Markevich v. Canada, [1999] 2 CTC 104, 99 DTC 5136

Evans J.:

A. Introduction

The Income Tax Act imposes no limitation on the time within which the Minister of National Revenue (hereinafter “the respondent” or “the Minister”) may seek to collect unpaid tax for which a taxpayer has been duly assessed. In the absence of any express provisions in the Income Tax Act itself, the principal question raised in this case is whether the Minister’s exercise of the statutory collection powers is subject to a limitation period, whether that contained in the Crown Liability and Proceedings Act R.S.C. 1985, c. C-50, section 32 or in the relevant provincial limitation statute. The applicant contends that it is, while the Minister says that it is not.

The question comes before me in the form of an application for judicial review under section 18.1 of the Federal Court Act R.S.C. 1985, c. F-7 [as amended]. The subject matter of the application is a letter of January 15th, 1998 written to the applicant by Ms. Nasim Kara of the Revenue Canada office in Richmond, British Columbia, informing the applicant that he owes more than $770,583.42 in unpaid taxes. The applicant requests a declaration that this amount is not owing and an order restraining the Minister from issuing requirements to pay to the applicant’s creditors.

B. Background

The applicant, Mr. Markevich, has been at all material times a resident in the province of British Columbia. In the early 1980s he failed to pay taxes on income that he had earned in the promotion of stocks. He has never challenged the validity or correctness of the notices of assessment issued by the Minister.

In 1986 he was assessed as owing $267,437.61 to Revenue Canada. In 1987 his house was sold and Revenue Canada took the proceeds of sale to reduce his indebtedness. Later in that same year Revenue Canada decided to “write-off’ the amount of tax still owed by the applicant, on the ground that he had no other assets and no income, and there were no realistic prospects of collecting the tax from him within the foreseeable future.

“Writing-off’ a tax debt does not extinguish or forgive it; it is an internal book- keeping device that removes a taxpayer’s tax debt from Revenue Canada’s active collection list. Subsection 25(3) of the Financial Administration Act, R.S.C. 1985, c. F-l 1 [as amended] provides that “[t]he writing off of any debt, obligation or claim pursuant to this section does not affect any right of Her Majesty to collect or recover the debt, obligation or claim.”

From 1992 the applicant reported income on his tax returns; in some years he was late in paying the amount for which he was assessed. After making payments in respect of those years, he received a statement of account in September 1993 showing the balance owing to Revenue Canada as $0.00. In the years 1995 to 1997 he again fell into arrears, and requirements to pay were issued to creditors informing them of the tax owing by the taxpayer and requiring them to pay to Revenue Canada money that they owed to the applicant. During the period 1995 to 1997, the statements of account sent to the applicant, and the requirements to pay issued to its creditors, showed him as owing only the tax due in respect of those years, not the larger amount owing from the years before 1986.

However, in January 1998 the applicant was informed that he also owed unpaid taxes assessed in the years up to 1986 in the amount $770,583.42, which comprised $267,437.61 of unpaid taxes and $503,145.81 of accrued interest. Apparently as a result of a change of policy, previously written-off tax debts are now included by Revenue Canada in both the statements of account sent to taxpayers, and any requirements to pay issued to taxpayers’ creditors.

Having heard virtually nothing about this debt in any of his communications with Revenue Canada since 1986, and having neither acknowledged nor made any payments in respect of this indebtedness since 1986, the applicant was taken aback when he received this information in January 1998. In particular, he feared that the inclusion of this large amount in any requirements to pay that Ms. Kara indicated would be issued to his creditors would be extremely damaging to him in the conduct of his business. However, it should also be noted that in August 1996 the applicant had been told that the assessment notice issued for the tax year 1993 did not include a previously unpaid tax liability and that a detailed statement would follow. It did not.

C. Jurisdiction

The respondent made a preliminary objection to the Court’s jurisdiction to entertain this proceeding. The argument was that only a “decision or order” may be the subject of an application for judicial review under section 18.1 of the Federal Court Act. The letter written on behalf of the Minister, which is identified in the applicant’s originating notice of motion as the subject of the application for judicial review, was simply informative in nature and did not purport to determine or otherwise affect any legal rights or duties of the applicant. It was not a “decision or order”, and was therefore unreviewable by this Court. Indeed, on very similar facts to those at bar, this was the conclusion reached by Teitelbaum J. in Fuchs v. R., [1997] 2 C.T.C. 246 (Fed. T.D.).

