The Queen v. Lambert, 74 DTC 6368, [1974] CTC 516 (FCTD), aff'd supra.

Walsh, J:—Three motions came before the Court in this matter as follows:

1. A motion by defendant by virtue of section 50 of the Federal Court Act, RSC 1970, c 10 (2nd Supp), and Rule 1909 to suspend execution proceedings on a certificate obtained by plaintiff on February 13, 1974 for income tax in the amount of $209,020.36 of which $205,981.51 remained unpaid, and to quash an order issued by the Court on March. 14, 1974 requiring defendant to appear in the Registry of the Court on April 1, 1974 for interrogation as to his assets by L Joseph Daoust, an officer of the Court, or alternatively, to suspend this order, on conditions to be fixed by the Court.

2. A motion by defendant by virtue of Rule 2200(3) to evoke to the Court the examination of defendant who had refused to reply to questions put to him before the Registrar, L Joseph Daoust, who had then dismissed his objections to these questions and refused to refer the examination to the Court.

3. A motion by defendant seeking a declaration that the certificate obtained against defendant by virtue of reassessments dated October 30, 1973 is null and void as a result of new reassessments dated May 7, 1974, and that as a consequence the order for examination as to assets issued under the authority of this certificate is now inoperative and that all the seizures, formal notices to third parties, and registrations of privilege made or done by virtue of this certificate are also null, and seeking the release of them.

Since the motions are connected and arise out of the same facts, all three were argued simultaneously. It is necessary to review briefly the background of the matter.

By notices of reassessment dated October 30, 1973 defendant was reassessed for his 1968, 1969, 1970 and 1971 taxation years additional taxes amounting, with interest, to $211,979.85.* [1] Notices of objection to these assessments were duly made by defendant on November 22, 1973. The Minister did not rep!y to these and provisional orders based on the certificate were issued by the Court on March 14, 1974 imposing a charge on securities and to show cause pursuant to Rule 2401, an order imposing a charge on various parcels of land and to show cause pursuant to Rule 2400, and an order to attend for examination as to assets pursuant to Rule 2200, all returnable on April 1, 1974. The orders to show cause were made definitive by judgments dated April 1, 1974.

Defendant appeared for examination as to his assets before Mr Daoust pursuant to the order issued by the Court, at which stage defendant refused to answer any questions, demanding that the matter be referred to the Court to decide on the validity of his refusal to answer. Mr Daoust, faced with an order of the Court that the examination be held before him, dismissed this objection, refusing to refer the entire examination to the Court. He allegedly did so on the basis of Rule 2200(3) which reads as follows:

RULE 2200. (3) Any difficulty arising in the course of an examination under this rule before the prothonotary or other officer, including any dispute with respect to the obligation of the person being examined to answer any question put to him, may be referred to the Court, and the Court may determine it or give such directions for determining it as it thinks fit.

taking the position that this rule merely permits the referring of “any question” to the Court, but that to refer the entire examination to the Court would be contrary to the order requiring that it take place before him. it is this decision which is the subject of the motion referred to as No 2 above. Defendant’s counsel takes the position, although it is common ground that this argument was not raised before Mr Daoust, that defendant’s refusal to answer any questions as to his assets was based on the fear of incriminating himself as he anticipated that criminal proceedings might be brought against him, although they had not been at that time. I will deal with this objection later after completing my review of the facts. In due course, it is common ground between the parties, although the complaint itself is not in the file, a complaint was laid against defendant under section 239 of the Income Tax Act. Subsequently, on May 7, 1974 further “reassessments” were made of defendant’s income tax for the said years 1968 to 1971 inclusive whereby a further claim for $296,172.36 was added which includes a 25% penalty under subsection 163(2) of the present Income Tax Act (subsection 56(2) of the former Act, RSC 1952, c 148 with amendments). Defendant’s principal contention is that these “reassessments” had the effect of replacing the previous reassessments with the result that all proceedings taken by virtue of the latter became null and void, and that he has 30 days from the date of mailing of the notices of reassessment in order to pay the amounts claimed, by virtue of subsection 158(1) of the Act, as the Minister has not made a direction under subsection 158(2) of the Act that the tax penalties and interest be paid forthwith following the said reassessments of May 7, 1974 so that the amounts due cannot be certified by the Minister until 30 days after default by virtue of section 223 of the Act. These sections read as follows:

158. (1) The taxpayer shall, within 30 days from the day of mailing of the notice of assessment, pay to the Receiver General 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.

