Date: 20030110
Docket: T-355-02
Neutral citation: 2003 FCT 18
BETWEEN:
DR. :LENARD-ZEPHIRIN:GAGNE
Applicant
and
Elinor Caplan, MINISTER OF NATIONAL REVENUE
CANADA CUSTOMS AND REVENUE AGENCY,
Michael Quebec, DIRECTOR - VANCOUVER TAX SERVICES OFFICE,
J. McCavour, VANCOUVER TAX SERVICES OFFICE
Respondents
[1] This is an application for judicial review challenging a Requirement to Pay by way of garnishee dated February 20, 2002 ("the Decision") and issued by the Respondents to the Applicant's employer, Kensington Medical Clinic Inc., for unpaid personal income taxes for the 1997, 1998 and 1999 taxation years.
[2] In early June of 2001, the Applicant received Notice of Assessments dated May 29, 2001 for unpaid personal income taxes for the 1997, 1998 and 1999 taxation years for the total amount of $237,006.70 as of that date. On October 16, 2001, the Applicant requested an extension to file a Notice of Objection to the assessments.
[3] By letter dated November 20, 2001, the Respondents confirmed the assessments, informing the Applicant that if he disagreed with the assessments, he could file an appeal to the Tax Court of Canada. They provided information on how to proceed with such an appeal. The Applicant made a conscious decision not to appeal the confirmation of the assessments. As a result, collection activity was initiated with regards to the assessments as of February 19, 2002.
[4] On February 22, 2002, a Requirement to Pay was sent to the Applicant's employer, Kensington Medical Clinic Inc., in an attempt to collect the debt owing to Her Majesty under the assessments. The form was received by the Office Manager at the Kensington Medical Clinic Ltd. on February 22, 2002 and handed to the Applicant on the same day.
[5] The Applicant then filed a Notice of Motion in this Court on March 21, 2002 wherein he claimed the following relief:
1) an order setting aside the Requirement to Pay;
2) an order for all costs incurred in the preparation for this application for judicial review;
[6] By letter dated December 19, 2002, the Applicant stated that in view of "unforseen events" that have occurred since the filing of the Applicant's Record in June of 2002, he wished to add the following to the orders sought:
1) an order directing that all monies that have been taken as a result of that decision be returned to the Applicant, including interest;
2) as the Requirement to Pay is only effective for one year, an order preventing the CCRA from sending another Requirement to Pay form to the Applicant's corporation or to the Medical Services Plan of British Columbia.
3) an order for damages for an amount of $33,000 for undue hardship caused by the Respondents.
[7] The central issue in these proceedings is whether this Court has jurisdiction on this application to review, restrain, set aside or otherwise deal with the Requirement to Pay and supporting assessments. In the alternative, it must be determined whether the Requirement to Pay is valid and enforceable.
[8] The Applicant submits that the Requirement to Pay is invalid on grounds that no certificate of indebtedness has ever been filed in, obtained by or issued from any court in support of same, particular reference being made to section 223(1) of the Income Tax Act. It is further argued that since nowhere on its face nor reverse side does the Requirement to Pay state that it is "a form properly authorized by the Minister" as per section 244.13 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Suppl.) ("the ITA"), it is issued ultra vires the ITA and is null and void ab initio.
It was therefore illegal for the CCRA and/or its agents to rely on the Requirement to Pay as authority for garnishing the Applicant's salary.
[9] Because of various motions launched in the Federal Court by this Applicant garnishment was delayed by the employer, and not until the months of October, November and December of 2002 did it retain 50% of his monthly wages and forward them as directed by the Requirement to Pay. The Applicant alleges that it was illegal for the employer to retain 50% of his wages when the law specifically allows the employer to retain and remit only 40% of the wages earned.
[10] It was submitted that by refusing to reply to the Applicant's queries, the Respondents effectively denied him natural justice since they failed to discharge the minimum standard of care prescribed by their internal policies, the Taxation Operations Manual #9110 and #9112.1. Further, that the Requirement to Pay denied the Applicant procedural fairness in that it is a subterfuge undermining and evading a proper airing of the matter in a court of competent jurisdiction that the Notice of Assessments upon which the Requirement to Pay was based are fraudulent and any alleged debt arising from them is fabricated. By confirming the assessments with no evidence before them as to any real liability, the Respondents erred in law in that they made a decision in a perverse or capricious manner without regard for the material before them.
[11] It is further submitted that while the Kensington Medical Clinic Ltd. received the Requirement to Pay via regular mail, the Applicant alleges he was never properly served with a copy of the Requirement to Pay via regular mail, registered mail or personal service, as prescribed by section 224 of the ITA and Taxation Operations Manual #2253.56.
