ITA-7404-95
IN
THE MATTER OF THE INCOME TAX ACT,
-and-
IN
THE MATTER OF AN ASSESSMENT OR ASSESSMENTS MADE BY THE MINISTER OF NATIONAL
REVENUE PURSUANT TO ONE OR MORE OF THE FOLLOWING ACTS: THE INCOME TAX ACT,
THE CANADA PENSION PLAN AND THE UNEMPLOYMENT INSURANCE ACT,
-and-
2203383
CANADA INC.,
Judgment
debtor,
-and-
TALAL
ABDALLAH,
Defaulting
garnishee,
-and-
2854-8816
QUÉBEC INC.,
Garnishee.
O
R D E R
DENAULT J.:
The appeal from the order
by Prothonotary Morneau dated September 25, 1996 is dismissed.
OTTAWA, November 6, 1996
J.F.C.C.
Certified true translation
J. Paterson
ITA-7404-95
IN
THE MATTER OF THE INCOME TAX ACT,
-and-
IN
THE MATTER OF AN ASSESSMENT OR ASSESSMENTS MADE BY THE MINISTER OF NATIONAL
REVENUE PURSUANT TO ONE OR MORE OF THE FOLLOWING ACTS: THE INCOME TAX ACT,
THE CANADA PENSION PLAN AND THE UNEMPLOYMENT INSURANCE ACT,
-and-
2203383
CANADA INC.,
Judgment
debtor,
-and-
TALAL
ABDALLAH,
Defaulting
garnishee,
-and-
2854-8816
QUÉBEC INC.,
Garnishee.
REASONS
FOR ORDER
DENAULT J.:
Her Majesty the Queen, for
the Minister of National Revenue (the applicant), is appealing from an order by
Prothonotary Morneau, who dismissed her application for a garnishee order to
show cause.
Having obtained judgment
against the judgment debtor 2203383 Canada Inc., the applicant proceeded with a
garnishment against the sole director of that company, Talal Abdallah. Since
this garnishee did not make a declaration, he became a defaulting garnishee and
was ordered in turn to pay the applicant the amount owed by the judgment
debtor. The applicant then applied for a garnishee order to show cause against
2854-8816 Québec Inc., of which Talal Abdallah is the sole shareholder, in
order to [TRANSLATION] "attach all amounts owing or accruing from the
company 2854-8815 (sic) Québec Inc. to Talal Abdallah and, more
specifically, all the shares held by Talal Abdallah in the said company". In
support of her application, the applicant relied on both Rule 2300 of the Federal
Court Rules and articles 618 and 625 of the Code of Civil Procedure.
Since in his view the
applicant's affidavit did not establish a commencement of proof with respect to
a specific debt, as required by Rule 2300(1)(a),
Prothonotary Morneau relied on the Federal Court of Appeal's decision in Champlain
Company Limited v. The Queen, [1976] 2 F.C. 481, in refusing to issue the
garnishee order to show cause.
The applicant is appealing
from that decision. She argues that the prothonotary erred, in view of the
factual evidence warranting the issuance of a writ of seizure by garnishment of
the shares of a private company pursuant to articles 617 et seq.
of the Code of Civil Procedure of Quebec, by failing to exercise the
judicial discretion conferred on him by subsection 56(1) of the Federal
Court Act.
The applicant argues more
specifically that [TRANSLATION] "the reason cited by the prothonotary, to
the effect that Her Majesty the Queen did not adduce prima facie
evidence of a debt owing or accruing from 2854-8816 Québec Inc. to Talal
Abdallah, is irrelevant to the exercise of the judicial discretion provided for
in subsection 56(1) of the Federal Court Act, because Her Majesty
was not claiming that such a debt existed but was instead seeking to seize the
shares by garnishment".
Insofar as counsel for the
applicant is relying on both the Federal Court Rules and the Code of
Civil Procedure of Quebec, it is important to consider the two systems for
the enforcement of judgments to which subsection 56(1) of the Federal
Court Act provides access. The writs of execution provided for by the Federal
Court Rules include, in particular, writs of fieri facias (Rules
2100 et seq.) and writs of garnishment (Rules 2300 et seq.).
The Rules of this Court do not provide for the garnishment of company share
certificates; under Rule 2401, it is possible only to impose a charge for
securing payment of the amount due on "any interest to which the judgment
debtor is beneficially entitled in such of the shares . . . as may be specified
in the order. . . ."
In the Code of Civil
Procedure, separate articles deal with seizure in execution of movable
property (articles 581 to 616.1), seizure in execution of shares of companies
(articles 617 to 624) and seizure by garnishment (articles 625 et seq.).
With respect to shares of companies, the Code of Civil Procedure
provides for two different enforcement methods, depending on whether the
creditor seizes the certificates (article 617) or makes a seizure by
garnishment in the hands of the company that issued them (article 618); in
the latter case, article 624 makes a reference to the rules for seizure by
garnishment in articles 625 et seq. of the Code.
