Date: 19980911
Docket: T-1143-98
T-1159-98
T-1143-98
BETWEEN:
047424 NB INC., NANCY PITRE, 047425 NB
INC., ALMA THERIAULT, MANDATE
ERECTORS AND WELDING (1997) LTD.,
SERGE THERIAULT, 0046595 NB INC.,
BARBARA PITRE, GERALD PITRE,
BATHURST MACHINE SHOP LTD.
Applicants
- and -
THE MINISTER OF NATIONAL REVENUE
Respondent
AND BETWEEN:
T-1159-98
047424 NB INC., NANCY PITRE, 047425 NB
INC., ALMA THERIAULT, MANDATE
ERECTORS AND WELDING (1997) LTD.,
SERGE THERIAULT, 0046595 NB INC.,
BARBARA PITRE, GERALD PITRE,
BATHURST MACHINE SHOP LTD.
Plaintiffs
- and -
THE MINISTER OF NATIONAL REVENUE, and
HER MAJESTY THE QUEEN IN RIGHT OF CANADA
Defendants
REASONS FOR ORDERS
MacKAY J.
[1] These reasons relate to orders which dispose of motions brought by the parties in two Court files, as follows.
[2] In file T-1143-98, the applicants seek
| (i) an order for an extension of time to file an application for judicial review, dated June 4, 1998; |
| (ii) if an extension of time is granted, the applicants also seek an order staying demands for information issued pursuant to s. 231.2 of the Income Tax Act by or on behalf of the respondent Minister, pending determination of the application for judicial review which questions those demands; |
If an extension of time is granted the respondent Minister seeks directions concerning the appropriateness of proceeding with a single application for judicial review in the circumstances of this case, as the applicants seek to do.
[3] In file T-1159-98 the plaintiffs (applicants in proceedings in Court file T-1143-98) seek a stay order, similar to that sought in the judicial review proceedings they desire to pursue, to stay the demands for information, pending, in this case, disposition of the action. In the action, commenced by statement of claim filed on June 15, 1998, the plaintiffs claim various declarations including that "s. 232.1 [sic] of the Income Tax Act is unconstitutional", that the demands issued constitute an unreasonable infringement of the plaintiffs' Charter rights, and that the demands for information are an abuse of process, irregular, illegal and void. In addition, the action seeks relief in the nature of certiorari and of prohibition, to be directed against the defendant Minister of National Revenue.
[4] The motions were heard on July 6, 1998 in Fredericton, when decisions were reserved. Orders now issue allowing an extension of time to file appropriate applications for judicial review, directing the filing of more than one application if judicial review proceedings are to be pursued, and dismissing the two applications of the applicants/plaintiffs for interim stay orders.
[5] After a brief overview of the background I deal in turn with the motion for an extension of time to file an application for judicial review, with the application of the respondent Minister for directions, and then with the motions to stay the demands for information.
The background
[6] In 1992 officers of the respondent Minister's department attended at the offices of Mandate Erectors & Welding Ltd. ("Mandate") in relation to a reassessment of its tax returns. Until February 1994 that company's records, and possibly some of the individual applicants' records, were made available to officers of the department, it is said on a voluntary and cooperative basis. In March 1994 search warrants were obtained on behalf of the Minister and a substantial volume of documents was seized by the department, and they were held until a provincial court order for their release was upheld by the New Brunswick Court of Appeal.
[7] Thereafter, in December 1996 criminal charges were laid, and later some of these were amended in January 1997, on behalf of the Minister against Mandate, against Bathurst Machine Shop Ltd., against Leopold Theriault, Kenneth Pitre and Gerald Pitre, all charged, inter alia, with tax evasion. Two of those charged, Bathurst Machine Shop Ltd. and Gerald Pitre, are applicants in these proceedings concerning judicial review, and they are plaintiffs in file T-1159-98. Preparation for trial on the criminal charges was underway when the collection branch of the Minister's department, concerned about changes in corporate directors of, and arrangements for, interrelated companies with outstanding tax liabilities, and about possible transfer of the assets of the corporations and their officers, issued the demands for information here in question pursuant to s.231.2 of the Income Tax Act. Those demands were in support of s.160 assessments under that Act. All demands were dated April 27, 1998 and they were served,
| on April 27, upon Bathurst Machine Shop Ltd. and Gerald Pitre, |
| on April 28, upon 046595 N.B. Inc. and Barbara Pitre, |
| on May 1, upon 047425 N.B. Inc. and Alma Theriault, and upon Mandate |
| Erectors & Welding (1997) Ltd. and Serge Theriiault, and |
| on May 4, upon 047424 N.B. Inc. and Nancy Pitre. |
In each case the individual served is the sole director or principal of the corporation with which his or her name is associated.