[12] Finally, it is contended that the Requirement to Pay is invalid and unenforceable as the address appearing on its face is incorrect and different from the Applicant's true address which was in the Respondent's possession at all relevant times; that the Requirement to Pay issued in February 2002 was only valid for 90 days, as indicated on the reverse side of the form, since he should be categorized as a debtor as described in section 4 of the document.
[13] The Respondent submits that by virtue of section 18.5 of the Federal Court Act, R.S.C. 1985, c. F-7, the provisions of the ITA and the clear case law of the Federal Court of Appeal, this Court has no jurisdiction on the present application to review, restrain, set aside or otherwise deal with the Requirement to Pay and supporting assessments.
[14] In the alternative, it is submitted that the Requirement to Pay is valid and enforceable. It is argued that the Minister can make an assessment in the absence of a return filed by a taxpayer, and is not bound to rely on information supplied by a taxpayer. Further, liability for tax under the ITA is not affected by an incorrect assessment, or by the fact that no assessment has been made. Finally, it is contended that the Taxation Operations Manual referred to by the Respondent is not law.
[15] It is argued that there is no requirement in the ITA that a certificate be registered in this Court prior to the issuance of a Requirement to Pay. Further, the Requirement to Pay was received both by the Kensington Medical Clinic Inc. and the Applicant and is acknowledged by the Applicant; that there is no obligation in the ITA that a Requirement to Pay be served in a specific manner. In fact, section 224(5) of the ITA merely specifies that personal service is required in the event that there is some doubt, which is clearly not the case in these proceedings.
[16] It is also argued that the ITA does not require a specific form for a Requirement to Pay issued pursuant to section 224(1), only that such a notice be in writing. Finally, it is submitted that there is no evidence that the address of the Applicant as stated on the Requirement to Pay form is incorrect and, in any event, this is insufficient to invalidate the notice.
[17] I am satisfied that the Applicant cannot obtain the relief he sought with reference to the assessments by the Minister, but the Court did agree to entertain his submissions with respect to his objections as to the validity of the garnishee proceedings.
[18] Section 18.5 of the Federal Court Act provides as follows:
Notwithstanding sections 18 and 18.1, where provision is expressly made by an Act of Parliament for an appeal as such to the Court, to the Supreme Court of Canada, to the Court Martial Appeal Court, to the Tax Court of Canada, to the Governor in
Council or to the Treasury Board from a decision or order of a federal board, commission or other tribunal made by or in the course of proceedings before that board, commission or other tribunal, that decision or order is not, to the extent that it may be so appealed, subject to review or to be restrained, prohibited, removed, set aside or otherwise dealt with, except in accordance with that Act.
[19] The effect of this provision, quite simply, is that the appeal procedure provided for in the ITA from a Notice of Assessment or Notice of Reassessment issued by the Minister cannot be supplanted by a section 18 application to this Court. The fact situation in the present case is strikingly similar to that which was before the Federal Court of Appeal in Minister of National Revenue v. Parsons, [1984] 2 F.C. 331 (F.C.A.). Pratte J.A., speaking for the Court, made the following statements at 332-333:
This is an appeal from a judgment of the Trial Division [[1984] 1 F.C. 804] quashing assessments made by the Minister of National Revenue pursuant to subsection 159(2) and (3) of the Income Tax Act. The special feature of this case is that the judgment under attack was not rendered on an appeal under the provisions of the Income Tax Act. Indeed, the respondents did not bring such an appeal; instead, they chose to apply to the Trial Division under section 18 of the Federal Court Act for an order quashing the assessments made against them and restraining the Minister and his servants from taking further action pursuant to those assessments. That application was granted by the judgment appealed from.
We are all of the opinion that the appeal must succeed on the narrow ground that the only way in which the assessments made against the respondents could be challenged was that provided for in section 169 and following of the Income Tax Act.
[...]
In our view, the Income Tax Act expressly provides for an appeal as such to the Federal Court from assessments made by the Minister; it follows, according to section 29 of the Federal Court Act, that those assessments may not be reviewed, restrained or set aside by the Court in the exercise of its jurisdiction under sections 18 and 28 of the Federal Court Act.
[20] Further, the Applicant admits he "made a conscious decision to not attend the Tax Court of Canada" because of his concern of bias in that Court in that it allegedly lacks independence. In the absence of any evidence to support his serious allegation, I am unable to find that the Applicant was unable to initiate the appeal procedures set out in the ITA nor am I able to conclude that no appeal procedure was in fact open to the Applicant to challenge the assessments upon which the Requirement to Pay was based.