In the case at bar, there
is nothing to indicate that the applicant knows the location of the share
certificates; she therefore does not intend to use the method provided for in
article 617 of the Code of Civil Procedure. Instead, as she stated
both in the affidavit supporting her application for a garnishee order to show
cause and in the present motion, she wishes to attach any amount owing or
accruing from 2854-8816 Québec Inc. to Talal Abdallah, and more specifically
the shares he holds in that company. In short, as stated in the title of her application,
she wishes to proceed by garnishment and thus prevent both the divestment of
any amount owing from the company to its shareholder and the transfer of the
shares.
The garnishment method
differs depending on the system. Whereas pursuant to the Code of Civil
Procedure the general enforcement rules provide that the writ is prepared
by the seizing creditor and signed and issued by the clerk of the district
where the judgment was rendered (article 555), Rule 2300 states that
a judgment creditor must apply to the Court on affidavit showing, inter alia,
"that there is a debt owing or accruing from some person in Canada to the
judgment debtor".
Counsel for the applicant
is relying on section 56 of the Federal Court Act to argue that in
the case at bar, the prothonotary was required to apply the Code of Civil
Procedure articles rather than the Federal Court Rules. I believe
on the contrary that the wording of section 56 of the Act encourages
respect for the process provided for by the Rules of this Court while
authorizing the use, as required, of the process of the province in which the
judgment is to be executed. It is undoubtedly helpful, as the Federal Court of
Appeal pointed out in Forest v. Hancor Inc., [1996] 1 F.C. 725, at
p. 738, to promote the notion that "provincial law and federal law
are complementary rather than inconsistent", but the Code of Civil
Procedure cannot prevail over a clear provision of the Federal Court
Rules. In the case at bar, Rule 2300 and articles 618 and 625 of
the Code of Civil Procedure deal with the same enforcement mechanism,
but the methods of obtaining a writ of garnishment differ in the two systems.
The method provided by Rule 2300 must prevail.
For these reasons, it is
the view of the Court that the prothonotary was right to apply Rule 2300
and to deem the applicant's affidavit unsatisfactory. Her appeal is dismissed.
OTTAWA, November 6, 1996
J.F.C.C.
Certified true translation
J. Paterson
A
P P E N D I X
555. The writ must mention the date of the
judgment to be executed and the amount of the condemnation; it is prepared by
the seizing creditor, and signed and issued by the clerk of the district where
the judgment was rendered.
617. The seizure of shares of companies is
effected by the seizure of the certificates which represent them, made in
virtue of a seizure in execution or of a seizure by garnishment, and notified
to the company which issued them or to its transfer agent in Québec.
Such notification is made
by the seizing officer by serving a copy of the writ of seizure or of the
judgment rendered in virtue of article 639, as the case may be,
accompanied by an exact description of the certificates and a notice that all
the shares represented thereby are seized.
618. The seizure of shares of the debtor in a
company which has its head office in Québec, and whose shares are not listed or
traded on a recognized stock exchange, may also be made by seizure by
garnishment in the hands of the company that issued them. Such seizure by
garnishment prohibits the company from making, completing or entering upon its
books any transfer of the shares, and orders it to appear and declare. . . .
624. Subject to the preceding articles, the
seizure in execution of shares of companies is subject to the rules provided in
Sections II and IV of this chapter, so far as they are applicable.
625. Seizure by garnishment is effected by the
service on the garnishee and on the judgment debtor of a writ of seizure by
garnishment. The writ orders the garnishee to appear on the day and at the hour
fixed to declare under oath what sums of money he owes to the debtor or will
have to pay him and what movable property he has in his possession belonging to
him, and not to dispossess himself thereof until the court has pronounced upon
the matter. The writ also summons the debtor to appear on the day fixed and
show cause why the seizure should not be declared valid.
If the debtor has no known
domicile, residence or place of business in the district where judgment was
rendered, the writ is served upon him at the office of the court.
FEDERAL
COURT OF CANADA
TRIAL
DIVISION
NAMES
OF SOLICITORS OF RECORD
COURT
NO.: ITA-7404-95
STYLE
OF CAUSE:The Income Tax Act, the Canada Pension Plan and the Unemployment
Insurance Act v. 2203383 Canada Inc., Talal Abdallah and 2854-8816 Québec
Inc.
WRITTEN MOTION CONSIDERED WITHOUT
APPEARANCE OF THE PARTIES
REASONS
FOR ORDER BY:The Honourable Mr. Justice Denault
DATED:November
6, 1996
WRITTEN REPRESENTATIONS BY:
Jacinthe
LandryFOR THE APPLICANT
SOLICITORS OF RECORD:
Deputy
Attorney General of CanadaFOR THE APPLICANT
Ottawa, Ontario
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