Alberta, on October 20, 2000)
McArthur J.
[1] I agree with the submissions of the Respondent that the Appellant was without legal capacity to commence this proceeding and is without legal capacity to continue it. It is not disputed that the Appellant was dissolved on May 28, 1999 and removed from the British Columbia Registry of Companies under section 257 of the B.C. Company Act for failure to file corporate returns. The Appellant filed a Notice of Appeal with this Court on August 18, 1999. However, the Appellant is no longer a legal entity and lacks the legal capacity to pursue this appeal. Section 257 of the B.C. Company Act, R.S.B.C. 1996, c. 62, provides that the Registrar may strike off from the register and dissolve a company if it, within a month of notice, does not respond. Section 262 provides for restoration of a dissolved company within 10 years of dissolution under certain circumstances.
[2] Counsel for the Appellant was not amenable to resolving the problem by restoration of the company because Robert L. Brown, formerly the sole shareholder of the Appellant, is now a United States citizen. The B.C. Company Act apparently requires that 50% of the issued shares be owned by a B.C. resident. It is unlikely that Mr. Brown would find a volunteer to own 50% of a vacant or dissolved company with a looming tax problem unless, of course, suitable security was arranged.
[3] I have attempted to find in favour of the Appellant’s position but cannot, and I realize my decision is harsh. Upon reading the Notice of Appeal and the Reply to the Notice of Appeal, the Appellant may have a valid case if it could have proven the facts set out in paragraph C. of the Notice of Appeal. It is, of course, better that the appeal be heard on its merits. I have searched to find support for the Appellant’s position.
[4] The Appellant submitted an affidavit of Robert L. Brown sworn in Phoenix, Arizona on October 14, 2000. Mr. Brown’s concern is that he was assessed personally under section 227.1, the director’s liability provisions of the Income Tax Act. His affidavit was of little assistance. It seemed to focus on the position that the assessment is not valid because the Appellant did not receive any benefit, commission, fee or monies whatsoever during the year ending November 1996. The basis of the Respondent’s assessment is that the Appellant received net income of $100,000 during that fiscal year 1996.
[5] Again, the logical resolution to the issue would preferably be to permit the Appellant to pursue an appeal. Unfortunately, the B.C. Company Act does not provide for this once a company has been dissolved. The B.C. legislature provided for the creation of the Appellant and also provided for its dissolution. I cannot restore the legal entity. The B.C. Act provides a solution for restoration of the company which the Appellant feels he is not able to take advantage of.
[6] Counsel for the Respondent referred to the decision of the British Columbia Supreme Court in First Gwent Investment Corp. Ltd. v. Sia et al[1]. At page 2 of that decision, Prowse J. stated:
Given that as long as a company is struck from the Register of Companies it cannot commence an action ... or maintain one, ... the action is considered to be an abuse of process ...
and continued at page 3:
... I have concluded that the appropriate remedy is to enter a stay of proceedings for a 60 day period ... during which time the plaintiff ... is at liberty to pursue the restoration of its corporate status. ...
Further, in Thomas v. M.N.R.,[2] my colleague, Rip J. stated at page 2320:
... During the period the corporation is dissolved pursuant to section 281 of the B.C. Act and the last day it may be restored to the company register in accordance with section 286 of the B.C. Act, it is not dead absolutely. The existence of the corporation is suspended; the corporation is a non-entity lacking any capacity. Only when the corporation is restored to the register is it "deemed to have continued in existence"... So long as the corporation is not restored to the register and is thus not deemed to continue in existence, it is not in existence. ...
When a corporation’s existence is in a state of suspense it cannot carry on activity normally carried on by a corporation because it lacks the legal capacity and competence to do so. It cannot, for example, sue a debtor or enter into a contract.
In Ragged Runner Enterprises Ltd. v. Victoria Sports Traders Inc.[3], Master Bishop of the British Columbia Supreme Court in Kelowna stated:
It is clear that when the plaintiff commenced the within action it was a limited company duly incorporated pursuant to the laws of the Province of British Columbia ...
It is also clear that during the course of the litigation, it was struck from the Register for failure to file annual reports ...
