Date: 20080725
Docket: T-543-08
Citation: 2008
FC 902
Ottawa, Ontario,
July
25, 2008
PRESENT: The Honourable Mr. Justice Beaudry
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 Income Tax Act, Canada Pension,
Employment Insurance Act,
AGAINST:
JOHN FELIX ALEXANDER
8560 Hélène
LaSalle (Québec) H8N 1Z4
REASONS FOR ORDER AND ORDER
[1]
On April
7, 2008, the applicant obtained an ex parte judgment rendered by Justice
Anne Mactavish (Jeopardy order) against the respondent under subsection 225.2(2)
of the Income Tax Act (the Act) to collect and/or guarantee the payment
by the respondent of the amount of $228,377.94 due pursuant to Notices of
Assessment dated April 7, 2008 for the Taxation Years 2002, 2003, 2004, 2005
and 2006.
[2]
The respondent
filed a motion under subsection 225.2(8) of the Act to quash, set aside and
annul the Jeopardy order.
[3]
The main
submissions advanced by the respondent are as follows:
- there are
no allegations in any of the supporting affidavits in support of the motion for
the Jeopardy order that the collection of all or part of the assessed tax would
be jeopardized by a delay in collection;
- some
allegations in the affidavits (surrender letter, possible extradition of the respondent
to the United States, commercial transactions related to fraudulent
telemarketing) are misleading, pure conjecture and speculations;
- the
indictment in the United
States against
the respondent refers only to two counts of fraud totalling $4,000 and not
$1,956,578.99 as alleged in the affidavits;
- the
affidavits signed in support of the Jeopardy orders were signed prior to the
Assessment being processed, thereby rendering the motion to obtain
the Jeopardy order null and void;
- full
disclosure of the respondent’s situation was not made to the Court by the
respondent.
[4]
The applicant
argues that it has met the legal test provided by the case law to obtain the
Jeopardy order: the respondent is in debt of over $200,000 to the applicant; he
is charged in the United States for fraud; his net worth cannot be explained by
his declared income and he sold one of his immovable properties in March 2008,
just a few days before he received the Assessments. All those circumstances
support the initial motion for the Jeopardy order.
[5]
The Act stipulates the
following at paragraphs 225.2(2), 225.2(8) and 244(15):
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225.2(2) Authorization
to proceed forthwith
Notwithstanding
section 225.1, where, on ex parte application by the Minister, a judge is
satisfied that there are reasonable grounds to believe that the collection of
all or any part of an amount assessed in respect of a taxpayer would be
jeopardized by a delay in the collection of that amount, the judge shall, on
such terms as the judge considers reasonable in the circumstances, authorize
the Minister to take forthwith any of the actions described in paragraphs
225.1(1)(a) to 225.1(1)(g) with respect to the amount.
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225.2(2)
Recouvrement compromis
Malgré
l’article 225.1, sur requête ex parte du ministre, le juge saisi autorise le
ministre à prendre immédiatement des mesures visées aux alinéas 225.1(1)a) à
g) à l’égard du montant d’une cotisation établie relativement à un
contribuable, aux conditions qu’il estime raisonnables dans les
circonstances, s’il est convaincu qu’il existe des motifs raisonnables de
croire que l’octroi à ce contribuable d’un délai pour payer le montant
compromettrait le recouvrement de tout ou partie de ce montant.
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225.2(8)
Review of authorization
Where a judge
of a court has granted an authorization under this section in respect of a
taxpayer, the taxpayer may, on 6 clear days notice to the Deputy Attorney
General of Canada, apply to a judge of the court to
review the authorization.
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225.2(8)
Révision de l’autorisation
Dans
le cas où le juge saisi accorde l’autorisation visée au présent article à
l’égard d’un contribuable, celui-ci peut, après avis de six jours francs au
sous-procureur général du Canada, demander à un juge de la cour de réviser
l’autorisation.
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244(15) Date when assessment
made
(15) Where any
notice of assessment or determination has been sent by the Minister as
required by this Act, the assessment or determination is deemed to have been
made on the day of mailing of the notice of the assessment or determination.
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244(15) Date d’établissement de
la cotisation
(15)
Lorsqu’un avis de cotisation ou de détermination a été envoyé par le ministre
comme le prévoit la présente loi, la cotisation est réputée avoir été établie
et le montant, déterminé à la date de mise à la poste de l’avis de cotisation
ou de détermination.
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[6]
The
initial burden under section 225.2(8) is on the respondent. He has 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 or any part of the
amounts assessed would be jeopardized by delay in the collection (Canada
(Minister of National Revenue – M.N.R.). v. Services M.L. Marengère, [1999]
F.C.J. No. 1840 (F.C.T.D.).
