Hughes v. The Queen, 91 DTC 5290, [1991] 1 CTC 492 (FCTD)

Collier, J. [Orally]:—In this action the plaintiff seeks to recover, or obtain a refund of overpayment of her income taxes for the years 1981 to 1983 inclusive.

The facts are not in dispute. An agreed statement of facts was filed. There was, as well, an agreed book of documents.

The plaintiff in the years referred to was a nursing educator employed by the city of Winnipeg, Manitoba. Her employer, as required under the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"), deducted tax from her earnings, and remitted the moneys to the Receiver General of Canada. The plaintiff did not file her income tax returns for the taxation years, earlier referred to, until February 20, 1987. When she did file, she claimed refunds in the following amounts:

1980 — $ 521.99 1981—$ 560.68 1982 — $ 76.54 1983 — $2,514.65

The moneys deducted at source had exceeded the amount of income tax payable by the plaintiff in those years.

On April 9,1987 the Department of National Revenue sent out certain forms for the 1981, 1982, and 1983 taxation years. Those forms indicated her returns had been examined, an income tax refund would have been applicable, but a specified time period under subsection 164(1) barred them.

The Minister of National Revenue on April 26, 1989, sent out Notices of Assessment for the years in question.

In each case, the Minister ruled a refund could not be issued, because of the time prescription in subsection 164(1) of the statute. For 1980, 1981 and 1982, that subsection read as follows:

164. (1) If the return of a taxpayer's income for a taxation year has been made within 4 years from the end of the year, the Minister

(a) may, on or after mailing the notice of assessment for the year, refund, without application therefor, any overpayment made on account of the tax and

(b) shall make such a refund after mailing the notice of assessment if application therefor has been made in writing by the taxpayer within 4 years from the end of the year.

For the 1983 taxation year, subsection 164(1) read:

164. (1) If the return of a taxpayer's income for a taxation year has been made Within 3 years from the end of the year, the Minister

(a) may, on or after mailing the notice of assessment for the year, refund, without application therefor, any overpayment made on account of the tax; and

(b) shall, with all due dispatch, make such a refund after mailing the notice of assessment if application therefor has been made in writing by the taxpayer within

(i) the 6 year period referred to in paragraph 152(4)(b), where that paragraph applies, and

(ii) the 3 year period referred to in paragraph 152(4)(c), in any other case.

For the purposes of this action, the only difference is that the four year time frame was, after 1982, reduced to three years.

It is obvious from the facts the plaintiff did not make a claim for refund within the applicable time periods. In fact, she did not file her income tax returns within the time periods prescribed by the statute.

The Minister taxes the position he has no authority to make a refund, other than is set out in subsection 164(1), and only in conformity with the time allowances.

The plaintiff contends the Minister holds these overpayments by her in trust; the time limits in that situation are not applicable. This action, it is said, is based on a trust relationship; the moneys are due and owing to her as beneficiary, and cannot be withheld by the Minister.

Counsel for the plaintiff argued that the scheme of the Act creates in the circumstances here, an express trust; the Court should apply constructive trust principals.

Excerpts from several text books were submitted in respect of those legal matters, as well as several judicial decisions.

Counsel contended that in this case, the employer made the deductions. Those amounts, by virtue of subsection 153(3) of the Act, were deemed to have been received by the plaintiff, and by subsection 227(4) were deemed to be held by the City of Winnipeg in trust for Her Majesty. Here, the submission runs, the excess of tax paid, by the employer on behalf of the plaintiff's tax liability, then becomes impressed with a trust, enforceable, in this case, by action.

I do not accept the submission on behalf of the plaintiff.

The Income Tax Act does not, to my mind, set up, in express terms or by implication, any kind of trust in the circumstances here. The deductions made and transmitted by the employer to the Receiver General go into the Consolidated Revenue fund. At the time those transactions occurred, no one, including the Minister, had any idea what the plaintiffs ultimate tax liability, for the years in issue, would be. Because it later turned out there was a lesser amount payable than had been remitted on her behalf, (or even if ultimately no tax at all had been payable) cannot, somehow, create a trust going back to the time the deductions were remitted to the Receiver General of Canada.

What happened here was there was an overpayment of tax. Whether it was a mistake, miscalculation, or the plaintiff's taxable income being ultimately much less than her earnings, is not known.

As I have said, they did not, in my opinion, become impressed then or later, with any kind of trust. As I see it, the only method of recapturing them is that set out in subsection 164(1) of the statute. The only authority of the Minister to refund overpayments is found there. When the plaintiff put herself into paragraph 164(1)(b), as she did, the Minister had no authority to make refunds to her, unless she had complied with the condition precedent: that she had filled her returns, claiming a refund, within the prescribed time.

She had not. The Minister was rendered powerless to come to her aid. The action is dismissed with costs.

Action dismissed.