Beaudry v. Canada (Customs and Revenue Agency), 2001 FCT 1347

Date: 20011207

Docket: T-783-00

Montréal, Quebec, December 7, 2001

Before:           RICHARD MORNEAU, PROTHONOTARY

BETWEEN:

YVES BEAUDRY

LAURENT BÉLANGER

JAMES BULLOCK

YVES CHARBONNEAU

RICHARD CHARLTON

MARIE-FRANÇOISE DESGRANGES

DAVID ELKINS

RAPHAËL EVANSON

CHRISTOPHER W. HERTEN-GREAVEN

ALBERT LEUNG

BRENDAN O'CONNOR

KIM PARLETT

OLEG ROMAR

PAUL A. S. SMITH

MARTIN T. TYLER

GEORGE H. WOO

                                                                                                                                                        Plaintiffs

                                                                                 and

                                 THE CANADA CUSTOMS AND REVENUE AGENCY

                                            THE ATTORNEY GENERAL OF CANADA

                                                                                                                                                    Defendants

                                                                            ORDER

The defendants' motion to strike the application for a declaratory judgment made by the plaintiffs pursuant to ss. 18(1)(a) and (b) of the Federal Court Act and 7, 11(b), 24(1) and 26 of the Canadian Charter of Rights and Freedoms is allowed with costs.

Certified true translation

Suzanne M. Gauthier, LL.L. Trad. a.

Date: 20011207

Docket: T-783-00

Neutral citation: 2001 FCT 1347

BETWEEN:

YVES BEAUDRY

LAURENT BÉLANGER

JAMES BULLOCK

YVES CHARBONNEAU

RICHARD CHARLTON

MARIE-FRANÇOISE DESGRANGES

DAVID ELKINS

RAPHAËL EVANSON

CHRISTOPHER W. HERTEN-GREAVEN

ALBERT LEUNG

BRENDAN O'CONNOR

KIM PARLETT

OLEG ROMAR

PAUL A. S. SMITH

MARTIN T. TYLER

GEORGE H. WOO

                                                                                                                                                        Plaintiffs

                                                                                 and

                                 THE CANADA CUSTOMS AND REVENUE AGENCY

                                            THE ATTORNEY GENERAL OF CANADA

                                                                                                                                                    Defendants

                                                            REASONS FOR ORDER

RICHARD MORNEAU, PROTHONOTARY:

[1]                 The Court has before it a motion by the defendants to strike the application for a declaratory judgment made by the plaintiffs pursuant to ss. 18(1)(a) and (b) of the Federal Court Act and 7, 11(b), 24(1) and 26 of the Canadian Charter of Rights and Freedoms.

[2]                 The reasons given by the defendants are that this Court has no jurisdiction to hear the said application since it is asking the Court to vacate the assessments made against the plaintiffs for the taxation years between 1982 and 1994.

[3]                 The defendants further contended that the arguments made in support of the application are clearly without foundation and as such the application is frivolous or vexatious and an abuse of the process of this Court.

Background

[4]                 In 1988 and subsequent years the Minister of National Revenue made assessments and reassessments on over 500 taxpayers for various taxation years between 1982 and 1994.

[5]                 The taxpayers affected by these assessments were members of partnerships known as "Les Associés de recherche médicale canadienne" ("ARMC") and "Les Associés de recherche médicale canadienne no.2" ("ARMC 2").

[6]                 The plaintiffs in the case at bar were all members of ARMC and/or ARMC 2.

[7]                 Nearly all of the partners, including all the plaintiffs in the case at bar, objected to these assessments.

Analysis

[8]                 Although the defendants' motion was made pursuant to Rule 221 of the Federal Court Rules, 1998 ("the Rules"), it is apparent that ultimately the power to strike must be considered here in accordance with this Court's inherent jurisdiction, not against an action but an application (see Bull (David) Laboratories (Canada) Inc. v. Pharmacia Inc. et al. (1994), 176 N.R. 48, at 54-5).

[9]                 In the course of this analysis the Court also clearly cannot confine itself strictly to the wording used by the plaintiffs in their application, since where an objection is taken to its jurisdiction, just as when pleadings are alleged to be frivolous or vexatious, the Court can make use of any extrinsic evidence in order to establish this (see MIL Davie Inc. v. Société d'exploitation et de développement d'Hibernia Ltée, [1998] F.C.J. No. 614, para. 8).