With all respect, I do not share this rather limited view of the scope of the subject-matter of this Court’s judicial review jurisdiction. The words “decision or order” are found in subsection 18.1(2) of the Federal Court Act, which provides that an application for judicial review of a “decision or order” must be made within 30 days after the time that the decision or order was first communicated by the decision-maker. In my opinion, this subsection simply provides a limitation period within which an application for judicial review of a decision or order must normally be made. It does not say that only decisions or orders may be the subject of an application for judicial review, nor does it say that administrative action other than decisions or orders are subject to the 30 days’ limitation period: Krause v. Canada (February 8, 1999), Doc. A-135-98 (Fed. C.A.).

It seems to me that the permitted subject-matter of an application for judicial review is contained in subsection 18.1(3), which provides that on an application for judicial review the Trial Division may order a federal agency to do any act or thing that it has unlawfully failed or refused to do, or declare invalid or set aside and refer back, prohibit or restrain “a deci- sion, order, act or proceeding of a federal board, commission or other tribunal”. The words “act or proceeding” are clearly broad in scope and may include a diverse range of administrative action that does not amount to a “decision or order”, such as subordinate legislation, reports or recommendations made pursuant to statutory powers, policy statements, guidelines and operating manuals, or any of the myriad forms that administrative action may take in the delivery by a statutory agency of a public programme: see Krause v. Canada, supra.

However, in order to qualify as an “act or proceeding” that is subject to judicial review, the administrative action impugned must be an “act or proceeding” of a “federal board, commission or other tribunal”, that is a body or person “having, exercising or purporting to exercise jurisdiction or powers conferred by or under an Act of Parliament” (subsection 2( I ) of the Federal Court Act). While the letter written on the Minister’s behalf to the applicant that is the subject-matter of this application for judicial review was not an act or proceeding by a federal body in the exercise of any statutory power, the Minister, of course, is a person having statutory powers under the Income Tax Act.

Even though not taken in the exercise of a statutory power, administrative action by a person having statutory powers may be reviewable as an “act or proceeding” under paragraph 18.1(3)(b) if it affects the rights or interests of individuals. The letter in question here contained no decision made pursuant to a statutory power, nor did it explicitly purport adversely to affect any right or interest of the applicant. However, it is a reasonable inference from both the letter, and the applicant’s communications with Ms. Kara, the writer of the letter, that it signified that Revenue Canada had made a decision to try to collect the unpaid tax and intended to take measures to attempt to recover the previously “written-off’ tax debt. And, as is apparent from the requirements to pay that were subsequently issued, this was indeed the case.

There is no doubt that it is potentially very damaging to a taxpayer’s business or professional reputation for Revenue Canada to issue requirements to pay that disclose that a taxpayer is in default on a large unpaid tax debt and require the creditor to pay to Revenue Canada whatever the creditor owes to the taxpayer. The Income Tax Act provides no remedy by which a taxpayer can challenge the validity of the issuance of a requirement to pay. In my opinion, it would be a serious gap in the Court’s supervisory jurisdiction if it could not entertain a challenge to the issuance of a require- ment to pay where, as here, the ground of the challenge could not have been raised by the taxpayer on receipt of the notice of assessment

D. Legislative Framework

It will be necessary in the course of these reasons to refer to a number of provisions in the federal Income Tax Act and the Income Tax Act of British Columbia. To set them all out at this stage would be both unnecessary and distracting. I shall therefore set out here only the statutory provisions that are of central importance to the disposition of this application.

Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50

32. Except as otherwise provided in this Act or in any other Act of Parliament, the laws relating to prescription and the limitation of actions in force in a province between subject and subject apply to any proceedings by or against the Crown in respect of any cause of action arising in that province, and proceedings by or against the Crown in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose.

32. Sauf disposition contraire de la présente loi ou de toute autre loi fédérale, les règles de droit en matière de prescription qui, dans une province, régissent les rapports entre particuliers s’appliquent lors des poursuites auxquelles l’État est partie pour tout fait générateur survenu dans la province. Lorsque ce dernier survient ailleurs que dans une province, la procédure se prescrit par six ans.

Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) [as amended]

222. All taxes, interest, penalties, costs and other amounts payable under this Act are debts due to Her Majesty and recoverable as such in the Federal Court or any other court of competent jurisdiction or in any other manner provided by this Act.

224 (1) Where the Minister has knowledge or suspects that a person is, or will be within one year, liable to make a payment to another person who is liable to make a payment to another person who is liable to make a payment under this Act (in this subsection and subsections (1.1) and (3) referred to as the “tax debtor”), the Minister may in writing require the person to pay forthwith, where the moneys are immediately payable, and in any other case as and when the moneys become payable, the moneys otherwise payable to the tax debtor in whole or in part to the Receiver General on account of the tax debtor’s liability under this Act.

222. Tous les impôts, intérêts, pénalités, frais et autres montants payables en vertu de la présente loi sont des dettes envers Sa Majesté et recouvrables comme telles devant la Cour fédérale ou devant tout autre tribunal compétent, ou de toute autre manière prévue par la présente loi.

