The
Associate
Chief
Justice:
—
In
these
six
files,
nine
motions
came
on
for
hearing
at
Edmonton,
Alberta,
on
December
8,
1987.
In
the
actions
in
which
Her
Majesty
the
Queen
and
the
Minister
of
National
Revenue
are
defendants,
motions
to
strike
the
statement
of
claim
were
withdrawn.
In
the
same
actions,
I
heard
argument
on
plaintiffs’
applications
for
an
interlocutory
injunction
to
restrain
the
Minister
of
National
Revenue
from
pursuing
collection
procedures
pending
trial.
In
the
remaining
actions,
I
heard
an
application
to
set
aside
the
order
of
the
Senior
Prothonotary
compelling
Alexander
Palynchuk
to
attend
upon
oral
examination
in
aid
of
execution
of
a
judgment
obtained
by
the
Minister
of
National
Revenue.
At
the
conclusion
of
argument,
I
gave
oral
reasons
for
setting
aside
the
order
of
the
Senior
Prothonotary
and
indicated
that
these
written
reasons
would
follow.
I
took
the
application
for
injunctive
relief
under
reserve.
The
following
also
includes
my
reasons
for
the
disposition
of
that
motion.
Each
of
the
three
companies
is
involved
in
scientific
research
and
development
in
the
area
of
oil
field
wells
and
pumps.
Under
the
Income
Tax
Act,
Part
VIII,
companies
involved
in
scientific
research
and
experimental
development
are
entitled
to
the
advantage
of
certain
tax
credits.
For
the
periods
in
question,
the
plaintiff
companies
filed
their
income
tax
returns
claiming
the
credits
as
required.
Sections
222
and
223
of
the
Income
Tax
Act
provide
that
a
certificate
of
moneys
owing
under
the
Act
registered
with
the
Federal
Court
has
the
same
force
and
effect
as
a
judgment.
On
April
7,
1986,
the
Minister
of
National
Revenue
filed
such
a
certificate,
certifying
that
the
plaintiff,
First
Canadian
Holdings,
owed
1985
taxes
of
$246,215.21
(including
interest).
On
June
17,
1986,
the
Minister
filed
another
certificate
with
this
Court
that
F-C
Research
Inc.
and
317966
Alberta
Ltd.
owed
$816,904.11
and
$366,204.34
(including
interest)
respectively
for
taxes.
Following
registration,
the
defendant
proceeded
with
collection
procedures
against
the
plaintiffs.
On
July
22,
1986,
plaintiffs'
banks
received
notice
that
they
were
required
to
pay
to
the
Receiver
General
all
sums
payable
to
the
plaintiffs,
and
on
July
23,
1986,
goods
belonging
to
the
plaintiffs
were
seized.
In
October
1986,
the
plaintiffs,
First
Canadian
Holdings
and
317966
Alberta
Ltd.
received
notices
of
assessment
informing
them
of
the
amounts
owing
in
taxes.
Such
notice
was
received
by
F-C
Research
Inc.
in
February
1987.
Notices
of
objection
were
duly
filed
by
the
plaintiffs
and
on
July
8,
1987,
they
received
notices
of
confirmation.
The
Minister’s
position
is
that
the
expenditures
did
not
qualify
as
scientific
research
and
experimental
development
in
accordance
with
the
provisions
of
the
Income
Tax
Act
and
were
therefore
not
eligible
for
Part
VIII
tax
credits.
Plaintiffs
have
appealed
this
assessment
in
another
action.
On
September
25,
1987,
the
Senior
Prothonotary
issued
an
order
that
Alexander
Palynchuk,
a
director
of
the
plaintiff
companies,
attend
at
an
examination
to
answer
questions
in
aid
of
execution
of
the
purported
judgment.
The
application
by
the
defendants
to
the
Prothonotary
was
made
under
Federal
Court
Rule
324
which
permits
certain
motions
to
be
disposed
of
without
the
personal
appearance
of
the
parties.
The
plaintiffs
received
no
formal
notice
of
this
application
though
they
were
aware
that
it
would
be
made.
On
the
basis
of
Rule
324(2)
the
plaintiffs
submitted
at
that
time
that
the
gravity
of
the
issues
raised
under
the
defendants'
application
required
an
oral
hearing.
The
order,
however,
was
made
without
oral
hearing
presumably
on
the
basis
of
written
submissions
filed
only
on
behalf
of
the
Minister.