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.

In support of this argument defendant’s counsel referred to the cases of Coleman C Abrahams (No 1) v MNR, [1966] CTC 690; 66 DTC 5451, and Mary E Walkem v MNR, [1971] CTC 513; 71 DTC 5288. Both of these cases decided that an appeal against an initial reassessment could not be proceeded with when it was replaced by a valid second reassessment since the first reassessment had thereby become a nullity. In rendering judgment in the Abrahams case, Jackett, P, as he then was, stated at page 691 [5451]:

The difference between the first reassessment and the second reassessment is that, by the second reassessment, the appellant is assessed on the basis that his income is the amount on which the first reassessment was based plus an additional amount.

and again at page 692 [5452]:

Assuming that the second reassessment is valid, it follows, in my view, that the first reassessment is displaced and becomes a nullity. The taxpayer cannot be liable on an original assessment as well as on a reassessment.

It would be different if one assessment for a year were followed by an “additional” assessment for that year.* [2] Where, however, the “reassessment” purports to fix the taxpayer’s total tax for the year, and not merely an amount of tax in addition to that which has already been assessed, the previous assessment must automatically become null.

The Walkem case followed this and also discussed several other judgments dealing with the same problem. After quoting the paragraph from page 692 [5452] of the Abrahams case referred to above, the Walkem judgment stated at page 518 [5291]:

in the present case, I do not consider that the final reassessment number 242468 constitutes an additional assessment over and above the two reassessments numbers 168531 and 168538 which were first appealed from merely because it adds $117.44 interest to the assessment for $33,108.89 tax which, as already pointed out, represents the total of the two earlier reassessments. On the contrary, it seems to purport to fix the taxpayer’s total tax for the year and not merely an amount of tax in addition to that which had already been assessed and, therefore, nullifies the previous reassessments in accordance with the Abrahams judgment.

Again, at pages 520-21 [5292], the Walkem judgment states:

On the contrary, I find that the real distinction lies, as implied in the Abrahams case (supra), in deciding whether or not the new reassessment completely replaces all previous assessments or reassessments so that there is no longer any issue before the Board or Court on those previous assessments or reassessments, in which case the Board or Court no longer has any jurisdiction to hear the original appeal, or whether, on the other hand, it is merely an additional assessment for an additional amount, which may perhaps even be based on a different issue, in which case the original assessment or reassessment has not been replaced and the issue arising out of it can still be litigated leaving to a later date the hearing of an appeal against the second reassessment unless by agreement they are joined for hearing.