[21] The Applicant submits that the Requirement to Pay is invalid since no certificate was issued by a competent court. As the Minister pointed out, section 224 of the Income Tax Act does not require any formal document to be processed by a competent court before garnishee proceedings can be initiated. Powers are granted to the Minister under this section of the Act: "as soon as the Minister becomes aware that a third person may make a payment to another person who is liable to make a payment in to a tax debtor...may require payment". Section 224(1.2) provides for garnishment procedure. Further, this initiative taken by the Minister is confirmed by the Federal Court of Appeal in Sorenson v. M.N.R. 82 D.T.C. at 6246, Thurlow CJ wrote:
We have not been persuaded that there is any error in the judgment under appeal. Of the various matters referred to, the only point worthy of mention is the submission that procedure to file a certificate under section 223 of the Income Tax Act must be followed by the Minister before he may exercise the power given him by section 224 to require a person who is or is about to become indebted or liable to a taxpayer to make payment to the Receiver General for Canada on account of the taxpayer's liability under the Act. In our opinion, there is no merit in the submission.
[22] With respect, the submission that the parties, the employer as well as the debtor were not properly served is unfounded. Both acknowledge being aware of the garnishee proceedings and
whether personal service was required as provided under section 224(5) only arises where there is some doubt as to whether or not one of the parties may not have been notified. As counsel for the Minister points out, section 2253.56 of the Act - "Service and R.. of Requirement to Pay"
(1) Mail delivery
a) normally requirements are sent through the bulk registration system.
[23] There are provisions should difficulties be encountered but, in the case at bar, once again I refer to the Applicant's own admission that both he and the employer were notified and aware as of February 2002.
[24] It was suggested that the form sent by the Minister called a Requirement to Pay was not a valid form. Pursuant to section 244(13) of the Act any document sent by the Minister signed by an authorized officer is deemed to have been signed by the Minister. The affidavit of Jim McCavour filed with the Respondent's Motion Record at paragraph 13 unequivocally states that the Requirement to Pay forwarded to the employer was signed by a person authorized to do so.
[25] With respect to the Requirement to Pay having expired, in 90 days from the date of notice, a clear reading of the conditions written in the document are irrefutable.
INFORMATION TO THE THIRD PARTY TO WHOM THIS REQUIREMENT TO PAY IS ADDRESSED
This Requirement to Pay applies to each and all of the amounts described in (1), (2), (3) and if applicable (4), on the front of the form. You are required to pay the lesser of the total of such amounts and the maximum payable.
This Requirement to Pay has a continuing effect with respect to the payments described in (3), until the maximum payable is paid in full.
With the exception of the payments described in the preceding paragraph where the requirement has a continuing effect until satisfied, please take notice that this Requirement to Pay is effective for one year with respect to payments described in (2) and 90 days with respect to payments described in (4).
This Requirement to Pay should not be returned prior to one year from the date it was issued.
(4) if the box on the right is X-ed, the moneys that within 90 days you would otherwise loan or advance to, or pay on behalf of, the tax debtor, and, if you are a bank, credit union, trust company or other similar person, pay in respect of a negotiable instrument issued by the tax debtor*,
but do not pay hereunder more than $252,648.32 (the maximum payable), at the rate of 40% out of each period payment, loan or advance and 100% of any additional monies payable upon termination of employment.
[26] The 90 day expiry date applies only when employers or financial institutions are to advance funds to a debtor within 90 days following the service of a Requirement to Pay. It is, as stated, effective for one year.
[27] Dealing with the issue of 50% of the debtor's wages being remitted in the months of October, November and December of 2002, the Applicant confirmed with this Court that the employer had been advised in February of 2002 of the Requirement to Pay but had failed to notify the accountant to withhold. Following a conversation between the employer's accountant and a representative of the Minister, the company agreed to withhold 50% rather than 40% of the Applicant's wages. This no doubt was arranged without the consent of the debtor but undoubtedly negotiated by the employer, who had failed to comply with the Minister's directive from February 2002, when served, until October 2002. The agreement was to the advantage of the employer and to the detriment of the debtor. As I advised him in open Court, it was up to him to take this up with his employer.
[28] In all respects I dismiss the allegations of the Applicant that the Minister acted beyond the scope of the law and all challenges relating to the collection process by way of garnishee were all within the prescribed sections of the ITA.
[29] No equitable remedy is warranted. The application with respect to challenging the assessments by the Minister are dismissed, this Court having no jurisdiction to entertain this aspect of the application.
[30] The application is dismissed.
(Sgd.) "P. Rouleau"
Judge
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-355-02
STYLE OF CAUSE: Dr.:Lenard-Zephirin:Gagne v. MNR et al
PLACE OF HEARING: Vancouver, B.C.
DATE OF HEARING: January 9, 2003
REASONS FOR Order : Rouleau J.
DATED: January 10, 2003
APPEARANCES:
Dr.:Lenard-Zephirin:Gagne FOR APPLICANT
Ms. Neva Beckie FOR RESPONDENT
SOLICITORS OF RECORD:
On his own behalf FOR APPLICANT
Vancouver, British Columbia
Mr. Morris Rosenberg FOR RESPONDENT
Deputy Attorney General of Canada