INCOME TAX |
Practice |
Capital Vision Inc. v. M.N.R.
T-493-00
Dawson J.
8/6/00
30 pp.
Motions for orders extending time for compliance with requirements until 30 days following final disposition of applications for judicial review--In 1996 Capital Vision Inc. and CVI Art Management (CVI) created, promoted charitable giving strategy whereby art purchased in bulk at discount (10% of fair market value) by latter sold in blocks to purchasers at 28 to 33% of fair market value--CVI also arranging for purchaser's art to be donated to registered charity resulting in purchaser benefitting from net savings on purchase price, significant tax credit--In November 1998 Capital Vision Inc. providing Revenue Canada with full access to books, records except for list of purchasers of art --In November 1999 F.C.T.D. granting ex parte order authorizing Minister to impose on applicants requirements under Income Tax Act, s. 231.2(1), (3) to provide information, documents relating to unnamed persons--Applicants moved to review authorization granted ex parte, sought order quashing requirements--Subsequently Minister, applicants agreed to extend deadlines in requirements pending resolution of issues--In February 2000 applicants served with new requirements without judicial authorization --Minister submitting new requirements rendering challenge to old requirements moot; characterizing motions as motions by which applicants trying to prevent prosecution for failure to comply with requirements; arguing Court cannot grant relief because interfering with right to lay information in respect of commission of crime, prosecutorial discretion--Last submission based on premise if applicants fail to comply with requirements may be guilty of offence, liable on summary conviction to fine, imprisonment under s. 238(1)--Motions allowed--(1) Court having jurisdiction pursuant to Federal Court Act, s. 18.2 to grant relief--S. 18.2 giving Court power to make such interim orders as it considers appropriate pending final disposition of application --Minister's characterization of motions for interim relief as motions to prevent laying of criminal charges not accepted --No charge can be laid unless, until applicants failing to comply with requirements within time allowed--By extending such time in order to preserve status quo, Court not preventing laying of charges, although laying of charges may be delayed--If Minister can extend time for compliance without improperly interfering with prosecutorial process, Court may also preserve status quo without improperly interfering with prosecutorial process--Conclusion supported by Licht v. Minister of National Revenue (1990), 90 DTC 6574 (F.C.T.D.) wherein Court exercising jurisdiction at issue, although jurisdictional issue not raised; holding possibility of prosecution under Act unless extension granted constituted irreparable harm--If Court having jurisdiction to extend time for compliance with requirement pending application for judicial review at behest of taxpayer whose affairs subject of Minister's attention, must similarly have jurisdiction to grant extension at behest of party served with requirements, faced with prospect of prosecution in event of non-compliance--Effect of extension (potentially delaying laying of charge) same--(2) Application of test in RJR--MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 to determine whether extension of time should be granted--(i) With respect to requirement served on Capital Vision Inc., serious issue to be tried as to propriety of Minister's efforts to determine identity of specific taxpayers, addresses, and to obtain documents relating to them in absence of any authorization under s. 231.2(3)--Significant length of time between Minister's last contact with representatives of Capital Vision Inc., Minister's steps before Court to obtain order authorizing issuance of first requirements noted--With respect to requirements served on other applicants, serious issue raised as to whether requirements misleading and if so, whether any misleading statement invalidated requirements--Not sufficient for Minister to argue for purpose of submitting no serious issue raised that applicants have adduced no evidence Minister not genuinely inquiring into affairs of individuals named in Schedule A to requirements served on applicants other than Capital Vision Inc.--Nor sufficient for Minister to argue, for same purpose, applicants knew Minister interested in information, documents relating to clients of Capital Vision Inc.--(ii) Applicants establishing irreparable harm--Irreparable harm must be of material nature which cannot be adequately remedied by damages--Mere laying of criminal charge carrying real potential for great prejudice to applicants, reputation, even if ultimately acquitted--In addition to prejudice inherent in facing charge under Act, at lease two applicants indicating will comply with requirements if not successful in obtaining interim relief--Compliance with requirements rendering judicial review application nugatory and would, contrary to Minister's submission, not result in opportunity to take any challenge in criminal courts--(iii) Once information available, Minister could protect any limitation period by issuing notices of reassessment--Failure to grant extension would place applicants in position where must choose between making disclosure required, thus rendering judicial review proceeding moot and creating potential for damage to commercial relationship between Capital Vision and customers, and failing to make disclosure which would invite criminal prosecution--Balance of convenience favouring grant of extension--Federal Court Act, R.S.C., 1985, c. F-7, s. 18.2 (as enacted by S.C. 1990, c. 8, s. 5)--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 231.2 (as am. by S.C. 1996, c. 21, s. 58), 238.