Date: 20091105
Docket: A-165-09
Citation:
2009 FCA 321
CORAM: NOËL J.A.
PELLETIER J.A.
TRUDEL J.A.
BETWEEN:
BERTRAND BOUCHARD
Appellant
and
ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR JUDGMENT
NOËL J.A.
[1]
This is an appeal from a decision of Justice Harrington
of the Federal Court (Federal Court judge) dated March 10, 2009 (2009
FC 249), dismissing the appellant’s application for judicial review of the
decision of the Minister of National Revenue (the Minister) to retain by way of
deduction or set‑off, under section 224.1 of the Income Tax Act,
R.S.C. 1985, c. 1 (5th Supp.) (the Act), part of the retirement
benefits and income supplement owed to him.
[2]
Section 224.1 allows the Minister to
require the retention of certain monies under the circumstances specified in
that section:
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224.1 Where a person is indebted to
Her Majesty under this Act or under an Act of a province with which the
Minister of Finance has entered into an agreement for the collection of the
taxes payable to the province under that Act, the Minister may require the
retention by way of deduction or set-off of such amount as the Minister may
specify out of any amount that may be or become payable to the person by Her
Majesty in right of Canada.
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224.1 Lorsqu’une personne est endettée envers Sa Majesté, en
vertu de la présente loi ou en vertu d’une loi d’une province avec laquelle
le ministre des Finances a conclu un accord en vue de recouvrer les impôts
payables à la province en vertu de cette loi, le ministre peut exiger la
retenue par voie de déduction ou de compensation d’un tel montant qu’il peut
spécifier sur tout montant qui peut être ou qui peut devenir payable à cette
personne par Sa Majesté du chef du Canada.
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[3]
The appellant, who acted (and continues to act) without
the assistance of counsel, submits that the preconditions for applying this
provision have not been met in this case and that the Federal Court Judge was
required to reverse the retention effected by the Minister and order the
reimbursement.
FACTS
[4]
The appellant does not challenge the fact that, in
February 2008, he owed $68,789.23 in taxes (the tax debt). The evidence
also shows that, at the same time, he was a Crown creditor under the Canada
Pension Plan, R.S.C. 1985, c. C‑8 (CPP) and the Old Age
Security Act, R.S.C. 1985, c. O‑9 (OASA). The appellant had
been receiving $965.33 per month in benefits under these plans.
[5]
In March 2008, the Minister began
deducting 30% of the monthly amount payable to the appellant and applying
it to his tax debt, with the result that the total monthly benefit amount paid
to the appellant was reduced to $675.74.
[6]
Subsections 65(1) and (1.1) of the CPP
and 36(1) and (1.1) of the OASA respectively stipulate that the benefits
paid under these acts are exempt from seizure:
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65. (1) A benefit shall not be
assigned, charged, attached, anticipated or given as security, and any
transaction purporting to assign, charge, attach, anticipate or give as
security a benefit is void.
(1.1) A benefit is exempt from
seizure and execution, either at law or in equity.
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65. (1)
Une prestation ne peut être cédée, grevée de privilège, saisie, escomptée ou
donnée en garantie. Toute opération qui vise à céder, grever, saisir,
escompter ou donner en garantie une prestation est nulle.
(1.1) Les prestations sont, en droit ou en equity, exemptes d’exécution
de saisie et de saisie-arrêt.
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36. (1) A benefit shall not be
assigned, charged, attached, anticipated or given as security, and any
transaction purporting to assign, charge, attach, anticipate or give as
security a benefit is void.
(1.1) A benefit is exempt from
seizure and execution, either at law or in equity.
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36. (1)
Les prestations sont incessibles et insaisissables et ne peuvent être ni
grevées ni données pour sûreté; il est également interdit d’en disposer par
avance. Toute opération contraire à la présente disposition est nulle.
(1.1) Les prestations sont, en droit ou en equity, exemptes d’exécution
de saisie et de saisie-arrêt.
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[7]
On April 17, 2008, the appellant sought
the cancellation of the statutory set‑off and reimbursement of the monies
retained. When his request went unanswered, the appellant brought his case to
the Minister’s attention. After receiving a negative response, the appellant
challenged the Minister’s decision by way of an application for judicial review
in Federal Court.
