Optical Recording Corporation (Formerly Carrying on Business as Information Tunnel Research Inc. v. Her Majesty the Queen and the Minister of National Revenue, [1986] 2 CTC 454, [1986] DTC 6569

Muldoon, J.:—On September 4, 1986, in this present cause, the Court pronounced the following order of certiorari and prohibition:

1. IT IS ORDERED THAT the determination by the respondent Minister of National Revenue to purport to assess tax as owing by the applicant and his issuance of a document headed “Notice of Assessment” dated June 13, 1985, in respect of those taxes allegedly owing by the applicant and the document itself are hereby removed into this Court on certiorari, and they are all quashed;

2. IT IS ORDERED THAT the decision by the respondent Minister to issue a "Requirement to Pay” dated March 18, 1986, pursuant to section 224 of the Income Tax Act delivered by hand to the Royal Bank of Canada, 20 King Street West, Toronto, Ontario respecting taxes allegedly owing by the applicant, and that instrument itself are hereby removed into this Court on certiorari, and they are both quashed;

3. IT IS FURTHER ORDERED THAT the decision by the respondent Minister to issue a “Requirement to Pay” dated March 18, 1986 pursuant to section 24 of the Income Tax Act delivered by hand to the Canada Permanent Trust, 66 Temperance Street, Toronto, Ontario respecting taxes allegedly owing by the applicant, and that instrument itself are hereby removed into this Court on certiorari and they are both quashed;

4. IT IS FURTHER ORDERED THAT the decision of the respondent Minister to issue a certificate pursuant to section 223 of the Income Tax Act respecting taxes allegedly owing by the applicant, and that instrument itself are hereby removed into this Court on certiorari, and they are both quashed; and

5. IT IS FURTHER ORDERED THAT the respondent Minister and everyone under his direction and control be, and he is and they are prohibited from continuing with collection proceedings or actions against the applicant until it is lawful and fair to do — one certain criterion for which being lawful assessment of Part VIII tax actually found and assessed to be owing, upon assessment of tax in regard to applicant’s filed return for its taxation year ended February 28, 1986.

The respondents have launched an appeal against the above-mentioned decision and in the meanwhile they bring this motion, in Ottawa, pursuant, they say, to Rule 1909 for a stay of execution of the above-recited order, "or for such other relief against such order as may be granted”. Their motion is supported by an affidavit of each of two officials of the Department of National Revenue.

Optical's counsel objects to the admissibility of those two affidavits because, as is admitted by the respondents’ counsel, the two deponents deal with no new matters which were not already well known before the hearing of Optical’s originating motion on August 15, 1986. While agreeing with that assertion, the respondents’ counsel nevertheless argues that these affidavits are submitted for the new and wholly legitimate purpose of establishing irreparable harm to the respondents if the order of certiorari and prohibition be not stayed as prayed. This is a valid contention and, while the weight of the old straw being threshed in these affidavits is slight, they are nevertheless admissible in these proceedings.

Even taking the affidavits at their full factual face value, as one must since there has been no cross-examination, and giving the deponents' opinions on the ultimate issue the appropriate weight which they carry, those affidavits fall far short of discharging the heavy burden here of demonstrating irreparable harm to the Crown which would be generated by failure to stay the order of certiorari and prohibition herein. However, that conclusion does not close off further consideration of the operation of the Federal Court Act and the Rules, herein.

There is more to this matter than Rule 1909. Here, with it, are other salient provisions:

Act:

50.(1) The Court may, in its discretion, stay proceedings in any cause or matter,

(a) on the ground that the claim is being proceeded with in another court or jurisdiction; or

(b) where for any other reason it is in the interest of justice that the proceedings be stayed.

(2) [Not applicable herein.]

(3) Any stay ordered under this section may subsequently be lifted in the discretion of the Court.

55. (2) An order for payment of money whether for costs or otherwise may be enforced in the same manner as a judgment.

56. (5) No execution shall issue on a judgment given by the Court against the Crown.

