Canada (Minister of National Revenue) v. Gravel, 2005 FC 1252

Date: 20050913

Docket: T-1410-05

Citation: 2005 FC 1252

Montréal, Quebec, September 13, 2005

PRESENT: THE HONOURABLE MR. JUSTICE LEMIEUX

BETWEEN:

In the matter of the Income Tax Act

and

In the matter of an assessment or assessments by

the Minister of National Revenue under one or more of the following statutes:

the Income Tax Act, the Canada Pension Plan

and the Employment Insurance Act

and

JEAN GRAVEL

7065 Jogues Street

Montréal, Quebec  H4E 2W9

REASONS FOR ORDER AND ORDER

[1]               On August 17, 2005, one of my colleagues, on an emergency ex parte application by the Minister of National Revenue (the Minister) pursuant to section 225.2 of the Income Tax Act (the Act), authorized the Minister to take forthwith any of the actions described in subsection 225.1(1) of the Act for the purpose of collecting and/or guaranteeing payment of amounts owed by Jean Gravel under the aforesaid Act as a result of reassessments issued in November 2001 for the 1997 and 1998 taxation years.  The reassessments are now being challenged by Mr. Gravel before the Tax Court of Canada.

[2]               The authorization order was granted solely on the basis of the affidavit and attached exhibits supplied by a collection officer with the Tax Services Office of the Canada Customs and Revenue Agency (the Agency), as well as written submissions in support of the ex parte application.

[3]               Subsection 225.2(8) of the Act states provides that a taxpayer in respect of whom an ex parte authorization is granted may apply to a judge of this Court to review the authorization, which Jean Gravel has done.

[4]               Subsection 225.2(11) of the Act provides that the judge reviewing the authorization may confirm, set aside or vary the authorization and make such other order as the judge considers appropriate.

[5]               Yesterday, after having heard counsel and for the reasons stated, which I hereby confirm, I set aside the order authorizing the Minister to take immediate enforcement action against Jean Gravel.

[6]               In Canada (Minister of National Revenue - M.N.R.) v. Services M.L. Marengère Inc., [1999] F.C.J. No. 1840, this Court summarized the principles concerning the granting of an ex parte order for the immediate enforcement of collection measures.

[7]                At paragraph 63 of the decision, the Court describes the purpose of section 225.2 and a number of underlying principles in the following terms:

(1)   The perspective of the jeopardy collection provision goes to the matter of collection jeopardy by reason of delay normally attributable to the appeal process. The wording of the provision indicates that it is necessary to show that because of the passage of time involved in an appeal, the taxpayer would become less able to pay the amount assessed. In other words, the issue is not whether the collection per se is in jeopardy but rather whether the actual jeopardy arises from the likely delay in the collection.

(2)   In terms of burden, an applicant under subsection 225.2(8) has the initial burden to show that there are reasonable grounds to doubt that the test required by subsection 225.2(2) has been met, that is, the collection of all or any part of the amounts assessed would be jeopardized by the delay in the collection.  However, the ultimate burden is on the Crown to justify the jeopardy collection order granted on an ex parte basis.

       (3) The evidence must show, on a balance or probability, that it is more likely than not that collection would be jeopardized by delay.  The test is not whether the evidence shows beyond all reasonable doubt that the time allowed to the taxpayer would jeopardize the Minister’s debt.

       (4)  The Minister may certainly act not only in cases of fraud or situations amounting to fraud, but also in cases where the taxpayer may waste, liquidate or otherwise transfer his property to escape the tax authorities; in short to meet any situation in which the taxpayer’s assets may vanish in thin air because of the passage of time.  However, the mere suspicion or concern that delay may jeopardize collection is not sufficient per se.  As Rouleau J. put it in 1853-9049 Quebec Inc., supra, the question is whether the Minister had reasonable grounds for believing that the taxpayer would waste, liquidate or otherwise transfer the assets, so jeopardizing the Minister’s debt.  What the Minister has to show is whether the taxpayer’s assets can be liquidated in the meantime or be seized by other creditors and so not available to him.

     (5)   An ex parte collection order is an extraordinary remedy.  Revenue Canada must use utmost good faith and insure full and frank disclosure.  On this point, Joyal J. in Peter Laframboise v. The Queen, [1986] 3 F.C. 521 at 528 said this:

The taxpayer’s counsel might have an arguable point were the evidence before me limited exclusively to that particular affidavit.  As Counsel for the Crown reminded me, however, I am entitled to look at all the evidence contained in the other affidavits.  These affidavits might also be submitted to theological dissection by anyone who is dialectically inclined but I find on the whole that those essential elements in these affidavits and in the evidence which they contain pass the well-known tests and are sufficiently demonstrated to justify the Minister’s action.

In Duncan, supra, Jerome A.C.J., after quoting Joyal J. In Laframboise, supra, viewed the level of disclosure required by the Minister as one of adequate (reasonable) disclosure

[8]               Full and frank disclosure by the Minister of relevant information is a sine qua non condition for obtaining such authorization.

[9]               In Services M.L. Marengère, supra, this Court stated:

[72]      Based on this case law, there must be full and frank disclosure by the Minister, of known, relevant and material facts to obtaining the ex parte jeopardy collection order . . . .

[10]           In my opinion, the motion record filed with my colleague by the Minister in support of the ex parte authorization contained a number of shortcomings which, had I been him, would have misinformed me, as they would have led me to believe that Mr. Gravel was wasting his assets to defeat recovery of his alleged debt to the Agency.

[11]           Such was the case, for example, with respect to the net value of real estate owned by him, his possession of certain vehicles and the existence of a boat in which he may have had an interest.

[12]           I am deeply grateful to counsel for the Minister for having acknowledged, during the hearing, the problems in this case.

ORDER

THE COURT ORDERS that the authorization granted on August 17, 2005, by Mr. Justice von Finckenstein is set aside, with costs to Mr. Gravel.  I ask the parties to come to an agreement on the quantum of costs; in case of disagreement, I reserve jurisdiction to rule on the issue.

“François Lemieux”