Date: 20100329
Docket: ITA-5671-08
Citation: 2010 FC 340
Toronto,
Ontario, March 29, 2010
PRESENT: The Honourable Mr. Justice Russell
BETWEEN:
IN
THE MATTER OF the Income Tax Act;
and
IN THE MATTER OF an assessment or assessments
by the Minister of National Revenue under
one or
more of the Income Tax Act, Canada
Pension Plan,
Employment Insurance Act
against: Don McDonald
1515
– 1
Lombard Place
Winnipeg, Manitoba
R3B
0X3
REASONS FOR ORDER AND ORDER
[1]
At
the show cause hearing for this matter under Rule 459 the judgment debtor, Mr.
Don McDonald, seeks to have the interim order discharged on the grounds that he
does not have an interest under Rule 458(1)(a) that can be charged.
[2]
Essentially,
Mr. McDonald argues that he has an indirect, contingent, beneficial interest in
the gift of real property contained in his father’s will and there is no
authority that permits such an interest to be charged under Rule 458(1)(a).
[3]
He
says that if the Court were to hold that such an interest is captured by Rule
458(1)(a), this would go beyond the plain and ordinary usage of the
words and would amount to “judicial legislation.” This could not have been the
intent of Parliament or the Rules Committee. He also says that, in the context
of the orderly administration of estates, such an interpretation would lead to
chaos.
[4]
In
other words, Mr. McDonald says that Rule 458(1) does not encompass the charging
of a beneficial, contingent interest such as the interest of a beneficiary of
real property under a will. He says that much more explicit language would be
required to permit such an extraordinary charge, particularly in light of the
effects that such an interpretation would potentially have on settled estate
administration jurisprudence.
[5]
The
interest in question in this case – Mr. McDonald’s interest in the real estate
that falls to be distributed under his father’s will to Mr. McDonald and his
sisters – arises for consideration under Rule 458(1)(a)(i) as “an
interest in real property.”
[6]
Rule
458(1)(a) places no limitation on the nature or extent of the judgment
debtors “interest in real property or immoveables.” As Justice Martineau
pointed out in Canada (Minister of National Revenue- M.N.R.) v. Laguerre,
2008 FC 460, [2008] F.C.J. No. 578 at paragraph 3, the registration of a
certificate of the Minister is “equivalent to a judgment of this Court” which
means that the Minister “may immediately register an interim charge against any
immovable (sic) belonging to the judgment debtor mentioned in the
certificate in question.” Justice Martineau’s words are equally applicable to
“any” interest in real property.
[7]
Justice
Martineau also makes several points at paragraph 5 of his reasons in Laguerre
that, in my view, are also applicable to the case before me:
5. Rule 459(1) reads, “At a show cause hearing referred to in
paragraph 458(1)(b), the Court shall make the
interim charge absolute, in Form 459, or discharge it. In this case, then, the
Court has two options: to make the charge absolute or to discharge it. I note
that rules 458 and 459 do not require a judgment creditor to seize the
immovable immediately (although he could); the goal is rather to charge it with
the equivalent of a judicial hypothec to ensure the protection of his rights: R. v. Mullin, [1985] 2 C.T.C. 128. More specifically, the
purpose and effect of these rules is the creation of a charge on the debtor's
immovable pursuant to a judgment, affecting the said immovable when that
judgment is enforced: Re Beaudry, [1979] 2 FC 138.
Given that we are simply dealing with a judgment execution measure and that
under rule 462, the Court may, on a motion by the judgment debtor or any other
person having a right in the property charged with an interim or absolute
charge, discharge or vary the charging order on such terms as it considers just
with respect to costs, I do not find it premature to issue a charging order
absolute in this case.
[8]
Mr.
McDonald does not deny that, under his father’s will, he has an “interest in
real property.” He characterizes this interest as “indirect/contingent,
beneficial,” but it is still an interest in real property.
[9]
As
Justice Martineau pointed out in Laguerre, Rule 462 allows a discharge
or variance on motion of the judgment debtor or any other person with an
interest in property subject to an interim or absolute charge under rule 458 or
459, at any time, on such terms as to costs as the Court considers just. In my
view, there is sufficient flexibility within the rules to deal with the charge
in question should it be necessary to do so as part of the estate
administration process. There is really no evidence before me that the charge
in question will lead to problems or “chaos” in the administration of the
estate. I regard Mr. McDonald’s concerns in this regard as speculative and
unlikely, given the Court’s ability to discharge or vary with suitable terms as
to costs.
[10]
As
regards the scope of “an interest in real property” under 458(1), there is
simply nothing in the governing legislation or the Rules to suggest that such
an interest should be limited in some way. Mr. McDonald argues that there is
nothing to suggest that the wording was intended to encompass the interest he
has in the land under his father’s estate. In my view, however, it is Mr.