[7]
If the respondent
succeeds, then the Court has to examine the evidence upon which the Jeopardy
order was obtained as well as any other evidence that would show on a balance
of probabilities that the collection would be jeopardized by delay (Canada
(Minister of National Revenue – M.N.R.) v. 144945 Canada Inc.,
2003 FCT 730, [2003] F.C.J. No. 937 at paragraph 9):
In Canada (Minister of National Revenue) v. Moss, [1997] F.C.J. No. 1583 (QL),
Muldoon J. stated, at para. 10-11, that (i) the taxpayer has the initial onus
to show reasonable grounds the Minister did not satisfy her onus before the
Court in the ex parte hearing; and (ii) if so, the Court must consider the
evidence before the authorizing judge and additional evidence to find whether
on a balance of probability the collection would be jeopardized by the delay.
[8]
In Canada (Minister of National Revenue
– M.N.R.) v. Thériault-Sabourin, 2003 FCT 124, [2003] F.C.J.
No. 168, Justice Layden-Stevenson summarized the case law in similar matters
and added obiter from other judges at paragraph 14:
I
would add to the principles articulated by Lemieux J., the propositions that
follow:
(a) The
sale of assets alone does not justify a jeopardy order: Canada (Minister of National Revenue) v. Landru [1993] 1 C.T.C. 93 (Sask. Q.B.).
(b)
The taxpayer's inability to pay the amount assessed at the time of the
direction is not by itself conclusive or determinative: Danielson, supra.
(c) The
nature of the assessment itself may raise a reasonable apprehension that the
taxpayer had not been conducting [her] affairs in what might be called an
orthodox fashion and can therefore contribute to the reasonable grounds to
believe that the collection of the amount assessed would be jeopardized by
delay: Canada (Minister of National Revenue) v. Laframboise, [1986] 3
F.C. 521 (T.D.); Canada (Minister of National Revenue) v. Rouleau,
[1995] 2 C.T.C. 442 (F.C.T.D.).
[9]
In the
case at bar, I find that the respondent has met the initial test.
[10]
Although,
as we shall see, I find in the end in favour of the respondent, I disagree with
him on his interpretation of section 244(15)
of the Act. He
argues that because the Assessments are dated after the signature of the
affidavits in support of the motion for the Jeopardy order, and because
Assessments are deemed to have been made on the date of mailing, the
Assessments did not exist at the time of the signature of the affidavits.
[11]
I am of
the opinion that subsection 244(15)
creates a presumption as a starting date for the calculation of interests. Even
if I am wrong on this,
the evidence shows that at the time that Annie Najm (person in charge for the audit) signed her affidavit
she had the Assessments on hand (Applicant's Reply, pages 13-18).
[12]
I also
disagree with the respondent’s proposition that it was up to the person
conducting the audit to obtain the documents supporting his allegation that he
inherited approximately
$80,000 from his
father. Although the respondent provided the information as to the probable
location of the documents, it is my opinion that it was his responsibility, and
not that of the person conducting the audit to recuperate and produce the
relevant information to Mrs. Najm.
[13]
In the
present case, the evidence shows that the respondent was under audit since
September 2007. There is no allegation in Mrs. Najm’s affidavit that the respondent
refused or failed to provide any documents or information which she requested.
[14]
On April
4, 2008, the respondent called Mrs. Najm to inquire about the status of his
file and told her that he had sold one of his properties because he had no
income and wanted to pay his high interest debts and improve his financial
situation. He did not know at that time that he would receive in the near
future the Assessments (dated April 7, 2008) from the applicant.
[15]
The respondent
filed with the Court his account activity at TD Canada Trust from March 31,
2008 to April 7, 2008 (pages 61-62, exhibit "H", Notice of Motion to
Review). This document indicates that out of the net proceed of the sale of his
property (nearly $119,000), numerous and important amounts were transferred or
paid to Visa, TD mortgage, for line of credit and loans from bank institutions.
I therefore agree with the respondent that the sale of his property could not
have been and was not a reaction to the Assessments or an attempt to jeopardize
the collection of the taxes due to the applicant.
[16]
The applicant
knew since December 2007 that the respondent had been charged for telemarketing
fraud in the USA for $4,000. The respondent is
presumed innocent until found guilty and I cannot come to the conclusion that
the recovery of the taxes assessed against him has been put in jeopardy by his
past conduct. There is no evidence that he tried or is trying to leave the
country without paying his debts.
[17]
The respondent
asserts that he is entitled to costs on a solicitor and client basis. I do not
agree. I cannot find in this file, evidence of reprehensible, outrageous and
abuse of conduct on the part of the applicant.
ORDER
THIS COURT ORDERS that the motion is granted. The
Order granted on April 7, 2008 by Justice Anne Mactavish is set aside, quashed
and annulled. The certificate in file ITA-4211-08 against the respondent’s property
legally described as Lot No.1 500 163 of the Cadastre of Québec, and registered
at the Registry Office of Montréal under number 15099040 on April 8, 2008 is
quashed, set aside, annulled, radiated and discharged. All the proceedings in the
execution of the said Order, in particular the garnishment of the respondent’s account
number 6250068 at TD Canada Trust on or about April 7, 2008, is quashed,
annulled and set aside. The applicant shall pay to the respondent costs by way
of a lump sum of $2,000.
“Michel
Beaudry”
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