Date: 20060719
Docket: ITA-11539-04
Citation: 2006
FC 895
Ottawa, Ontario, July 19, 2006
PRESENT: The Honourable Mr. Justice Barnes
BETWEEN:
GREGORINA
ALESSANDRO
Applicant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR ORDER AND ORDER
[1]
At the
root of this dispute between the parties is a contested tax assessment for the
1997 tax year. The Canada Customs and Revenue Agency, now the Canada Revenue
Agency (Agency), is seeking payment of tax arrears from Gregorina Alessandro in
the amount of $54,508.48. In pursuit of its claim, the Agency registered a
Certificate of indebtedness with this Court under section 223 of the Income
Tax Act R.S.C. 1985, Chapter 1 (5th Supp.) (Act). It also registered two
Notices of Lien against properties owned by Ms. Alessandro in Ontario. Those enforcement steps
were taken in November and December of 2004. At that time, it is conceded that
Ms. Alessandro’s tax debt was outstanding and subject to collection by the
Agency.
[2]
Subsequently,
Ms. Alessandro brought an appeal in the Tax Court of Canada in which she
challenged the Agency’s claim to tax arrears. That appeal was filed on March
30, 2005 after the Tax Court granted an extension of time to appeal by an Order
issued on the same day.
[3]
Ms.
Alessandro contends that the subsequent acceptance of her Tax Court appeal
obliges the Agency to remove its Certificate of indebtedness from this Court
and the two liens registered against her real properties. The Agency declined
to accommodate those demands and Ms. Alessandro is now seeking an Order to
cancel the Certificate and to vacate the liens. She contends that the
collection restrictions contained within section 225.1 of the Act can be
applied, after the fact, to reverse the enforcement steps that were lawfully
carried out by the Agency before her appeal was launched.
[4]
Although the
Agency concedes that section 225.1 of the Act prevents it from taking fresh
collection steps against Ms. Alessandro, it says that the Act does not require
that it reverse any enforcement steps which were lawfully taken at the time.
In furtherance of that view, the Agency did withdraw an outstanding and active
Notice of Garnishment that had been sent to Ms. Alessandro’s bank; however, it
refused any further relief.
Issue
The issue before the Court is whether section 225.1 of the
Act requires the Agency to reverse all of its collection actions in the face of
a subsequent appeal of the tax assessment to the Tax Court of Canada.
Analysis
[5]
In the
ordinary course, section 225.1 of the Act does preclude the Agency from taking
any collection action against a taxpayer within ninety days of the mailing of a
Notice of Assessment. Thereafter, the affected taxpayer can hold the Agency at
bay by filing a Notice of Objection or a Notice of Appeal to the Tax Court
within the prescribed time. In those instances, section 225.1 of the Act
continues to apply. So long as the taxpayer acts in a timely way, section
225.1 of the Act offers seamless protection from collection of claimed tax
arrears up to the conclusion of a Tax Court appeal.
[6]
This case
is anomalous because Ms. Alessandro’s Tax Court appeal was initiated well
beyond the ninety day filing deadline and, during that time, the Agency
proceeded lawfully to enforce its claim by filing a Certificate of indebtedness
and by registering its liens.
[7]
Counsel
for Ms. Alessandro concedes that the Act does not expressly oblige the Agency
to reverse lawful collection steps in the face of a subsequently launched
appeal; however, he contends that the failure by the Agency to withdraw the
Certificate and to vacate its liens violates the spirit or intent of this
protective statutory provision.
[8]
A plain
reading of subsection 225.1(3) of the Act indicates that the Minister is
prohibited from actively pursuing collection action against a taxpayer in the
face of an outstanding Tax Court appeal. In those circumstances, this
provision prevents the following enforcement actions:
|
(a)
commence legal proceedings in a court,
(b)
certify the amount under section 223,
(c)
require a person to make a payment under subsection 224(1),
(d)
require an institution or a person to make a payment under subsection
224(1.1),
(e)
require the retention of the amount by way of deduction or set-off under
section 224.1,
(f)
require a person to turn over moneys under subsection 224.3(1), or
(g)
give a notice, issue a certificate or make a direction under subsection
225(1).
