Cormier (M.) v. Canada (No. 2), [1991] 1 CTC 410

Walsh, J.:—Plaintiff moves for an interim injunction, writ of prohibition, or an order in the nature thereof to prevent the defendant from taking any action with respect to the collection or the obtaining of security with respect to any tax, interest or penalties that are the subject matter of these proceedings.

The proceedings were initiated by a statement of claim on February 23, 1987 to which defendant filed a Defence on May 1, 1987 and have not yet come to trial. The tax dispute concerns amounts plaintiff deducted from the gross business income of Westminster Insulation Ltd. as amounts allegedly paid to subcontractors for each of the said years. By notice of reassessment dated March 21, 1983 plaintiff was assessed by increasing his business income to the gross amounts received in each year from the said Westminster Insulation Ltd. After notice of objection received on August 25, 1983 a notice of confirmation was issued by the Minister on December 24, 1986. The appeal is brought pursuant to subsection 172(2) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"). The alleged unreported income for the five years amounts to $240,340.80. There are allegations of omissions or false statements in the returns resulting in the imposition of penalties pursuant to paragraph 163(2)(a) of the Act.

The present motion results from an exchange of letters between Craig Sturrock, counsel for plaintiff dated October 9, 1990 referring to a case of N.B. O'Sullivan v. Canada, [1990] 1 C.T.C. 429; 90 D.T.C. 6278 which he contends is applicable and seeks to have defendant cease collection efforts while the Assessment is under appeal. Counsel for the Minister replied on November 14, 1990 to the issue of whether the amounts in question are protected from collection under section 225.1(3) of the Act. He contends that the O'Sullivan case does not apply as in it there was a further reassessments after the taxpayer had filed notice of objection, which the taxpayer objected to after 1984 so section 225.1(3) applied, whereas in the present case there were no further reassessment after March 21, 1983, so the said amending section does not apply. It is contended that the notice of confirmation and subsequent appeal are not relevant as the notice of confirmation does not constitute an assessment so section 225.1(3) does not apply. Defendant seeks a signed Acknowledgment of Mortgage letter sent to plaintiff in May 1990 and his acceptance to enter into a new mortgage reflecting the amendments to the Income Tax Act in respect of interest charges. Furthermore, since there is allegedly insufficient equity in the property to cover the value of the mortgage payment of $122,000, an additional security for it is sought.

Section 225.1(3) which is in issue reads as follows:

(3) Idem.—Where a taxpayer has appealed from an assessment of an amount payable under this Act to the Tax Court of Canada, the Minister shall not, for the purpose of collecting the amount in controversy, take any of the actions described in paragraphs (1)(a) to (g) before the day of mailing of a copy of the decision of the Court to the taxpayer or the day on which the taxpayer discontinues the appeal whichever is the earlier.

It was added by 1985, c. 45, subsection 111(1) applicable to notices of assessment mailed after 1984.

The issue to be decided in this motion is whether section 225.1(3) is applicable to plaintiff so as to stay collection proceedings against him pending the outcome of the action on the merits in which he contests his liability for the assessment.

Plaintiff relies inter alia on the decision of Justice Collier in O’Sullivan v. Canada, supra, in which he stated at pages 432-33 (D.T.C. 6281):

In Lor-Wes Contracting Ltd. v. The Queen, [1985] 2 C.T.C. 79; 85 D.T.C. 5310 (F.C.A), the Court held that the old rules of strict interpretation in dealing with taxation statutes were no longer to be absolutely relied on. MacGuigan, J. stated at page 83 (D.T.C. 5313):

The only principle of interpretation now recognized is a words-in-total-context approach with a view to determining the object and spirit of the taxing provisions.

In this case, the purpose of the amendments contained in section 225.1 is the protection of taxpayer's rights. In my view, it would be contrary to the spirit and intent of the legislation to attach a technical meaning to the word in question, thereby requiring the plaintiff to pay an assessment before an impartial hearing could be conducted. These are the very circumstances the legislation was designed to avoid.

In the case of 1853-9049 Quebec Inc. v. The Queen, [1987] 1 C.T.C. 337; 87 D.T.C. 5093 Justice Rouleau had a different question to deal with, namely a "jeopardy assessment".

Subsection 225.2(2) of the Act reads as follows:

(2) Authorization to proceed forthwith. Notwithstanding section 225.1, when on ex parte application by the Minister, a judge is satisfied that there are reasonable grounds to believe that the collection of all or any part of an amount assessed in respect of a taxpayer would be jeopardized by a delay in the collection thereof, he shall, on such terms as he considers reasonable in the circumstances, authorize the Minister to take forthwith any of the actions described in paragraphs 225.1(1)(a) to (g) with respect to the amount.

In the present case, the Minister has not at this stage adopted this procedure, which has been described as a safety measure to overcome the rigours of section 225.1 so that issue is not before the Court on this motion.

This brings us to the issue of whether in effect it is the reassessment of March 21, 1983, objected to as of August 25, 1983 (before the amendment took effect) which is in issue on the merits, or rather the notice of confirmation issued on December 24, 1986 which would be covered by the amendment.

The word "assessment" is defined in the Act as including a reassessment, “confirmation” is not defined.

If there had been any change in the original reassessment after 1984, any objection or appeal from it would clearly be covered by the amendment.

Defendant contends, however, that a notice of confirmation is not a reassessment. It is used when following a notice of objection no change is made, which appears to be a reasonable policy. One can hardly reassess a reassessment unless a change is being made. It may and will be reconsidered after a notice of objection, but the very use of the prefix "re" would seem to imply that a change is being made, so if there is to be no change, the original reassessment is merely "confirmed".

It is the liability for additional tax which is the real issue and the notices of reassessment for each of the six years in question which are under dispute. The notice of confirmation added nothing to this dispute, which arose prior to the end of 1984.

There is some careless drafting in some sections of the Act, of which plaintiff wishes to take advantage, for example, section 225.1(2) refers to no action to collect can be taken until 90 days after mailing of notice that the Minister has “ confirmed or varied the assessment". That is, of course, not the subsection in issue in the present motion where there is a pending appeal, initiated more than 90 days after the notice of confirmation.

While plaintiff argues that the entire intention and spirit of the amendments is to protect a taxpayer from harassment while his tax liability is still under dispute and has not yet been determined by a judgment of the Court, and seeks a liberal and non-technical application of the amendments to attain this laudable purpose, I do not conclude that this would justify the Court in giving a retroactive effect to the amendments to apply to this case. The amendments apply and are intended to apply to all assessments or reassessments made after the end of 1984 and not to reassessments made and objected to before that date. Legislation takes effect from the date of its sanction unless expressly given retroactive effect and that is not the case here.

The motion is therefore dismissed with costs.

Motion dismissed.