224(1) S’il sait ou soupçonne qu’une personne est ou sera, dans les douze mois, tenue de faire un paiement à un autre personne qui, elle-même, est tenue de faire un paiement en vertu de la présente loi (appelée “débiteur fiscal” au présent paragraphe et aux paragraphes (1.1) et (3)), le ministre peut exiger par écrit de cette personne que les fonds autrement payables au débiteur fiscal soient en totalité ou en partie versés, sans délai si les fonds sont immédiatement payables, sinon au fur et à mesure qu'ils deviennent payables, au receveur général au titre de l’obligation du débiteur fiscal en vertu de la présente loi.

Limitation Act R.S.B.C. 1996, c. 266

1. The term ’action’ is defined as including any proceeding in a court and any exercise of a self help remedy.

3(5) Any other action not specifically provided for in this Act or any other Act may not be brought after the expiration of 6 years after the date on which the right to do so arose.

9(1) On the expiration of a limitation period set by this Act for a cause of action to recover any debt, damages or other money, or for an accounting in respect of any matter, the right and title of the person formerly having the cause of action and of a person claiming through the person in respect of that matter is as against ne person against whom the cause of action formerly lay and as against his successors, extinguished.

9(3) A cause of action, whenever arising, to recover costs on a judgment or to recover arrears of interest on principal money is extinguished by the expiration of the limitation period set by this Act for an action between the same parties on the judgment or to recover the principal money,

E. Issues

Although they will be broken into several more specific components, the principal issues raised by this litigation are as follows.

1. Does section 32 of the Crown Liability and Proceedings Act apply to the exercise by the Minister of National Revenue of the statutory power to issue requirements to pay with respect to a duly assessed tax liability under the Income Tax Act?

2. If it does, is the applicant’s liability under the Income Tax Act one that “arises in a province”, or “otherwise than in a province”?

3. If it arises in a province, is the issue of a requirement to pay a “proceeding in a court” or an “exercise of a self help remedy” within the definition of “action” in section 1 of the British Columbia Limitation Act?

4. Regarding the requirement to pay issued with respect to unpaid taxes under the British Columbia Income Tax Act:

i) does the British Columbia Income Tax Act exclude the application of the British Columbia Limitation Act from governing the time within which the Minister must exercise the power to collect the tax?

ii) if it does not, does the British Columbia Limitation Act apply to the exercise of powers by a Minister of the federal Crown pursuant to the British Columbia Income Tax Act?

F. Analysis

Before embarking on a detailed analysis of the issues described above, it will be helpful to bear in mind the approaches to the interpretation of taxation statutes adopted by the courts in recent years. At one time, the principal presumption of statutory interpretation in this area of the law was that taxing statutes should be construed narrowly in favour of the taxpayer, who should also be given the benefit of any doubt about the meaning of the legislative provisions in dispute: Johns-Manville Canada Inc. v. R., [1985] 2 S.C.R. 46 (S.C.C.).

More recently, however, the courts have developed other interpretative approaches or principles that undoubtedly limit the influence previously exercised by the presumption requiring a narrow interpretation of tax legislation in favour of the taxpayer. The following passage from the judgment of Gonthier J. in Québec (Communauté urbaine) c. Notre-Dame de Bon- secours (Corp.), [1994] 3 S.C.R. 3 (S.C.C.) at 17-18 provides authoritative guidance to the current interpretation of tax legislation:

there is no longer any doubt that the introduction of tax legislation should be subject to the ordinary rules of construction. At page 872 of his text Construction of Statutes (2nd. ed. 1983), Driedger fittingly summarizes the basic principles: “.. the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”. The first consideration should therefore be to determine the purpose of the legislation, whether as a whole or as expressed in a particular provision.

The teleological approach makes it clear that in tax matters it is no longer possible to reduce the rules of interpretation to presumptions in favour of or against the taxpayer or to well-defined categories known to require a liberal, strict or literal interpretation. ...

In addition, as the Income Tax Act recognizes, the principle of “horizontal equity” among taxpayers is an important policy objective of the statute, so that whenever possible the Act should be interpreted to ensure that tax-

payers who are similarly situated should pay the same amount of tax: Symes v. R., [1993] 4 S.C.R. 695 (S.C.C.), 751-752. The cost of the failure to collect duly assessed tax must inevitably be borne by other taxpayers and the population at large.

