Lambert v. The Queen, 76 DTC 6373, [1976] CTC 611 (FCA)

The Chief Justice (per curiam) (judgment delivered from the Bench: June 16, 1976):—This is an appeal from a judgment of the Trial Division disposing of three interlocutory motions. At the conclusion of the appellant’s argument, we dismissed the appeal with costs, without calling on counsel for the respondent. When we did so, we indicated that we would subsequently give written reasons for dismissing the appeal in so far as it related to the third motion. These are the reasons so promised.

The facts, in so far as relevant, as set out in the application to the Trial Division, may, aS we understand the application, be summarized as follows:

(a) New assessment notices for the 1968 to 1971 taxation years were issued in respect of the appellant on October 30, 1973, adding $450,000 to his income.

(b) A certificate having the same effect as a Federal Court judgment was issued requiring the appellant to pay $209,020.36 of which $205,985.51 remained unpaid.

(c) Based on that certificate, the Trial Division ordered the appellant to appear April 1, 1974 for examination in aid of execution.

(d) Under the authority of the certificate

(i) shares belonging to the appellant were seized,

(ii) a charge was imposed on land belonging to the appellant, (iii) goods and documents of the appellant were seized.* [1]

(e) On or about May 10, 1974 the appellant received new assessment notices dated May 7, 1974 for the same taxation years.

The application contained, in conclusion, two paragraphs concerning the legal consequences contended for, which paragraphs read as follows:

10. Les premières cotisations ayant été annulées par les nouvelles cotisations, il s’ensuit que le certificat en vertu duquel toutes les procédures d'exécution compris les saisies, les constitutions de privilèges . . . ont été effectuées, est nul et de nul effet;

11. Le requérant ayant 30 jours pour acquitter les impôts fixés par la nouvelle cotisation, il s’ensuit qu’aucun montant n’est encore payable par lui, ces nouvelles cotisations étant datées du 7 mai 1974.

The application, which was dated May 22, 1974, asked that the Court, inter alia,

a) déclarer nul le certificat obtenu contre le requérant, si tel certificat existe, en vertu des cotisations datées du 30 octobre 1973;

b) déclarer que l'ordonnance faite sous l'autorité dudit certificat par l’Honorable Juge Walsh ordonnant au requérant de comparaître pour être interrogé sur ses biens est maintenant sans objet et inopérante;

c) annuler toutes les saisies, . . . et constitutions de privilège faits ou exécutés en vertu dudit certificat et, en conséquence, en donner mainlevée;

To understand the contention of the appellant, and to explain why it is not, in our view, sound, some reference must be made to the provisions of the Income Tax Act.* [2]

Restricting such references to the situation of an individual under the Act, it is to be noted that

(a) a liability is imposed on a resident of Canada to pay income tax upon his taxable income for each taxation year (s 2);

(b) the amount of that annual tax may be “assessed” by the Minister; and he may, within certain limited periods, “reassess or make additional assessments” (subsec 152(4)); but the “Liability for the tax . . . is not affected . . . hy the fact that no assessment has been made” (subsec 152(3));

(c) parts of the tax are payable before the taxpayer makes an annual income tax return that he is required to make (s 151) but the balance is payable

(i) in part, on or before April 30 in the year following the taxation year (subsec 153(2) and subsec 156(1)), and

(ii) as to the rest, within 30 days of being assessed for it (subsec 158(1));

(d) a taxpayer may appeal to the courts from any assessment and the courts may correct an assessment;

(e) the liability to pay the “assessed” tax within 30 days applies whether or not an appeal from the assessment is outstanding (subsec 158(1)) subject, of course, to the right of a successful appellant to recover an overpayment (s 164);

(f) among the remedies provided to the Minister to enforce the obligation of the taxpayer to pay an amount “payable” under the Act is that provided by section 223 which is the section the meaning of which had to be determined on this appeal; it reads in part:

223. (1) An amount payable under this Act that has not been paid . .. may be certified by the Minister

(b) . . . upon the expiration of 30 days after the default.

(2) On production to the Federal Court . . . a certificate made under this Section . . . 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 ....

With that much of the statute in mind, reference must be made to a line of jurisprudence in the Exchequer and Federal Courts—not because it is pertinent but because it has given rise to some confusion

—that has held that where there has been a reassessment for a taxation year as opposed to a further assessment—ie, a redetermination of the total amount payable for the year as opposed to a determination of an additional amount payable for the year—the reassessment displaces the previous assessment so as to nullify from that time forward the previous assessment and, consequently, any appeal from that previous assessment. (See, for example, Abrahams v MNR (No 2), [1967] 1 Ex CR 333; [1966] CTC 694; 66 DTC 5453.)

As appears from the above quotations from the application to the Trial Division, the appellant’s position was

(a) that the original assessments having been nullified by the new assessments, it follows that the section 223 certificate became null and that the court orders and processes based thereon also became null, and

(b) that the appellant having 30 days to pay the amounts fixed by the new assessments, no amounts were payable at the time the application was made.

The learned trial judge appears to have rejected these contentions on the ground that the new assessments were not reassessments but were further assessments.

On examining the new assessments, we are inclined to the view that they are not further assessments but are reassessments. This question did not, however, have to be decided because, in our view, whichever they are, they do not, in themselves, affect the validity of the section 223 certificate or operate automatically to confer on the appellant a right to have the section 223 certificate nullified.

As appears from our review of the provisions of the Act, there is a difference between

(a) a liability under the Act to pay tax, and

(b) an “assessment” (including a reassessment or a further assessment), which is a determination or calculation of the tax liability. It follows that a reassessment of tax does not nullify the liability to pay the tax covered by the previous [assessment] as long as that tax is included in the amount reassessed.* [3] As there can be no basis for the appellant’s contention on this motion unless the ‘‘amount payable” on which the certificate was based had ceased to be “payable” and as the material before us does not show that it had ceased to be payable, in our view, the appeal had to be dismissed. Indeed, the appeal was argued, as we understood the argument, on the assumption that the amounts on which the certificate was based were carried forward inio the new assessments.

Counsel for the appellant placed special emphasis on two provisions, which should be mentioned.

The firsi of those provisions is subsection 248(2), which reads in part:

248. (2) in this Act, the tax payable by a taxpayer . . . means the tax payable by him as fixed by assessment or reassessment subject to variation on objection or on appeal. . . .

This provision does not, in itself, have any substantive operation. As we read it, it fixed the amount of the ‘tax payable” for the purpose of any provision of the Act where that expression is found. Counsel did not, as we understand him, refer us to any provision that would have the effect for which he was contending if it were read with subsection 248(2).

The other provision on which counsel put special emphasis was subsection 158(1), which reads, in part:

158. (1) The taxpayer shall, within 30 days from the day of mailing of the notice of assessment, pay . . . any part of the assessed tax . . . then remaining unpaid, .. .

As we understood counsel, he asked us to read this provision as saying, in effect, that, where unpaid tax was included in an assessment, it ceased to be payable for the period of 30 days following the assessment even though it was already payable prior to the assessment. In our view, it says no such thing. What it does is impose a liability to pay tax within 30 days. It operates only to create such a liability to pay in respect of tax that had not previously been payable because it had not previously fallen within any provision of the Act making it payable and it had not previously become payable by being the subject matter of a previous assessment.

For the above reasons, we dismissed the appeal with costs.