Judgments

[1996] 2 F.C. 146

A-68-95

Norman A. Mintzer (Appellant) (Plaintiff)

v.

Her Majesty the Queen (Respondent) (Defendant)

Indexed as: Mintzer v. Canada (C.A.)

Court of Appeal, Stone, Strayer and Linden JJ.A.— Toronto, November 17; Ottawa, December 21, 1995

Pensions — Appeal from F.C.T.D. decision dismissing motion for summary judgment MNR not entitled to set-off unpaid income taxes against Canada Pension Plan retirement benefits — Minister requiring debt be retained by way of statutory set-off — C.P.P., ss. 65(1), 108(3)(a) not affecting right of deduction or set-off in Income Tax Act, s. 224.1 — Set-off, attachment distinguished — Retirement benefits not trust funds in hands of Crown — New s. 65(1.1) not intended to bind Crown — Minister entitled to set-off — Genuine issue for trial under R. 432.2(1).

Income tax — Whether MNR may set-off unpaid income tax against C.P.P. retirement benefits — Under Income Tax Act, s. 224.1 MNR may require retention by set-off where person indebted to Her Majesty — Set-off at law distinguished from equitable set-off — No necessity for legal process as statutory authority — 1995 C.P.P. amendments not overriding s. 224.1.

Crown — Creditors and debtors — Unpaid income taxes retained by deduction or set-off under Income Tax Act, s. 224.1 — Taxpayer not released from paying debt — Crown not bound by Canada Pension Plan, s. 65(1.1) — Set-off not equivalent to attachment under Ontario law — Not requiring legal process for execution under s. 224.1 — “Seizure and execution” in s. 65(1.1) not including set-off — Crown entitled to set-off.

This was an appeal from a Trial Division decision dismissing a motion for summary judgment in which the taxpayer claimed that the Minister of National Revenue was not entitled to set-off unpaid income taxes against Canada Pension Plan retirement benefits payable to him. In March 1993, the Minister executed a form of “statutory set-off” requiring that $75,245.22 be retained by way of deduction or set-off, for taxes owing for the years 1986 to 1991, from amounts payable to the taxpayer under the Canada Pension Plan. Although not admitted in pleadings, the Crown admitted in affidavit evidence that the taxpayer was under no liability to pay taxes for the taxation years 1986 to 1991 because he was not a resident of Canada in any of those years. The Crown did, however, maintain that Revenue Canada had not at any time released him from, or forgiven him for unpaid taxes for the taxation years 1973, 1974 and 1976 to 1979 inclusive. The Motions Judge ruled that subsection 65(1) of the Canada Pension Plan does not affect the right of deduction or set-off in section 224.1 of the Income Tax Act and concluded that the dispute raised a genuine issue for trial, which could not be decided on summary judgment. There were two principal issues in this appeal: 1) whether the Crown was entitled to set-off unpaid income taxes against retirement benefits payable to the appellant, and 2) if so, whether the 1995 amendment to the Canada Pension Plan prevented the Crown from exercising its right of set-off.

Held, the appeal should be dismissed.

1) Section 224.1 of the Income Tax Act authorizes the Minister to require retention by way of deduction or set-off “where a person is indebted to Her Majesty”. Although the set-off may have been executed with the debt thought to exist for the 1986-1991 taxation years in mind, it was not by its terms limited to that particular debt. In this case the statutory set-off broadly applied to any benefits payable to the appellant under the Canada Pension Plan for any unpaid income taxes including that owing for the 1973, 1974 and 1976 to 1979 taxation years, up to the limit of $75,245.22 specified therein. This “set-off” is not equivalent in law to “attachment” as understood under the law of Ontario where the set-off was executed. This is a set-off at law as distinguished from equitable set-off. “Attachment” refers to an attachment under legal process while “set-off”, in the context of section 224.1 of the Income Tax Act, neither depends on nor requires legal process for its execution. The statute itself provides the necessary authority. The word “attached” in subsection 65(1) of the Canada Pension Plan signifies something that is given to or exercised by a third party rather than by the Crown. The benefits payable to the appellant were not insulated from set-off on the basis that they constitute trust funds in the hands of the Crown under paragraph 108(3)(a) of the Canada Pension Plan. It is not the contributions which are paid into the Consolidated Revenue Fund that are subject to the statutory set-off but the “benefits” which are or become “payable” to a beneficiary under the Canada Pension Plan. This statute manifests no intention to create a trust either in respect of contributions or benefits. The role of the Crown with respect to monies credited to the Canada Pension Plan Account or to benefits not yet paid is that of an administrator in the exercise of its governmental functions rather than that of a trustee.