... The court will order, though, that in the event that the company is not restored to the Register of the Registrar of Companies on or before the 15th day of October, 1993, then the statement of claim will be struck out and the action will be dismissed ...
As well, Master Bolton of the British Columbia Supreme Court in Victoria stated in Canada v. T.S. Engineering Inc.:[4]
Striking off the register is not some mere procedural act done by bureaucrats in Victoria. By s. 281(4) of the Company Act, the striking off of a company dissolves it. It no longer exists.
... The petitioner must seek to raise the respondent from the dead by applying to restore it to the register under the powers set out in s. 286 of the Company Act.
In The Queen v. Gill,[5] Oliver C.C.J. of the British Columbia County Court of Westminster stated:
A limited liability company is a legal person and like a human person lives from birth to the moment of death. It is a creature of statute. It is born on incorporation: It dies upon dissolution. Each of the three companies following its death by dissolution was in the words of the learned trial judge "non-existent" it was incapable once dissolved of operating, earning income, incurring losses, performing any act or having a "taxation year".
These B.C. cases are cited to create a background or scheme with respect to the legislation of that province.
[7] The Appellant relied almost entirely on the decision of Jerome J. of the Federal Court, Trial Division in 460354 Ontario Limited v. The Queen,[6] which was confirmed by the Federal Court of Appeal in The Queen v. Sarraf, (in his capacity as a Director of 495187 Ontario Limited at the time of its dissolution)[7]. In this case the corporation, 460354, obtained a voluntary disposition of dissolution under the Ontario Business Corporations Act. Subsequently, the Minister of National Revenue issued an assessment against the corporation. Jerome J. held the paragraph 241(1)(b) of the Ontario Business Corporations Act permits a civil, criminal or administrative action or proceeding to be brought against the corporation within five years of its dissolution. The issuance of a notice of assessment or reassessment under the Income Tax Act is an administrative proceeding within paragraph 241(1)(b). Once the Minister issues an assessment or reassessment against the taxpayer, it must be open to the taxpayer to exercise rights of appeal under the Income Tax Act.
[8] The facts in the above case are similar to the present one, but for one overriding distinguishing factor and that is Jerome J. relied on the Ontario Business Corporations Act and in particular paragraph 241(1)(b). That paragraph reads as follows:
241(1) Notwithstanding the dissolution of a corporation under this Act,
(a) a civil, criminal or administrative action or proceeding commenced by or against the corporation before its dissolution may be continued as if the corporation had not been dissolved;
(b) a civil, criminal or administrative action or proceeding may be brought against the corporation within five years after its dissolution as if the corporation had not been dissolved; and
any property that would have been available to satisfy any judgment or order if the corporation had not been dissolved remains available for such purpose.
In the decision, Jerome J. stated:
... Paragraph 241(1)(b) of the Act contemplates that where an action is brought against a dissolved corporation, the matter is to proceed as it normally would have, i.e., "as if the corporation had not be dissolved". I do not agree that the right to take advantage of an appeal procedure in the context of administrative proceedings or the right to defend itself in the case of civil litigation or criminal charges must be conferred upon a dissolved corporation by the statute which authorizes the commencement of the action.
A dissolved corporation has no status to commence legal proceedings, but having determined that the issuance of a notice of assessment or reassessment by the Minister is an administrative proceeding within the meaning of paragraph 241(1)(b) ...
He then goes on to reject the argument of the plaintiffs. Unfortunately, the B.C. Act does not contain such a provision. Further, counsel for the Respondent stated that Jerome J. did not refer to the Tax Court of Canada Rule 58(3)(c), which reads:
58(3) The respondent may apply to the Court to have an appeal dismissed on the ground that,
(c) the Appellant is without legal capacity to commence or continue the proceeding,
...
[9] I conclude that for a British Columbia corporation which has been dissolved to appeal an assessment, that corporation must be restored. One must look to the statutory scheme of the provincial legislation that gave life and a legal status and then took those away. I cannot ignore that fact. Applying my discretion in section 9 of the Rules over paragraph 58(3)(c) does not assist the Appellant. The British Columbia Company Act dominates. The Respondent's motion is granted and the appeal is dismissed.
Signed at Ottawa, Canada, this 5th day of January, 2001.
"C.H. McArthur"
J.T.C.C.