Docket: T-493-16
Citation:
2016 FC 1329
Ottawa, Ontario, November 30, 2016
PRESENT: The
Honourable Mr. Justice Boswell
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BETWEEN:
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MARCO
VALLELUNGA
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Applicant
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and
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HER MAJESTY THE
QUEEN IN RIGHT OF CANADA AS REPRESENTED BY THE MINISTER OF REVENUE
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Respondent
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JUDGMENT AND REASONS
[1]
In December 2002, the Applicant’s father,
Giuseppe Vallelunga, transferred real property known as 259 Regina Avenue in
Thunder Bay, Ontario, to the Applicant for less than fair market value. As a
result of this non-arm’s length transfer, the Applicant was assessed by the
Canada Revenue Agency and determined to be liable for $69,329.75. Ultimately,
this debt resulted in a memorial issued pursuant to section 223 of the Income
Tax Act, RSC, 1985, c 1 (5th Supp) [Act] being registered against
the title to the real property on November 21, 2007. The Applicant has applied
for cancellation of the memorial pursuant to paragraph 223(7) (c) of the Act
as well as the cancellation of all penalties and interest in respect of the memorial.
I.
Background
[2]
In a letter dated February 16, 2006, the Canada
Revenue Agency notified the Applicant of the CRA’s intention to assess the
Applicant under subsection 160(2) of the Act for the amount which was
the lesser of, the benefit he received from the non-arm’s length transfer of
the Regina Avenue property in 2002, and the amount of his father’s outstanding tax
debt which, at the time of the transfer, totalled $110,325.85. In May 2006, the
CRA proceeded to assess the Applicant pursuant to subsection 160(1) of the Act
for the amount of the equity transferred to him by his father, being
$69,329.75, plus accrued interest to the date of mailing of the Notice of
Assessment on May 25, 2006. The total amount assessed was $88,564.74. A year or
so later, the CRA advised the Applicant in a letter dated August 24, 2007, that
the amount of $88,564.74, plus interest, remained outstanding and, that if he
failed to respond to the letter or to pay the full amount owing within 14 days,
appropriate legal action would be taken without further notice.
[3]
The CRA continued its collection efforts by
sending the Applicant and his bank a requirement to pay dated September 10,
2007, which sought to garnish his bank account. On October 11, 2007, the
principal amount of the Applicant’s tax debt was certified pursuant to
subsection 223(2) of the Act and registered in this Court pursuant to
subsection 223(3). The CRA advised the Applicant of this certificate in a
notice dated November 1, 2007; this notice stated that if the Applicant did not
pay the amount due, it might be necessary to seize and sell some of his assets
to eliminate the debt. In response to this notice, the Applicant’s legal
counsel called the CRA on November 8, 2007, requesting information about the
certificate; he was informed that the certificate related to the assessment
under section 160 of the Act dated May 25, 2006, and that the CRA would
be proceeding to register a lien against the Applicant’s property. On November
21, 2007, the CRA registered a notice of lien pursuant to subsections 223(5)
and (6) of the Act against the Applicant’s Regina Avenue property as
well as another property of the Applicant located in Thunder Bay.
[4]
In 2012, the Applicant decided to sell the
Regina Avenue property and the Applicant’s representative obtained a copy of
the lien from the Land Registry Office; the lien stated that the Applicant owed
an outstanding debt of $69,329.75, plus interest, to the CRA. On May 10, 2012,
the Applicant’s accountant obtained a Client Summary from the CRA website which
stated that his account balance was zero, and on June 22, 2012, the Applicant’s
accountant conducted another online search and confirmed that the account
balance remain unchanged. On December 17, 2012, the Applicant sold the
Regina Avenue property; but, in order to complete the sale, a holdback in the
amount of $150,000 was set aside until the apparent discrepancy between the
lien and the Client Summary was resolved. According to the CRA’s records,
neither the Applicant nor any of his representatives contacted the CRA after
the sale of the property.
[5]
As of May 10, 2016, the total outstanding
balance of the Applicant’s income tax debt, including interest, was
$159,537.36.
II.
Issues
[6]
The Applicant submits that the only issue is
whether the Crown is estopped from enforcing the memorial because of its
misrepresentation of fact made to him. For the Respondent, the issue is whether
the CRA can be compelled to vacate the memorial on the basis of estoppel. In my
view, however, the overarching issue is whether the doctrine of estoppel by
representation applies in this case.
III.
Analysis
A.
Does the Doctrine of Estoppel by Representation
Apply?
