Date: 20011011
Docket: A-606-00
Neutral citation: 2001 FCA 301
CORAM: ROTHSTEIN, J.A.
SEXTON, J.A.
EVANS, J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
MERCHANT (2000) LTD.
Respondent
Heard at Calgary, Alberta on Wednesday, October 10, 2001.
Judgment delivered Orally from the bench at Calgary, Alberta on Wednesday,
October 10, 2001.
REASONS FOR JUDGMENT OF THE COURT BY: SEXTON, J.A.
[1] The Appellant Merchant (2000) Ltd. (hereinafter referred to as Merchant) brought an application for judicial review challenging a Requirement of the Minister of National Revenue issued pursuant to section 230 (3) of the Income Tax Act which required Merchant to keep such records and books of account as were specified in the Requirement in order that the Minister could properly determine the amount of taxes payable by Merchant.
[2] The Requirement, contained in a letter dated June 12, 1998, stated, amongst other things, the following:
An auditor from this office visited your place of business on January 27, 1997 and has since reported to me on the condition of the books and records being maintained for the business. After a review of this report, I am of the opinion that your books and records are inadequate for purposes of the Income Tax Act.
[3] An affidavit was sworn by a Mr. Button, the auditor in the Regina office of Revenue Canada who had primary responsibility for Merchant's tax affairs since 1994, in which he explained what he regarded as the unsatisfactory financial records maintained by Merchant and the difficulties which this posed for accurately determining the company's tax liability. If the Minister had made his decision on the basis of the content of this affidavit, it would clearly have provided a reasonable basis for his conclusion, even though the auditor never expressly stated the records were inadequate for the purpose of subsection 230 (3).
[4] However, the affidavit does not state that the information contained therein was before the Minister. The letter informing Merchant of the requirement similarly fails to mention what was contained in the report of the auditor.
[5] Since Mr. Button was the auditor in the office responsible for Merchant's tax affairs and he set out in his affidavit the reasons for dissatisfaction with those records, which had been an ongoing matter of controversy between himself and Merchant, one would expect that the report of the auditor referred to in the letter was supplied by Mr. Button as the Motions Judge concluded. However, on the basis of the material before the Court, it is not possible to know whether the information contained in this report was the same as that contained in the affidavit.
[6] There is nothing in the record before us indicating the basis for the decision of the Minister to issue a Requirement. The learned Motions Judge held that the Minister could not issue a Requirement unless it was established that the Applicant had failed to maintain adequate records. The Motions Judge found that there was no evidence before him that the records were inadequate. He therefore set aside the Requirement.
[7] In our respectful view the learned Motions Judge erred in his analysis when he said that the adequacy of Merchant's records is a "jurisdictional question" on which the Minister must be correct if his decision is to stand.
[8] Merchant could only obtain relief if it established that the decision maker had committed a reviewable error, in this case an error in the exercise of the discretion conferred on the Minister by section 230 (3) of the Income Tax Act.
[9] In the context of this case Merchant would have had to demonstrate that there was no material before the Minister that was reasonably capable of supporting his conclusion that Merchant had failed to keep adequate records. In fact there was no evidence filed indicating the basis of the Minister's decision.
[10] Merchant, as the Applicant for judicial review of the Minister's decision, had the burden of establishing that the Minister did not have such evidence when he exercised his discretion to issue a Requirement. Rule 317 of the Federal Court Rules permits a party to request material relevant to an application that is in the possession of a tribunal whose order is the subject matter of an application. Merchant neither asked for this material nor invoked the provisions of Rule 317. Therefore, no serious complaint can be made by Merchant that the basis of the Minister's decision is not before this Court. Because the basis of the Minister's decision is not before this Court, Merchant is unable to show that the discretion was improperly exercised.
[11] This appeal will therefore be allowed and an order will issue dismissing the application for judicial review.
[12] The Appellant will have its costs of this appeal.
"J. Edgar Sexton"
J.A.
Calgary, Alberta
October 11, 2001
Date: 20011011
Docket: A-606-00
Neutral citation: 2001 FCA 301
CORAM: ROTHSTEIN, J.A.
SEXTON, J.A.
EVANS, J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
MERCHANT (2000) LTD.
Respondent
REASONS FOR JUDGMENT
(Delivered from the Bench at Calgary, Alberta
on Wednesday, October 10, 2001)
SEXTON, J.A.