[8]
In support of his request, the appellant raised
two arguments. First, he submitted that, since the amounts deducted are exempt
from seizure under the sections of the CPP and OASA, set‑off cannot be
effected according to the applicable private law, in particular article 1676
of the Civil Code of Québec, R.S.Q. 1991, c. 64 (CCQ), which reads as
follows:
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1676. Compensation
is effected regardless of the cause of the obligation that has given rise to
the debt.
Compensation
does not take place, however, if the claim results from an act perform with
intention to harm or if the object of the debt is property which is exempt
from seizure.
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1676. La compensation s’opère quelque soit la cause de l’obligation
d’où résulte la dette.
Elle
n’a pas lieu, cependant, si
la créance
résulte d’un acte fait dans l’intention de nuire ou si la dette a pour
objet un bien insaisissable.
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[Emphasis
added.]
[9]
In the alternative, the appellant argued before
the Federal Court that the benefits to which he is entitled are held in trust for
him and are not debts that can be subject to the set‑off mechanism under section 224.1
of the Act.
DECISION
OF THE FEDERAL COURT
[10]
The Federal Court judge identified the issue as
follows: does the term “set‑off” (“compensation” in the French version) in
section 224.1 of the Act incorporate civil law concepts of compensation,
more specifically, paragraph 2 of article 1676 of the CCQ, according to
which compensation “does not take place . . . if the object
of the debt is property which is exempt from seizure”? He recognizes that, if
so, compensation could not take place, as the “property” in question is exempt
from seizure (reasons, paras. 1 to 5).
[11]
The Federal Court judge began his analysis by
explaining the role of provincial private law in federal law. In this regard,
he cites sections 8.1 and 8.2 of the Interpretation Act,
R.S.C. 1985, c. I-21, which read as follows:
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8.1 Both the common law and the civil law are equally authoritative
and recognized sources of the law of property and civil rights in Canada and,
unless otherwise provided by law, if in interpreting an enactment it
is necessary to refer to a province’s rules, principles or concepts
forming part of the law of property and civil rights, reference must be made
to the rules, principles and concepts in force in the province at the time
the enactment is being applied.
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8.1 Le droit civil et la common law font pareillement autorité et sont
tous deux sources de droit en matière de propriété et de droits civils au
Canada et, s’il est nécessaire de recourir à des règles, principes ou
notions appartenant au domaine de la propriété et des droits civils en vue
d’assurer l’application d’un texte dans une province, il faut, sauf règle
de droit s’y opposant, avoir recours aux règles, principes et notions en
vigueur dans cette province au moment de l’application du texte.
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8.2 Unless otherwise provided by law, when
an enactment contains both civil law and common law terminology, or
terminology that has a different meaning in the civil law and the common law,
the civil law terminology or meaning is to be adopted in the Province of
Quebec and the common law terminology or meaning is to be adopted in the
other provinces.
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8.2 Sauf règle de droit s’y opposant, est
entendu dans un sens compatible avec le système juridique de la province
d’application le texte qui emploie à la fois des termes propres au droit
civil de la province de Québec et des termes propres à la common law des
autres provinces, ou qui emploie des termes qui ont un sens différent dans
l’un et l’autre de ces systèmes.
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[Emphasis
added.]
[12]
In this case, the Federal Court judge asked [translation] “whether Parliament
intended paragraph two of article 1676 to be available to a tax debtor” (reasons,
para. 15). He then referred to the decision of the Court of Appeal in Mintzer
v. Canada, [1996] 2 F.C.
146 (Mintzer) and the distinction made therein regarding the potentially
distinct effect of civil law (reasons, paras. 15 and 16).
[13]
The Federal Court judge went on to explain that,
for section 224.1 of the Act to apply, the two debts must be liquid and
that, surely, Parliament was therefore referring to legal set‑off, not
judicial liquidation (reasons, para. 17). He added that the Minister can,
in exercising his discretion, determine the extent of the set‑off amount (for
example, here, he requires only 30% of the amounts paid to the appellant) and
that [translation] “[i]t is
therefore clear that Parliament did not intend to make all the compensation
provisions of the Civil Code of Québec applicable in such circumstances”
(reasons, para. 18). In the Federal Court judge’s opinion, Parliament
could not have intended to provide tax debtors with another way to avoid
seizure (reasons, paras. 19 and 20).