2) Appellant’s submission was that the provisions of subsection 65(1.1) of the Canada Pension Plan, which became effective on July 13, 1995, prohibits the setting-off of benefits against a debt for unpaid taxes because such a set-off amounts to “seizure and execution”. The new subsection was not intended to bind the Crown and to override the provisions of section 224.1 of the Income Tax Act . If Parliament had intended to nullify the right of set-off in section 224.1, it could easily have done so by express language in subsection 65(1.1). “Set-off” is a quite different legal concept than either “seizure” or “execution” at common-law or in equity. “Seizure and execution” in subsection 65(1.1) are not intended to include a set-off so as to nullify the rights conferred on the Minister under section 224.1 of the Income Tax Act . The Crown’s right of set-off against the appellant was not affected by the 1995 amendment. As moving party for summary judgment under subsection 432.2(1) of the Rules, the appellant failed to bring forth evidence showing that there was no genuine issue for trial. The respondent has satisfied the requirement of that subsection in showing that there was a genuine issue for trial. The Motions Judge did not err in dismissing the appellant’s motion for summary judgment.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Canada Pension Plan, R.S.C., 1985, c. C-8, ss. 2(1) “benefit”, 62(2), 65(1),(1.1) (as enacted by S.C. 1995, c. 33, s. 29), 65.1(1) (as enacted by R.S.C., 1985 (2nd Supp.), c. 30, s. 33), 108(1),(2) (as am. by S.C. 1995, c. 33, s. 46), (3)(a ).

Canadian Charter of Rights and Freedoms, being Part I of the Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44], ss. 7, 8, 12, 15, 26.

Civil code of Québec, S.Q. 1991, c. 64, Art. 1676.

Code of Civil Procedure, R.S.Q., c. C-25, Art. 553(12).

Federal Court Rules, C.R.C., c. 663, RR. 341, 432.1 (as enacted by SOR/94-41, s. 5), 432.2 (as enacted idem), 432.3 (as enacted idem), 432.4 (as enacted idem), 432.5 (as enacted idem), 432.6 (as enacted idem), 432.7 (as enacted idem).

Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 224.1.

Interpretation Act, R.S.C., 1985, c. I-21, s. 17.

CASES JUDICIALLY CONSIDERED

CONSIDERED:

Alberta Government Telephones v. Canada (Canadian Radio-television and Telecommunications Commission), [1989] 2 S.C.R. 225; [1989] 5 W.W.R. 385; (1989), 26 C.P.R. (3d) 289; 98 N.R. 161; Overseas Aviation Engineering (G.B.) Ltd., In re, [1963] Ch. 24 (C.A.); Bankruptcy Notice, A, In re, [1934] Ch. 431 (C.A.); Sigurdson v. The Queen in right of British Columbia (1982), 132 D.L.R. (3d) 131; [1982] 2 W.W.R. 579; 33 B.C.L.R. 190; 41 C.B.R. (N.S.) 113 (B.C.C.A.).

REFERRED TO:

Holt v. Telford, [1987] 2 S.C.R. 193; (1987), 81 A.R. 385; 41 D.L.R. (4th) 385; [1987] 6 W.W.R. 385; 54 Alta. L.R. (2d) 193; 39 B.L.R. 241; 21 C.P.C. (2d) 1; 78 N.R. 321; Atlantic Lines & Navigation Co. Inc. v. Didymi (The), [1988] 1 F.C. 3 (1987), 39 D.L.R. (4th) 399; 78 N.R. 99 (C.A.); Aero Trades (West.) Ltd. (Receiver of) v. Can., [1989] 1 W.W.R. 723; (1988), 71 C.B.R. (N.S.) 97; 18 C.E.R. 139; [1989] 1 C.T.C. 142; 89 DTC 5050; 2 TCT 4042 (F.C.A.); W. C. Fast Enterprises Ltd. v. All-Power Sports (1973) Ltd., Astrope and Royal Bank of Canada (1981), 29 A.R. 483; 126 D.L.R. (3d) 27; 16 Alta. L.R. (2d) 47; 40 C.B.R. (N.S.) 182 (C.A.); Paterson (D.S.) & Co. Ltd., Re, [1931] O.R. 777 (S.C.); R. v. Guerin, [1983] 2 F.C. 656 (1982), 143 D.L.R. (3d) 416; [1983] 2 W.W.R. 686; [1983] 1 C.N.L.R. 20; 13 E.T.R. 245; 45 N.R. 181 (C.A.); Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3; (1992), 88 D.L.R. (4th) 1; [1992] 2 W.W.R. 193; 84 Alta. L.R. (2d) 129; 3 Admin. L.R. (2d) 1; 7 C.E.L.R. (N.S.) 1; 132 N.R. 321; Johnston v. Hogg (1882-83), 10 Q.B.D. 432; Feoso Oil Ltd. v. Sarla (The), [1995] 3 F.C. 68 (1995), 184 N.R. 307 (C.A.).

AUTHORS CITED

Dunlop, C. R. B. Creditor-Debtor Law in Canada, 2nd ed. Toronto: Carswell, 1995.

