T-1139-86
Bonnie Ellen Danielson (Applicant)
v.
Deputy Attorney General of Canada and Minister
of National Revenue (Respondents)
INDEXED AS: DANIELSON Y. CANADA (DEPUTY ATTORNEY
GENERAL)
Trial Division, McNair J.—Vancouver, September
5, 1986.
Income tax — Practice — Motion for determination of
question whether Minister's direction, under Act s. 225.2(1), to
pay assessed amount forthwith justified — Applicant depen
dent on husband for support — Husband's financial situation
precarious and likely to worsen — S. 225.2 read in context
with s. 225.1 — S. 225.2(1) requiring demonstration that
because of passage of time for appeal, taxpayer becoming less
able to pay amount assessed — Inability to pay insufficient
justification for direction to pay — Test is whether evidence,
on balance of probability, sufficient to lead to conclusion more
likely than not collection jeopardized by delay — Issue not
whether collection in jeopardy, but whether jeopardy arising
from delay in collection — Income Tax Act, S.C. 1970-71-72,
c. 63, ss. 225.1 (as enacted by S.C. 1985, c. 45, s. 116), 225.2
(as enacted idem).
COUNSEL:
D. Barry Kirkham, Q.C. and David Chesman
for applicant.
Margaret Clare for respondents.
SOLICITORS:
Owen, Bird, Vancouver, for applicant.
Deputy Attorney General of Canada for
respondents.
The following are the reasons for order deliv
ered orally in English by
MCNAIR J.: This is the motion of the applicant,
Bonnie E. Danielson, pursuant to subsection
225.2(2) of the Income Tax Act [R.S.C. 1952,
c. 148 (as am. by S.C. 1970-71-72, c. 63, s. 1;
1985, c. 45, s. 116)] for the determination of the
question whether a direction by the Minister to the
taxpayer to pay an assessed amount of tax forth-
with, pursuant to subsection 225.2(1) [as enacted
idem] thereof, was justified in the circumstances.
Subsection 225.2(1) of the Income Tax Act
provides as follows:
225.2 (1) Notwithstanding section 225.1, where it may rea
sonably be considered that collection of an amount assessed in
respect of a taxpayer would be jeopardized by a delay in the
collection thereof, and the Minister has, by notice served
personally or by registered letter addressed to the taxpayer at
his latest known address, so advised the taxpayer and directed
the taxpayer to pay forthwith the amount assessed or any part
thereof, the Minister may forthwith take any of the actions
described in paragraphs 225.1(1)(a) to (g) with respect to that
amount or that part thereof.
Subsection 225.2(5) states:
225.2...
(5) On the hearing of an application under paragraph (2)(c)
the burden of justifying the direction is on the Minister.
In my view, section 225.2 must read in context
with section 225.1 [as enacted idem] of the Act,
which imposes restrictions on the collection ave
nues open to the Minister for the recovery of
unpaid assessments. Sections 225.1 and 225.2 are
relatively new, having been enacted by S.C. 1985,
c. 45, effective on Royal Assent on October 29,
1985.
By virtue of section 225.2, the Minister may
give a notice or direction to pay forthwith an
amount assessed for tax where it may reasonably
be considered by the Minister that the collection of
the amount so assessed would be jeopardized by a
delay in the collection thereof. In that event, the
Minister may forthwith take any of the collection
actions described in paragraphs (a) to (g) inclusive
of subsection 225.1(1) of the Act. The burden of
justifying any direction so made rests squarely on
the Minister by virtue of subsection 225.2(5).
In my judgment, the issue goes to the matter of
collection jeopardy by reason of the delay normally
attributable to the appeal process. The wording of
subsection 225.1(1) would seem to indicate that it
is necessary to show that because of the passage of
time involved in an appeal the taxpayer would
become less able to pay the amount assessed.
In my opinion, the fact that the taxpayer was
unable to pay the amount assessed at the time of
the direction would not, by itself, be conclusive or
determinative. Moreover, the mere suspicion or
concern that delay may jeopardize collection
would not be sufficient per se. The test of whether
"it may reasonably be considered" is susceptible of
being reasonably translated into the test of wheth
er the evidence on balance of probability is suffi
cient to lead to the conclusion that it is more likely
than not that collection would be jeopardized by
delay.
Cogent evidence on the part of the Minister as
to the dissipation of the taxpayer's assets or the
movement of assets out of the jurisdiction beyond
the reach of the Department of National Revenue
and other potential creditors could be very persua
sive and compelling. A more difficult borderline
case might be the situation where the taxpayer's
assets are of a wasting nature, or likely to decline
in value with the mere passage of time.
What of the case where the taxpayer has little,
if anything, in the way of assets? Is the inability to
pay the amount assessed sufficient justification,
without more, to enable the Minister to successful
ly invoke subsection 225.2(1)? I think not.
In my opinion, the issue is not whether the
collection per se is in jeopardy but rather whether
the actual jeopardy arises from the likely delay in
the collection thereof.
The rationale of the Crown's position is that the
applicant is totally dependent on her husband for
her support and means of wherewithal. His finan
cial position was precarious, to say the least, on
May 13, 1986 and is likely to worsen. Her fate and
fortunes are linked to those of her husband. The
analogy was drawn to a house of cards. When the
key card falls, the whole edifice topples. Crown
counsel concluded with this submission:
She had no income, that is the whole idea of the Minister's
proceeding in the way he did.
I am of the opinion that this falls far short of the
justificatory standard imposed by subsection
225.2(1) of the Income Tax Act.
Apart from the ground of mere inability to pay,
the only scintilla of evidence tending to support the
direction to pay is contained in the concluding
paragraphs of the affidavit of Patricia Colleen
Connor, namely, paragraphs 42 and 43 thereof,
which read respectively as follows:
42. 1 do verily believe that Bonnie Ellen Danielson is financial
ly dependent on Charles Edward Danielson and because of that
fact and the other facts alleged herein, the payment of the
amount assessed in respect of Bonnie Ellen Danielson would be
jeopardized by a delay in the collection thereof.
43. I do further verily believe that because of the facts alleged
herein the Minister of National Revenue is justified in directing
both Charles Edward Danielson and Bonnie Ellen Danielson to
pay the assessed amount forthwith.
Against this is the countervailing averment in
paragraph 11 of the applicant's affidavit sworn
herein on August 28, 1986. The paragraph reads
as follows:
11. I at no time, either before or subsequent to April 12, 1986,
took any steps to secrete, dispose, or otherwise hinder any
collection proceedings.
I find therefore that the taxpayer's inability to
pay is insufficient justification for the direction to
pay in the absence of any compelling evidence
beyond mere suspicion or conjecture of actions by
the taxpayer or other creditors or claimants, or the
reasonable apprehension . of such actions, that
would be likely to jeopardize the collection of the
amount assessed.
In the result, the motion is granted and the
direction to pay is necessarily quashed. The appli
cant shall have her costs of the motion. An order
will go accordingly.
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.