Rules:

341A.(1) It is hereby declared, for greater certainty, that the operation of a judgment, or a part of a judgment, whether final or interlocutory, for anything other than the payment of money (including without restricting the generality of the foregoing, a judgment or part of a judgment for a mandamus, an injunction, specific performance or appointment of a receiver or a judgment or part of a judgment setting aside the arrest of a ship) may, by the terms thereof, in the discretion of the Court, be suspended pending appeal.

(2) Where the operation of a judgment or a part of a judgment for anything other than the payment of money has not been suspended pending appeal as contemplated by paragraph (1), the Court may, in its discretion, make an order suspending the operation thereof pending appeal.

(3) A suspension contemplated by this rule may be granted upon such terms or conditions, if any, as seem just in the circumstances.

(4) Where the operation of a judgment or a part of a judgment has been suspended pending appeal as contemplated by this rule, the suspension continues until the Court makes an order cancelling the suspension upon being satisfied

(a) that the party against whom the judgment was given is not proceeding with an appeal in relation thereto to the Appeal Division or the Supreme Court of Canada as expeditiously as possible,

(b) that the judgment or part of judgment has been finally upheld on appeal, or

(c) that, owing to a change in circumstances since the suspension was granted, the suspension is no longer justified. [Emphasis added.]

605. A judgment against the Crown shall be a declaration that the person in favour of whom the judgment is given is entitled to the relief to which the Court has decided that he is entitled, either absolutely or upon such terms and conditions, if any, as are just.

1213. Execution of a judgment appealed against shall be stayed pending the disposition of the appeal upon the appellant

(a) giving security satisfactory to the respondent that, if the judgment or any

part thereof is affirmed, the appellant will satisfy the judgment as affirmed; or

(b) giving such security and doing such other acts and things as are required by order of the Trial Division to ensure that, if the judgment or any part thereof is affirmed, the judgment as affirmed will be satisfied.

1800. Where in any proceeding there is a judgment or order against the Crown for the payment of money for costs or otherwise, a judge, the Administrator, or any officer of the registry designated for the purpose, shall, after the judgment or order has been entered,

(a) ... [not applicable] . ..,

(b) ... [not applicable] . . .,

(c) upon the final disposition of the appeal, if there has been an appeal from the judgment or order, or

(d) .. . [not applicable] .. .,

unless the judgment or order has been quashed on appeal, certify the tenor and purport of the judgment or order (as varied on appeal, if it has been so varied); and such certificate shall be by the registry transmitted to, or left at, the office of the Deputy Attorney General of Canada. [Emphasis added]

1909. A party against whom a judgment has been given or an order has been made may apply to the Court for a stay of execution of the judgment or order or other relief against such judgment or order, and the Court may grant such relief, and on such terms, as it thinks just. [Emphasis added.]

Rule 1800 is noteworthy in that, promulgated in contemplation of subsection 56(5) of the Act (above recited), it accords an advantage to the Crown not enjoyed by other litigants. The declaration pursuant to Rule 605, which Optical did not specifically seek in the original motion, is without doubt to be implied in the order therein made by the Court, and against which the Crown and the Minister now appeal. The money to be paid by the Crown is payable pursuant to Rule 1800 if no appeal be instituted, but if an appeal be taken, the money is to be certified as payable only if the Crown's appeal be unsuccessful to have the judgment or order quashed. Now, subsection 57(3) of the Act provides that there shall be paid out of the Consolidated Revenue Fund any money or costs awarded to any person against the Crown in any proceedings in the Court. That provision appears clearly to direct that whether or not the money awarded be reposing in the Consolidated Revenue Fund, that fund shall be the source of payment; the convenient and proximate source of payment; and, whether other persons hold money by which the Crown may compensate itself wholly or partly for the money awarded, the Consolidated Revenue Fund shall ultimately be liable to make good the award in any event.