Halsbury’s Laws of England, vol. 42, 4th ed. London: Butterworths, 1983, para. 406.

Judge, J. A. M. and M. E. Grottenthaler. “Legal and Equitable Set-Offs” (1991), 70 Can. Bar Rev. 91.

Law Reform Commission of British Columbia. Report on Set-Off (LRC 97). Vancouver: Ministry of Attorney General, 1988.

Palmer, K. R. The Law of Set-Off in Canada. Aurora, Ont.: Canada Law Book, 1993.

APPEAL from Trial Division decision ([1995] 1 C.T.C. 220) dismissing appellant’s motion for summary judgment under subsection 432.3(1) of the Federal Court Rules. Appeal dismissed.

COUNSEL:

Norman A. Mintzer on his own behalf.

Harley R. Nott for respondent (defendant).

SOLICITORS:

Norman A. Mintzer on his own behalf.

Deputy Attorney General of Canada for respondent (defendant).

The following are the reasons for judgment rendered in English by

Stone J.A.: By a motion brought in this action the appellant seeks relief by way of summary judgment on the basis that, at law, the Minister of National Revenue is not entitled to have set-off against Canada Pension Plan [R.S.C., 1985, c. C-8] retirement benefits payable to him for any alleged debt for income taxes owing under the Income Tax Act [R.S.C., 1985 (5th Supp.), c. 1]. The learned Motions Judge, Rothstein J., dismissed the motion [[1995] 1 C.T.C. 220]. In argument before this Court the appellant relies as well on a recent amendment of the Canada Pension Plan, from which he argues that the Minister is prohibited from continuing to set-off any benefits payable from and after the date the amendment became law.

A form of “statutory set-off” of March 31, 1993, directed to the “Canada Pension Plan, Income Security Programs, Health & Welfare Canada”, was executed by the Director—Taxation, Toronto District Office of the Department of National Revenue Taxation. It reads in part as follows:

PURSUANT to one or more of the following acts, the undersigned hereby requires that $75,245.22 be retained by way of deduction or set-off from such amounts as may be or may become payable by you to the taxpayer whose name appears above,

at the rate of an amount each month equal to 100 per centum of each amount which may be or may become payable to the said taxpayer,

in respect of the transaction(s) detailed below plus any other amounts that may be or may become payable to the taxpayer, and where the taxpayer is an employee, any amount payable upon termination of employment to such taxpayer by Her Majesty in Right of Canada until such time as this requirement is withdrawn or the amount owed by the taxpayer has been satisfied.

THIS REQUIREMENT has been executed under one or more of the following Acts:

the Income Tax Act, the Canada Pension Plan, the Unemployment Insurance Act, the Petroleum and Gas Revenue Tax Act.

Requisition for payment is to be forwarded monthly in accordance with interdepartmental settlement procedures and must be identified with Intra Number, Creditor Account Code, the taxpayer’s name, address, Social Insurance Number, where applicable and Account Number.

The appellant alleges that in April 1992 the Minister advised him to file returns for the taxation years 1986 to 1991, inclusive, in order to be eligible for Canada Pension Plan benefits. He also alleges that prior to filing for those years he “did not owe any monies”. He further alleges that he began receiving benefits of $372.30 per month in August 1992. By paragraphs 8 and 9 of his pleading, the appellant alleges as follows:

8. In or about the month of May 1993 the Defendant seized the plaintiff’s Canada pension Plan retirement payments allegedly for taxes owing for the years 1986 through 1991. The last of such payments was received by the plaintiff in April 1993, and there were no taxes owing.

9. The plaintiff alleges that the seizure of his Canada Pension Plan Benefits is invalid and void under the Canada Pension Plan Act, R.S.C. 1985, chap C-8, as amended, in that:

a) It is an assignment, charge, attachment, anticipation or giving or taking as security of the plaintiff’s benefits in contravention of section 65: and

b) It is not an authorized payment under section 108.

Paragraph 14 of this pleading contains the following allegation:

14. The plaintiff alleges that the Canada Pension Plan Act is a contributory, earnings related plan that offsets loss of income due to retirement, disability and death, and its funds are held in trust by the defendant for the benefit of the contributors one of whom was the plaintiff.

The appellant acknowledges in paragraphs 16 and 18 of his pleading that his income for the years 1973 and 1974 was reassessed by Revenue Canada and that he appealed. By paragraph 19, he alleges:

19. In or about the year 1988 the defendant released and forgave the plaintiff from any debt owing by him to Her for taxes to date, and the appeals were not pursued.

The appellant goes on in paragraphs 20 to 26 to allege that the Minister illegally seized monies standing in his trust account, that the respondent admitted “the impropriety of their actions” and that in or about 1988 “the defendant released and forgave the plaintiff from any debt owing to him to Her for taxes to compensate for the harm injury and damage caused to the plaintiff and his family by their illegal actions”. He also alleges certain infringements and denials of rights and freedoms guaranteed by sections 7, 8, 12, 15 and 26 of the Canadian Charter of Rights and Freedoms [being Part I of the Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44]]. These allegations were not pursued in argument before this Court.

