460354 Ontario Inc. v. MNR, 88 DTC 1679, [1988] 2 CTC 2338 (TCC)

Bonner, T.C.J.:—Counsel for the appellant herein has made a preliminary application for an order ”. . . allowing the Appellant's appeal on the ground that the reassessments and assessments referred to in the Notice of Appeal are nullities having been issued to a taxpayer no longer in existence". In the alternative, he seeks an order that the proceedings be stayed to permit the appellant to apply to the Federal Court of Canada for a writ of certiorari quashing the decision of the respondent to issue the assessments and reassessments.

The respondent has applied for an order dismissing the appeals on the ground that the named appellant, a corporation which was dissolved, has no capacity to conduct them. The motions were heard together.

It is common ground that 460354 Ontario Inc., a body corporate formed under the Business Corporations Act of Ontario, was dissolved pursuant to section 246 of that Act by articles of dissolution effective on April 3, 1985.

The appeals are brought from three assessments as follows:

(a) an assessment of tax under Part I of the Income Tax Act, notice of which is dated October 14, 1986;

(b) an assessment of tax under Part III of the Income Tax Act, notice of which is dated September 11, 1987;

(c) an assessment of tax under Part Il of the Income Tax Act, notice of which is also dated September 11, 1987.

Thus all three assessments were made following the dissolution of the taxpayer. The taxpayer has not been revived. I assume that no attempt to do so has been made.

It was the position of counsel for the appellant that the assessments are void and of no effect because there is no taxpayer in existence who could be liable to pay the tax and to whom notices of the assessments could be sent. He made submissions with regard to the effect of subsections 241(1) and (2)of the Business Corporations Act. They read as follows:

241 (1) Notwithstanding the dissolution of a corporation under this Act,

(a) a civil, criminal or administrative action or proceeding commenced by or against the corporation before its dissolution may be continued as if the corporation had not been dissolved;

(b) a civil, criminal or administrative action or proceeding may be brought against the corporation within five years after its dissolution as if the corporation had not been dissolved; and

(c) any property that would have been available to satisfy any judgment or order if the corporation had not been dissolved remains available for such purpose.

(2) For the purposes of this section, the service of any process on a corporation after its dissolution shall be deemed to be sufficiently made if it is made upon any person last shown on the records of the Ministry as being a director or officer of the corporation before the dissolution.

Counsel asserted that the assessments did not fall within the words of paragraph 241(1)(b) "a civil, criminal or administrative action or proceeding . . .” with the consequence that the Minister was unable to make them. He said that it was impossible to serve the notices of the assessments notwithstanding subsection (2). In summary, he said, a valid assessment requires that a taxpayer exist, be properly named in the notice of assessment and be liable for the tax.

It was the position of counsel for the respondent that no appellant exists and there is no manner in which a non-existent entity can pursue an appeal. In consequence, she submitted, the appeals must be quashed. In argument she referred, inter alia, to Spray Construction Company Limited v. M.N.R., 2 Tax A.B.C. 170; 50 D.T.C. 282 and Lord Elgin Hotel Ltd. v. M.N.R., [1969] C.T.C. 24; 69 D.T.C. 5059.

In my view the Court cannot consider the question whether assessments are valid unless it is first able to find that appeals from those assessments have been properly launched. No corporation that has been dissolved exists for the purpose of the conduct of litigation unless the proceeding falls within the ambit of provisions similar to paragraph 241(1)(a) or (b) of the Business Corporations Act. The present appeals purport to be brought by and not against the above-named appellant and were commenced following its dissolution. Thus neither paragraph (a) nor (b) of subsection 241(1) applies to permit the conduct of this litigation.

I decline to follow Mr. Banwell’s invitation to dismiss the appeals on the ground that because the company was dissolved prior to the assessments, the assessments must be treated as nullities which are incapable of giving rise to any right of appeal. To consider and rule on the validity of the assessments is to entertain the appeals. This Court has no power to give declaratory relief. It may dispose of income tax appeals only in the manner laid down in subsection 171(1) of the Income Tax Act. I do not agree with the submission that section 13 of the Tax Court of Canada Act in any way authorizes the granting of declaratory relief.

Counsel for the appellant referred to the decision of the Federal Court in Burri v. The Queen, [1985] 2 C.T.C. 42; 85 D.T.C. 5287. He noted that the style of cause in that case was as follows:

Eric Burri in his capacity as a director of New Park Apartments Limited at the time of its dissolution (Plaintiff) v. Her Majesty The Queen (Defendant).

Nothing in the reasons for judgment in that case indicate that the Court considered or decided either the question whether a company which had been dissolved had the capacity to conduct litigation or whether a former director had the right to conduct litigation on behalf of a dissolved corporation. It seems illogical to suggest that litigation can be conducted on behalf of a non-existent entity. I have already dealt with the question whether a non-existent entity can itself conduct litigation. The word quashed is not to be found in subsection 171(1) of the Income Tax Act. Judgment will therefore go dismissing the appeals. Finally, I will note that the dismissal of the appeals does not prevent counsel from seeking other forms of relief in other courts. For the foregoing reasons the appeals will be dismissed and not stayed.

Appeals dismissed.