Date: 20060302
Docket: T-47-06
Citation: 2006 FC 279
Vancouver, British Columbia, Thursday, the 2nd day of March, 2006
Present: THE HONOURABLE MR. JUSTICE SHORE
BETWEEN:
THE MINISTER OF NATIONAL REVENUE
Applicant
- and -
LINDA MAE MARSHALL
Respondent
REASONS FOR ORDER AND ORDER
OVERVIEW
A review of subsections 231.2(1) and 231.7(1) of the Income Tax Act suggests that three requirements must be satisfied before it is appropriate for a judge of this Court to exercise his or her discretion under section 231.7 of the Income Tax Act to order a person to provide any information or documents sought by the Minister under subsection 231.2(1) of the Income Tax Act.
INTRODUCTION
[1] The Applicant makes application for an order under section 231.7 of the Income Tax Act that the Respondent provide the certain information and documents sought by the Applicant pursuant to subsection 231.2(1) of the Income Tax Act ("ITA").
BACKGROUND
[2] Linda Mae Marshall (the "Taxpayer") is the principal operator of a business knows as "West Lake Housecleaning Ltd." ("Housecleaning") (Affidavit of J. Durant, Applicant's Record, Tab 2, subpara. 5(a).)
[3] The Canada Revenue Agency ("CRA") is attempting to determine the liability of Housecleaning for CPP and EI remittances for the taxation years 2000 to 2004. It is CRA's understanding that Housecleaning has been struck from the Registry and that it is operating as a sole proprietorship. (Affidavit of J. Durant, Applicant's Record, Tab 2, subpara. 5(b).)
[4] As part of its investigation of the Taxpayer's and Housecleaning's affairs, the Minister issued four Requirements for Information (the "RFIs") pursuant to paragraphs 231.2(1)(a) and (b) of the ITA on February 16, 2005. (Affidavit of J. Durant, Applicant's Record, Tab 2, subpara.5(c).)
[5] The RFIs required the Taxpayer to provide the following information and documents to the Minister within 90 days of service of the RFIs:
i. The books or books and records recording day to day business transactions of West Lake Housecleaning Ltd. for the period from taxation year 2000 to taxation year 2004 inclusive including, but not limited to: cash receipts, cash disbursements, billing statements, cancelled cheques, bank statements, cheques registers, payroll records, journal entries, synoptics, shareholders loan accounts and deposit books;
ii. The books or books and records recording day to day business transactions of Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) for the period from taxation year 2000 to taxation year 2004 inclusive including, but not limited to: cash receipts, cash disbursements, billing statements, cancelled cheques, bank statements, cheques registers, payroll records, journal entries, synoptics, shareholders loan accounts and deposit books;
iii. Complete details of, including but not limited to name, complete address and types of transactions with all financial institutions West Lake Housecleaning Ltd. has had dealings with for the period taxation year 2000 to taxation year 2004 inclusive;
iv. Complete details of, including but not limited to name, complete address and types of transactions with all financial institutions Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) has had dealings with for the period of taxation year 2000 to taxation year 2004 inclusive;
v. Complete details, including the names and addresses of all parties for all contracts entered into by West Lake Housecleaning Ltd. for the period of taxation year 2000 to taxation year 2004 inclusive;
vi. Complete details, including the names and addresses of all parties for all contracts entered into by Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) for the period of taxation year 2000 to taxation year 2004 inclusive;
vii. A complete list, including but not limited to names, addresses, amounts receivable, and projected amounts receivable, of all work-in-progress of West Lake Housecleaning Ltd. for the period of taxation year 2000 to taxation year 2004 inclusive;
viii. A complete list, including but not limited to names, addresses, amounts receivable, and projected amounts receivable, of all work-in-progress of Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) for the period of taxation year 2000 to taxation year 2004 inclusive;
ix. A complete list of all personal guarantees, trust agreements and power of attorneys signed by West Lake Housecleaning Ltd. for the period of taxation year 2000 to taxation year 2004 inclusive;
x. A complete list of all personal guarantees, trust agreements and power of attorneys signed by Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) for the period of taxation year 2000 to taxation year 2004 inclusive;
xi. A complete copy of all financial statements, including but not limited to the Balance Sheet, Notes to the Balance Sheets, Income Statement, Statement of Retained Earnings, and Statement of Change in the Financial Position for West Lake Housecleaning Ltd. for the period of taxation year 2000 to taxation year 2004 inclusive;
xii. A complete copy of all financial statements, including but not limited to the Balance Sheet, Notes to the Balance Sheets, Income Statement, Statement of Retained Earnings, and Statement of Change in the Financial Position for Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) for the period of taxation year 2000 to taxation year 2004 inclusive.
(collectively, the "Information and Documents");
(Affidavit of J. Durant, Applicant's Record, Tab 2, subpara. 5(d), Ex. "A".)
[6] On February 16, 2005, Jacquelyn Durant, a collections officer employed by the Canada Revenue Agency, effected personal service of the RFIs on the Taxpayer. (Affidavit of J. Durant, Applicant's Record, Tab 2, subpara. 5(g).)
