In the Matter of the Income Tax Act v. In the Matter of Steven Low, [1966] CTC 325, 66 DTC 5198

DONUHUE, J.:—This is an application by Steven Low for an order of prohibition, whereby he seeks to restrain J. L. Gourlay from conducting an inquiry under the provisions of Section 126(4) of the Income Tax Act.

By Notice of Re-assessment dated July 6, 1965, the Minister of National Revenue re-assessed Steven Low in the amount of about $652,000. Steven Low filed a Notice of Objection thereto. At this point the Minister could have confirmed, varied or vacated the said re-assessment. The Minister having taken none of these courses after the expiration of 180 days a right of appeal accrued to Steven Low and on February 10, 1966, he filed a Notice of Appeal instituting an appeal to the Tax Appeal Board.

On April 12, 1966, the wife of Steven Low and two other persons were served with a summons over the signature of J. L. Gourlay, which summons purports to have been issued pursuant to the authorization of the Deputy Minister of National Revenue dated March 28, 1966, and is styled In the Matter of the Income Tax Act and In the Matter of Steven Low.

Counsel were agreed that the said summons and the inquiry therein referred to is a proceeding under the Inquiries Act, R.S.C. 1952, c. 154.

The said summons requires the persons to whom it is directed to attend before Mr. Gourlay to give evidence on all matters within their knowledge relating to the entire financial affairs of Steven Low and it further requires such persons to produce any documents, books or papers in their possession or control relating to the financial affairs of Steven Low and of his dealings with some half dozen corporations.

The Application for Prohibition herein was launched by Steven by Notice of Motion dated April 13, 1966.

Counsel for the Minister filed a cross motion, asking that the time be abridged in order that the Application for Prohibition could be argued on April 21, 1966. The matter coming before me in Chambers on April 21, 1966. It was agreed that the time be abridged and I so ordered and argument on the application then proceeded.

Counsel for the Applicant asked for prohibition on the following grounds :—

(A) That the said J. L. Gourlay, being an officer of the Department of National Revenue, he is not a disinterested person and as such could not act judicially.

(B) That the summons served is too broad and general to be capable of enforcement.

(C) That there was no jurisdiction in said J. L. Gourlay to hold such inquiry because of the pending appeal of Steven Low to the Tax Appeal Board.

Counsel for the Minister of National Revenue took the position that firstly, the remedy of prohibition was not open to the applicant, and secondly, even if it were the applicant’s position as set out in A, B and C above is untenable.

Dealing with the point that the remedy of prohibition is not available to the applicant it is my opinion that this objection 18 well founded.

It is clear that the proceeding which has been authorized by the Deputy Minister of National Revenue under Section 126(4) of the Income Tax Act is an administrative procedure. In the case of Philippe Guay v. René Lafleur, [1965] S.C.R. 12; [1964] C.T.C. 350, relating to an inquiry under Section 126(4) of the Income Tax Act and the Inquiries Act, Abbott, J., writing a majority judgment p. 16, 354, referred with approval to the judgments of Hyde and Montgomery, JJ. in the Court of Queen’s Bench Appeal Side, Province of Quebec, wherein these judges had held that an investigation held under said Section 126(4) Income Tax Act is a purely administrative matter.

This, then, being an administrative matter, the rule in such cases aS Re Imperial Tobacco Company Limited et al. and McGregor, [1939] O.R. 213 and 627 at 638, and Re Ontario Crime Commission, [1963] O.R. 391, applies.

On this ground alone, I would hold that the remedy of prohibition is not available to the applicant.

However, here the applicant while in effect conceding that the procedure under Section 126(4) is administrative and not judicial, contends that because the appeal of Steven Low is pending to the Tax Appeal Board this administrative procedure cannot or ought not to be used by the Minister. Counsel argued that this inquiry was in the nature of a Discovery procedure to enable the Minister to obtain information about the financial affairs of Steven Low in preparation for the said appeal.

As Mr. Laidlaw put it in argument the purpose of the inquiry is “to discover my witnesses’’.

The material filed on the motion by the Solicitor for the Minister discloses that indeed this is the purpose of the inquiry.

Mr. Laidlaw argues that once an appeal is launched then the investigative procedure under Section 126(4) is not open to the Minister because the Tax Appeal Board has the right to make rules for its own operation. An appeal having been launched, any procedure in connection with that appeal must be something authorized by the Rules of the Tax Appeal Board and no such rule authorizes the employment of the machinery set up by Section 126(4). Mr. Laidlaw supports the argument by reference to the statement of Abbott, J. in the Guay case mentioned above where at Paragraph 17, he said ‘‘The taxpayer’s right is not affected until an assessment is made. Then all the appeal provisions mentioned in the Act are open to him’’. There, Abbott, J. was pointing out the ratio of judgments affecting inquiries under the Inquiries Act turned upon whether the findings of such inquiries affected persons’ rights. I read the statement of Abbott, J. simply as stating that inquiries do not affect rights. An assess- ment affects rights and when made, the aggrieved person can appeal. I do not understand Abbott, J. as saying that when appeal is launched, the Minister cannot institute or continue investigating under Section 126(4) unless the rules of the Tax Appeal Board so provide.

The rights of the Minister to employ the inquiries procedure in Section 126(4) are based upon sound and reasonable grounds. Without such fact-finding machinery the Tax Collector would often be merely passing the hat. If it was intended that the launching of an appeal to the Tax Appeal Board should deprive the Minister of the right to institute inquiry under Section 126(4) the statute should so state as it does not.

Further, I see no unfair tactics against the applicant here. The so-called appeal to the Tax Appeal Board is in fact a trial. In all trial procedures each party may continue up to and during the trial to find evidence to support its case.

Dealing with point A. in the application re the alleged bias of J. L. Gourlay, I see no valid objection here. In this matter Mr. Gourlay is a commissioner carrying on an inquiry. He does not decide upon anyone’s rights.

If because of the nature of his work as a counsel in the Department of National Revenue he feels some special sympathy to the collecting service it will not affect the applicant’s rights.

Dealing with point B. in the application that the summons is too broad, I would consider that this is entirely a matter to be dealt with by the Commissioner if the persons summoned complain on this point.

For these reasons, I dismiss the application with costs.