T-3013-74
The Queen (Plaintiff)
v.
Arthur James Williams (Defendant)
Trial Division, Kerr J.—Vancouver, April 7;
Ottawa, June 6, 1975.
Income tax—Certificate of amounts owing—Order to show
cause re imposing charge on land—Defendant claiming he
received notices of assessment after show cause order—Notices
bearing same date as Minister's certificate—Whether certifi
cate valid if no prior direction by Minister under s. 158(2) of
Income Tax Act—Whether s. 223 contrary to Canadian Bill of
Rights—Federal Court Rules 2400(1), (2), (7), (8)—Income
Tax Act, S.C. 1970-71-72, c. 63, ss. 158, 165, 169, 172, 175,
223 and Regulations, s. 900(6)—Canada Pension Plan, R.S.C.
1970, c. C-5, s. 24—Canadian Bill of Rights, S.C. 1960, c. 44,
ss. 1(a), 2(e).
On August 16, 1974 a certificate of amounts owing under the
Income Tax Act and Canada Pension Plan was filed, and an
order to show cause imposing a charge on defendant's land was
made on August 19. Defendant maintained that he received no
demand for outstanding taxes, and that he did not receive
notices of assessment dated August 16 until after August 21.
Defendant claims that (a) the certificate is not valid unless
there was a prior direction by the Minister under section 158(2)
of the Income Tax Act, and (b) section 223 of the Income Tax
Act is contrary to the Canadian Bill of Rights.
Held, making the order absolute, as to (a), sections 158(2)
and 223 are designed to empower effective tax collection; the
fact that the certificate bears the same date as the notices does
not raise doubt as to its validity, or give rise to an inference that
there was no prior direction by the Minister under section
158(2). The making and registering of a section 223 certificate
does not end the right to contest an assessment; Rule 2400 does
not provide an additional means for determining the merits of
an assessment. As to (b), according to Lambert v. The Queen,
"Where the fundamental right of the taxpayer to have his
liability ... ultimately determined'... is preserved, such as in
the Income Tax Act, the power given the Minister ... by
section 223 to ensure speedy and effective tax collection does
not infringe the principle of audi alteram partem nor the
Canadian Bill of Rights."
Lambert v. The Queen [1975] F.C. 548, followed.
ORDER to show cause.
COUNSEL:
A. Gilchrist for plaintiff.
H. A. Hope for defendant.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Hope, Heinrich and Hansen, Prince George
B.C., for defendant.
The following are the reasons for judgment
rendered in English by
KERR J.: This relates to an order to show cause,
dated August 19, 1974, made by this Court pursu
ant to Rule 2400 of the Federal Court Rules,
which imposed a charge on land or interest in land
of the defendant more fully described in the said
order.
The order to show cause why the land or interest
should not be charged was initially returnable on
October 21, 1974, and eventually, after substitu
tion of new dates, came on for hearing and further
consideration at Vancouver on April 7, 1975. It
was heard jointly with two other similar orders to
show cause, T-3007-74 and T-3008-74, the same
counsel appeared for the parties, and the argu
ments were common to all three orders, mutatis
mutandis.
Rule 2400(1),(2),(7) and (8) are as follows:
Rule 2400. (1) The Court may make an order imposing a
charge on land or an interest in land of a judgment debtor.
(2) Any such order shall in the first instance be an order to
show cause, specifying the time and place for further consider
ation of the matter and imposing the charge until that time in
any event.
(7) On the further consideration of the matter the Court
shall, unless it appears (whether on the representation of the
judgment debtor or otherwise) that there is sufficient cause to
the contrary, make the order absolute with or without
modifications.
(8) Where on the further consideration of the matter it
appears to the Court that the order should not be made
absolute, it shall discharge the order.
A certificate signed by Donald Brown Cameron,
Director of Collections, Department of National
Revenue, Taxation, under section 223 of the
Income Tax Act, and section 24 of the Canada
Pension Plan, was filed in this Court on August
16, 1974. The certificate states that it was certified
on that day. The body of the certificate reads as
follows:
I Donald Brown Cameron, Director of Collections, Department
of National Revenue, Taxation, pursuant to section 223 of the
Income Tax Act, section 24 of the Canada Pension Plan and/or
section 79 of the Unemployment Insurance Act, 1971, do
hereby certify that in addition to such other sums as may have
been previously certified in a similar manner the following
amounts are now owing and unpaid by the said ARTHUR JAMES
WILLIAMS.