[7]
The Applicant says that the doctrine of estoppel
by representation binds the Crown in cases where there is a representation made
about facts. According to the Applicant, the CRA’s representation, in the form
of the Client Summary, is a clear statement of fact that showed that the
Applicant did not owe any taxes. The Applicant maintains that he suffered a
detriment as a result of the Client Summary in that a $150,000 holdback was
applied upon sale of the Regina Avenue property.
[8]
The Respondent says that estoppel does not apply
in this case because estoppel cannot override the law and, therefore, cannot
prevent the Crown from exercising its statutory duty to collect a tax debt.
According to the Respondent, the Minister of National Revenue has a statutory
duty under subsection 220(1) to administer and enforce the Act, which
includes the collection of an outstanding income tax debt, and case law has
established that the doctrine of estoppel can never interfere with the proper
carrying out of the provisions of Acts of Parliament.
[9]
The parties agree that the essential factors
giving rise to an estoppel by representation are set forth in Canadian
Superior Oil Ltd v Paddon-Hughes Development Co, [1970] S.C.R. 932 at para 19,
[1970] SCJ No 48 [Canadian Superior Oil]; the three elements to be
satisfied are:
(1) A representation or conduct amounting to
a representation intended to induce a course of conduct on the part of the
person to whom the representation is made.
(2) An act or omission resulting from the
representation, whether actual or by conduct, by the person to whom the
representation is made.
(3) Detriment to such person as a
consequence of the act or omission.
[10]
In addition, the representation must be
unambiguous and unequivocal (see: Canada (Attorney General) v Jencan Ltd,
[1997] FCJ No 876 at para 49, [1998] 1 FC 187, (FCA)), and that to constitute
an estoppel it is necessary that the truth not be known to the party relying
upon the representation (see: Livingstone v Jannetta, [1931] OJ No 422
at para 42, [1931] OR 325, (Ont CA), rev’d on other grounds, [1932] S.C.R. 175 [Livingstone]).
[11]
Although in certain circumstances the doctrine
of estoppel may lie against the Crown, estoppel will generally not bind the
Crown if it would “work a contrary result to that set
out in a statute; nor should it work to tie the hands of the legislature in the
future.” (See: Bruce MacDougall, Estoppel (Markham: LexisNexis
Canada, Inc, 2012) at 47 [Estoppel]). In the tax context, the Crown is
not bound by the statements of its officials regarding opinions about the
interpretation of a statute (Estoppel at 49); though it may be if a
taxpayer relies to his detriment upon an erroneous statement about the status
of an educational institution for tax purposes (see: Rogers v Canada,
[1998] TCJ No 31 at para 7, 98 DTC 1365). The Crown may also be bound by
estoppel “where a statute allows a government official
some discretion” (Estoppel at 49).
[12]
In my view, the doctrine of estoppel cannot be
utilized in the circumstances of this case to erase the Applicant’s outstanding
income tax debt which he is obligated to pay under the Act. Estoppel
cannot be used to remove an obligation to obey a statute or, as in this case,
to pay a valid and binding tax assessment (see: Maritime Electric Co v
General Dairies Ltd, [1937] JCJ No 3 at para 9, [1937] 1 DLR 609; also see Kenora
(Town) Hydro Electric Commission v Vacationland Dairy Co-operative Ltd,
[1994] 1 S.C.R. 80 at para 52, [1994] SCJ No 3). Moreover, in Abbott v Canada,
2001 FCT 242 at para 70, [2001] 3 FC 342, this Court observed that: “it is trite law to say that the Crown cannot be estopped
from applying the law to a subject in terms of enforcing regulatory or taxing
provisions.”
[13]
I agree with the Respondent that subsection
220(1) places a positive duty on the Minister to administer and enforce the Act.
This positive duty encompasses, at the very least, an obligation to assess
taxpayers under the Act and to take appropriate steps to collect unpaid
taxes. Moreover, when non-arm’s length persons transfer property to each other,
subsection 160(1) of the Act makes both “the
transferee and transferor... jointly and severally, or solidarily, liable to
pay a part of the transferor’s tax.” The Applicant in this case did not
question or object to the assessment made in 2006 prior to the commencement of
this application.
[14]
Although I am of the view that the Applicant
cannot resort to the doctrine of estoppel to eradicate his tax debt, this is
not to say that the Crown could never be estopped from enforcing a memorial
through a registered lien. As noted above, estoppel might apply when the Crown
exercises a discretionary power conferred upon it by statute. In this case, the
CRA exercised its discretion to obtain a memorial and file it as a lien against
the Applicant’s Regina Avenue property. The evidence shows that the CRA made no
representation whatsoever to the Applicant that it would not enforce the tax debt
or not file the lien. On the contrary, the Applicant’s legal counsel was
apprised of the CRA’s intentions to take action to enforce the tax debt during a
telephone call on November 8, 2007, a week after a certificate was filed
pursuant to subsection 223(2) of the Act and registered pursuant to
subsection 223(3). The Applicant does not claim that the CRA misrepresented the
manner in which it intended to enforce the tax debt.
