Collver, J.:—The respondents, Avalon Developments Ltd., Molnar Construction Ltd., and 942 Holdings Ltd., have applied to set aside an order which I made on August 9, 1993, under the provisions of section 225.2 of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"). I made the order on an ex parte application, having determined that delay would jeopardize collection of tax. The order authorizes the taking of collection action fort with, notwithstanding the statutory restriction on such action during the 90 days following the mailing of a notice of assessment by Revenue Canada.
Before I discuss the two bases upon which the respondents challenge the validity of my order of August 9, 1993, I should mention some of the information and considerations which satisfied me that the order was justified.
In an affidavit filed in support of the petition, Ronald K. Schramm, a Revenue Canada collections investigation officer, detailed the corporate activities of Andre Molnar, a well-known British Columbia entrepreneur. Mr. Molnar is a director of a number of companies (including the three respondents) described by Mr. Schramm as the “Molnar Group of Companies". Seven of those companies (not including the three respondents) are substantial tax debtors, and their total unpaid tax obligations currently exceed $500,000.
Mr. Schramm's investigations, which included examination of the financial statements of the debtor companies, revealed that during the past few years each of the companies, apparently at the end of a development project, has transferred its surplus funds to another company in the Molnar Group. These "advances" from or to affiliated companies are described as “non-interest bearing, and have no specific terms of repayment". Millions of dollars have been transferred in this fashion—with the financial statements of each company reflecting the rather loose repayment arrangements I have described.
When, on July 19, 1993, Revenue Canada made a demand on eight Molnar companies for payment of delinquent taxes, Andre Molnar, signing as "President and C.E.O.” of Molnar Group Inc., replied:
We advise you that at the present time there are no funds available to these companies. We will forward payment for each account as funds for the company become available.
This, apparently, was the response which prompted Mr. Schramm to depose:
From my investigations conducted in respect to the taxpayer companies above referred to as well as the respondents, Avalon Developments and Molnar Construction Ltd., I believe that each of these companies has been deliberately stripped of assets by way of inter-company loans in order to prevent Revenue Canada from collecting on any of the tax debts owed by the taxpayer companies.
However, in a responding affidavit filed in support of the application to have my August 9, 1993 order set aside, Mr. Molnar rejected the notion of asset dissipation or removal, deposing to the retention of assets in excess of the amount of the outstanding taxes, but making no comment as to why any of the listed companies has failed to pay its tax obligation which, in the case of each, existed at the time of the inter-company transfer.
In oral reasons, pronounced at the end of the August 9, 1993 hearing, I characterized the various advances as "maneuverings". I do not, upon reflection, resile from that.
Having been told, for example, that the respondent, 942 Holdings Ltd., had received advances totalling almost $2,000,000 from the respondent, Molnar Construction Ltd. (which, previously, had received advances from related tax delinquents), and that the respondent, 942 Holdings Ltd. had title to the only tangible asset Mr. Schramm was able to identify, I commented:
Now, the overwhelming conclusion that I draw from reading Mr. Schramm's detailed affidavit is that the Molnar group of companies must be called to account for the pattern of transfers of monies from associated companies to either of the respondents, Avalon Developments Ltd., Molnar Construction Ltd., or 942 Holdings Ltd., over the course of the past two or three years, in light of the resulting claimed inability of the companies from whom those advances had been obtained to pay their tax obligations.
Before I turn to the bases upon which revocation of my order is sought, I will summarize the applicable statutory provisions.
Subsection 225.1(1) of the Act stipulates that when a taxpayer is liable for payment of an amount assessed, legal proceedings, including attachment, cannot e brought before the expiration of 90 days, or until judgment if the assessment is appealed.
However, subsection 225.2(2) of the Act, pursuant to which the Minister petitioned here, authorizes collection action forthwith, if a judge is satisfied that collection of an amount assessed in respect of a taxpayer would be jeopardized by a delay in collection.
Furthermore, subsection 225.2(3) provides that an authorization may be granted under subsection 225.2(2) in respect of an amount assessed in respect of a taxpayer, notwithstanding that a notice of assessment has not been sent to the taxpayer, where the judge is satisfied that the receipt of the notice of assessment would likely further jeopardize collection.
As to garnishment, subsection 224(1) provides for third party attachment of an amount payable to the tax debtor, and subsection 224(4) stipulates that failure to comply with such a payment requirement invokes liability on the garnishee to pay an amount equal to the amount otherwise payable to the tax debtor. Subsection 227(10) provides that the Minister may assess any person for any amounts payable under subsection 224(4).
Counsel for the respondents first contends that the "jeopardy" provisions of subsections 225.2(2) and (3) apply only to a taxpayer, not to a third party garnishee who is alleged to be indebted to the taxpayer.
However, I accept the petitioner's submission that since subsection 225.2(2) refers to an amount assessed "in respect of a taxpayer”, collection, without notice or delay can, in addition to being sought from the taxpayer, be immediately sought from a third party. I am, therefore, satisfied that the "jeopardy" provisions of the Act apply to a third party garnishee.
Counsel for the respondents further contends that since the third party has no pre-existing liability to the Minister, the "jeopardy" provisions of subsections 225.2(2) and (3) cannot be invoked until the Minister has issued a third party demand under subsection 224(1) and, if there is no compliance, the third party's liability has thereby been established pursuant to subsection 224(4).
With respect, that approach would render subsections 225.2(2) and (3) toothless with respect to these respondents, as third parties. I accept the petitioner’s submission that once the court, is satisfied that delay would jeopardize the Minister’s ability to collect "an amount assessed in respect of a taxpayer", any of the actions enumerated in paragraphs 225.1 (1)(a) to (g) can be taken forthwith (and simultaneously), which is what happened here.
For the above reasons, I am not prepared to set aside my order of August 9, 1993.
Application dismissed.
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