T. McCall v. M.N.R., [1989] 1 CTC 383, [1989] DTC 5148

Dubé J.:—The plaintiff seeks an interlocutory injunction restraining the defendant from taking any steps in respect of collection of tax alleged to be due by him for the 1979 taxation year.

The essential facts are as follows. On September 28, 1984 the plaintiff filed an objection for his assessment for the year 1979. On February 4, 1987 the defendant issued a notice of reassessment. On May 4, 1987 the plaintiff filed a notice of appeal to the Tax Court of Canada. The plaintiff claims that, notwithstanding his earlier objection and appeal, the officials of the Minister have continued to pursue and harass him for payments of tax alleged to be owed for the year 1979. He wants them to stop their collection proceedings and has launched an action in damages.

It is common ground that the Minister has not made a direction that the collection of the said tax is in jeopardy pursuant to the provisions of section 225.2 of the Income Tax Act of Canada, as amended and in force on January 1, 1985.

The Minister concedes that the 1987 reassessment constitutes a new assessment and renders previous assessments null and void in accordance with the jurisprudence in the matter (Starlite Bottlers Ltd. v. H.M.Q., 88 D.T.C. 6272, Mary E. Walkem v. M.N.R., 71 D.T.C. 5288, Coleman C. Abrahams v. M.N.R., 66 D.T.C. 5451). However, he contends that an appeal to the Tax Court of Canada does not constitute an objection under the Act and therefore, that he may proceed with the collection as if the taxpayer had not objected. It is trite law that prior to January 1, 1985 the taxpayer had to pay within 30 days of the notice of assessment, whether he objected or not, or whether he appealed or not (see Morch v. M.N.R., 1949 D.T.C. 649 and Cecil Mcleod v. M.N.R., 1983 D.T.C. 5212).

The new amendments to the Income Tax Act provide under section 222 that all taxes payable under the Act are debts due to Her Majesty and recoverable in the Federal Court or any other court of competent jurisdiction. Under section 223 the Minister may certify that an amount payable has not been paid and on production of such certificate to the Federal Court of Canada, such certificate has the force of a judgment. The Minister may then proceed to collect his judgment by way of garnishment under section 224, by way of recovery by deduction or set-off under section 224.1, by acquisition of the debtor's property under section 224.2, by the seizure of moneys under section 224.3 or seizure of chattels under section 225.

However, section 225.1 prescribes some collection restrictions. Under subsection 225.1(1) the Minister may not collect before 90 days after the mailing of the notice of assessment. Under subsection 225.1(2), where a taxpayer has served a notice of objection under this Act to an assessment, the Minister shall not collect for 90 days after the Minister has confirmed or varied the assessment. Under subsection 225.1(3) where a taxpayer has appealed to the Tax Court of Canada or to the Federal Court, the Minister shall not collect until judgment has been pronounced.

In its own notice to the taxpayer dated February 4, 1987 (wherein Revenue Canada Taxation re-assessed the plaintiff's taxation year 1979) the defendant notified the taxpayer that he had a right of appeal to either the Tax Court of Canada or the Federal Court of Canada within ninety days from the notification.

Relevant extracts from the Technical Notes to the new amendments to the Income Tax Act read as follows:

New section 225.1 restricts the collection of unpaid amounts for which a taxpayer has been assessed under the Act where the taxpayer objects to or appeals from the assessed amounts in question. These restrictions do not apply where it may reasonably be considered that collection of the amount would be jeopardized by delay. Under new section 225.2 the Minister may in jeopardy circumstances take immediate collection action.

Subsection 225.1(3) provides that where a taxpayer appeals to the Tax Court of Canada or directly to the Federal Court—Trial Division, no collection actions may be taken in respect of the amount in controversy until the date that a copy of the decision of the Tax Court is mailed to the taxpayer or the day on which the judgement of the Federal Court is pronounced as the case may be. Where a taxpayer discontinues an appeal to the Federal Court, collection actions may be commenced at that time. This subsection is applicable to appeals from assessments for which notices of objection were served after 1984.

A corollary issue is whether the appeal to the Tax Court of Canada in the instant case can be construed as a notice of objection. A strict interpretation of the Act could lead to a negative answer but a liberal interpretation might be more favourable to the taxpayer. In my view there is clearly a serious question to be tried which affords a sufficient basis for an interlocutory injunction (see American Cyanamid Co. v. Ethicon Ltd., [1975] 1 All E.R. 504).

Consequently, the motion is granted and the defendant is hereby restrained from taking any steps in respect of collecting the plaintiff's 1979 tax until judgment. Costs in the cause.

Motion granted.