Shirley Landru v. Her Majesty the Queen in Right of Canada as Represented by the Minister of National Revenue, [1993] 1 CTC 93

Geatros, J.:—This is the motion of the applicant, Shirley Landru, for an order pursuant to section 225.2 of the Income Tax Act, R.S.C. 1952, c. 148, as am. R.S.C. 1970-71-72, c. 63:

. . . setting aside of the order of Mr. Justice G.H. Armstrong, dated the 23rd day of July, 1992, where the learned justice ordered that the Minister of National Revenue be allowed to take forthwith, and from time to time, any and all of the actions described in paragraphs 225.1(1)(a) to (g) of the Income Tax Act as provided by subsection 225.2(2) of the Act.

On July 24, 1992, the Minister forwarded a Requirement to Pay to the law offices of Gates and Company, in Regina, and $23,290.90 was received and applied to the applicant’s tax debt. On August 26, 1992, a requirement to pay was forwarded to a branch of the Bank of Montreal in Regina and $7,891 was received and applied to the tax debt. The sum of the two amounts exceeded the amount assessed by the Minister. On August 26, the applicant formerly objected to the Minister's assessment under subsection 160(1) of the Income Tax Act.

Section 225.1 of the Act places collection restrictions on the Minister. Section 225.2 provides in part:

(2) Notwithstanding section 225.1, where, on ex parte application by the Minister, a judge is satisfied that there are reasonable grounds to believe that the collection of all or any part of an amount assessed in respect of a taxpayer would be jeopardized by a delay in the collection thereof, he shall, on such terms as he considers reasonable in the*circumstances, authorize the Minister to take forthwith any of the actions described in paragraphs 225.1 (1)(a) to (g) with respect to the amount.

(8) Where a judge of a court has granted an authorization under this section in respect of a taxpayer, the taxpayer may, upon 6 clear days’ notice to the Deputy Attorney General of Canada, apply to a judge of the court to review the authorization.

(11) On an application under subsection (8), the judge shall determine the question summarily and may confirm, set aside or vary the authorization and make such other order as he considers appropriate.

(13) No appeal lies from an order of a judge made pursuant to subsection (11).

The applicant contends that Armstrong, J. erred in granting the Minister’s ex parte application for a“ "jeopardy order”.

The sole question to consider is whether, on the basis of the material before him, the Minister had reasonable grounds for believing that the taxpayer, the applicant, would waste, liquidate, or otherwise transfer her assets so as to become less able to pay the amount of tax assessed, thereby jeopardizing the debt owing to the Minister: The Queen v. Golbeck [1990] 2 C.T.C. 438, 90 D.T.C. 6575 (F.C.A.). With reference to the approach to be taken on this motion, MacKay, J. in Satellite Earth Station Technology Inc. v. M.N.R., [1989] 2 C.T.C. 291, 89 D.T.C. 5506 (F.C.T.D.) said this, at pages 296-97 (D.T.C. 5510):

In an application to review a" jeopardy order” originally granted under subsection 225.2(2) the issue will be whether that order will now be set aside or varied. In this, an applicant under subsection 225.2(8) has the initial burden to muster evidence, whether by affidavits, by cross-examination of affiants on behalf of the Crown, or both, that there are reasonable grounds to doubt that the test required by subsection 225.2(2) has been met. Thus the ultimate burden on the Crown established by subsection 225.2(2) continues when an order granted by the court is reviewed under subsection 225.2(8).

When the evidence submitted by the taxpayer applicant raises reasonable doubt about the sufficiency of evidence originally provided by the Crown in an ex parte application, it is implicit in the process established by subsection 225.2(8) that the Court considering review of the authorization once made may consider evidence originally presented on behalf of the Minister in support of the jeopardy order and any additional evidence by affidavit or from cross-examination of affiants, presented by either party in relation to the motion for review. The evidence must be considered in relation to the test established by subsection 225.2(2) itself and by relevant cases, that is, whether on a balance of probability the evidence leads to the conclusion that it is more likely than not that collection would be jeopardized by delay.