[7] The Taxpayer did not provide any of the Information and Documents nor did she provide any response to any of the RFIs. (Affidavit of J. Durant, Applicant's Record, Tab 2, subpara. 5(h).)
[8] It appears from the amount of time that has passed since the RFIs were served that the Taxpayer does not intend to comply with the RFIs by providing any of the Information and Documents. (Affidavit of J. Durant, Applicant's Record, Tab 2, subpara. 5(i).)
[9] The Minister issued the RFIs to the Taxpayer for purposes related to the administration or enforcement of Part XV of the ITA, including the collection of amounts payable or remittable under this Part by the Taxpayer. (Affidavit of J. Durant, Applicant's Record, Tab 2, para. 5(j).)
[10] The tax liabilities of the Taxpayer and the collection of amounts payable by the Taxpayer are under administrative investigation, and the information and documents sought from the Taxpayer are considered necessary to assist in the collection of amounts owed to Her Majesty the Queen. (Affidavit of J. Durant, Applicant's Record, Tab 2, para.5(k).)
ISSUES
[11] The Minister submits that this application gives rise to the following issues:
(a) What are the requirements that must be satisfied before it is appropriate for a judge of this Court to exercise his or her discretion under section 231.7 of the ITA to order a person to provide information or documents sought by the Minister under subsection 231.2(1) of the ITA?
(b) Have the requirements for an order under section 231.7 of the ITA been satisfied in this case?
ANALYSIS
Requirements for a compliance order
[12] The Minister has the task of administering and enforcing the ITA, and subsections 231.2(1) and 231.7(1) of the ITA have been enacted to assist the Minister in that regard.
[13] The leading decision regarding the use of subsection 231.2(1) (formerly 231(3)) of the ITA is that of the Supreme Court of Canada in R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627. In McKinlay, Wilson, J. held (at p. 649) that subsection 231.2(1) of the ITA provides the "least intrusive means by which effective monitoring of compliance with the ITA can be effected".
[14] Subsection 231.2(1) of the ITA reads as follows:
231.2(1) Notwithstanding any other provision of this Act, the Minister may, subject to subsection (2), for any purpose related to the administration or enforcement of this Act, including the collection of any amount payable under this Act by any person, by notice served personally or by registered or certified mail, require that any person provide, within such reasonable time as is stipulated in the notice,
any information or additional information, including a return of income or a supplementary return; or
any document.
[15] Subsection 231.7(1) of the ITA reads as follows:
231.7(1) On summary application by the Minister, a judge may, notwithstanding subsection 238(2), order a person to provide any access, assistance, information or document sought by the Minister under section 231.1 or 231.2 if the judge is satisfied that
(a) the person was required under section 231.1 or 231.2 to provide the access, assistance, information or document and did not do so; and
(b) in the case of information or a document, the information or document is not protected from disclosure by solicitor-client privilege (within the meaning of subsection 232(1)).
[16] First, the Court must be satisfied that the person served with the requirement letter was required under subsection 231.2(1) of the ITA to provide the information or documents sought by the Minister. Subsection 231.2(1) establishes that the person served with the requirement letter will be so required if it appears that the Minister was acting for a purpose related to the administration or enforcement of the ITA, including the collection of any amount payable under the ITA by any person, and the person was given a reasonable amount of time for production of the information or documents.
[17] Second, it must be shown to the Court that, although the person was required to provide the information or documents sought by the Minister, he or she did not do so. This requirement is established by paragraph 231.7(1)(a) of the ITA.
[18] Third, the Court must be satisfied that the information or documents are not protected from disclosure by solicitor-client privilege. This requirement is established by paragraph 231.7(1)(b) of the ITA.
The requirements for a compliance order have been met in this case
[19] It is clear that the Taxpayer is a person who was required under subsection 231.2(1) of the ITA to provide the information and documents sought by the Minister.
[20] The Taxpayer was given 90 days to provide the Minister with the Information and Documents. The information and documents are relevant to the collection of amounts payable under the ITA by the Taxpayer. Accordingly, the Minister submits that the first requirement has been satisfied in this case.
[21] The Minister further submits that the Taxpayer has clearly failed to provide the information and documents sought by the Minister.
[22] Although the Taxpayer was served with the RFIs on February 16, 2005, she has yet to provide the information and documents sought by the Minister. Accordingly, the Minister submits that the second requirement has been satisfied in this case.
[23] Lastly, it is clear that the information and documents sought by the Minister are not protected from disclosure by solicitor-client privilege. Such a privilege attaches only to communications passing between a solicitor and a client in professional confidence. Accordingly, the Minister submits that the third requirement has been established in this case.
[24] Based on the foregoing, it is appropriate for a Judge of this Court to exercise his or her discretion to order the Taxpayer to provide the information and documents sought by the Minister under the RFIs served upon the Taxpayer on February 16, 2005.