[10]            The remedies framed by the plaintiffs in their application read as follows:

[TRANSLATION]

(1)           The plaintiffs are asking the Court to find that the conduct of the Canada Customs and Revenue Agency is contrary to the Canadian Charter of Rights and Freedoms and the rules of natural justice and to rule that the plaintiffs' files relating to ARMC and ARMC#2 for the relevant years are closed, null and void; [paragraph 1 of remedies]

(2)           the plaintiffs are further asking this Honourable Court to order any other remedy which it may see fit to impose in view of the circumstances as a whole. [paragraph 2 of remedies]

[11]            In my opinion it is clear from paras. 7, 9 and 12 of the plaintiffs' application that the [TRANSLATION] "conduct" referred to by the plaintiffs in the wording of para. 1 of the remedies refers squarely to the time or the delay which the then Minister of National Revenue allowed to elapse between the date the plaintiffs' objections were received and the date the latter ratified the assessments initially made.

[12]            It also seems quite clear from reading the record and listening to counsel for the parties that the second statement contained in para. 1 of the remedies, namely "rule that the plaintiffs' files relating to ARMC and ARMC#2 for the relevant years are closed, null and void", entails purely and simply a request to vacate the assessments made against the plaintiffs. In the circumstances, this statement cannot mean anything else. As such, the request for [TRANSLATION] "any other remedy" as mentioned in para. 2 of the remedies ultimately, as a practical matter, can only refer to the request to vacate.

[13]            The first statement contained in para. 1 of the remedies, namely "The plaintiffs are asking the Court to find that the conduct of the Canada Customs and Revenue Agency is contrary to the Canadian Charter of Rights and Freedoms and the rules of natural justice", logically and from a practical standpoint can have no viable existence apart from the second statement following it. Its purpose, in fact, can only be to lead up to the second statement, namely the vacating of the assessment. The two statements in para. 1 of the remedies are intrinsically related and ultimately their sole purpose is to have the relevant assessments vacated. In my opinion, this conclusion necessarily follows.

[14]            It is also quite clear that in the circumstances this Court does not have jurisdiction to deal with the vacating of the assessments.

[15]            Once a tax assessment has been made it is binding on the taxpayer and the Minister of National Revenue until reversed, if necessary, by the proper authorities: see s. 152(8) of the Income Tax Act. Except in the event of a reassessment at the initiative of National Revenue within the specified deadlines, s. 152(8) excludes any remedy other than an objection and an appeal to have a tax assessment reviewed or vacated. (See Hamer v. Québec (sous-ministre du Revenu), [1998] A.Q. No. 1600; The Queen v. Ginsberg, 96 D.T.C. 6372, at 6376-6377; Subsidiaries Holding Co. Ltd. v. The Queen, 56 D.T.C. 1141 (Exchequer Court); and Optical Recording Corp. v. Canada, [1991] 1 F.C. 309, at 320-321.)

[16]            In Optical Recording Corp. v. Canada, supra, the Federal Court of Appeal relied in particular on s. 152(8) of the Income Tax Act as a basis for concluding that the Federal Court had no jurisdiction to hear an originating motion made pursuant to s. 18 of the Federal Court Act and asking inter alia that a tax assessment be vacated.

[17]            It is true that s. 18(1) of the Federal Court Act gives the Federal Court Trial Division exclusive jurisdiction over the traditional forms of judicial review involving the federal government. At the same time, s. 18.1 of the Federal Court Act allows an application for judicial review to be made against a decision by a "federal board, commission or other tribunal".

[18]            However, s. 18.5 of the Federal Court Act states that where appeal procedures are provided by law they must be given priority, and to this end excludes judicial review where the law provides a specific right of appeal.

[19]            Relying on s. 18.5 (and formerly s. 29) of the Federal Court Act and on s. 152(8) of the Income Tax Act, the courts have thus consistently dismissed for lack of jurisdiction proceedings for judicial review which ultimately seek to have tax assessments vacated or reviewed. (See Albion Transportation Research Corp. v. Canada (T.D.), [1998] 1 F.C. 78; Greene v. M.N.R., 95 D.T.C. 5684 (F.C.A.); Optical Recording Corp. v. Canada, [1991] 1 F.C. 309 (F.C.A.); and M.N.R. v. Parsons, [1984] 2 F.C. 331 (F.C.A.)).