The respondent raises the following defences in paragraphs 9-13 of the statement of defence:

9. As a result of the aforementioned assessments for taxation years 1986 to 1991 taxes were levied against the Plaintiff in the amount of $70,178.51, including penalties and interest.

10. After unsuccessful attempts to contact the plaintiff in order to collect the aforementioned debt owing to Her Majesty the Queen, the Minister of National Revenue, pursuant to s. 224.1 of the Income Tax Act, required the detention by way of deduction or set-off in the amount of $75,245.22 which was the amount then owing, including accrued interest, from the amounts payable to the Plaintiff under the Canada Pension Plan. The requisition for this statutory set-off was sent to Health and Welfare Canada on March 31, 1993 and notice was sent to the plaintiff by mail on the same day at his last recorded mailing address.

11. Pursuant to the statutory set-off required by the Minister of National Revenue, the full amount of the retirement pension payable to the Plaintiff was retained commencing in May, 1993 and continuing to the present date.

12. The Defendant states that the set-off required by the Minister of National Revenue was and is valid and is not precluded by any provision of the Canada Pension Plan, and, in particular, s. 65. The Defendant states that the set-off is not an assignment, charge, attachment, anticipation or giving or taking as security within the meaning of the said provision. Moreover, the set-off does not constitute and (sic) additional charge to the Canada Pension Plan account and therefore s. 108 of the Canada Pension Plan has no application. The Defendant accordingly denies paragraph 9 of the Plaintiff’s Statement of Claim.

13. With respect to paragraph 14 of the Statement of Claim, the Defendant denies that the monies in the Canada Pension Plan account are held in trust by the Crown for the benefit of contributors to or recipients of money from the account.

Paragraphs 20 and 21 of this pleading allege as follows:

20. On or about November, 1993 Revenue Canada Taxation received from the Plaintiff T1 Adjustment Requests dated October 18, 1993 with respect to his individual tax returns for taxation years 1986 to 1991 inclusive. The Plaintiff thereby seeks an adjustment on the basis that he was a non-resident of Canada during the said years, that none of the income reported in those tax returns was earned in Canada or received from Canadian sources and that he had filed the returns in order to be eligible for Canada Pension Plan benefits. The said T1 Adjustment Requests have not to date been disposed of and the Defendant, therefore, denies the allegations in paragraphs 7 and 8 of the Statement of Claim. In the event that the Plaintiff’s requests are granted, there would be no tax liability by the Plaintiff during those taxation years as currently being set-off in the amount of $75,245.22.

21. The Plaintiff has a previous unpaid debt to the Defendant for unpaid taxes for taxation years 1973, 1974 and 1976 to 1979 inclusive. The Defendant denies that the Plaintiff was released and forgiven for this debt as alleged in paragraph 19 of the Statement of Claim. On or about December 21, 1988 the outstanding balance then owing in the amount of $117,400.74 was deleted by Revenue Canada as being uncollectible. The debt with accrued interest remains outstanding and may be re-instated for collection at any time whenever circumstances indicate that collection is possible. The Defendant further denies the allegations of fact contained in paragraphs 7 and 8 of the Statement of Claim in this regard.

In paragraph 23, the respondent alleges that the appellant did not pursue his assessment appeals and denies “that the appeals were not pursued because the debt was forgiven by Revenue Canada” as alleged by the appellant in paragraph 19 of his pleading. By its affidavit evidence, however, the respondent admits that the appellant is under no liability to pay any taxes under the Income Tax Act for the taxation years 1986 to 1991 because he was not a resident of Canada in any of those years, but that “Revenue Canada did not at anytime release the plaintiff from, or forgive him for” unpaid taxes for the taxation years 1973, 1974 and 1976 to 1979 inclusive[1] even though the debt was “deleted by Revenue Canada Taxation as uncollectible in 1988”.[2] This evidence is not controverted.

Shortly after the defence was filed, the appellant launched the motion for judgment upon the grounds set forth in the notice of motion, which read:

1. Pursuant to Rules 432.1(1) and 432.3, in that the seizure of the Canada Pension Plan Benefits by the Defendant is prohibited by section 65 of the Canada Pension Plan Act R.S.C. 1985, chapt C-8 and amendments thereto, and is null and void;

2. Pursuant to Rules 432.1(1) and 432.3, in that the payment of the plaintiff’s Canada Pension Plan Benefits to the Defendant or to its behalf is prohibited by section 108 of the Canada Pension Plan Act and is null and void;

3. Pursuant to Rules 341, 432.1(1) nd (sic) 432.2, in that the Defendant has admitted that the debt upon which the Plaintiff’s Canada Pension Plan Benefits were seized by it is not owing by the plaintiff to the defendant and is therefore not a debt upon which the said Benefits could be so seized.