In the light of these comments it is necessary to examine the “reassessments” of May 7, 1974 closely. These were all made on forms known as T7WC which are headed ‘Notice of Reassessment” and annexed to each is a form entitled “Adjustments to Declared Income” which purports to explain the changes made and it is this latter form which refers to the penalties under subsection 56(2) of the former Act (subsection 163(2) of the present Income Tax Act). It is not necessary to go into the figures on all of these forms and it will be more convenient to look at the last one, for the year 1971. This starts with a column showing previous net balance of $157,383.94 which represents the cumulative balance from the reassessments of May 7, 1974 for the three preceding years 1968, 1969 and 1970. In an inner column there appears an assessment entitled “This Year” $169,423.01 from which is deducted “Previous Assessment” of $46,750.95 leaving the figure designated as “Increase This Year” of $122,672.06 which is carried to the outside column and added to the figure of $157,383.94 brought forward from the previous year. Interest charged on the increase is shown as $16,116.36 and the addition of these figures makes a total of $296,172.36 indicated as being “Balance Owing for Years Reassessed”. It is evident that this balance was obtained after giving credit for the sum of $46,750.95 indicated as being the previous assessment, which was the assessment for the year 1971 shown in the October 30, 1973 assessment. Similarly, in the May 7, 1974 reassessment credit is given in the year 1968 for a previous assessment in the amount of $22,223.24, for 1969 in the amount of $52,924.07 and in 1970 in the amount of $91,668.38, these being the amounts shown in the reassessments of October 30, 1973 for each of the years in question. It is evident therefore that the figure of $296,172.36 representing the cumulative total resulting from the May 7, 1974 assessments does not represent the total amount allegedly owing by defendant who also owes the amounts shown in the reassessments of October 30, 1973 which resulted in a cumulative total of $211,979.85. At the bottom of the May 7, 1974 reassessment for the year 1971 showing the cumulative total of $296,172.36 there is a footnote which reads (translated): “This notice reflects the unpaid balance resulting from assessments established to this date. If amounts already assessed are due a consolidated statement of account will be established by the Taxation Data Centre in Ottawa”. It is interesting to note, although not directly in issue, that the October 30, 1973 reassessments were made in exactly the same way, indicating an assessment for each of the years 1968 to 1971 inclusive in question and in each case giving a credit for the amount of a previous assessment and then carrying forward the balances which, with interest added, makes the final figure of $211,979.85, the notice of reassessment for 1971 bearing the identical footnote I have already referred to which appeared on the May 7, 1974 assessment. In effect, therefore, the October 30, 1973 reassessments were also not complete in themselves so that in addition to the cumulative total shown in them, the taxpayer also owed the amounts for which he had been given credit for each of the years in question which were reflected by previous assessments.

Plaintiff relies on subsection 152(4) of the Income Tax Act which reads as follows:

152. (4) The Minister may at any time assess tax, interest or penalties under this Part or notify in writing any person by whom a return of income for a taxation year has been filed that no tax is payable for the taxation year, and may

(a) at any time, if the taxpayer or person filing the return

(i) has made any misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the return or in supplying any information under this Act, or

(ii) has filed with the Minister a waiver in prescribed form within 4 years from the day of mailing of a notice of an original assessment or of a notification that no tax is payable for a taxation year, and

(b) within 4 years from the day referred to in subparagraph (a)(ii), in any other case,

reassess or make additional assessments, or assess tax, interest or penalties under this Part, as the circumstances require.

and calls attention to the fact that this entitles the Minister to “reassess or make additional assessments”. Plaintiff’s counsel contended that the “reassessments” of May 7, 1974 although on a form entitled “Notice of Re-assessment” were really notices of additional 'assessments, the same form being used for both cases. (The same applies, of course, to the notices of reassessment of October 30, 1973.) On the basis of this interpretation, which I accept, as an analysis of the forms makes it clear that this was the case, these ‘‘reassessments” were not really reassessments so as to annul and replace the earlier reassessments of October 30, 1973 in accordance with the Abrahams and Walkem cases (supra) but rather fall within the distinctions made by those cases and being “additional assessments”, it is possible for the taxpayer to remain liable on the original assessments to which the notices of objection were made as well as on these additional reassessments. Counsel for plaintiff also referred to subsection 152(8) of the Income Tax Act which reads as follows:

152. (8) An assessment shall, subject to being varied or vacated on an objection or appeal under this Part and subject to a reassessment, be deemed to be valid and binding notwithstanding any error, defect or omission therein or in any proceeding under this Act relating thereto.

contending that the “reassessments” of May 7, 1974 being merely additional assessments did not invalidate or relieve defendant of the liability arising out of the reassessments of October 30, 1973.