The
relevant
legislation
regarding
this
issue
is
Federal
Court
Rules
321(4),
324
and
2200:
321.(4)
Any
motion
authorized
to
be
made
ex
parte
may
be
disposed
of
in
accordance
with
the
provisions
of
Rule
324(1)
unless
a
judge
or
a
prothonotary
otherwise
directs.
324.(1)
A
motion
on
behalf
of
any
party
may,
if
the
party
by
letter
addressed
to
the
Registry,
so
requests,
and
if
the
Court
or
a
prothonotary,
as
the
case
may
be
considers
it
expedient,
be
disposed
of
without
personal
appearance
of
that
party
or
an
attorney
or
solicitor
on
his
behalf
and
upon
consideration
of
such
representations
as
are
submitted
in
writing
on
his
behalf
or
of
a
consent
executed
by
each
other
party.
(2)
A
copy
of
the
request
to
have
the
motion
considered
without
personal
appearance
and
a
copy
of
the
written
representations
shall
be
served
on
each
opposing
party
with
the
copy
of
the
notice
of
motion
that
is
served
on
him.
(3)
A
party
who
opposes
a
motion
under
paragraph
(1)
may
send
representations
in
writing
to
the
Registry
and
to
each
other
party
or
he
may
file
an
application
in
writing
for
an
oral
hearing
and
send
a
copy
thereof
to
the
other
side.
(4)
No
motion
under
paragraph
(1)
shall
be
disposed
of
until
the
Court
is
satisfied
that
all
interested
parties
have
had
a
reasonable
opportunity
to
make
representations
either
in
writing
or
orally.
2200.(1)
Where
a
person
has
obtained
a
judgment
or
order
for
the
payment
by
some
other
person
(hereinafter
referred
to
as
"the
judgment
debtor")
of
money,
the
Court
may,
on
an
application
made
ex
parte
by
the
person
entitled
to
enforce
the
judgment
or
order,
order
the
judgment
debtor
or,
if
the
judgment
debtor
is
a
body
corporate,
an
officer
thereof,
to
attend
before
a
prothonotary
or
such
other
officer
of
the
Court
as
the
Court
may
appoint,
and
be
orally
examined
on
the
questions
(a)
as
to
all
the
property
that
he
possesses
or
has
possessed
since
the
incurring
of
the
obligation
that
was
the
basis
of
the
judgment
or
order,
and
as
to
his
sources
of
income,
and
(b)
without
limiting
the
generality
of
paragraph
(2)
whether
any
and,
if
so,
what
debts
are
owing
to
the
judgment
debtor,
and
the
Court
may
also
order
the
judgment
debtor
or
officer
to
produce
any
books
or
documents
in
the
possession
or
control
of
the
judgment
debtor
relevant
to
the
questions
aforesaid
at
the
time
and
place
appointed
for
the
examination.
The
plaintiff
argues
that
the
order
of
the
Senior
Prothonotary
was
contrary
to
Rule
324(4)
in
that
the
plaintiffs,
as
interested
parties,
did
not
have
a
reasonable
opportunity
to
make
representations
in
writing
and
their
application
for
an
oral
hearing
was
not
dealt
with.
In
oral
arguments,
counsel
for
the
defendants
made
three
submissions
for
rejection
of
plaintiffs’
application
to
set
aside
the
order.
First,
that
the
notices
of
motion
by
the
plaintiffs
are
really
appeals
from
the
decision
of
the
Senior
Prothonotary
and
the
applicable
Rule
is
336(5),
which
would
render
the
motions
defective
because
they
were
not
served
within
14
days
after
the
order
was
made.
Second,
if
they
are
appeals
they
should
fail
in
that
they
do
not
articulate
the
grounds
of
objection
to
the
order.
Finally,
that
the
Senior
Prothonotary
simply
exercised
his
discretion
to
refuse
an
oral
hearing
after
submissions
had
been
made
by
both
parties
and
there
was
no
error
on
his
part.
I
am
of
the
opinion
that
the
order
of
the
Senior
Prothonotary
is
defective
and
must
be
set
aside.
Confusion
between
the
provisions
of
Rule
321,
which
permits
ex
parte
applications
and
those
of
Rule
324,
may
contribute
to
the
impression
that
since
Rule
324
applications
do
not
require
personal
appearance,
they
do
not
require
notice.
Rule
324(2),
however,
says
precisely
the
opposite.