Rules 341, 432.1(1) [as enacted by SOR/94-41, s. 5] and 432.3 [as enacted idem] of the Federal Court Rules [C.R.C., c. 663] read:

Rule 341. A party may, at any stage of a proceeding, apply for judgment in respect of any matter

(a) upon any admission in the pleadings or other documents filed in the Court, or in the examination of another party, or

(b) in respect of which the only evidence consists of documents and such affidavits as are necessary to prove the execution or identity of such documents,

without waiting for the determination of any other question between the parties.

…

Rule 432.1 (1) A plaintiff may, after the defendant has filed a defence, or earlier with leave of the Court, and at any time prior to the fixing of the time and date for trial, make a motion to a judge, with supporting affidavit material or other evidence, for summary judgment on all or part of the claim in the statement of claim.

…

Rule 432.3 (1) Where a judge is satisfied that there is no genuine issue for trial with respect to a claim or defence, the judge shall grant summary judgment accordingly.

(2) Where a judge is satisfied that the only genuine issue is the amount to which the moving party is entitled, the judge may order a trial of that issue or grant summary judgment with a reference to determine the amount.

(3) Where a judge is satisfied that the only genuine issue is a question of law, the judge may determine the question and grant summary judgment accordingly.

(4) Where a judge decides that there is a genuine issue with respect to a claim or defence, the judge may nevertheless grant summary judgment in favour of any party, either upon an issue or generally, unless

(a) the judge is unable on the whole of the evidence to find the facts necessary to decide the questions of fact or law; or

(b) the judge considers that it would be unjust to decide the issues on the motion for summary judgment.

(5) Where a motion for summary judgment is dismissed, either in whole or in part, a judge may order the action, or the issues in the action not disposed of by summary judgment, to proceed to trial in the usual way, but upon the request of any party, a judge may order an expedited trial under rule 327.1.

The appellant does not actually seek a judgment pursuant to Rule 341 but, rather, relies on admissions of the kind referred to in that Rule to support his motion for summary judgment.

In dismissing the motion, the Motions Judge dealt with the issue of whether a debt for unpaid income taxes was owing at the time the statutory set-off was executed, and concluded at page 221 of his reasons:

On this motion, it was agreed by the parties that no income tax moneys were owing by the plaintiff for the years 1986 to 1991. The seizures were originally effected to recover a debt owed for this period. It has been determined that the plaintiff was not a resident of Canada during that period. Nonetheless, the defendant says that the plaintiff owes more than $117,000 in income tax from a period during the 1970s and that the Canada Pension Plan moneys seized should apply to this debt. The plaintiff says he was released from this obligation or that the obligation has been forgiven. On this dispute there is a genuine issue for trial and it cannot be decided on summary judgment.

He dealt next with the appellant’s submission that the Canada Pension Plan benefits are insulated from the set-off by virtue of subsection 65(1) and paragraph 108(3)(a) of that statute. At pages 222-223 of his reasons, the Motions Judge stated:

Section 224.1 [of the Income Tax Act] uses the words “retention by way of deduction or set-off…out of any amount that may be or become payable to such person by Her Majesty in right of Canada.” Subsection 65(1) of the Canada Pension Plan refers to assignments, charges, attachments and security. A deduction or set-off under section 224.1 is between Her Majesty on the one hand and the recipient of moneys from Her Majesty on the other. The assignment, charge, attachment, or security envisaged by subsection 65(1) is to be given to or exercised by a third party, pertaining to moneys payable by Her Majesty as a benefit under the Canada Pension Plan to the recipient thereof. Subsection 65(1) does not affect the right of deduction or set-off in section 224.1 of the Income Tax Act.

Paragraph 108(3)(a) of the Canada Pension Plan provides that all amounts payable under the Canada Pension Plan on account of benefits shall be paid out of the Consolidated Revenue Fund and charged to the Canada Pension Plan Account. Section 224.1 allows the Minister to retain, by way of deduction or set-off, amounts that may be or become payable to a person by Her Majesty. Clearly the amounts that are payable to a person in respect of the Canada Pension Plan are amounts that may be retained by way of deduction or set-off by the Minister under section 224.1.

The plaintiff’s arguments, based on subsection 65(1) and paragraph 108(3)(a) of the Canada Pension Plan are without merit. This finding is without prejudice to any other basis for claim the plaintiff may have. The matter is otherwise inappropriate to be decided by way of summary judgment and shall be referred to trial.

The statutory provisions in issue are section 224.1 of the Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, as amended:

224.1 Where a person is indebted to Her Majesty under this Act or under an Act of a province with which the Minister of Finance has entered into an agreement for the collection of the taxes payable to the province under that Act, the Minister may require the retention by way of deduction or set-off of such amount as the Minister may specify out of any amount that may be or become payable to the person by Her Majesty in right of Canada.

and subsection 65(1) and paragraph 108(3)(a) of the Canada Pension Plan, R.S.C., 1985, c. C-8, as amended:

65. (1) A benefit shall not be assigned, charged, attached, anticipated or given as security, and any transaction purporting to assign, charge, attach, anticipate or give as security a benefit is void.

