Date: 20080211
Dockets: T-1978-06
T-1982-06
T-1990-06
Citation: 2008 FC 175
Docket: T-1978-06
BETWEEN:
MINISTER
OF NATIONAL REVENUE
Applicant
and
COMTAX
INTERNATIONAL INC.
Respondent
Docket: T-1982-06
AND
BETWEEN:
MINISTER OF NATIONAL REVENUE
Applicant
and
2261669 CANADA INC.
Respondent
Docket: T-1990-06
AND
BETWEEN:
MINISTER OF NATIONAL REVENUE
Applicant
and
JACKY SHRYVER
Respondent
REASONS FOR ORDERS
HARRINGTON
J.
[1]
The financial affairs of 2261669 Canada Inc. (the Company) have
been brought to the attention of three courts: the Quebec Superior Court, the
Tax Court of Canada and the Federal Court.
[2]
The Minister is of the view that the company owes taxes relating
to various tax years and has issued Notices of Assessments which total close to
$7,000,000. The Company has filed notices of appeal which are currently before
the Tax Court.
[3]
The Company filed a proposal under the Bankruptcy and
Insolvency Act, R.S.C. 1985, c. B-3 which was accepted by a majority
of its creditors in September 2006. The Minister, whose claim has been deemed
contingent by the Trustee, opposes the approval of the proposal by the
Bankruptcy Court, in this case, the Quebec Superior Court. That matter has been
held in abeyance for some time pending negotiations between the parties.
[4]
What is before this Court are motions first filed in November
2006 requiring the Company, its principal and two other companies to provide
certain documentation and information as authorized by section 231.7 of the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.)
as amended. One of the companies, 5075 de Sorel Management Limité, has
complied. The Company, its principal Jacky Schryver and Comtax International
Inc. have not. The motions have appeared on the role for the general sittings
in Montreal from time to time, and then adjourned by consent, as the parties
have had ongoing discussions and as the Minister is currently carrying out an
audit of the Company.
[5]
However, the Minister now submits the time has come for a formal
order to assist in the audit and to advance the case. The respondents submit
the motion is premature because: a) the company may not owe taxes; b) the
proposal may be accepted by the Bankruptcy Court; and c) the information and
documentation could lead to the Minister approaching the respondents’ customers
which could have the effect of damaging business relations.
[6]
It is a peculiarity of sections 91, 92, 96 and 101 of our Constitution
Act that jurisdiction over this federal matter is divided among three
courts, but that is what the Parliament has enacted. The Superior Courts of the
province have jurisdiction over the Bankruptcy and Insolvency Act, the
Tax Court of Canada over federal tax assessments, and the Federal Court over
federal tax enforcement issues.
[7]
The current state of the proceedings before the Bankruptcy Court does
not constitute a stay of the proceedings before this Court. Section 231.7(1) of
the Income Tax Act permits this Court to order a person to provide
access, assistance, information or documentation legitimately required by the
Minister. The Minister is entitled to obtain further information relevant to
the tax debt notwithstanding that a proposal has been filed under the Bankruptcy
and Insolvency Act (Canada (Minister of National Revenue – M.N.R. v.
Stern, [2004] F.C.J. No. 935, 9 C.B.R. (5th) 64, [2004] 4 C.T.C.
52, 2004 D.T.C. 6470 and cases cited therein). The respondents have been under
notice for some 15 months now, the information has not been provided and no
issue of solicitor/client privilege has been raised.
[8]
This Court must take the Notices of Assessments as valid, until
set aside. (Canada (Minister of National Revenue-M.N.R.) v. MacIver, [1999]
F.C.J. No. 182, 172 F.T.R. 273, [1999] 4 C.T.C. 203; 99 D.T.C. 5524; Canada
(Minister of National Revenue-M.N.R.) v. Services M.L. Marengère Inc., [1999]
F.C.J. No. 1840, 176 F.T.R. 1, [2000] 1 C.T.C. 229, 2000 D.T.C. 6032; and Canada
(Minister of National Revenue – MNR) v. Arab, [2005] F.C.J. No. 333, 276
F.T.R. 18, [2005] 2 C.T.C. 107, 2005 D.T.C. 5134)
[9]
The respondents submit that the granting of the orders sought
will result in the company bringing on a motion to the Bankruptcy Court that
the proposal be accepted. So be it. They further submit that if the Minister
successfully opposes the proposal, then in the resulting bankruptcy ordinary
creditors, including the Minister, will receive a smaller dividend than they
would under the proposal. Maybe yes, maybe no, but it is certainly not up to this
Court to give tax recovery advice to the Minister.
[10]
The alleged prejudice the respondents who have not made a
proposal in bankruptcy would suffer is non-specific and highly speculative. The
requirements of the Income Tax Act have been met, and I see no reason
why the order should not issue.
“Sean Harrington”
Ottawa,
Ontario
February
11, 2008
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-1978-06
STYLE OF CAUSE: MINISTER
OF NATIONAL REVENUE v.
COMTAX
INTERNATIONAL INC.
AND DOCKET: T-1982-06
STYLE OF CAUSE: MINISTER
OF NATIONAL REVENUE v.
2261669 CANADA
INC.
AND DOCKET: T-1990-06
STYLE OF CAUSE: MINISTER
OF NATIONAL REVENUE v.
JACKY SHRYVER
PLACE OF
HEARING: Montréal, QC
DATE OF
HEARING: February
4, 2008
REASONS FOR ORDERS: HARRINGTON J.
DATED: February
11, 2008
APPEARANCES:
|
Me Louis Sébastien
|
FOR
THE APPLICANT
|
|
Me Guy Martel
|
FOR
THE RESPONDENT
|
SOLICITORS OF RECORD:
|
John H. Sims, Q.C.
Deputy Attorney General of Canada
|
FOR
THE APPLICANT
|
|
Stikeman Elliott
Barristers & Solicitors
Montréal, QC
|
FOR
THE RESPONDENT
|
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