The fact that the same forms are used for “Additional Assessments” as for “Reassessments” is, to say the least, misleading as is the fact that the final cumulative figure showing the “Balance Owing for Years Reassessed” only refers to the additional balance owing resulting from the particular “reassessment” resulting in this balance. It is even more misleading when the first sentence of the footnote indicates that this reflects the unpaid balance from the assessments established “up to this day”. The second sentence indicating that if sums already assessed are due, a consolidated account will be established by the Taxation Data Centre in Ottawa, seems hardly sufficient to warn an unwary taxpayer that actually he may owe considerably more than the balance owing shown on the reassessment which he has just received and that he must bear in mind that it is crediting him with the amounts shown as due as a result of previous assessments or reassessments. However, as Thorson, P stated in Jacob John Morch v MNR, [1949] CTC 250 at 258; 49 DTC 649 at 653:

It is well to keep in mind that the notice of assessment is not the same thing as the assessment. The former is merely a piece of paper whereas the latter is an important administrative act within the exclusive function of the Minister, . . .

It would appear in the present case that, despite the somewhat misleading form, there is no doubt that the May 7, 1974 “reassessments” resulted in an additional amount due of $296,172.36 over and above the amount of $211,979.85 due as a result of the October 30, 1973 reassessments.

The “reassessments” of May 7, 1974 are now covered by defendant’s objection to the reassessments of October 30, 1973 as a result of the provisions of subsection 165(7) of the Act, which is new law and which reads as follows:

165. (7) Where a taxpayer has served a notice of objection to an assessment in accordance with this section and thereafter the Minister reassesses the taxpayer’s tax for the taxation year in respect of which the notice of objection was served or makes an additional assessment in respect thereof, and sends to the taxpayer a notice of the reassessment or of the additional assessment, as the case may be, the taxpayer may, without serving a notice of objection to the reassessment or additional assessment,

(a) appeal therefrom to the Tax Review Board or the Federal Court in accordance with section 169 or subsection 172(2); or

(b) if an appeal to the Tax Review Board or the Federal Court has been instituted with respect to the assessment, amend such appeal by joining thereto an appeal in respect of the reassessment or the additional assessment in such manner and on such terms, if any, as the Board or the Court directs.

Defendant may therefore now appeal directly to the Tax Review Board or the Federal Court from both reassessments. It is of interest to note that no similar section was in effect when the Abrahams and Walkem judgments (supra) were rendered and this now indicates that whether the further “reassessment” is a reassessment properly speaking or an “additional assessment”, the two can be dealt with simultaneously. This result is sensible and logical. It would be incongruous to find that because a taxpayer allegedly owes a much greater sum than that for which he was originally reassessed, all seizures and execution proceedings made by virtue of the original reassessment must be annulled and replaced by new proceedings taken by virtue of the further reassessment or additional assessment after a resulting delay of 30 days (unless the Minister avails himself of subsection 158(2)) during which delay the taxpayer is free to deal with and dispose of assets seized by virtue of the first reassessments.

This disposes of the most serious argument raised by defendant, but there were other arguments raised in connection with the various motions which can be dealt with briefly.

Defendant contended that subsection 223(2) of the Income Tax Act had not been fully complied with. This subsection reads as follows:

223. (2) On production to the Federal Court of Canada, a certificate 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.

The contention was to the effect that this requires the keeping of a special register by the Court in which the certificates can be entered, which is not done. Actually, the procedure followed was that set out in Rules 2400 and 2401 for imposing charges on land and on securities respectively, the applications for these orders being made by an affidavit to which was exhibited the certificate to be enforced and provisional orders were issued in due course which were made definitive on April 1, 1974 the date fixed to show cause in connection with these orders when no opposition was made. The certificate produced in connection with the applications for these orders bears the stamp of the Court and, in the absence of some special rule as to how they should be registered, I consider this to be sufficient evidence of their registration in Court. In practice they are only so registered when some use is to be made of them in connection with execution proceedings or for an order for examination of a judgment debtor, as in the present case. The procedure adopted in the present case was that always followed and I find no irregularity in connection with the seizures made or the order for examination.

