Date: 20060120
Docket: A-21-05
Citation: 2006 FCA 22
CORAM: LÉTOURNEAU
J.A.
NADON
J.A.
PELLETIER
J.A.
BETWEEN:
DONALD FABI
Appellant
and
THE MINISTER OF NATIONAL
REVENUE
Respondent
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
[1]
Mr. Fabi
is appealing from a judgment by Mr. Justice Lemieux of the Federal Court
(the judge) dismissing his application for judicial review that challenged the
legality of two requests for documents and information made by the Minister of
National Revenue (the Minister).
[2]
Those
requests were made pursuant to paragraph 231.2(1)(a) and (b)
of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1
(the Act). They sought to obtain from the appellant information as to the
ownership or transfer of a building and/or lot owned by him in Florida. These applications, set out
in an affidavit by a representative of the defendant, had three purposes: to
determine the value of the appellant’s assets, to discover what had happened
with the selling price of the building, if applicable, and to ascertain, if no
purchase was made as the appellant claimed, what had happened with the money
disbursed by the bank to acquire the properties.
[3]
The
appellant submitted that the judge erred when he dismissed his argument that
the Minister’s demands were illegal in the light of subsection 69.1(1) of
the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3.
[4]
In
particular, under paragraph 69.1(1)(a), set out below, creditors
may not sue or commence any execution or recovery action on claims provable
against a debtor who has filed a proposal, as in the appellant’s case:
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69. (1) [Stay of proceedings – Division I
proposals] Subject to subsections (2) to (6) and sections 69.4 and 69.5,
on the filing of a proposal under subsection 62(1) in respect of an insolvent
person,
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69. (1) [Suspension des procédures en cas de
dépôt d’une proposition]
Sous
réserve des paragraphes (2) à (6) et des articles 69.4 et 69.5, entre la date
de dépôt d’une proposition visant une personne insolvable et :
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(a)
no creditor has any remedy against the insolvent person or the insolvent
person's property, or shall commence or continue any action, execution or
other proceedings, for the recovery of a claim provable in bankruptcy, until
the trustee has been discharged or the insolvent person becomes
bankrupt . . .
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a) soit sa faillite, soit la libération du
syndic, les créanciers n’ont aucun recours contre elle ou contre ses biens et
ne peuvent intenter ou continuer aucune action, exécution ou autre procédure
en vue du recouvrement de réclamations prouvables en matière de
faillite . . .
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[5]
I am of
the view that the judge correctly understood and determined the legal relationship
existing between the provisions of the Act and the provisions of the Bankruptcy
and Insolvency Act.
[6]
Indeed,
the purpose of the actions taken by the Minister pursuant to
subsection 231.2(1) was to determine and establish the existence and value
of an asset which he had reason to believe was being concealed by the appellant
at the expense of his creditors, including the Canada Customs and Revenue
Agency (the Agency).
[7]
As the
judge noted, referring to judgments of his colleagues
Mr. Justice Beaudry in Carrefour Langelier Inc. v. Canada (Customs
and Revenue Agency), 2003 FC 1403, and Mr. Justice Blais in Canada
(Minister of National Revenue – MNR) v. Stern, 2004 FC 763, the information
obtained through the requests may benefit creditors and the trustee responsible
for administering the debtor’s proposal.
[8]
The
appellant did try to distinguish Carrefour Langelier Inc., arguing that
that was a request for information addressed to a third party and not the
debtor, as in this case. However, I think this argument must be rejected as
the purpose of the request for information in both cases was to establish the
existence and value of an asset owned by the debtor.
[9]
The
information which the Minister sought to obtain was also relevant and necessary
to establish the appellant’s tax debt. The latter submitted that his tax debt
had already been determined in the proposal and amounted to $183,621.09,
according to the proof of claim filed by the respondent with the trustee. I am
ready to follow the appellant in this respect, but the tax debt does not
include debts to come, that is, a debt which has not yet been determined and
which might relate to undeclared or concealed taxable assets.
[10]
Indeed,
the appellant’s undeclared assets may give rise to a taxable income if they
exist. The affidavit by Mr. Phaneuf, who is employed by the Agency,
indicates at paragraph 14 that the purpose of the request for information
was to determine whether the appellant’s undeclared assets had been
transferred, in which case the transfer or disposition, especially to related
persons, could give rise to a tax debt for the appellant.
[12]
At this
stage, according to the evidence, this is the objective pursued by the requests
for production of information and documents made by the Minister. If the
Minister thereafter wishes to proceed to the next stage, that is the collection
of the new tax debt so established, if any, then paragraph 69.1(1)(a)
of the Bankruptcy and Insolvency Act will come into play. It cannot be
assumed at this point, and there is no evidence to this effect in the record,
that the Minister will ignore paragraph 69.1(1)(a) of the Bankruptcy
and Insolvency Act and will not proceed to collect the new tax debt by way
of an amended claim, as he is allowed to do by section 121 of that Act.
[13]
In support
of his arguments, the appellant relied on subsection 222(1) of the Act,
which contains a definition of the word “action”, added by S.C. 2004,
c. 22, s. 50. I set out below this definition found in the section
“Collection”, which solely applies in relation to section 222:
Collection
Section 222: [Limitation Period for Collection of Tax
Debts]
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Recouvrement
Article 222 : Définitions.