Nonetheless, the special nature of tax legislation, and in particular the reliance placed upon its provisions by those planning their affairs in order to minimize or avoid tax liability, has meant that the broad and purposive approach applied to legislation in general is not applied to the same extent to the interpretation of tax statutes. The “plain meaning” rule retains a vigour in this area that it does not have elswhere: see, for example, Antosko v. Minister of National Revenue, [1994] 2 S.C.R. 312 (S.C.C.) at 326-327. And in 2747-3174 Québec Inc. c. Quebec (Régie des permis d’alcool), [1996] 3 S.C.R. 919 (S.C.C.), 1013-1014, L’Heureux-Dubé J. said that, for these reasons, and because business practice has often contextualized the meaning of words used in tax statutes, the “plain meaning” rule should be given priority over the purposive or “modern” approach with which courts generally approach the interpretation of legislation.

Issue 1

In order to establish that section 32 of the Crown Liability and Proceedings Act applies to the Minister’s exercise of the power to issue requirements to pay, the applicant must show that the following two elements are satisfied.

(i) Is the issue of a requirement to pay a “proceeding with respect to any cause of action arising in a province”.

There are two methods by which the Minister may seek to collect a debt that is owing as a result of an unpaid tax liability under section 222 of the Income Tax Act. First, the Minister may institute legal proceedings by way of a statement of claim for the recovery of a debt in the Federal Court or any other court of competent jurisdiction. Second, the Minister may employ one of the statutory collection methods that do not require the institution of an action. These include registering a certificate of indebtedness with the Federal Court under section 223 of the Income Tax Act and issuing to third party creditors a requirement to pay under section 224 of the Act.

The applicant’s first argument was that section 32 of the Crown Liability and Proceedings Act applies to anything that is a “proceeding”, and that the phrase “in respect of a cause of action” only modifies the words that follow it, namely, “arising in a province” or, when relevant, “otherwise than in a province”. He then relied on cases where it has been said that “proceedings” is a word of the broadest connotation and is not confined to measures taken in court or as a step in the initiation or prosecution of litigation.

Thus, in Royce v. Macdonald (1909), 12 W.L.R. 347 (Man. C.A.) it was held that the sale of property under a writ of fieri facias in the execution of a judgment was “a proceeding” for the purpose of a municipal taxing Statute.

Similarly, in E.H. Price Ltd. v. R., [1983] 2 F.C. 841 (Fed. C.A.) the Federal Court of Appeal held that the registration in the Federal Court by the Minister of National Revenue of a certificate of indebtedness was a “proceeding by the Crown” for the purpose of the then subsection 38(2) of the Federal Court Act, which prescribed the limitation period applicable to proceedings by and against the Crown. And in Twinriver Timber Ltd. v. British Columbia (1980), 25 B.C.L.R. 175 (B.C. C.A.) affirming (1979), 15 B.C.L.R. 38 (B.C. S.C.), the British Columbia Court of Appeal concluded that the filing of a certificate of default for taxes due constituted an “action” within the meaning of section 1 of the provincial Limitation Act and that therefore the six year limitation period was applicable.

The difficulty that I have with this argument is that it depends upon reading the words of section 32 of the Crown Liability and Proceedings Act in an artificial and compartmentalized fashion. It seems to me that a more natural interpretation of the words “proceeding with respect to a cause of action arising in a province” is that they constitute a single concept, so that each of the components limits what precedes it. Thus, the phrase “with respect to a cause of action” limits the scope of the word “proceeding”, and “arising in a province” locates the “cause of action”.

In my opinion, therefore, the relevant question at this stage of the inquiry is whether the issue of a requirement to pay is a “proceeding with respect to a cause of action”. Returning to E.H. Price Ltd., the respondent argued that the court in that case concluded that the registration of a certificate was a “proceeding by the Crown” for the purpose of subsection 38(2), as it then was, of the Federal Court Act. However, the court also said that the registration was not a “proceeding in the Court with respect to a cause of action” for the purpose of the limitation period prescribed by subsection 38(1).

The absence of the words, “in the Court”, from section 32 of the Crown Liability and Proceedings Act arguably makes section 32 broader in scope than subsection 38(2) of the Federal Court Act that was considered in E.H. Price Ltd. In an attempt to refute this argument, counsel for the respondent submitted that the words, “in the Court”, are merely formulaic in nature and are found throughout the Federal Court Act, where their function is simply to limit the application of its provisions to the Federal Court of Canada.

The words, “in the Court”, should therefore not be read in the former subsection 38(1) of the Federal Court Act as imposing any kind of limit on the concept of a “proceeding with respect to a cause of action”, other than to locate it in the Federal Court of Canada. Thus, the conclusion in E.H. Price Ltd. that the registration of a certificate under the Excise Tax Act was not a “proceeding in the Court with respect to a cause of action” disposes of the applicant’s contention that a requirement to pay is a “proceeding with respect to a cause of action” for the purpose of section 32 of the Crown Liability and Proceedings Act.