ORDER
UPON the application of the Minister of National Revenue (the "Minister") on Monday, February 27, 2006 at 9:30 a.m. at the Courthouse located at 701 West Georgia Street, Vancouver, British Columbia;
AND UPON hearing the submissions of counsel for the Minister and reviewing the materials filed by the Minister;
AND UPON BEING SATISFIED THAT:
1) The requirements have been met for granting an order against the Respondent under section 231.7 of the Income Tax Act to provide information or documents sought by the Minister under subsection 231.2(1) of the Income Tax Act, such requirements being:
a) the Respondent was required under subsection 231.2(1) of the Income Tax Act to provide the information and documents sought by the Minister;
b) the Respondent has failed to provide the information and documents sought by the Minister; and
c) the information and documents sought by the Minister are not protected from disclosure by solicitor-client privilege.
2) An order under section 231.7 of the Income Tax Act that the Respondent provide the following information and documents sought by the Minister be made pursuant to subsection 231.2(1) of the Income Tax Act:
a) The books or books and records recording day to day business transactions of West Lake Housecleaning Ltd. for the period from taxation year 2000 to taxation year 2004 inclusive including, but not limited to: cash receipts, cash disbursements, billing statements, cancelled cheques, bank statements, cheques registers, payroll records, journal entries, synoptics, shareholders loan accounts and deposit books;
b) The books or books and records recording day to day business transactions of Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) for the period from taxation year 2000 to taxation year 2004 inclusive including, but not limited to:
cash receipts, cash disbursements, billing statements, cancelled cheques, bank statements, cheques registers, payroll records, journal entries, synoptics, shareholders loan accounts and deposit books;
c) Complete details of, including but not limited to name, complete address and types of transactions with all financial institutions West Lake Housecleaning Ltd. has had dealings with for the period taxation year 2000 to taxation year 2004 inclusive;
d) Complete details of, including but not limited o name, complete address and types of transactions with all financial institutions Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) has had dealings with for the period of taxation year 2000 to taxation year 2004 inclusive;
e) Complete details, including the names and addresses of all parties for all contracts entered into by West Lake Housecleaning Ltd. for the period of taxation year 2000 to taxation year 2004 inclusive;
f) Complete details, including the names and addresses of all parties for all contracts entered into by Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) for the period of taxation year 2000 to taxation year 2004 inclusive;
g) A complete list, including but not limited to names, addresses, amounts receivable, and projected amounts receivable, of all work-in-progress of West Lake Housecleaning Ltd. for the period of taxation year 2000 to taxation year 2004 inclusive;
h) A complete list, including but not limited to names, addresses, amounts receivable, and projected amounts receivable, of all work-in-progress of Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) for the period of taxation year 2000 to taxation year 2004 inclusive;
i) A complete list of all personal guarantees, trust agreements and power of attorneys signed by West Lake Housecleaning Ltd. for the period of taxation year 2000 to taxation year 2004 inclusive;
j) A complete list of all personal guarantees, trust agreements and power of attorneys signed by Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) for the period of taxation year 2000 to taxation year 2004 inclusive;
k) A complete copy of all financial statements, including but not limited to the Balance Sheet, Notes to the Balance Sheets, Income Statement, Statement of Retained Earnings, and Statement of Change in the Financial Position for West Lake Housecleaning Ltd. for the period of taxation year 2000 to taxation year 2004 inclusive;
l) A complete copy of all financial statements, including but not limited to the Balance Sheet, Notes to the Balance Sheets, Income Statement, Statement of Retained Earnings, and Statement of Change in the Financial Position for Linda Mae Marshall (sometime carrying on business as West Lake Housecleaning Ltd.) for the period of taxation year 2000 to taxation year 2004 inclusive.
(collectively, the "Information and Documents");
3) The Respondent has not provided the Minister with the Information and Documents; and
4) The Information and Documents are not protected from disclosure by solicitor-client privilege within the meaning of subsection 232(1) of the Income Tax Act.
THIS COURT ORDERS pursuant to section 231.7 of the Income Tax Act that the Respondent comply with the notice issued by the Minister and shall forthwith, and in any event not later than 30 days from the date of this Order, provide the Information and Documents to a Canada Revenue Agency officer acting under the authority conferred by the Income Tax Act or other person designated by the Commissioner of Customs and Revenue.
THIS COURT FURTHER ORDERS that the requirement for personal service of this Order pursuant to Rule 128 of the Federal Court Rules, 1998, be met.
THIS COURT FURTHER ORDERS that costs are awarded to the Minister in the
amount of $500.00.
(Sgd.) "Michel Shore"
Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-47-06
STYLE OF CAUSE: THE MINISTER OF NATIONAL REVENUE
- and -
LINDA MAE MARSHALL
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: February 27, 2006
REASONS FOR ORDER AND ORDER: SHORE J.
DATED: March 2, 2006
APPEARANCES:
Mr. Jason Levine FOR APPLICANT
Ms. Linda Mae Marshall ON HER OWN BEHALF
(FOR RESPONDENT)
SOLICITORS OF RECORD:
Miller Thompson LLP FOR APPLICANT
Vancouver, BC
n/a FOR RESPONDENT
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