[20]            Parliament has thus adopted a special and unified procedure for the revision and cancellation of tax assessments. It has legislated by exclusion, first by removing any remedy other than objection and appeal in this area, then by giving the Tax Court of Canada exclusive jurisdiction over appeals brought from tax assessments, and finally by excluding judicial review by the Federal Court where a right of appeal exists. (See Tax Court of Canada Act, R.S.C. 1985, c. T-2, s. 12; Income Tax Act, R.S.C. 1985 (5^th Supp.), c. 1, ss. 152(8), 169 and 171; and Federal Court Act, ss. 18(1) and 18.5.)

[21]            In my opinion, therefore, it is quite clear that the Federal Court is consequently deprived of any jurisdiction to rule on the revision and vacating of the tax assessments made against the plaintiffs for the various taxation years between 1982 and 1994.

[22]            Consequently, the Court must strike the plaintiffs' application as it lacks jurisdiction over the latter.

[23]            In the event that I am wrong in arriving at this conclusion, I also consider that the plaintiffs' application is clearly frivolous and vexatious.

[24]            The plaintiffs cited ss. 7, 11(b), 24(1) and 26 of the Canadian Charter of Rights and Freedoms but gave very little indication in their application of the nature of any alleged infringement of their constitutional and fundamental rights.

[25]            In any case, the substantive provisions of the Charter (ss. 7 and 11(b)) and its remedial provisions (ss. 24 and 26) do not apply to the case at bar. The same is true of s. 1 of the Canadian Bill of Rights.

[26]            Section 7 of the Charter guarantees everyone the "right to life, liberty and security of the person". These three rights imply protection of individuals in a physical sense and do not extend to economic and property rights, except perhaps for fundamental economic rights to life and survival. It is quite clear that there is no question of these fundamental rights being infringed in the case at bar. (See Rodriguez v. British Columbia (A.G.), [1993] 3 S.C.R. 519, and Irwin Toy Ltd. v. Quebec (Attorney General), [1989] 1 S.C.R. 927.)

[27]            Section 11(b) of the Charter states that "any person charged with an offence has the right . . . to be tried within a reasonable time" and applies to purely criminal and penal proceedings. (R. v. CIP Inc., [1992] 1 S.C.R. 843; R. v. Wigglesworth, [1987] 2 S.C.R. 541.)

[28]            Section 24(1) of the Charter allows a person whose rights have been infringed to apply to a court of competent jurisdiction to obtain such remedy as the court considers appropriate and just in the circumstances. A court is competent if it has jurisdiction over the person, matter and remedy sought. Section 24(1) gives a court no new jurisdiction. In the circumstances of the case at bar, the Tax Court of Canada is the court of competent jurisdiction as, under its enabling Act, the Income Tax Act, it is that Court which has the power to grant the remedy sought by the plaintiffs, namely revision or vacating of the assessments. (Weber v. Ontario Hydro, [1995] 2 S.C.R. 929; Mills v. The Queen, [1986] 1 S.C.R. 863; and Singh et al. v. M.E.I., [1985] 1 S.C.R. 177.)

[29]            Section 26 of the Charter guarantees that other rights and freedoms that exist in Canada will continue to exist and, like s. 7, has no bearing on the case at bar.

[30]            As regards the rules of natural justice allegedly infringed by the Minister's conduct, that is by the latter's delay in ratifying the assessments, I cannot based on the facts in evidence and the state of the law see how the Minister can be blamed for a delay, still less an unreasonable one.

[31]            For the vast majority of the plaintiffs a large part of the time which elapsed after the filing of their notices of objection did so because of the fact that they themselves had agreed in writing to suspend their objections while the Tax Court of Canada ruled on three test cases. The lapse of time in question therefore cannot be set up against the Minister.

[32]            Additionally, at any time relevant to the plaintiffs who did not enter into an agreement to suspend, and any time elapsed before and after the life of the agreement for those plaintiffs who did conclude such an agreement, s. 169(1) of the Income Tax Act provides that a taxpayer may also file an appeal with the Tax Court of Canada at any time after 90 days have elapsed after service of the notice of objection and the Minister has not notified the taxpayer that he has vacated or confirmed the assessment or reassessed.