|
a)
entamer une poursuite devant un tribunal;
b)
attester le montant, conformément à l'article 223;
c)
obliger une personne à faire un paiement, conformément au paragraphe 224(1);
d)
obliger une institution ou une personne visée au paragraphe 224(1.1) à faire
un paiement, conformément à ce paragraphe;
e)
exiger la retenue du montant par déduction ou compensation, conformément à
l'article 224.1;
f)
obliger une personne à remettre des fonds, conformément au paragraphe
224.3(1);
g)
donner un avis, délivrer un certificat ou donner un ordre, conformément au
paragraphe 225(1).
|
[9]
The fact that the Act
does not address the problem arising in this case does not mean that the spirit
or underlying intent of this protective scheme has been breached by the
Agency’s conduct. If Parliament had intended that the Agency ought to be
required to take active steps to reverse its previous and lawful collection
actions, it could easily have said so. Indeed, in other provisions of the Act,
the Agency is expressly required to repay funds or to release security in the
face of challenges by a taxpayer (see section 164).
[10]
It is also noteworthy
that Ms. Alessandro has obtained a substantial benefit from the statutory
collection restrictions which are created by these provisions. The Agency is
prevented from taking further steps to collect the amount it claims to be owed.
The Certificate of indebtedness and liens merely constitute passive security
interests in favour of the Agency. If the liens are interfering with Ms.
Alessandro’s ability to deal with her real estate holdings, she has the ability
to substitute the security or to negotiate reasonable alternate arrangements
with the Agency.
[11]
Although the
circumstances in the case of Topol v. Canada
(Minister of National Revenue - M.N.R.) [2003] F.C.J. No. 858, 2003 FCT 658 were somewhat different
from those arising here, I accept as correct the following statements by
Justice Carolyn Layden-Stevenson concerning the scope of section 225.1 of the
Act:
22
Moreover, submits Topol, the position that the writ was lawfully obtained is
inconsistent with the purpose of the provision. Referring again to section
225.1, he maintains that the Minister is precluded from taking steps to collect
the taxes in dispute for the duration of the dispute, i.e., from assessment
through to objection and appeal to the Tax Court. Topol argues that there is,
however, a gap in section 225.1 because it does not address the situation where
a taxpayer begins the objection or appeal process outside of the time limits
specifically prescribed within the section. To give effect to their purpose,
the provisions must be interpreted liberally to protect taxpayers when the
objection or appeal procedure is commenced beyond the prescribed times. Topol
contends that to conclude otherwise means that a taxpayer, unable to adhere to
the prescribed time limitation for reasons beyond his or her control and
subject to a garnishment issued by the Minister, who is subsequently granted
leave to file a notice of objection, will not be able to have the garnished
funds returned to him. That taxpayer will have paid the taxes in dispute
before an impartial hearing has been concluded. Since he was permitted to file
a notice of objection to the 1996 and 1998 tax years on September 24, 2001,
more than 90 days after the relevant notices of assessment, if the writ is not
lifted, Topol contends that he will have, in effect, paid the taxes in dispute
before an impartial hearing has been concluded. Such a result is inconsistent
with the purpose of both section 225.1 and subsection 164(1.1) of the Act and
should not be permitted in the absence of express wording to that effect in the
Act.
…
29
I note Topol's hypothetical argument that a taxpayer, who for reasons beyond
his or her control fails to file a notice of objection within the prescribed
time limits and who is subsequently granted leave to file a notice of
objection, may be prejudiced and lose the benefit of subsection 164(1.1) if the
meaning I have ascribed to "security" is adopted. My observations in
this respect are twofold. First, there is nothing in the record to indicate
that Topol was unable to file his notices of objection in a timely manner
because of reasons beyond his control. In this sense, it may be said that he
is the author of his own misfortune. Second, if indeed there exists a gap in
the legislation, it is for Parliament, not the court, to remedy. Neither the
statute nor the provision support the meaning of the word "security"
advanced by Topol. Thus, I conclude that the Minister's decision was not only
reasonable, it was correct. This does not and should not be taken to mean,
however, that the Minister is at liberty to execute on the writ while the
objections with respect to the 1996 and 1998 taxation years remain alive.
[12]
In this case, there
is no legal basis for requiring the Agency to withdraw the Certificate of
indebtedness filed with the Court or to lift the liens against Ms. Alessandro’s
real properties.
[13]
In the result, this
application is dismissed with costs payable to the Respondent in the amount of
$1,250.00 inclusive of disbursements.
ORDER
THIS COURT ORDERS that this application is dismissed with costs
payable to the Respondent in the amount of $1,250.00 inclusive of
disbursements.
"R.
L. Barnes"
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