[14]
Lastly, relying on Mintzer, the Federal
Court judge dismisses the appellant’s argument that the monies owed to him [translation] “are not debts in the
hands of Her Majesty” but rather sums that are held in trust for him.
GROUNDS OF
APPEAL
[15]
In support of his appeal, the appellant repeats
the arguments he raised before the Federal Court judge. First, he submits that
the Federal Court judge erred in law in declining to give effect to the civil
law as suppletive law. Second, the Federal Court judge should not have relied
on Mintzer to find that the benefits owed to the appellant are not held
in trust. According to the appellant, the conclusion in Mintzer, to the
extent that it established that the benefits payable to him are debts, was incorrect.
ANALYSIS AND
DECISION
[16]
The first issue is as follows: on the basis of
sections 8.1 and 8.2 of the Interpretation Act, must the term
“compensation” found in the French version of section 224.1 of the Act be
interpreted in reference to the concept of compensation as defined at articles 1672
to 1682 of the CCQ? More specifically, must paragraph 2 of article 1676
of the CCQ, which states that property that is exempt from seizure cannot be
subject to compensation, apply? This is a matter of pure statutory
interpretation that is subject to the standard of correctness.
[17]
According to sections 8.1 and 8.2 of
the Interpretation Act, it is appropriate to refer to the civil law when
it is “necessary” to do so, except where “otherwise provided by the law” (see
on this point St‑Hilaire v. Canada (Attorney General), 2001 FCA
63, [2001] F.C.J. No. 444 (QL), para. 43). The burden is therefore on
the appellant to show that it is necessary to incorporate the civil law notions
on which he relies and that there is no provision to the contrary in federal
law.
[18]
The purpose of the collection measures set out
in section 224.1 of the Act is to allow the tax authority to collect debts
owing to that authority. At first glance, Parliament wanted to allow the
Minister to retain the amounts owing by the Crown to a tax debtor to ensure
payment of that person’s tax debt. Contrary to what the appellant seems to
believe, that the Minister may satisfy the appellant’s debts from the amounts
payable to the appellant is consistent with the objective sought (appellant’s
memorandum, paras. 42 and 43).
[19]
Like any statutory provision,
section 224.1 must be read in its “entire context and in [its] grammatical
and ordinary sense harmoniously with the scheme of the Act, the object of the
Act, and the intention of Parliament” (Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, para. 21).
The context of section 224.1 obviously includes the provisions of the Act
that pursue the same objective.
[20]
In
this respect, a reading of subsection 225(5) of the Act reveals that, when
Parliament wishes to make its collection measures subject to the seizure
exemption rules made by the provinces, it does so expressly:
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225. (5) Such goods and chattels of any person in default
as would be exempt from seizure under a writ of execution issued out of a
superior court of the province in which the seizure is made are exempt from
seizure under this section.
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225. (5) Les biens meubles de toute personne en
défaut qui seraient insaisissables malgré un bref d’exécution décerné par une
cour supérieure de la province dans laquelle la saisie est opérée sont
exempts de saisie en vertu du présent article.
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[21]
This
Court also upheld the effect of this recognition in circumstances similar to the
ones here. In Marcoux v. Canada (Attorney General), 2001 FCA 92, [2001] F.C.J. No. 493 (QL), the issue was whether
the seizure exemption rules set out in article 553(7) of the Quebec Code
of Civil Procedure, R.S.Q. c. C-25, prevented the Minister from exercising his power to collect. The
Court dealt with this argument as follows (para. 13):
. . . As Décary
J.A. noted in St‑Hilaire, supra, at para. 30 of his reasons,
Parliament may derogate from the civil law when it legislates on a subject that
falls within its jurisdiction. Section 224, when read with s. 225,
shows that in creating the methods of seizure mentioned in those sections
Parliament had in mind the exemptions from seizure enacted in private law, and
chose to take them into account in s. 225 and not take them into account
in s. 224. Contrary to what was argued by counsel for the appellant,
Parliament has spoken on the point at issue.
[Emphasis
added.]