UNDER THE INCOME TAX ACT
TAXATION YEAR
OR
ASSESSMENT
DATE AMOUNT PENALTY INTEREST
1971 $11,907.40 $500.00 $1,661.03
1972 16,970.15 500.00 1,328.86
1973 28,335.00 500.00 499.02
UNDER THE CANADA PENSION PLAN
1971 $ 172.80 —
1972 176.40
1973 180.00 — —
Constituting a total amount of $62,730.66 together with addi
tional interest at the rate of 6% per annum on the sum of
$57,741.75 from the 16th day of August, 1974, to date of
payment.
In support of the order to show cause there was
filed an affidavit of Bertram C. Callaway, an
employee of the Victoria Regional Taxation Divi
sion, Collection Branch, which states, inter alia,
that the said certificate remains wholly unsatisfied
and that the whole amount thereof is owing to Her
Majesty and is payable to the Receiver General of
Canada.
Section 223 of the Income Tax Act reads as
follows:
223. (1) An amount payable under this Act that has not
been paid or such part of an amount payable under this Act as
has not been paid may be certified by the Minister
(a) where there has been a direction by the Minister under
subsection 158(2), forthwith after such direction, and
(b) otherwise, upon the expiration of 30 days after the
default.
(2) On production to the Federal Court of Canada, a certifi
cate made under this section shall be registered in the Court
and when registered has the same force and effect, and all
proceedings may be taken thereon, as if the certificate were a
judgment obtained in the said Court for a debt of the amount
specified in the certificate plus interest to the day of payment
as provided for in this Act.
(3) All reasonable costs and charges attendant upon the
registration of the certificate are recoverable in like manner as
if they had been certified and the certificate had been regis
tered under this section.
Section 158 of the Income Tax Act is also
relevant and is as follows:
158. (1) The taxpayer shall, within 30 days from the day of
mailing of the notice of assessment, pay to the Receiver Gener
al of Canada any part of the assessed tax, interest and penalties
then remaining unpaid, whether or not an objection to or
appeal from the assessment is outstanding.
(2) Where, in the opinion of the Minister, a taxpayer is
attempting to avoid payment of taxes, the Minister may direct
that all taxes, penalties and interest be paid forthwith upon
assessment.
At the hearing an affidavit, sworn to by the
defendant, was filed, stating, in part, that prior to
August 21, 1974, he received no demand for out
standing tax and had no communication from or
with the tax department to indicate outstanding
taxes on his behalf or on behalf of the B.C.
Institute of Mycology, of which he was a member;
that notices of assessment, Exhibits A, B, C and D
to the affidavit, were the only notices of assess
ment that he received in connection with the
matter, and that he received them after August 21,
1974; and that he made no income that would
attract the tax alleged in the exhibits, nor did the
B.C. Institute of Mycology. The said notices are
dated August 16, 1974.
Counsel for the plaintiff rose to tender certain
documents in support of the Crown's application
for the charging order, but objection to their
reception by the Court was raised by counsel for
the defendant, whereupon counsel for the plaintiff
withdrew the tender. I do not know whether the
documents would have been informative.
Section 900 of the Income Tax Regulations
provides certain delegation of the powers and
duties of the Minister to specified officials. It does
not expressly mention section 158 of the Act, but
subsection (1) of the said section 900 provides that
an official holding a position of Assistant Deputy
Minister of National Revenue for Taxation may
exercise all the powers and perform all the duties
of the Minister under the Act. Section 900(6) of
the Regulations reads, in part, as follows:
900. (6) The Director, Collections Division of the Depart
ment of National Revenue, Taxation', may exercise the powers
and perform the duties of the Minister under
(a) section 223 of the Act,
At the hearing on April 7, counsel for the
defendant argued principally to the following
effect:
A. That the notices of assessment bear the same
date, August 16, 1974, as the date of the certifi
cate in question; that the certificate is not valid
unless there was a prior direction by the Minister
under section 158(2) of the Income Tax Act (or by
an authorized delegate), that it must be shown in
the certificate that such direction was made, but
the certificate does not show that any such direc
tion was made, nor has it otherwise been shown to
have been made; and it is null, void and of no
effect.