Defendant also objected to the use by plaintiff of section 224 of the Act by sending notices of garnishment to a number of persons who allegedly were or were about to become liable to defendant, said notices being dated January 10, 1974, January 15, 1974, January 21, 1974, January 28, 1974, January 30, 1974, February 6. 1974 and February 27, 1974 all prior to any “registration” of the certificate against defendant. Subsection 224(1) reads as follows:

224. (1) When the Minister has knowledge or suspects that a person is or is about to become indebted or liable to make any payment to a person liable to make a payment under this Act, he may, by registered letter or by a letter served personally, require him to pay the moneys otherwise payable to that person in whole or in part to the Receiver General of Canada on account of the liability under this Act.

This was the procedure adopted and there is nothing whatsoever in the Act which makes use of the procedure under section 224 dependent on the production or registration of a certificate having the same force and effect as a judgment by virtue of section 223. This argument must therefore also be rejected.

Defendant also contended, as set out in the motion as No 1 above, that the seizures already made are sufficient guarantee to cover the amount allegedly due and to establish this he had engaged the services of an independent evaluator whose report was not ready at the time his interrogation was commenced. The value of the assets seized is, in my view, irrelevant and not a proper subject for consideration at this stage of the proceedings. The certificate, when registered, has the same force and effect as if it were a judgment and unless and until the amount claimed is reduced or wiped out altogether by decision of the Minister following the taxpayer’s objection or by appeal to the Tax Review Board or the Federal Court, there is a presumption that it is due and the Minister is entitled to avail himself of Rules 2400 and 2401 to impose charging orders on land or securities, Rule 2300 by way of garnishment proceedings, Rules 2000 and following dealing with execution proceedings as well as the procedure set up for garnishments in section 224 of the Income Tax Act, and the procedure for seizure of chattels set out in section 225 of the Act, and these remedies are cumulative and not in the alternative, and can be used without limitation until the full amount due has been paid. Hypothetical questions of the value of the property seized have no bearing on the matter; it is the amount realized when the property seized is sold that is applied against the indebtedness. This argument must therefore also be rejected.

I turn now to the objections made by defendant to the interrogation before Mr Daoust under Rule 2200. It should be pointed out that Rule 2200(3) (supra) refers to “any difficulty arising in the course of an examination” and goes on to say that this includes “any dispute with respect to the obligation of the person being examined to answer any question put to him” and then states they “may” be referred to the Court. I am of the view that the wording of the rule taken as a whole has in mind that, while the Court “may” be called upon to decide when an objection is taken to any specific question, or when some other difficulty arises in the course of the examination, it is not intended that the person being interrogated can refuse any interrogation whatsoever before the Court officer before whom he has been directed to appear and, in any event, the rule does not Say that any such difficulty or refusal to answer any question must be referred to the Court but merely that it may be so referred. I believe that Mr Daoust’s decision at the time, therefore, was quite proper especially since it is common ground that defendant did not raise before him his real objections to answering any and all questions, namely his fear of self-incrimination. This would be a serious objection and I believe such an objection should be referred to the Court for consideration. The answer, however, is to be found in section 5 oi the Canada Evidence Act, RSC 1970, c E-10. This Act is clearly applicable to the present proceedings since section 2 reads as follows:

2. This Part applies to all criminal proceedings, and to all civil proceedings and other matters whatever respecting which the Parliament of Canada has jurisdiction in this behalf.

Section 5 of the said Act reads:

5. (1) No witness shall be excused from answering any question upon the ground that the answer to such question may tend to criminate him, or may tend to establish his liability to a civil proceeding at the instance of the Crown or of any person.