[8] Efforts by the applicants to resolve differences about the demands for information were not successful. Then the plaintiffs sought, unsuccessfully, consent for filing an application for judicial review beyond the 30-day limit fixed by s.18.1(2) of the Federal Court Act, R.S.C. 1985, c. F-7.
The motion for an extension of time to apply for judicial review
[9] The test for an extension of time is that set out by the Court of Appeal in Grewal v. Minister of Employment and Immigration (1985), 63 N.R. 106 (F.C.A.). It includes whether the applicant intended, within the time limited, to commence proceedings to bring an application, and maintained that intention subsequently, what the length of the period of extension is that is sought, and what prejudice would be caused to the opposing party if the extension were granted. The underlying consideration, in the view of Thurlow, C.J. in Grewal is said to be whether, in the circumstances, "to do justice between the parties calls for the grant of the extension" (at 63 N.R. 110). In the view of Mr. Justice Marceau in that case (at 63 N.R. 116), a balancing of all of the factors of concern in the circumstances, including the nature of the interests at stake, is appropriate in considering the exercise of judicial discretion to grant an extension of time.
[10] In this case, counsel for the applicants was apprised of the various demands for information within a week of service of the last of the demands. Counsel, who practices in Fredericton, and was involved in lengthy litigation in May 1998, concedes that ultimately he was responsible for the delay in applying for judicial review, though in part his delay arose from difficulties in communicating with all the applicants, all of whom are located or resident at or near Bathurst, New Brunswick. For the respondent, it is urged that here the applicants do not demonstrate reasonable diligence in pursuit of their rights and in seeking to question the demands for information. However, as counsel points out, in Leblanc v. National Bank of Canada, [1994] 1 F.C. 81 (T.D.), where I refused to grant an extension of time to commence proceedings, I did comment (at [1994] 1 F.C. 93)
| ...missteps by counsel, ...would not be enough, in my view, to preclude the exercise of discretion in a case where the applicant establishes a basis for the Court to conclude, in the interests of justice between the parties, that there is a reasonable chance of success in an application for judicial review. |
[11] In my opinion, in the circumstances of this case, in principle the extension of time sought should be granted. That extension will apply to amended applications, amended in accord with these reasons and the related order concerning directions sought by the respondent Minister. The extension of time is warranted in my view because the applicants clearly had the intention to initiate proceedings once instructions were obtained by counsel within the 30-day period set by s.18.1(2) of the Federal Court Act. That intention continued until this matter was heard. The applicant's counsel sought consent to extend the time to commence proceedings. The application for judicial review was filed June 5, 1998, a very few days beyond the 30-day time limit following service of all of the demands in question. The application for an extension of time was then filed within a few more days.
[12] The period of extension sought was minimal in the circumstances of this case. The applicants contend that their interests, rights protected by the Charter, would be prejudiced if the extension is not granted but the respondent would not be prejudiced if the extension of time is allowed. While that contention is not proof, the Minister offers no evidence or argument that his position would be prejudiced if the extension were granted. While neither party is persuasive on the issue of potential prejudice, in my opinion the interests of the applicants are likely to suffer greater prejudice than the interests of the Minister if the extension were not granted.
[13] The issues raised by the application for judicial review concern constitutional Charter rights of the applicants and the lawful exercise of the Minister's powers pursuant to s.231.2 of the Income Tax Act. The issues presented are at least arguable, and they concern important interests of the individual applicants and of the state, represented by the Minister.
[14] I conclude that, as a matter of principle, it is in the interests of justice that the extension of time sought be granted to file applications for judicial review in accord with the directions that follow.
The Motion for Directions (T-1143-98)
[15] The respondent Minister seeks directions concerning the appropriateness of proceeding with a single application for judicial review with respect to requirements or demands for information that concern ten taxpayers. In questioning these demands the application for judicial review as framed by the applicants concerns five written requirements for information concerning ten different taxpayers, each of whom was served with a demand for information. The five "requirements" or cases each concern a corporation and the sole or principal director of that corporation.
[16] The respondent urges that the proper procedure would be to commence five different applications for judicial review, one for each of the five written requirements for information, for each of which different issues arise which require a distinct application to properly assess the appropriateness and/or constitutionality of each of the demands for information.
[17] The applicants contend, that while there are five written demands and ten distinct taxpayers, the basic facts and issues relating to each of them are essentially the same. It is urged that in view of Rule 3 of the Federal Court Rules, 1998, providing for application of the Rules "so as to secure the just, most expeditious and least expensive determination of every proceeding on its merits", the appropriate procedure here would be to deal with all of the demands in a single proceeding.
Rule 302 provides:
Unless the Court orders otherwise, an application for judicial review shall be limited to a single order in respect of which relief is sought.
Sauf ordonnance contraire de la Cour, la demande de contrôl judiciare ne peut porter que sur une seule ordonnance pour laquelle une réparation est demandée.