A difficulty with this argument is that, in distinguishing subsections 38(1) and (2) in E.H. Price Ltd., Clement D.J. emphasized the presence of the words “in the Court” (or “in court” as he also sometimes incorrectly put it) in subsection 38(1). This is what he seems to have regarded as preventing him from concluding that registering a certificate of indebtedness fell within that subsection, but permitted him to decide that it did fall within subsection 38(2), where the operative words were “proceedings by and against the Crown”, with no “in the court” limitation. In view of this, I am unable to conclude that E.H. Price Ltd. is as damaging to the applicant’s case as the respondent contends.

Counsel for the respondent also argued that, by their very nature, statutory limitation periods operate as defences raised to proceedings taken in the course of litigation. A requirement to pay is not issued as a result of any court process and therefore statutes of limitation are simply irrelevant to the timing of its issuance. While the applicant’s failure to pay tax due undoubtedly created a cause of action in the respondent, the respondent had elected not to pursue that cause of action, but to have resort to one of the statutory debt collection tools provided by the Income Tax Act. The existence of an uninvoked cause of action is not sufficient to render the issue of a requirement to pay a proceeding “with respect to a cause of action”.

Support for this view, albeit in a rather different context, can be found in Mark v. Canada (Minister of Fisheries & Oceans) (1991), 50 F.T.R. 157 (Fed. T.D.), where Cullen J. held that the suspension of a commercial fishing licence for allegedly breaching fishery regulations was not “a proceeding in any cause or matter” that could be the subject of a stay by the Court pursuant to section 50 of the Federal Court Act, even though the Minister could presumably have instituted proceedings in court for any breach of the regulations.

The respondent’s submission on the limiting effect of the words “with respect to a cause of action” seems to me persuasive. Nor is it weakened by the fact that limitations statutes may apply both to the initiation of proceedings in court, and to attempts to execute judgments. This is because a judgment is obtained as a result of a litigant’s pursuing a cause of action, and the execution of a judgment can therefore readily be characterized as a measure taken “with respect to a cause of action”.

My conclusion on this point is sufficient to dismiss the application, but out of deference to the thorough arguments presented by counsel, and in case I am wrong, I shall now consider whether the applicant has established that the other element of section 32 of the Crown Liability and Proceedings Act is satisfied.

(ii) Does the Income Tax Act exclude the application of section 32 of the Crown Liability and Proceedings Act?

The opening words of section 32, “Except as otherwise provided in this Act or any other Act of Parliament”, limit the scope of its application. The respondent’s argument is that the Income Tax Act contains its own limitation periods that apply to various aspects of the assessment, reassessment, review of assessments and collection of tax. In other words, the statute is a complete code and is not subject to limitation periods prescribed in general legislation dealing with proceedings to which the Crown is a party, or to civil litigation as a whole.

Two cases were brought to my attention where this issue was explicitly raised. In E.H. Price Ltd., supra, it was held that the limitation statutes did not prescribe the time within which a certificate of indebtedness must be registered with the Court under the Excise Act. The court drew this inference from provisions in the Excise Act to the effect that sums payable under it were recoverable “at any time”.

A similar inference was drawn in Brière v. Canada (Employment & Immigration Commission) (1988), 57 D.L.R. (4th) 402 (Fed. C.A.), where the statute prescribed specific limitation periods within which the Commission could recover benefits paid in error to those not entitled. Having failed to comply with the notice provisions under the Unemployment Insurance Act, which were relevant to the running of the limitation period, the Commission was not able to rely upon a provision in the Civil Code of Lower Canada governing prescription periods in general.

However, since there were words in the statutes in these cases that related to the very measures invoked and alleged to be subject to the limitations statute, the decisions do not bear directly on the problem in the case at bar. However, counsel for the respondent also pointed out that when E.H. Price Ltd., supra, and Brière, supra, were decided, subsection 38(2) of the Federal Court Act stated that it applied unless another act expressly provided otherwise. The word “expressly” no longer appears in section 32 of the Crown Liability and Proceedings Act, thus making it easier for a court to infer from the overall scheme created by the statute that its limitations provisions are exhaustive.

Counsel for the respondent took me through a large number of provisions in the Income Tax Act that impose a time limit on other aspects in the assessment and collection of tax. The provision that seemed to me of most direct assistance is section 225.1, which prohibits the collection of tax until the expiry of the 90 days within which the taxpayer may appeal an assessment. The existence of this provision supports an inference from the absence of a prescribed time after which no collection can be made that Parliament intended that there should be no such limitation period.