Evidence by affidavit reveals that the applicant entered into agreements for the sale of 2071 Wascana Greens and for the purchase of 3062 Reeves Road, both in Regina, with the sales to close on August 1, 1992. Mr. Gibson contends that the property located at 2071 Wascana Greens was the only asset of the applicant which could have satisfied the tax debt. He points out that the applicant's affidavit does not disclose any other assets, other than 3062 Reeves Road, which would likely be exempt under the Exemptions Act. The applicant argues that the sale and purchase should not be viewed as a reaction to the Minister's assessment or an attempt to jeopardize the Minister's collection. Both transactions were consummated prior to the date of the Minister's assessment. I am inclined to the view, as the applicant contends, that the applicant's sale of 2071 Wascana Greens does not constitute reasonable grounds for believing that the applicant would waste, liquidate or otherwise transfer her assets so as to become less able to pay the amount assessed and thereby jeopardize the Minister's collection of the assessed amount. The primary, if not the sole asset, remaining would seem to be the monies collected consequent upon the "jeopardy order".

In Danielson v. M.N.R., [1986] 2 C.T.C. 380, 86 D.T.C. 6518 (F.C.T.D.), McNair, J. presented the following analysis, page 381 (D.T.C. 6519):

In my judgment, the issue goes to the matter of collection jeopardy by reason of the delay normally attributable to the appeal process. The wording of subsection 225.1(1) would seem to indicate that it is necessary to show that because of the passage of time involved in an appeal the taxpayer would become less able to pay the amount assessed.

In my opinion, the fact that the taxpayer was unable to pay the amount assessed at the time of the direction would not, by itself, be conclusive or determinative. Moreover, the mere suspicion or concern that delay may jeopardize collection would not be sufficient per se. The test of "whether it may reasonably be considered" is susceptible of being reasonably translated into the test of whether the evidence on balance of probability is sufficient to lead to the conclusion that it is more likely than not that collection would be jeopardized by delay.

Cogent evidence on the part of the Minister as to the dissipation of the taxpayer's assets or the movement of assets out of the jurisdiction beyond the reach of the Department of National Revenue and other potential creditors could be very persuasive and compelling. A more difficult borderline case might be the situation where the taxpayer's assets are of a wasting nature, or likely to decline in value with the mere passage of time.

What of the case where the taxpayer has little, if anything, in the way of assets? Is the inability to pay the amount assessed sufficient justification, without more, to enable the Minister to successfully invoke subsection 225.2(1)? I think not.

In my opinion, the issue is not whether the collection perse is in jeopardy but rather whether the actual jeopardy arises from the likely delay in the collection thereof.

The content of the subsections alluded to by McNair, J. is now contained in the subsections of the Act heretofore referred to.

The respondent submits that if the order of Armstrong, J. is set aside, collection of the applicant's outstanding taxes will be jeopardized because the moneys captured, once returned, could easily be hidden or moved from the jurisdiction and, as well, the applicant would be free to sell or further mortgage the home at 3062 Reeves Road in Regina, thereby prejudicing the Minister's collection of the applicant's tax debt. I am of the opinion that this falls short of the justificatory standard imposed by the Act.

The cases are unequivocal; mere suspicion of collection being jeopardized by delay is not enough. There is not a scintilla of evidence that the applicant has ever taken steps to secrete, dispose or otherwise hinder any collection proceedings. Transactions between the applicant to her husband alluded to cannot be looked upon as having that purpose in mind. The applicant's affidavit sworn herein on September 8, 1986, reads, in part, as follows:

5. That I believe that I have acted in good faith and honestly with respect to this matter.

6. That on August 24, 1992, commenced employment with Reedford, and have continuously been employed since that date. My annual salary from this job is approximately $15,000 per year.

7. That my husband, Leroy Landru, has been actively looking for employment.

8. That in the event that the amount assessed by the Minister is held to be owing to the Minister, I will make diligent attempts to pay the full amount owing.

I find that there is an absence of compelling evidence beyond mere suspicion or conjecture of actions by the applicant, or the reasonable apprehension of such actions, that would be likely to jeopardize the collection of the amount assessed.

In the circumstances the application of the applicant Shirley Landru is allowed and the other made on July 23, 1992, is set aside. Costs are awarded to the applicant Landru.

Application allowed.