…

108. …

(3) There shall be paid out of the Consolidated Revenue Fund and charged to the Canada Pension Plan Account

(a) all amounts payable under this Act as or on account of benefits or otherwise;

The appellant also relies on an amendment of the Canada Pension Plan adopted by section 29 of S.C. 1995, c. 33:

29. Subsections 65(2) and (3) of the Act are replaced by the following:

(1.1) A benefit is exempt from seizure and execution, either at law or in equity.

This amendment came into force July 13, 1995.

The principal issues in this appeal are twofold. The first is whether by law the Crown is entitled to a set-off of retirement benefits payable to the appellant against a debt for unpaid income taxes. The second is whether, if the Crown is so entitled, the 1995 amendment of the Canada Pension Plan prohibits the Crown from setting-off those benefits against a debt for unpaid income taxes from and after the date that amendment came into force. These issues must be analyzed with the relief sought on the motion in mind—that of securing a judgment before trial pursuant to Rule 341 or Rules 432.1 to 432.7 [as enacted by SOR/94-41, s. 5] of the Federal Court Rules .

I shall deal with the issues in the order in which they were presented in argument at the hearing.

Crown’s right of set-off prior to July 13, 1995

The appellant submits that the statutory set-off, if valid, cannot be used to set-off retirement benefits against any debt for unpaid income tax owing for any taxation year other than the taxation years 1986 to 1991, both inclusive. He then contends that the set-off is expressly prohibited by subsection 65(1) of the Canada Pension Plan and that, in any event, it cannot be effected against monies held in trust by the Crown pursuant to the provisions of that statute.

A summary judgment under Rules 432.1 to 432.7, is available in a proper case. Under paragraph 341(a) of the Rules, judgment may be sought “upon any admission” contained in one of the source documents therein mentioned. In the present case, the respondent did admit that the International Audit Section of Revenue Canada, Toronto District Office, “has deemed Mr. Mintzer to be a non-resident of Canada for taxation purposes for the taxation years 1986 to 1991, inclusive”, that the appellant was not required to file income tax returns for those years and that his arrears balance would be adjusted accordingly “to reflect that the particular debt thought to have arisen from these years does not exist”.[3] However, it states that a decision was made “to apply any credit balance resulting from the above adjustments, to set-off any subsequent Canada Pension Plan benefits that Mr. Mintzer receives following appropriate adjustments, against the aforementioned debt of Mr. Mintzer in the amount of $117,400.34 owing by him from the taxation years 1973, 1974, and 1976 to 1979”.[4]

The appellant submits that he is entitled to judgment under the Rules on the basis of these admissions. He contends that as the statutory set-off expressly required that the sum of “$75,245.22” be retained by way of deduction or set-off from such amounts as may be or may become payable to him under the Canada Pension Plan . He argues that as he owes no taxes for any of the 1986 to 1991 taxation years, the statutory set-off cannot be applied to benefits in respect of a debt for any taxes he may owe for the taxation years 1973, 1974 and 1976 to 1979. I have difficulty in accepting this contention. Section 224.1 of the Income Tax Act authorizes the Minister to require retention by way of deduction or set-off “[w]here a person is indebted to Her Majesty”. Although the statutory set-off may have been executed with the debt thought to exist for the 1986 to 1991 taxation years in mind, it is not by its terms limited to the collection of that particular debt. It requires only that the amount of “$75,245.22” be retained by way of deduction or set-off and states that it “has been executed under … the Income Tax Act”, without identifying a particular taxation year or years for which the debt is owing. It seems to me that the statutory set-off broadly applies to any benefits payable to the appellant under the Canada Pension Plan for any unpaid income taxes including that owing for the 1973, 1974 and 1976 to 1979 taxation years, up to the limit of $75,245.22 specified therein unless the statutory set-off should earlier be withdrawn.

The appellant next argues that by the statutory set-off the Minister has “attached” the benefits in question contrary to subsection 65(1) of the Canada Pension Plan. I do not agree. In my view, this “set-off” is not equivalent in law to “attachment” as understood under the law of Ontario where the set-off was executed. What we have here is set-off at law as distinguished from equitable set-off.[5] By subsection 224.1 of the Income Tax Act the Minister is broadly entitled to a deduction or set-off according to its provisions. In my view, however, “attachment” and “set-off” are distinct legal concepts. As I understand it, “attachment” refers to an attachment under legal process. See e.g. W. C. Fast Enterprises Ltd. v. All-Power Sports (1973) Ltd., Astrope and Royal Bank of Canada (1981), 29 A.R. 483 (C.A.), at pages 497-498, where McGillivray, C.J.A. relied, inter alia, on the opinion of Sedgewick J. in Paterson (D.S.) & Co. Ltd., Re, [1931] O.R. 777 (S.C. in bankruptcy), at page 780, that the words “seizure or attachment” in an Ontario statute were “intended to cover exercise of judicial power”.[6] I do not see that “set-off”, in the context of section 224.1 of the Income Tax Act, depends on or requires legal process for its execution. The statute itself provides the necessary authority. No resort to legal process is required.