In addition, I attach some importance to the fact that subsection 152(1) of the Income Tax Act requires the Minister, on the receipt of the taxpayer’s return, to examine the return and assess the tax payable “with all due dispatch”. This provision ensures that in most cases taxpayers are assessed soon enough after the end of the year in which the income was earned and the return filed, so that the evidence required to challenge the assessment is still likely to be fresh. The fact that the Court has held in Ginsberg v. R. (1996), 96 D.T.C. 6372 (Fed. C.A.) reversing (1994), 94 D.T.C. 1430 (T.C.C.) and J. Stollar Construction Ltd. v. Minister of National Revenue (1989), 89 D.T.C. 134 (T.C.C.) that a failure by Revenue Canada to comply with subsection 152(1) does not invalidate the assessment is not inconsistent with Parliament’s intention that assessments are to be made promptly.

Other examples of the inclusion in the Income Tax Act of specific time limitation periods include: subsections 227.1(4) (two year limitation period beyond which the Minister may not assess a director of a corporation for corporate tax debts); 152(2) (reassessments must normally be undertaken within three years of an assessment); 152(4) (in certain situations the Minis- ter may reassess tax at any time); and 227(10) (the Minister may assess a director of a corporation at any time).

I am satisfied that, given the complex and unique nature of the statutory scheme for the levying and collection of income tax, it is a clear inference from the statutory provisions to which I have referred that Parliament has “otherwise provided” for prescription, and that section 32 of the Crown Liability and Proceedings Act accordingly does not apply to the collection of a debt arising under section 222 of the Income Tax Act.

The courts have often accepted that taxing statutes constitute complete codes into which the legislature did not intend them to import general legal principles, rules or remedies. For example, in Québec (Sous-ministre du Revenu) c. Marcel Grand Cirque Inc. (1995), 107 F.T.R. 18 (Fed. T.D.), 21, this Court held that it had no jurisdiction to entertain a motion in revocation of judgment in respect of a certificate filed with the court in which the taxpayer sought to challenge the assessment of tax on which the certificate was based:

The Excise Tax Act, like the Income Tax Act, ... contains in effect a complete code for the collection of taxes pursuant to which a taxpayer, after receiving a notice of assessment, may file a notice of opposition and possibly appeal to the Tax Court of Canada.

Counsel for the applicant, Mr. Worland, had some difficulty in articulating the injustice that his client would suffer if the Minister were permitted to issue requirements to pay, or to take other statutory collection measures, more than six years after the applicant’s tax liability had been assessed. The applicant had been assessed promptly and had had an opportunity to challenge these assessments soon enough after the income had been earned to enable him to produce any relevant evidence. In fact, he has never disputed the assessments. His financial inability to pay the arrears would have prevented him from discharging his pre-1986 tax debts earlier, thus avoiding the large amount of interest that has been charged to him. At best, the applicant could be said to have been entitled in 1992 to the peace of mind that comes from knowing that the Minister of National Revenue could no longer pursue him for an old debt.

Although not directly relevant to this application, the logic of the respondent’s position is that, since it can be inferred from other provisions in, and the overall structure of, the Income Tax Act that section 32 of the Crown Liability and Proceedings Act is excluded, the Crown may attempt to collect a tax debt outside the general statutory limitation periods either by one of the statutory collection methods, as here, or by an action for debt. Surprising as it may seem that the Crown’s action for debt would not be statute barred, this does seem to be a logical consequence of the respondent’s argument. While this consideration has given me some pause, I have decided that it does not tip the balance in favour of the applicant’s position.

First, it is a hypothetical consideration in the context of this case, and there may be reasons that have not been canvassed here for concluding that the Crown’s right to pursue an action for debt is subject to a statutory limitation period, even though the statutory collection methods are not. Second, the respondent’s statutory duty to assess “with all due dispatch” the tax owing provides protection against most of the mischiefs at which statutory prescription periods are aimed. Third, to regard the respondent’s ability to collect tax as subject to the Crown Liability and Proceedings Act for this reason alone would give insufficient weight to the difficulties that importing general limitation periods would cause to the fair and effective collection of tax arrears.

For example, as already noted, horizontal equity is a well-established principle of tax law and administration, and to prevent the Crown from recovering against persons whose income may fluctuate considerably over time, as seems to be the applicant’s position, would be unfair to the majority of taxpayers whose income is steady and who have tax deducted at source.

Moreover, if the prescription period were to run from the date of assessment then, in cases where the taxpayer seeks a review and exercises rights of appeal, the respondent may be left with relatively little time within which to collect any arrears. However, this difficulty may be avoided by holding that the prescription period starts only at the time when the Crown may collect the tax; 90 days after the assessment, or when all rights of appeal have been exhausted.

Accordingly, I am satisfied that the Income Tax Act provides for prescription and by clear implication excludes section 32 of the Crown Liability and Proceedings Act from applying to an exercise by the Minister of the statutory powers to enforce tax debts.