[13] The Appellant Merchant (2000) Ltd. (hereinafter referred to as Merchant) brought an application for judicial review challenging a Requirement of the Minister of National Revenue issued pursuant to section 230 (3) of the Income Tax Act which required Merchant to keep such records and books of account as were specified in the Requirement in order that the Minister could properly determine the amount of taxes payable by Merchant.
[14] The Requirement, contained in a letter dated June 12, 1998, stated, amongst other things, the following:
An auditor from this office visited your place of business on January 27, 1997 and has since reported to me on the condition of the books and records being maintained for the business. After a review of this report, I am of the opinion that your books and records are inadequate for purposes of the Income Tax Act.
[15] An affidavit was sworn by a Mr. Button, the auditor in the Regina office of Revenue Canada who had primary responsibility for Merchant's tax affairs since 1994, in which he explained what he regarded as the unsatisfactory financial records maintained by Merchant and the difficulties which this posed for accurately determining the company's tax liability. If the Minister had made his decision on the basis of the content of this affidavit, it would clearly have provided a reasonable basis for his conclusion, even though the auditor never expressly stated the records were inadequate for the purpose of subsection 230 (3).
[16] However, the affidavit does not state that the information contained therein was before the Minister. The letter informing Merchant of the requirement similarly fails to mention what was contained in the report of the auditor.
[17] Since Mr. Button was the auditor in the office responsible for Merchant's tax affairs and he set out in his affidavit the reasons for dissatisfaction with those records, which had been an ongoing matter of controversy between himself and Merchant, one would expect that the report of the auditor referred to in the letter was supplied by Mr. Button as the Motions Judge concluded. However, on the basis of the material before the Court, it is not possible to know whether the information contained in this report was the same as that contained in the affidavit.
[18] There is nothing in the record before us indicating the basis for the decision of the Minister to issue a Requirement. The learned Motions Judge held that the Minister could not issue a Requirement unless it was established that the Applicant had failed to maintain adequate records. The Motions Judge found that there was no evidence before him that the records were inadequate. He therefore set aside the Requirement.
[19] In our respectful view the learned Motions Judge erred in his analysis when he said that the adequacy of Merchant's records is a "jurisdictional question" on which the Minister must be correct if his decision is to stand.
[20] Merchant could only obtain relief if it established that the decision maker had committed a reviewable error, in this case an error in the exercise of the discretion conferred on the Minister by section 230 (3) of the Income Tax Act.
[21] In the context of this case Merchant would have had to demonstrate that there was no material before the Minister that was reasonably capable of supporting his conclusion that Merchant had failed to keep adequate records. In fact there was no evidence filed indicating the basis of the Minister's decision.
[22] Merchant, as the Applicant for judicial review of the Minister's decision, had the burden of establishing that the Minister did not have such evidence when he exercised his discretion to issue a Requirement. Rule 317 of the Federal Court Rules permits a party to request material relevant to an application that is in the possession of a tribunal whose order is the subject matter of an application. Merchant neither asked for this material nor invoked the provisions of Rule 317. Therefore, no serious complaint can be made by Merchant that the basis of the Minister's decision is not before this Court. Because the basis of the Minister's decision is not before this Court, Merchant is unable to show that the discretion was improperly exercised.
[23] This appeal will therefore be allowed and an order will issue dismissing the application for judicial review.
[24] The Appellant will have its costs of this appeal.
"J. Edgar Sexton"
J.A.
Calgary, Alberta
October 11, 2001
FEDERAL COURT OF CANADA
FEDERAL COURT OF APPEAL
Date: 20011011
Docket: A-606-00
CORAM: ROTHSTEIN, J.A.
SEXTON, J.A.
EVANS, J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
And
MERCHANT (2000) LTD.
Respondent
REASONS FOR JUDGMENT
______________________________________
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-606-00
STYLE OF CAUSE: Her Majesty the Queen v. Merchant (2000) Ltd.
PLACE OF HEARING: CALGARY, Alberta
DATE OF HEARING: October 10, 2001
REASONS FOR JUDGMENT OF THE COURT BY SEXTON, J.A.
DATED: October 11, 2001
APPEARANCES:
Mr. Gérald L. Chartier FOR THE APPELLANT
Mr. Curtis R. Stewart
Mr. Michel Bourque FOR THE RESPONDENT
SOLICITORS OF RECORD:
Morris Rosenberg
Deputy Attorney General of Canada FOR THE APPELLANT
Bennett Jones
Calgary, Alberta FOR THE RESPONDENT
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