[18] In the circumstances of this case, it seems to me that the issues raised by the applicants in regard to four of the five requirements for information, and eight of the ten demands, are essentially the same even though the factual issues underlying the respective demands may differ in minor respects. Those demands, and the applicants concerned who are directed to provide information, are:
| 047424 NB Inc. and its sole director, Nancy Pitre, |
| 046595 NB Inc. and its sole director, Barbara Pitre, |
| 047425 NB Inc., and its sole director, Alma Theriault, and |
| Mandate Erectors & Welding (1997) Ltd. and its sole director, Serge Theriault. |
In each case the demand for information was dated April 27, 1998, although the demands were served on different dates from April 28 to May 4, 1998. In my opinion all eight recipients of these essentially similar demands for information may join as applicants in one proceeding for judicial review.
[19] In the fifth case of requirements demanded, i.e. the case of demands served upon Bathurst Machine Shop Ltd. and Gerald Pitre, the issues and argument may differ from those in the other cases because of the status of that corporation and Gerald Pitre as accused in criminal proceedings already underway before the demands for information were issued. In my opinion, those two taxpayers should proceed separately from the other applicants in seeking judicial review.
[20] An order goes directing that the extension of time to file the applications for judicial review shall be applicable to the two separate applications first, by Bathurst Machine Shop Ltd. and Gerald Pitre, and second by all other applicants, as set out in the order accompanying these Reasons, providing those are filed on or before September 25, 1998. In each case any application filed is to be supported by an affidavit of one or more applicants as the case may be.
Motions to stay the demands for information
[21] Similar motions are presented by the applicants/plaintiffs in files T-1143-98 and T-1159-98, though the stay requested is related to the determination of the issues raised in the respective proceedings.
[22] The test for a stay is well settled, as set out in R.J.R. MacDonald Inc. v. Canada (Attorney General) (1994), 111 D.L.R. (4th) 385 (S.C.C.) and Manitoba (Attorney General) v. Metropolitan Stores Ltd., [1987] 1 S.C.R. 110. Among other factors the test requires that there be evidence of irreparable harm to the applicant if the stay is not granted, pending determination of a serious question that is before the Court. Assuming without deciding, that the application for judicial review and the action here involved do raise serious issues for determination by the Court, I am not satisfied there is evidence, in the affidavits filed in support of the stay applications, that the applicants will suffer irreparable harm if the stay orders sought are not granted. The affidavit of David Oley, a solicitor, states in part:
| 8. The harm suffered by the Applicants will not be compensable by an award of damages and accordingly, will be irreparable. If the Respondent, Minister of National Revenue is allowed to gain access to the information which is the subject of the Demands for Information, a decision on the merits of the case will be rendered nugatory and the rights of the Applicants will have been seriously prejudiced. |
[23] In my opinion, even though the issues raised concern the respondent's authority to demand information in light of the Charter, the mere difficulty of determining monetary damages, if the respondent has access to the information demanded, does not in itself, in this case, constitute irreparable harm. If the information is provided as demanded but no unauthorized action is taken by the respondent with any adverse effects upon the applicants, there will be no harm to the applicants. If the harm feared is possible use of the information demanded in criminal proceedings, the validity of that use may be tested in those proceedings. If it is not allowed, there will be no irreparable harm to the applicants, and if its use is allowed in other proceedings, by judicial approval, that use could not be irreparable harm.
[24] The course of action here pursued by the Minister is presumed to be valid until determined otherwise, unless irreparable harm is established. In these circumstances the balance of convenience favours the Minister and weighs against granting the interlocutory injunction sought by the applicants.
[25] I am not prepared to order that the demands for information be stayed, either pending determination of issues raised in the judicial review proceedings (T-1143-98), or pending determination of those raised in the action commenced by the plaintiffs (T-1159-98).
Conclusion
[26] An order now issues that allows an extension of time to file applications for judicial review, provided they are consistent with directions now issued by separate order and are filed on or before September 25, 1998. The order for directions authorizes an extension of time to file two applications, if it is determined to proceed by judicial review, one in which Bathurst Machine Shop Ltd. and Gerald Pitre may be applicants, the other in which all other applicants here before the Court may be applicants. Any such application shall be supported by an affidavit sworn by one, or affidavits by more than one, of the applicants. Finally, orders go dismissing the applicants'/plaintiffs' motions for orders to stay the demands for information.
[27] The applicants sought costs in relation to their motions, now dismissed, for orders to stay the demands for information. In the circumstances no costs are awarded, and they remain in the cause. I direct that a copy of these Reasons be filed on Court file nos. T-1143-98 and T-1159-98.
W. Andrew MacKay
Judge
OTTAWA, Ontario
September 11, 1998.