Issue 2

In the event that my conclusion on both parts of the above issue are wrong, then the final question relating to the interpretation of section 32 of the Crown Liability and Proceedings Act is whether the British Columbia Limitation Act applies. It will apply only if the failure to pay tax owing is a “cause of action arising in a province”. If, on the other hand, the cause of action arises “otherwise than in a province”, then the six years’ limitation provision contained in section 32 for proceedings by and against the federal Crown will apply.

In this case there appear to be two principal consequences of concluding that the cause of action arises in a province and that the applicable limitation period is that contained in the British Columbia Limitation Act. First, section I of that Act defines the word “action” to which the Act applies as meaning, “any proceeding in a court and any exercise of a self help remedy”. The applicant argues that the issue of a statutory requirement to pay must fall under one or the other branch of this broad definition of the word “action”, and that if they are not a “proceeding in a court”, they must be a “self help remedy”. Second, the Limitation Act provides in subsection 9(3) that a time-barred debt is extinguished; most limitation statutes merely make the debt unenforceable by proceedings instituted in court.

Although not relevant in the context of this case, if the applicant is correct in his contention that a debt owed under the Income Tax Act normally arises in the province where the taxpayer resides, then the length of time available to the Crown to collect a tax debt will vary according to the taxpayer’s province of residence, since provincial limitation statutes vary quite significantly across the country.

Mr. Worland relied on two cases where it was asserted that a debt under a federal statute is a cause of action arising in a province, and therefore would have been subject to the limitations statute of the province in which the taxpayer resided if the federal statute had not excluded its application: E.H. Price, supra, at 844 (Excise Tax Act), Brière, supra, at 418-419 (Unemployment Insurance Act).

More recently, however, in Gingras v. Canada (1994), 113 D.L.R. (4th) 295 (Fed. C.A.), Décary J.A. considered (at 319) whether the Crown’s obligation to pay a language bonus to the plaintiff as a member of the R.C.M.P. arose under federal or provincial law. If the latter, then it would be subject to the limitation period prescribed in the Civil Code of Lower Canada. Décary J.A. pointed out that it would be somewhat incongruous if the enforceability of the right created by a federal statute depended on the province in which the member happened to live. On the facts, however, it was not necessary for him to express a definitive view on whether the statute created a federal cause of action.

I should note that I did not find particularly helpful the statements in English, Scottish & Australian Bank Ltd. v. Inland Revenue Commissioners, [1932] A.C. 238 (U.K. H.L.) to the effect that a debt must have a “local situation” and that this will normally be where the debtor resides. The context of that case was very different, relating as it did to whether a debt was “property locally situate out of the United Kingdom” for the purpose of being exempted from stamp duty. Moreover, it did not speak at all to the federalism aspect of the issue raised by the case at bar which may call for a different approach to “locating” a debt.

In principle there is much to be said in favour of the proposition that the Income Tax Act should be applied uniformly to taxpayers across the country to the greatest extent possible. Of course, as Mr. Worland pointed out, there are situations in which taxpayers’ liability on the same facts will inevitably vary depending on the province where they reside. Thus, whether or not a tax is payable, or an expenditure deductible, may depend on the legal consequences that the law of contract of the province where the taxpayer resides ascribes to a particular transaction.

However, in my view even though the liability of the taxpayer to pay money due under the Income Tax Act is a debt to the Crown, and debt is a common law concept, there is no reason of policy for subjecting its enforceability to provincial law when this will detract from the uniform application of the statute without any justification. Indeed, if the law of British Columbia applies to the debt in question here it would be extinguished altogether.

Moreover, I note that in Vancouver Society of Immigrant & Visible Minority Women v. Minister of National Revenue [reported (1999), 99 D.T.C. 5034 (S.C.C.)] (S.C.C.; January 28, 1999), Gonthier J. said that, even though the Income Tax Act did not define the term “charitable”, but left it to the courts to elaborate, the statute’s conception of charity is uniform federal law across the country and does not

accord precisely with the way these terms are understood in the common law provinces, due to judicial decisions and provincial statutory incursions into the common law.

In my opinion, therefore, the Income Tax Act should be interpreted as creating a federal cause of action in the event that a taxpayer fails to pay tax duly assessed. Accordingly, if a general limitation period were applicable to the Crown’s ability to collect tax through any of the statutory collection methods, it would be the six year period prescribed by section 32 of the Crown Liability and Proceedings Act, and not that contained in the limitation statute of the province where the taxpayer resided.

Issue 3

If I am wrong on this point, and the British Columbia Limitation Act applies, then I agree with the applicant’s contention that use of the statutory collection methods available under the Income Tax Act, including the issue of a requirement to pay, constitutes “any exercise of a self help remedy” within the meaning of section 1 of the provincial Limitations Act.