I respectfully agree with the Motions Judge that the word “attached” in subsection 65(1) of the Canada Pension Plan signifies something that is given to or to be exercised by a third party rather than by the Crown. The subsection appears to be aimed at ensuring that benefits payable under the statute be for the beneficiary’s own use by preventing that person from alienating or encumbering them. The exception contained in subsection 65.1(1), allowing an assignment in favour of a spouse, supports this contention. That subsection reads:[7]

65.1 (1) Notwithstanding subsection 65(1) but subject to this section, the Minister may approve the assignment of a portion of a contributor’s retirement pension to his spouse, on application in prescribed manner and form by the contributor or his spouse, if the circumstances described in either subsection (6) of (7) exist.

But for this subsection the prohibitions in subsection 65(1) would clearly prevent such an assignment. I can find no indication from the language of the subsection that it was meant to prevent the Minister from exercising the power conferred by section 224.1 of the Income Tax Act.

I am also of the view that the benefits payable to the appellant are not insulated from set-off on the basis that they constitute trust funds in the hands of the Crown under paragraph 108(3)(a) of the Canada Pension Plan. Subsection 62(2) in Part II of that statute indicates at what point in time benefits are deemed to become payable to a beneficiary. It reads:

62. …

(2) For the purposes of this Act, where a benefit is payable under this Part commencing with any month, the benefit shall be deemed to have become payable at the beginning of that month.

Subsection 108(1) of the Canada Pension Plan establishes in the accounts of Canada “an account to be known as the Canada Pension Plan Account”. Subsection 108(2) [as am. by S.C. 1995, c. 33, s. 46] requires specified amounts and interest to be paid into the Consolidated Revenue Fund and be credited to the Canada Pension Plan Account. Pension “benefits” are, by paragraph 108(3)(a), to be “paid out of the Consolidated Revenue Fund and charged to the Canada Pension Plan Account”.

On the basis of section 108 the appellant contends that the “benefits” are held in trust by the Crown and cannot be set-off against a debt for unpaid taxes. In my opinion this argument is without merit. It is not the contributions which are paid into the Consolidated Revenue Fund that are subject to the statutory set-off but the “benefits” which are or become “payable” to a beneficiary under the Canada Pension Plan. It seems to me that the “benefits”[8] as such would no longer be subject to any trust for which the appellant contends, if a trust there be. I am not satisfied, in any event, that the statute manifests an intention to create a trust either in respect of contributions or benefits.[9] As I read the Canada Pension Plan the role of the Crown with respect to monies credited to the Canada Pension Plan Account or to benefits not yet paid, is that of an administrator in exercise of its governmental functions rather than of a trustee.

Crown’s right of set-off after July 13, 1995

The appellant submits that the provisions of subsection 65(1.1), which became effective on July 13, 1995, prohibits the setting-off of benefits against a debt for unpaid taxes because such a set-off amounts to “seizure and execution”. The respondent advances three arguments against the words “seizure” and “execution” being construed so as to override the right of set-off under section 224.1 of the Income Tax Act. First, the amending statute does not purport to expressly qualify the right of set-off under section 224.1, as would have been the case had subsection 65(1.1) of the Canada Pension Plan been introduced with such words as: “Notwithstanding the provisions of any other statute”, and that the absence of some such words indicates an intention that the right of set-off be in no way affected by the amendment. Secondly, that just as “set-off” and “attachment” are distinct legal concepts, so too are “set-off”, “seizure” and “execution”. Finally, by virtue of section 17 of the Interpretation Act, R.S.C., 1985, c. I-21, the Crown is not bound by the restrictions in the 1995 amendment. That section reads:

17. No enactment is binding on Her Majesty or affects Her Majesty or Her Majesty’s rights or prerogatives in any manner, except as mentioned or referred to in the enactment.

The respondent argues that nothing in the 1995 amendment manifests an intention to bind the Crown, upon any of the tests laid down in Alberta Government Telephones v. Canada (Canadian Radio-television and Telecommunications Commission), [1989] 2 S.C.R. 225, at pages 270-283, which held that the Crown will be bound by express words in a statute or by a clear intention revealed by the context of other textual provisions or where the purpose of a statute would be wholly frustrated if the government were not bound. (See also Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3, per La Forest J. at pages 52-63.) I do not find in subsection 65(1.1) or in the context any intention to bind the Crown including that the purpose of the statute would be wholly frustrated if the Crown were not bound by its provisions.