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(1)
Definitions. The following definitions apply in this section.
“action”
means an action to collect a tax debt of a taxpayer and includes a
proceeding in a court and anything done by the Minister under
subsection 129(2), 131(3), 132(2) or 164(2), section 203 or any
provision of this Part.
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(1)
Les définitions qui suivent s’appliquent au présent article.
« action »
Toute action en recouvrement d’une dette fiscale d’un contribuable, y
compris les procédures judiciaires et toute mesure prise par le
ministre en vertu des paragraphes 129(2), 131(3), 132(2) ou 164(2),
de l’article 203 ou d’une disposition de la présente partie.
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[Emphasis added.]
I would add that this section deals with the prescription of
actions to collect a tax debt.
[14]
The
appellant read, in the language used – “includes . . . anything
done by the Minister under . . . any provision of this Part” – a
prohibition against the Minister requiring a person to provide information. He
came to this conclusion because the relevant power is found at
section 231.2 and, like section 222, that section stands in “this
Part”, namely Part XV of the Act.
[15]
I am of
the view that this reading by the appellant of subsection 222(1) ignores
the very first parts of the definition of the word “action”: the action must be
“an action to collect” a tax debt. I agree with the judge, who thus ruled at
paragraph 49 of his reasons: the Minister’s power set out at
section 231.2 of the Act does not relate to collection. The power is not
a collection action.
[16]
Further,
although section 232.1 does stand in Part XV of the Act, it does not
stand in the “Collection” section. Rather, it is under the heading “General”,
which includes the obligation of keeping books of account and registers,
including registers of political contributions, powers of inspection, audit,
search and seizure necessary to apply and enforce the Act, prohibitions of a
public official from disclosing confidential information or giving access to
it, provisions relating to the solicitor-client privilege, those relating to
information statements which every association of individuals must make, and so
on.
[17]
With
respect, it seems clear to me that the words “anything done by the Minister
under . . . this Part” are qualified by the fact that a
collection action must be at stake, and therefore that the action taken pursuant
to this Part referred to by subsection 222(1) is a collection measure.
The words “under this Part” contained in the definition of
subsection 222(1) do not have the effect of transforming a power of
investigation into a collection action.
[18]
Finally,
in the same context, the appellant referred the Court to subsection 222(8)
of the Act, which provides that periods of limitation for bringing a collection
action are extended when the collection action the Minister may bring in
respect of a tax debt is restricted by the Bankruptcy and Insolvency Act:
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222. (8) Extension of limitation period.
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222. (8) Prorogation du délai de prescription.
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In
computing the day on which a limitation period ends, there shall be added the
number of days on which one or more of the following is the case:
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Le
nombre de jours où au moins un des faits suivants se vérifie prolonge
d’autant la durée du délai de prescription :
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(a)
the Minister may not, because of any of subsections 225.1(2) to (5), take any
of the actions described in subsection 225.1(1) in respect of the tax debt;
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a) en raison de l’un des
paragraphes 225.1(2) à (5), le ministre n’est pas en mesure d’exercer
les actions visées au paragraphe 225.1(1) relativement à la dette fiscale;
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(b)
the Minister has accepted and holds security in lieu of payment of the tax
debt;
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b) le ministre a accepté et détient une
garantie pour le paiement de la dette fiscale;
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(c)
if the taxpayer was resident in Canada on the applicable
date described in paragraph (4)(a) in respect of the tax debt, the
taxpayer is non-resident; or
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c) la personne, qui résidait au Canada à la
date applicable visée à l’alinéa (4)a) relativement à la dette
fiscale, est un non-résident;
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(d)
an action that the Minister may otherwise take in respect of the tax debt is
restricted or not permitted under any provision of the Bankruptcy and
Insolvency Act, of the Companies’ Creditors Arrangement Act or of
the Farm Debt Mediation Act.
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d) l’une des actions que le ministre peut
exercer par ailleurs relativement à la dette fiscale est limitée ou interdite
par une disposition quelconque de la Loi sur la faillite et
l’insolvabilité, de la Loi sur les arrangements avec les créanciers
des compagnies ou de la Loi sur la médiation en matière d’endettement
agricole.
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[19]
He infers
from this paragraph, wrongly in my opinion, that Parliament has extended the
limitation periods applicable to the exercise by the Minister of his power to
require a taxpayer to provide information.
[20]
I say
wrongly because, firstly, the appellant’s reasoning is based on the premise
that the section 232.1 power of investigation is a collection action or an
action taken in view of collection, subject to the limitation period. As we
have already noted, that is false.
[21]
Secondly,
the appellant has ignored the comment made by this Court in Tower v. M.N.R.,
supra; at paragraph 32 of that decision, the Court recalled that
“there is no statutory time limit” applicable to the exercice of this power.
The Court has thus implicitly but necessarily concluded that the Minister’s
power to impose a requirement to provide information is not a collection
action, still less an action aiming at the collection of a tax debt already
determined when, as in this case, its purpose is to determine the existence of
a new tax debt and to ascertain its amount.
“Gilles
Létourneau”
I
concur.
Marc Nadon J.A.
I
concur.
J.D.
Denis Pelletier J.A.
Certified
true translation
François
Brunet, LLB, BCL
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