McDonald who is seeking to limit the plain and obvious meaning of “an interest
in real property or immoveables” and there is nothing in the scheme of the
governing legislation, the Rules, or the jurisprudence to suggest that such a
limitation should apply. An interest in land is an interest in land, even if it
is a beneficial and contingent interest in land. To embark upon a process of
trying to carve out certain interests in land that should not be subject to
Rule 458 would, in my view, be extremely difficult and would result in the kind
of confusion for which I can see no justification in principle or authority.
[11]
Jowitt’s
dictionary of English Law, 2nd ed. (1977) p. 995 (as cited in Words
& Phrases, volume 4 at page 1178), establishes that a person has an
interest in something when “he has rights, advantages, duties, liabilities,
losses or the like, connected with it, whether present or future, ascertained
or potential…”
[12]
Based
on such an expansive definition, I believe that there is little question that
the property interests in the land currently maintained by the Respondent would
fall within the scope of Rule 458.
[13]
Black’s
Law Dictionary also contains an expansive interpretation of the term
“interest.” Black’s considers an interest to be “a legal share in something;
all or part of a legal or equitable claim to or right in property.” Black’s 7th
edition at page 816.
[14]
Moreover,
in Williams v. Papworth, [1900] A.C. 563, 69 LJPC (as cited in Rystephaniuk
v. Prosken, 59 Man R. 142 and Words and Phrases, above,) Lord
Macnagten said with regard to the term interest in land,
It could not, of course, be disputed that
the expression “interest in land,” unless there was something to restrict the
meaning, must include equitable as well as legal interests.
[15]
Based
on the expansive definition of the word “interest” and the phrase “interest in
land,” it is my view that the Respondent’s interest is encompassed in Rule 458.
Furthermore, contrary to the Respondent’s argument, there is nothing in the wording
of Rule 458 that restricts the meaning of “an interest in real property.” As
such, on an interpretive basis, it appears that the Respondent’s interest is
included in Rule 458.
[16]
Because
the estate has yet to be distributed, the Respondent has a concern that it could
be premature to require the Respondent to pay tax on an asset he has yet to
acquire. I think that such a concern, although potentially valid, does not
arise on these facts.
[17]
In
this case, it appears the Respondent is attempting to delay distributing the
property in question to the beneficiaries, himself included, so that he can
avoid paying his share of taxes on the property. As stated by the Applicant,
his “failure to convey the legal interest of this real property to the devisees
is ostensibly keeping his one quarter beneficial interest in this asset outside
the reach of the tax collector.” Hence, on these facts, I see no reason not to
allow Rule 458(1)(a) to take effect in accordance with the
interpretation set out above. As Justice Martineau pointed out in Laguerre,
given that we are dealing with a judgment execution measure, there is enough
flexibility to deal with anomalies and injustices if and when they arise. They
do not arise here.
[18]
Consequently,
I believe that the interim change in this case should be made absolute in
accordance with Rule 459.
CHARGING
ORDER ABSOLUTE
UPON MOTION made
returnable on January 18, 2010 by Order of Justice Pinard, dated November 30,
2009;
AND UPON reading the
material filed on behalf of the Attorney General of Canada in its application
for an ex parte interim charging order and on hearing the submissions of
counsel for Don McDonald and counsel for the Attorney General of Canada, and
upon reading further written submissions filed by both counsel;
IT IS ORDERED
THAT:
- The interest of Don
McDonald in the assets specified in the real property described as:
a.
PCL
34570 SEC DKF; PT LOCATION 460P UNSURVEYED TERRITORY PT OF GALT ISLAND, LAKE OF
THE WOODS, PT 9, 10, 11, 12, 13 23R5964 and PT 3 and 4 KR341 S/T PT 10 and 13,
23R5964 AS IN LT30027; S/T LT222465; DISTRICT OF KENORA; and
b.
PDL
35264 SEC DKF; PT LOCATION 460P UNSURVEYED TERRITORY BEING PT OF GALT ISLAND, LAKE OF THE
WOODS, PT 8, 23R5964; DISTRICT OF KENORA.
stand charged
with the payment of $2,546,249.27, the amount due from Don McDonald to Her
Majesty the Queen in Right of Canada as represented by the Minister of National
Revenue pursuant to a certificate registered in this Honourable Court on or
about May 8, 2008, said certificate having the force of a judgment pursuant to
subsection 223(3) of the Income Tax Act, together with any applicable
interest, compounded daily, at the rate prescribed under the Income Tax Act
and the costs of this motion, which are to be added to the judgment debt.
“James
Russell”
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