I cannot see that the new subsection was intended to override the provisions of section 224.1 of the Income Tax Act. The terms used in that section are “deduction or set-off”, neither of which appear in subsection 65(1.1). Parliament was obviously well aware of the distinction between attachment and deduction or set-off. If Parliament had intended to nullify the right of set-off in section 224.1 of the Income Tax Act , it could easily have done so by express language in subsection 65(1.1) of the Canada Pension Plan.

Moreover, in its ordinary and natural meaning “seizure” as understood at common law is “a forcible taking possession”: Johnston v. Hogg (1882-83), 10 Q.B.D. 432, per Cave J., at page 434.[10] The word “execution” was defined by Lord Denning M.R. in Overseas Aviation Engineering (G.B.) Ltd., In re , [1963] Ch. 24 (C.A.), at page 39, as “the process for enforcing or giving effect to the judgment of the court”.[11] The term “set-off” has been defined in Bankruptcy Notice, A, In re, [1934] Ch. 431 (C.A.) by Lord Hanworth M.R., at page 437 as follows:

With regard to the word “set-off”, that is a word well known and established in its meaning; it is something which provides a defence because the nature and quality of the sum so relied upon are such that it is a sum which is proper to be dealt with as diminishing the claim which is made, and against which the sum so demanded can be set off.

In Halsbury’s Laws of England, 4th ed. (London: Butterworths, 1983), vol. 42, paragraph 406, the following definition of that term appears:

Where A has a claim for a sum of money against B and B has a cross-claim for a sum of money against A such that B is, to the extent of his cross-claim, entitled to be absolved from payment of A’s claim, and to plead his cross-claim as a defence to an action by A for enforcement of his claim, then B is said to have a right of set-off against A to the extent of his cross-claim. [Footnotes omitted.]

In Sigurdson v. The Queen in right of British Columbia (1982), 132 D.L.R. (3d) 131 (B.C.C.A.), Carrothers J.A., speaking for a majority, dealt with the concept of set-off at page 592, as follows:

The law relating to true set-off is well settled. A true set-off of indebtedness can take place only between two debtors who are at the same time one another’s creditors. A set-off is merely the remission or cancellation pro tanto of reciprocal debts by applying one’s credit receivable from another against one’s debt owed to that other. A set-off is a cross-claim for money’s worth respecting mutual or reciprocal debts due and owing from and to the same parties in the same right.

It is apparent that “set-off” is a quite different legal concept than either “seizure” or “execution” at common law or in equity.[12]

In my view, the 1995 amendment does not in this case prevent the Crown from exercising its right of set-off under section 224.1 of the Income Tax Act. It seems to me that “seizure and execution” in subsection 65(1.1) of the Canada Pension Plan are not intended to include a set-off so as to nullify the rights conferred on the Minister under section 224.1 of the Income Tax Act. These words, it appears, were intended to be additions to the list of prohibitions already contained in subsection 65(1). The Crown’s right of set-off against the appellant under section 224.1 of the Income Tax Act is not, in my view, affected by the amendment.

I am satisfied that the Motions Judge did not err in dismissing the appellant’s motion for summary judgment. As already stated, as a matter of law section 224.1 of the Income Tax Act entitles the Minister to set-off for any unpaid taxes owing under that statute for the taxation years 1973, 1974 and 1976 to 1979, inclusive, against benefits payable to the appellant from time to time under the Canada Pension Plan up to the limit specified in the statutory set-off, unless that set-off be earlier withdrawn. I further agree that the respondent’s admissions do not provide a valid basis for granting a summary judgment under Rules 432.1 to 432.7. The admissions relate only to the absence of liability for taxes in the taxation years 1986 to 1991, inclusive. They have no bearing on whether the appellant is indebted to Her Majesty for unpaid taxes assessed for the years 1973, 1974 and 1976 to 1979, inclusive. While the appellant pleads that the debt of $117,400.74 has been forgiven and that he has been released from paying it, he neither offers any supporting evidence nor contradicts the respondent’s evidence to the opposite effect. As moving party for summary judgment, he was required by subsection 432.2(1) of the Rules to bring forth evidence, if available, showing that there is no genuine issue for trial within the meaning of subsection 432.3(1) of the Rules: Feoso Oil Ltd. v. Sarla (The), [1995] 3 F.C. 68(C.A.), at page 82. That he has failed to do. The respondent appears to have satisfied the requirement of subsection 432.2(1) of the Rules of showing by affidavit or other evidence that there is a genuine issue for trial.[13] The defence raised is not clearly without foundation. I respectfully agree with the Motions Judge that the appellant is not entitled to summary judgment at this stage of the proceeding.

I would dismiss the appeal with costs if requested by the respondent.

Strayer J.A.: I agree.

Linden J.A.: I agree.

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