The clear implication of the Court's order of September 4, 1986, is that with the garnishments all quashed, and the decisions to proceed against Optical all quashed, the money ought to be restored to Optical. The Crown could not, and clearly would not, pretend not to understand such to be the obvious effect of the Court's order of September 4, 1986. Indeed if the garnishor had been any respondent other than the Crown, the Court would unhesitatingly accord to Optical the leave to make the late application which it has made pursuant to Rule 337(5)(b). The Crown has not shown that it or the Minister stands in any irreparable jeopardy or risk of irreparable harm if it had to disgorge the money seized as it was by irresistible implication ordered to do on September 4, 1986. The Crown however, since the award is to be paid out of the Consolidated Revenue Fund, is in a privileged position accorded by the cumulative effect of subsection 56(5) of the Act and of Rule 1800. It should be noted that there is quid pro quo in this arrangement. In effect the Consolidated Revenue Fund stands as the insurer, indemnifier and guarantor of money awarded to anyone against the Crown, no matter where, or in whose hands, the very money or fund in contention may be actually reposing, or from which it may have been lost or depleted.

Therefore the Crown's application to stay in so far as it relates to the money of which Optical is seeking restoration is unnecessary for the Act and rules already work that effect, upon the Crown's launching of its timely appeal herein. In this regard, too, Optical’s motion under Rule 337(5) ought to be conditionally dismissed, depending, of course, upon the disposition of the Crown's appeal by the Appeal Division. If the Appeal Division does not in fact make any disposition of the matter of the money in its judgment, then Optical shall be entitled hereby to move under Rule 337(5) ex parte and peremptorily, if the Crown's appeal be lost and the order of September 4, 1986, be upheld, for a specific declaration under Rule 605 to reify the obviously inescapable implication of that order to restore the money to Optical.

In regard to the above matter of the money, the Crown's motion is dismissed and Optical’s motion is conditionally allowed as above described. The effect is that the money will not now be restored to Optical.

The Crown also seeks to stay the execution or operation of the prohibition pronounced on September 4, 1986. Rules 341A and 1909 make it certain that this is a perfectly proper application to bring before the Court. But the Crown fails to demonstrate any irreparable harm which could be inflicted upon it if the operation of the prohibition were not stayed. Moreover, no special privilege is accorded to the Crown in this regard. The Crown must do that which any ordinary litigant would have to do in order to persuade the Court to grant it the extraordinary relief it seeks. Like any ordinary litigant who alleges harm or damage, the Crown, too, must demonstrate that it is doing all it can within its power to mitigate or to avoid the alleged harm or damage.

The parties hereto would be restored to a normal relationship if only the Minister would assess Optical’s annual income tax payable in which assessment the matter of the Part VIII tax, if any, would be also assessed. The Minister has had Optical’s income tax return in his hands for some months already. On September 4, 1986, the Court identified that assessment by the Minister as a certain criterion for dissolution of the prohibition order. But counsel for the Minister informed the Court that he has no instruction to assert that such assessment has been performed or is even in progress. How can the Minister avoid whatever harm might conceivably be inflicted upon him or the Crown by that order of prohibition? Exactly as the Court originally suggested during the original hearing on August 15, 1986, and in the reasons and order of September 4, 1986. Counsel for the Minister does not, and presumably cannot, allege that the Minister is unable to perform that assessment, or is somehow prevented from doing it. So long as the Minister declines to do his duty on a basis of priority, in order to mitigate or avoid the harm he alleges, he (with the Crown) is not entitled to have that order of prohibition stayed. In this regard the taxpayer is blameless. The normalization of matters, which have unfortunately become litigious, is entirely within the power and duty of the Minister. He is the author of his own apprehension of harm or damage. Therefore, his motion for a stay of the execution of the prohibition pronounced on September 4, 1986, is dismissed.

Optical is entitled to its party-and-party costs in response to the Crown’s motion for a stay. No costs are awarded for or against any party in regard to Optical’s motion pursuant to Rule 337(5) which is dismissed at this time with possible future conditional allowance, only in the event that the Crown's appeal be dismissed.

Motion dismissed.