[22]
Similarly, paragraph 122.61(4)(b) of
the Act states that child tax benefits “cannot be
assigned, charged, attached or given as security”. However, at paragraph 122.61(4)(d),
Parliament deemed it necessary to specify that these benefits “cannot be
retained by way of deduction or set‑off under the Financial
Administration Act”.
[23]
It is therefore clear that,
when Parliament wishes to limit its power to effect a set‑off, it does so
expressly. The inevitable conclusion is that there is no such limitation imposed on section 224.1.
[24]
Beyond the context of section 224.1, the
statutory set‑off mechanism set out in this section is fundamentally
different from the one underlying compensation under Quebec civil law. For example, unlike article 1673 of the CCQ, which
states that compensation is effected “by operation of law”, section 224.1 provides
that “the Minister may require the retention”.
Similarly, section 224.1 grants the Minister the power to determine
the amount that will be subject to the set‑off, whereas, under article 1673
of the CCQ, mutual debts are automatically extinguished up to the amount of the
lesser debt. Lastly, the right to effect a set‑off provided at
section 224.1 is exercised in respect of an “amount [. . .]
payable” and not a debt, as stipulated in article 1676 of the CCQ.
[25]
These characteristics reveal that the statutory
set‑off described in section 224.1 is inspired by common law and is
a complete departure from the civil law concept of compensation. Not only is it
unnecessary to refer to civil law to give effect to section 224.1, but the
law underlying this provision, in particular the concept of set‑off
borrowed from common law, requires otherwise. In my respectful view, the
argument that Parliament relied on civil law as suppletive law cannot succeed,
and the Federal Court judge was correct in law in rejecting it.
[26]
Next, the appellant submits that the Minister
cannot effect set‑off, as the benefits payable to him are held in trust
and not “debts” owing to him by the Crown. In Mintzer, this Court already
decided this issue (Mintzer, para. 17):
On the basis of section 108 the
appellant contends that the “benefits” are held in trust by the Crown and
cannot be set-off against a debt for unpaid taxes. In my opinion this argument
is without merit. It is not the contributions which are paid into the
Consolidated Revenue Fund that are subject to the statutory set-off but the
“benefits” which are or become “payable” to a beneficiary under the Canada
Pension Plan. It seems to me that the “benefits” as such would no longer be
subject to any trust for which the appellant contends, if a trust there be.
I am not satisfied, in any event, that the statute manifests an intention to
create a trust either in respect of contributions or benefits. As I read the
Canada Pension Plan the role of the Crown with respect to monies credited to
the Canada Pension Plan Account or to benefits not yet paid, is that of an
administrator in exercise of its governmental functions rather than of a
trustee. (endnotes omitted)
[Emphasis
added.]
[27]
The appellant challenges that decision, citing
subsection 8(3) of the Pension Benefits Standards Act, 1985, R.S.C.
1985, c. 32 (2nd Supp.), whose full title is An Act respecting pension plans
organized and administered for the benefit of persons employed in connection
with certain federal works, undertakings and businesses. Subsection 8(3)
states, among other things, “The administrator shall administer the pension
plan and pension fund as a trustee . . .”. The appellant contends
that, according to this provision, the funds of the plans to which he
contributes are held in trust.
[28]
It is unclear whether this provision applies to
the CPP or the OASA, but, in any event, this has no bearing on the reasoning of
this Court in Mintzer, according to which the benefits to be paid, once payable,
are no longer part of the trust.
[29]
Lastly, and in any case, the
Crown is not bound by the seizure exemption provisions set out in the CPP and OASA.
Under section 17 of the Interpretation Act, “[n]o enactment is
binding on Her Majesty or affects Her Majesty or Her Majesty’s rights or
prerogatives in any manner”, unless otherwise indicated. The provisions of the CPP
and OASA appear to be aimed at “ensuring that benefits payable under [these]
statute[s] be for the beneficiary’s own use by preventing that person from
alienating or encumbering them” (Mintzer, para. 15). Although these
provisions apply to third parties, there is no indication of any intention to
bind the Crown (idem, para. 18).
[30]
I would dismiss the appeal
with costs.
“Marc Noël”
“I agree
J.D. Denis Pelletier J.A.”
“I agree
Johanne Trudel J.A.”
Certified true translation
Tu-Quynh Trinh
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