B. Section 1(a) of the Canadian Bill of Rights
declares the right of the individual to enjoyment of
property and the right not to be deprived thereof
except by due process of law, and by virtue of
section 2 of that statute the Income Tax Act must
be so construed and applied as not to abrogate,
abridge or infringe, or to authorize the abrogation,
abridgment or infringement of the said rights, and
in particular, by clause (e), it shall not be con
strued or applied so as to deprive a person of the
right to a fair hearing in accordance with the
principles of fundamental justice for the determi
nation of his rights and obligations; that section
223 of the Income Tax Act is contrary to the
Canadian Bill of Rights, and the aforesaid certifi
cate registered in this Court, coupled with the
charging order, constitutes an infringement of the
defendant's right to enjoyment of his property and
' Donald Brown Cameron, who signed the certificate in
question, was such an official.
his right not to be deprived thereof except by due
process of law, and he has been unlawfully
deprived of his right to a fair hearing.
As to point "A", I am not able to infer or
conclude from what has been presented and sub
mitted herein that the certificate was made by
Cameron and registered in this Court without any
prior direction having been made under section
158(2) of the Act. The certificate bears the same
date, August 16, 1974, as the notices of assess
ment, but sections 158(2) and 223 are designed to
empower effective tax collection, and I think that
the fact that this certificate bears the same date as
the notices of assessment should of itself not raise
any doubt as to its validity or warrant an inference
that there was not any prior direction by the
Minister under section 158(2). The making and
registration of a certificate pursuant to section 223
does not terminate the right of a taxpayer to
contest an assessment, for he may do so by serving
on the Minister a notice of objection in accordance
with section 165 and by appealing to the Tax
Review Board in accordance with section 169 or to
the Federal Court of Canada in accordance with
sections 172 and 175; and I think that Rule 2400
of the Federal Court Rules does not provide an
additional means or procedure for determining the
merits of an assessment on the further consider
ation of an order to show cause under that Rule.
As to point "B", in a recent decision Lambert v.
the Queen [1975] F. C. 548, Mr. Justice Addy of
this Court referred to an argument respecting
section 223 of the Income Tax Act, and he said, in
part, as follows:
The plaintiff argues that section 223 of the Income Tax Act
is ultra vires because it violates the principle of audi alteram
partem or, alternatively, that it is null, void and of no effect as
being contrary to section 2(e) of the Canadian Bill of Rights on
the grounds that it purports to give to the Minister of National
Revenue, without the taxpayer being heard or notified, the
right to issue a certificate which purports to establish the
amount owed by the taxpayer and of subsequently registering
the certificate in the Federal Court, following which the said
certificate is purported to have the same force and effect as a
judgment.
In the case of the Income Tax Act should the assets of a
taxpayer be seized and should it be established at a later date
that there was in fact no liability for taxes, then obviously he
would be entitled to restitution. The principle of audi alteram
partem applies to the question of final determination of liability
which is a completely different question from the temporary
deprivation of assets or even from the permanent loss of assets,
providing there exists a right of restitution of the assets or of
compensation for their loss.
The public policy behind the power in many taxing statutes
to declare an amount payable before final liability for the
amount has been determined and to take effective steps of
securing such payment by means of seizure of assets and of sale
of same if necessary, is of course founded on the principle that
the tax collector must be furnished some means of preventing
tax avoidance by dissipation of assets or by the taxpayer
removing them from the jurisdiction. Where the fundamental
right of the taxpayer to have his liability for taxes ultimately
determined on the merits is preserved, such as in the Income
Tax Act, the powers given the Minister of National Revenue by
section 223 to ensure speedy and effective tax collection do not
infringe the principle of audi alteram partem or the Canadian
Bill of Rights. The section must, of course, be read with the
other provisions of the Act to which I have referred.
I reject the argument by counsel for the defend
ant that section 223 of the Income Tax Act is
contrary to the Canadian Bill of Rights and that
the certificate produced and registered in this
Court, coupled with the subsequent charging
order, has deprived or is depriving the defendant of
the right to a fair hearing and constitutes an
infringement of his right to enjoyment of his prop
erty and his right not to be deprived thereof except
by due process of law.
Therefore, on the further consideration of the
matter pursuant to Rule 2400, it does not appear
to me that sufficient cause has been shown why
the aforesaid charging order, dated August 19,
1974, should not be made absolute. The order will
accordingly be made absolute, with costs, which I
fix at $75.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.