No doubt statutory remedies of the kind contained in the Income Tax Act were not what the Legislature primarily had in mind when it defined “action” to include “any exercise of a self help remedy”. However, when included as an alternative to “any proceeding in court’, self help remedies should be regarded as including the statutory remedies available to assist Revenue Canada in recovering tax debts by unilateral means that do not include resort to litigation. Otherwise, there would be a gap in the law that cannot be justified in light of the policy of the Limitation Act.

Issue 4

The question here is whether the British Columbia Limitation Act applies to attempts by the Crown to collect tax due under the British Columbia Income Tax Act outside the limitation period prescribed by the Limitation Act. Under the British Columbia-Canada Tax Collection Agreement [Memorandum of Agreement between The Minister of Finance, Government of Canada and the Minister of Finance, Province of British Columbia, dated August 23, 1984, amending an earlier agreement, pursuant to subsection 7(2) of the Federal-Provincial Fiscal Arrangements Act (R.S. 1985, c. F-8) [as amended] and subsection 69(2) of the Income Tax Act of British Columbia] the federal Crown collects tax owing under the provincial Income Tax Act as agent for the provincial authorities.

To a large extent, the assessment and collection provisions of the British Columbia Income Tax Act have been amended so as to harmonize with those contained in the federal Income Tax Act. For example, the requirement to pay provisions in the federal Income Tax Act (subsection 224(1)) are incorporated by reference in section 67 of the British Columbia Income Tax Act. And subsections 69(2) and (3) of the British Columbia Income Tax Act authorize the Minister and Deputy Minister of National Revenue of Canada to exercise the various powers relating to the collection of tax conferred by the Act on the British Columbia minister.

The analysis of the problem raised here is essentially the same as that developed in the context of Issue 1 with regards to the federal Income Tax Act. Thus, the first question is whether the British Columbia /ncome Tax Act can be said to have excluded the application of the Province’s Limitation Act by the various measures that the Minister may take in the assessment, reassessment and collection of tax.

Even when the respondent seeks to collect tax allegedly owing under a provincial tax statute that he is administering under a provincial-federal agreement, section 32 of the Crown Liability and Proceedings Act is still potentially relevant because the collection measure is being taken by a minister of the federal Crown, albeit under the authority of provincial legislation.

However, the proviso in section 32 that states that the section applies “Except as otherwise provided in this Act or any other Act of Parliament” is obviously inapplicable to a provision in a provincial statute, such as the British Columbia Income Tax Act.

Nonetheless, section 32 will only apply to the issuance of a requirement to pay if it can be characterized as a “proceeding by the Crown in respect of any cause of action arising in that provision”. For the reasons given in connection with requirements to pay issued in respect of moneys owing under the federal Income Tax Act, in my opinion the exercise of a power to issue a requirement to pay is not a “proceeding in respect of a cause of action”.

However, the fact that section 32 does not apply to the issuance of a requirement to pay under the British Columbia Income Tax Act still leaves the question whether the British Columbia Limitation Act applies of its own force, and not by virtue of the reference to the applicable provincial law in section 32 of the Crown Liability and Proceedings Act.

The first issue here is whether that provincial Limitation Act is capable of applying to a measure taken by the respondent, a Minister of the federal Crown, in an attempt to collect a debt owing to the provincial Crown under the British Columbia Income Tax Act.

The British Columbia Interpretation Act R.S.B.C., c. 238 reverses the common law presumption that statutes do not bind the Crown in the absence of express words or necessary implication. Subsection 14(1) of that Act provides:

Unless it specifically provides otherwise an enactment is binding on the government

. The question then is whether “the government” includes a Minister of the federal Crown when exercising on behalf of the provincial government a power under a provincial statute.

Section 29 of the Interpretation Act defines “government” to mean “Her Majesty in right of British Columbia”. Therefore, “government” does not include a Minister of the federal Crown, even when acting on behalf of the Crown in right of the Province. Since the statutory presumption does not apply here, the common law presumption does. Therefore, in the absence of express words or necessary implication, the British Columbia Limitation Act does not apply to measures taken by a Minister of the federal Crown to enforce the British Columbia Income Tax Act. In my opinion the Limitation Act cannot be said as a matter of necessary implication to apply to the federal Crown.

However, if I am wrong on this point, for reasons that I have already given I would conclude that the issuance of a requirement to pay is the “exercise of a self help remedy” and thus subject to the British Columbia Limitation Act by virtue of section I.

G. Conclusion

For these reasons, the application for judicial review is dismissed. Accordingly, my answers to the questions posed in paragraph 16 are:

1. No

2. “otherwise than in a province”

3. Yes

4. i) No ii) No

Application dismissed.