It
is
true
that
Rule
2200
also
permits
ex
parte
applications,
but
it
would
be
extraordinary
to
act
upon
it
where
the
parties,
as
here,
are
litigants
not
only
with
respect
to
the
validity
of
the
certificate,
but
also
with
respect
to
the
merits
of
the
assessments
leading
to
the
judgment.
In
any
event,
the
application
was
not
made
on
an
ex
parte
basis
solely
on
the
basis
of
Rule
2200
or
Rule
321.
Although
authorized
by
those
two
Rules,
the
application
was
made
pursuant
to
Rule
324.
Before
proceeding,
the
proper
course
was
to
first
require
proof
of
service
in
accordance
with
Rule
324(2).
In
turn,
the
plaintiffs
would
have
to
be
given
the
opportunity
to
file
written
submissions
both
on
the
merits
of
the
application
and
on
the
suitability
of
Rule
324.
Finally,
it
would
be
necessary
to
make
a
preliminary
determination
as
to
whether
Rule
324
was
appropriate
for
the
resolution
of
a
dispute
of
this
rather
substantial
nature
or
whether,
as
I
consider
far
more
likely,
it
would
be
directed
that
the
parties
deal
with
the
matter
by
way
of
a
contested
motion.
In
the
absence
of
these
steps,
particularly
in
the
face
of
the
written
request
by
the
plaintiffs,
the
order
of
the
Senior
Prothonotary
must
be
set
aside.
I
have
also
decided
that
in
the
rather
special
circumstances
of
this
case,
the
plaintiffs
are
entitled
to
the
interlocutory
injunction
sought.
It
is
well
established
that
where
the
validity
of
any
law
is
questioned
that
the
law
is
presumed
to
be
valid
until
declared
otherwise
by
judgment
of
a
competent
Court.
Indeed,
any
other
approach
would
create
chaos
in
the
administration
of
justice.
In
accordance
with
those
principles,
the
Minister
was
entitled
here
to
bring
to
bear
all
of
the
enforcement
provisions
available
in
the
Income
Tax
Act
notwithstanding
the
plaintiffs’
attack
on
the
assessments,
and
on
the
validity
of
Part
VIII
of
the
Income
Tax
Act.
The
status
quo
should
be
reversed
here,
however,
because
of
a
combination
of
four
circumstances.
First,
I
am
satisifed
that
the
plaintiffs
are
genuine
entrepreneurs
in
a
field
which
lends
itself
to
research
and
development.
I
am
also
satisfied
that
the
project
which
is
in
issue
is
substantial
in
nature.
Whatever
the
ultimate
determination
of
qualification
for
the
Part
VIII
tax
treatment,
it
is
certainly
not
a
case
of
a
scheme
thrown
together
solely
for
the
purpose
of
attracting
investors
who
seek
nothing
more
than
the
tax
benefit.
The
second
circumstance
is
that
the
allowances
created
in
Part
VIII
as
they
apply
to
the
plaintiffs'
operations,
are
relatively
new
and
untested.
The
ultimate
determination
in
actions
ITA-1058-86,
ITA-1800-86
and
ITA-1803-86
will
therefore
assist
the
Minister
and
industry
in
the
resolution
of
other
disputes.
Thirdly,
the
collection
procedures
which
the
plaintiffs
seek
to
restrain
are
placing
the
operation
of
the
business
in
jeopardy.
If
the
business
fails
as
result,
it
seems
to
me
that
the
penalty
upon
the
taxpayer
would
be
excessive
and
the
ability
of
the
Minister
to
collect
would
be
at
risk,
neither
of
which
is
in
the
public
interest.
Finally,
and
I
consider
this
to
be
extremely
significant,
the
taxpayer
has
undertaken
to
make
arrangements
satisfactory
to
the
Minister
to
guarantee
that
the
funds
released
from
the
grip
of
the
Minister
owuld
be
used
solely
for
the
operation
of
the
business,
so
that
the
right
of
access
to
them
for
the
purpose
of
collection
will
not
be
frustrated.
The
injunction
is
therefore
granted
on
the
condition
that
the
taxpayer
so
satisfies
the
Minister.
Should
the
parties
be
unable
to
come
to
a
satisfactory
arrangement
in
30
days
from
the
date
of
this
judgment,
I
will
hear
counsel
as
to
arrangements
which
are
satisfactory
to
the
Court.
Costs
in
the
cause.
Order
accordingly.
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