[15]
In any event, even if I am incorrect in my view
that the Applicant cannot resort to the doctrine of estoppel to eliminate his
tax debt, the Applicant has nevertheless failed to satisfy the onus upon him to
show that an estoppel by representation has been established. The Applicant has
not satisfied any of the elements from Canadian Superior Oil.
[16]
It is difficult to see how any intention on the
part of the CRA can be attributed to the Client Summary. It is true, as the
Applicant rightly points out, that the Client Summary indicated a zero account
balance. However, the intent requirement of the first element from Canadian
Superior Oil requires the Applicant to establish that “a reasonable person would interpret the purpose of the
statement as having been made with the intention that it be relied on” (Estoppel
at 161). In this case, it appears that the Applicant unreasonably assumed that
because the Client Summary showed a zero account balance, his tax debt and the
associated lien had somehow been removed.
[17]
I agree with the Respondent that the Client
Summary was not a clear and unequivocal representation intended to induce the
Applicant to sell his property in the belief that the lien against the property
would be or had been removed. The Client Summary is not a sufficiently
unequivocal representation that the Applicant no longer owed the $69,329.75,
plus interest. On the contrary, it only details a taxpayer’s own personal
income tax assessments and does not include any information about a so-called “derivative assessment” based on the underlying debt
of another taxpayer, such as an assessment under section 160 of the Act.
Nothing in the Client Summary warrants that there are no other assessments
against a taxpayer who relies upon it. Indeed, the words used in the Client
Summary, e.g., “status of return”, “instalments” and “payments
made on filing”, are suggestive of assessments made with respect to
annual income tax returns.
[18]
The Applicant cannot satisfy the second element
of estoppel by representation because there is no act or omission resulting
from the representation. The Applicant had notice of the debt and his counsel
was aware of the CRA’s intention to register a lien since 2007. However, the
Applicant took no steps to contact the CRA before selling the Regina Avenue
property. Furthermore, the Applicant did not contact the CRA about the outstanding
debt even after he says he became aware of the lien in 2012. Although he
obtained the Client Summary, the Applicant never bothered to contact the CRA to
specifically inquire about the lien.
[19]
A party seeking to show an estoppel by
representation “must have been misled or deceived by
the representation… if the representee knew or ought to have known of the
falsity of the representation, then it cannot form the basis for an estoppel by
representation” (Estoppel at 244; also see: Livingstone).
The Applicant has not established that he was unaware that the alleged
representation in the Client Summary was false. The evidence is such that the
Applicant was well aware, at least since November 2007, that there was an
outstanding income tax assessment in respect of which a lien would be
registered against the Regina Avenue property. The Applicant was notified on
numerous occasions prior to sale of the property about the assessment, the
debt, and collection of the debt. Although the Applicant never personally responded
to the various letters and notices from the CRA, his counsel spoke with the CRA
on November 8, 2007, and was informed about the debt and the CRA’s intention to
register a lien. Additionally, the Applicant received a copy of the lien from
the Land Registry Office, which stated the debt owing to the CRA, when he
prepared to sell his property in 2012.
[20]
Lastly, the Applicant has not suffered any
detriment from allegedly acting on the representation in the Client Summary.
The Applicant simply decided to holdback $150,000 in order to effect the sale
of the Regina Avenue property. Even if the Applicant had never received the
Client Summary, he still would have likely been compelled to agree to the
holdback to effect sale of the property, unless he contacted the CRA and had
the lien discharged. The Applicant’s conduct also demonstrates the lack of
detriment, in that he never bothered to contact the CRA and have the lien
discharged prior to the sale of the property and he has allowed the money to
remain in a holdback account for nearly four years. I agree with the Respondent
that the Applicant’s complacency exhibits that there is no detriment.
IV.
Conclusion
[21]
The Applicant’s application under subsection
223(7) of the Act is dismissed with costs in favour of the Respondent.
[22]
The Respondent is entitled to costs in such
amount as may be agreed to by the parties. If the parties are unable to agree
as to the amount of such costs within 15 days of the date of this judgment,
either party shall thereafter be at liberty to apply for an assessment of costs
by an assessment officer in accordance with the Federal Courts Rules,
SOR/98-106.
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