(2) Where with respect to any question a witness objects to answer upon the ground that his answer may tend to criminate him, or may tend to establish his liability to’ a civil proceeding at the instance of the Crown or of any person, and if but for this Act, or the Act of any provincial legislature, the witness would therefore have been excused from answering such question, then although the witness is by reason of this Act, or by reason of such provincial Act, compelled to answer, the answer so given shall not be used or receivable in evidence against him in any criminal trial, or other criminal proceeding against him thereafter taking place, other than a prosecution for perjury in the giving of such evidence.

This protects defendant against the use of his answers in the interrogation as to his assets in criminal proceedings against him, and he can ask the Court for the protection of this Act. Defendant states, however, that, because of the imposition of the 25% penalty against him by virtue of subsection 163(2) of the Act, his answers might provide information assisting plaintiff in justifying the imposition of this penalty, and that by virtue of subsection 163(3) the burden of proof lies on the Minister who cannot obtain this proof by forcing defendant to incriminate himself. These subsections read as follows:

163. (2) Every person who, knowingly, or under circumstances amounting to gross negligence in the carrying out of any duty or obligation imposed by or under this Act, has made, or has participated in, assented to or acquiesced in the making of, a statement or omission in a return, certificate, statement or answer filed or made as required by or under this Act or a regulation, as a result of which the tax that would have been payable by him for a taxation year if the tax had been assessed on the basis of the information provided in the return, certificate, statement or answer is less than the tax payable by him for the year, is liable to a penalty of 25% of the amount by which the tax that would so have been payable is less than the tax payable by him for the year.

(3) Where, in any appeal under this Act, any penalty assessed by the Minister under this section is in issue, the burden of establishing the facts justifying the assessment of the penalty is on the Minister.

Plaintiff’s counsel points out that it is only on appeal that the burden of proof is on the Minister. It does not appear to me that a simple interrogation of defendant as to his assets should be prevented merely because the answers might be used against him in justifying the imposition of the penalty. Defendant’s counsel referred to the Supreme Court case of George William Batary v Attorney General for Saskatchewan et al, [1965] SCR 465, but this case dealt with a different matter. That case conceded that the accused cannot be compelled to testify in the course of criminal proceedings brought against him, and held that he was therefore not a compellable witness at a coroners’ inquest, the result of which might lead to charges eventually being laid against him. The facts are, to my mind, clearly distinguishable from the situation in the present case. A penalty imposed in a civil proceeding to collect income tax cannot be assimilated to a charge for a criminal offence and the fact that such a penalty is claimed cannot justify the defendant in putting obstacles in the way of the Minister obtaining information as to his assets to assist in the collection of the taxation allegedly due. I therefore find that defendant should appear again before Mr Daoust on June 10, 1974 for examination as to his assets. During the course of such examination he may testify with the protection of the Canada Evidence Act in connection with the use of any of his answers in criminal proceedings against him other than a prosecution for perjury in connection with the evidence he gives. Objections to any specific question can be referred to the Court.

JUDGMENT

1. Defendant’s motion to suspend execution proceedings already instituted herein and to quash or suspend the order requiring defendant to appear for interrogation as to his assets before L Joseph Daoust, an officer of the Court, is dismissed with costs.

2. Defendant’s motion to evoke to the Court his examination before the said Registrar is dismissed with costs, and he is ordered to reappear before Mr Daoust in the office of the Court in Montreal on June 10, 1974 at 2 pm or such other time as may be arranged, for such examination on the understanding that to the extent that his answers might tend to incriminate him in criminal proceedings brought against him he will be testifying under the protection of the Court and that such answers cannot be used against him in criminal proceedings save for any charges of perjury which might be laid as a result of such answers.

3. Defendant’s motion seeking a declaration that the certificate obtained against him by virtue of reassessments dated October 30, 1973 is null and void as well as all subsequent proceedings brought as a result thereof including the order for examination as to his assets, all seizures, formal notices to third parties, and registrations of privilege made or done by virtue of this certificate arising from these reassessments, is dismissed, with costs.