[33]            That subsection reads:

     169. (1) Where a taxpayer has served notice of objection to an assessment under section 165, the taxpayer may appeal to the Tax Court of Canada to have the assessment vacated or varied after either

                (a) the minister has confirmed the assessment or reassessed, or

                (b) 90 days have elapsed after service of the notice of objection and the minister has not notified the taxpayer that the minister has vacated or confirmed the assessment or reassessed,

but no appeal under this section may be instituted after the expiration of 90 days from the day notice has been mailed to the taxpayer under section 165 that the minister has confirmed the assessment or reassessed.

[34]            Accordingly, the time elapsed cannot be transformed into a delay for which the Minister is to blame. If there had been no mutual agreement to suspend, the plaintiffs could have presented their case relying on s. 169(1).

[35]            Finally, if the defendants really could be blamed for any delay, the Federal Court of Appeal in James v. Canada (Minister of National Revenue-M.N.R.), [2000] F.C.J. No. 2135, had to rule on a motion filed by the plaintiff at trial to vacate the assessments on the ground that the Minister had not acted as promptly as possible in reviewing the notices of objection. In that case the Court noted its position, at pp. 3 and 4 as follows, namely that the Minister's inaction cannot lead to vacating of the assessments as a remedy:

12      The Income Tax Act does not stipulate any consequence for a failure on the part of the minister to deal with a notice of objection with all due dispatch. On that question, the leading authority in this Court is Bolton v. The Queen, (1996), 200 N.R. 303, 96 D.T.C. 6413, [1996] 3 C.T.C. 3 (F.C.A.). In that case Mr. Justice Hugessen, speaking for the Court, said this (at page 304, N.R.):

                Parliament clearly did not intend that the minister's failure to reconsider an assessment with all due dispatch should have the effect of vacating such assessment. If the minister does not act, the taxpayer's recourse is to appeal pursuant to section 169.

. . . . .

15      If Bolton stands, than regardless of the reason for the ten year delay in dealing with the objections, Mr. James cannot obtain the remedy he seeks.

. . . . .

20      It was argued on behalf of Mr. James that the Bolton interpretation of paragraph 165(3)(b) imposes a statutory duty on the minister but gives no effective weapon to taxpayers by which they can compel the minister to comply. It is true that under Bolton, a taxpayer cannot claim the right to have a reassessment vacated because it is under objection for an unduly long period of time. However, it does not follow that the taxpayer has no effective remedy. The taxpayer may appeal to the Tax Court under paragraph 169(1)(b), or commence proceedings in the Federal Court to compel the minister to consider the objection and deal with it. There is jurisprudence relating to such applications in the context of other income tax provisions imposing an obligation on the minister to act with all due dispatch: Burnet v. Canada, 98 D.T.C. 6205, [1999] 3 C.T.C. 60, [1998] F.C.J. No. 364 (QL) (F.C.A.); Merlis Investments Ltd. v. Canada, [2000] F.C.J. No. 1746 (QL) (F.C.T.D.).

21      We conclude that there is no basis for departing from the decision of this Court in Bolton, and that the Trial Judge was correct to dismiss the motion to set aside or vary the notices of reassessments.

[36]            The plaintiffs' application is thus clearly frivolous and vexatious as well as, most importantly, not being within this Court's jurisdiction.

[37]            The defendants' motion to strike will therefore be allowed with costs.

MONTRÉAL, QUEBEC

December 7, 2001

Certified true translation

Suzanne M. Gauthier, LL.L. Trad. a.

                          FEDERAL COURT OF CANADA

                                       TRIAL DIVISION

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

FILE:

STYLE OF CAUSE:

T-783-00

YVES BEAUDRY, LAURENT BÉLANGER, JAMES BULLOCK, YVES CHARBONNEAU, RICHARD CHARLTON, MARIE-FRANÇOISE DESGRANGES, DAVID ELKINS, RAPHAËL EVANSON, CHRISTOPHER W. HERTEN-GREAVEN, ALBERT LEUNG, BRENDAN O'CONNOR, KIM PARLETT, OLEG ROMAR, PAUL A. S. SMITH, MARTIN T. TYLER, GEORGE H. WOO

                                                                             Plaintiffs

and

THE CANADA CUSTOMS AND REVENUE AGENCY

THE ATTORNEY GENERAL OF CANADA

                                                                        Defendants

PLACE OF HEARING:Montréal, Quebec

DATE OF HEARING:November 8, 2001

REASONS FOR ORDER BY: RICHARD MORNEAU, PROTHONOTARY

DATED:December 7, 2001

APPEARANCES:

SOLICITORS OF RECORD: