Hart v. The Queen, 86 DTC 6335, [1986] 2 CTC 63 (FCTD)

Walsh, J.:—The plaintiffs move for:

1. A Writ of Certiorari or an Order for Relief in the nature thereof to quash the determination by the Respondent, The Minister of National Revenue, to assess tax as owing by Polar Safety-Com Ltd. and the issuance of documents headed “Notice of Assessment" dated April 19, 1985, and June 3, 1985, as well as any other such documents as may be discovered through these proceedings, in respect of those taxes allegedly owing by Polar Safety-Com Ltd.;

2. A Writ of Certiorari or an Order for Relief in the nature thereof to quash the decision by the Respondent to issue a “requirement to pay" pursuant to Section 224 of the Income Tax Act respecting taxes allegedly owing by Polar Safety-Com Ltd.;

3. A Writ of Certiorari or an Order for Relief in the nature thereof to quash the decision by the Respondent to issue a Certificate dated December 10, 1985 pursuant to Section 223 of the Income Tax Act respecting taxes allegedly owing by Polar Safety-Com Ltd., and to vacate the said Certificate, and the Writ of Fieri Facias dated December 10, 1985 based upon it.

4. A Writ of Prohibition or relief in the nature thereof or an Order of Injunction prohibiting or restraining the Respondent and anyone under his direction and control from continuing with assessment or collection proceedings against Polar Safety-Com until it is lawful to do so. . . .

It is their contention that the grounds on which relief is sought are that the respondent acted without jurisdiction to reassess taxes against Polar Safety-Com Ltd. and that the applicants are judgment creditors of the said company so that the actions have adversely affected the applicants’ rights to funds available to them upon execution of their respective judgments.

Applicants’ motion is supported by an affidavit of Robert Hart that sets forth that he was an employee and officer of Polar Safety-Com Ltd. during the relevant times. The company’s fiscal year ended November 30th each year. During the early part of 1985 the company sold scientific research tax credits to investors, some $2,184,000 of such credits having been sold on or about March 15, 1985, 32 per cent of the moneys being advanced to the company. Designations pursuant to Part VIII of the Income Tax Act were filed with Revenue Canada Taxation but as of June 16, 1985 when applicant Hart left the company's employ, no income tax return for 1985 had been filed by the company under Part VIII of the Act, so no assessment had of course been made.

On June 28, 1985 Hart commenced action in the Court of Queen's Bench of Alberta against the company for wrongful dismissal, as a result of which some $148,000 was paid into court by way of garnishee before judgment. He obtained judgment against the company and filed a writ with the Sheriff of the Judicial District of Calgary in the amount of $149,159.29. Subsequent to this writ, however, Revenue Canada caused a Certificate and Writ of Fieri Facias to issue against the company in the amount of $1,092,000 pursuant to an assessment of the company's scientific research tax credit sale. This writ was filed with the Sheriff of the Judicial District of Calgary and by judgment of Mr. Justice O'Leary in the Alberta Court proceedings, dated January 15, 1986 moneys paid into court through the garnishee before judgment proceedings were directed to be paid to the Sheriff of the Judicial District of Calgary and be distributed in accordance with the Execution Creditors Act of Alberta.

On or about February 13, 1986 Hart's solicitors received a statement of proposed distribution from the Sheriff. It is his contention that the actions of Revenue Canada and the Minister have adversely affected his status as a creditor and jeopardized the successful execution of his judgment, which induced him to bring the present proceedings although the Court was informed at the hearing of the motion that the distribution has now been made. Gunther's Building Centre Ltd., another creditor of the company, Polar Safety-Com Ltd., has been joined as applicant.

These proceedings raise some interesting issues which it is contended have never been definitively determined by this Court in other proceedings. The first question to be determined is whether the applicants, third parties having a financial interest in the distribution of moneys seized by judgment in favour of applicant Hart, have any status to intervene in the assessment of taxes by the Minister against the taxpayer, Polar Safety-Com Ltd. In this connection applicants referred to the text book H.W.R. Wade, Administrative Law, Fourth Edition, in which at page 544 he states:

Every citizen has standing to invite the court to prevent some abuse of power, and in doing so he may claim to be regarded not as a meddlesome busybody but as a public benefactor.

Referring to the judgment of Parker, L.J. on the law of certiorari in R. v. Thames Magistrates' Court ex. p. Greenbaum (1957), 55 L.G.R. 129, he quotes:

Anybody can apply for it — a member of the public who has been inconvenienced, or a particular party or person who has a particular grievance of his own. If the application is made by what for convenience one may call a stranger, the remedy is purely discretionary. Where, however, it is made by a person who has a particular grievance of his own, whether as a party or otherwise, then the remedy lies ex debito justitiae. . . .

The footnote at page 544, however, referring to this case states:

The law as thus stated was not mentioned in Durayappah v. Fernando [1967] 2 A.C. 337, where the Privy Council denied certiorari to a mayor who had lost office when the municipal council was dissolved by a ministerial order made in breach of natural justice. The decision may be justified on the ground that failure to give a hearing is a wrong which is strictly personal to the party entitled to be heard.

At page 545 Wade refers to a judgment in R. v. Paddington Valuation Officer ex. p. Peachey Property Corporation, [1966] 1 Q.B. 380 in which Lord Denning stated at 400:

A ratepayer likewise has a particular grievance if the rating list is invalidly made even though the defects will make no difference to him financially.

and at 401:

The Court would not listen, of course, to a mere busybody who was interfering in things which did not concern him. But it will listen to anyone whose interests are affected by what has been done.

Reference was also made to the Federal Court of Appeal judgment in the case of Rothmans of Pall Mall Canada Limited and Imperial Tobacco Limited v. M.N.R. et al, [1976] 2 F.C. 500; [1976] C.T.C. 339, in which the issue was the classification of the length of cigarettes for excise tax purposes in which appellants did not contend that they had any interest in marketing a cigarette with the tobacco portion of less than four inches but an overall length, including the filter tip, of more than four inches, but did seek an interpretation which they contended to be the correct one, not in order to permit them to do anything in particular that they were not now able to do but rather to prevent respondent companies from doing something which was thought would give the latter a commercial advantage. At 506 (C.T.C. 343) Justice Le Dain, rendering the judgment of the Federal Court of Appeal states:

I am in agreement with the learned trial judge that such an interest is not sufficient to give the appellants the required status or locus standi to obtain any of the relief sought in their application. The appellants do not have a genuine grievance entitling them to challenge by legal proceedings the interpretation which the respondent officials have given to the definition of “cigarette” in section 6 of the Excise Act for purposes of their administrative application of the Act. Such interpretation does not adversely affect the legal rights of the appellants nor impose any additional legal obligation upon them. Nor can it really be said to affect their interests prejudicially in any direct sense.

This was followed by the Court of Appeal in the case of William (Billy) Solosky v. The Queen, [1978] 1 F.C. 609, in which the Criminal Lawyers' Association of Ontario sought standing to intervene as amicus curiae in an appeal by a prisoner dealing with his right to send mail to his solicitor without inspection. At 611-12 the judgment reads:

Applying that test to the circumstances of this case, it is my view that the result of this appeal cannot adversely affect, in any way, the legal rights of the members of the applicant association nor can it possibly impose any additional legal obligation upon those members, nor can it really be said to affect their interest prejudicially in any direct sense.

I reached a similar conclusion in the case of Canadians for Abolition of the Seal Hunt and Tina E. Harrison v. Minister of Fisheries and Environment, [1981] 1 F.C. 733; 10 C.E.L.R. 1. After examining the jurisprudence respecting the right of individuals to bring proceedings seeking the issue of a prerogative writ or even of declaratory judgment when they are not personally affected other than in their sensibilities, including the cases of Thorson v. The Attorney General of Canada, [1975] 1 S.C.R. 138; 43 D.L.R. (3d) 1; Nova Scotia Board of Censors v. McNeil, [1976] 2 S.C.R. 265; 55 D.L.R. (3d) 632 and Kiist v. Canadian Pacific Railway Co., [1980] 2 F.C. 650; 109 D.L.R. (3d) 428, I concluded that the applicants had no locus standi to bring the proceedings.

Applicant’s counsel distinguishes these cases, however, arguing that his client has a distinct financial interest in that the moneys subsequently se- ized as a result of the certificate by the Minister making the assessment were already under seizure in satisfaction of his judgment and any other claimants such as that of Gunther's Building Centre Ltd. and he stands to personally suffer a loss if the assessment by the Minister for a much greater amount for taxes allegedly due by Polar Safety-Com Limited is not quashed as the distribution directly affects his financial interest.

Reference was made by respondent to the British Case of Inland Revenue Commissioners v. National Federation of Self-Employed and Small Businesses Limited, [1981] 2 All E.R. 93, in which Lord Wilberforce stated at 98-99:

The position of other taxpayers, other than the taxpayers whose assessment is in question, and their right to challenge the Revenue's assessment or nonassessment of that taxpayer, must be judged according to whether, consistently with the legislation, they can be considered as having sufficient interest to complain of what has been done or omitted. I proceed thereto to examine the Revenue’s duties in that light.

These duties are expressed in very general terms and it is necessary to take account also of the framework of the income tax legislation. This establishes that the commissioners must assess each individual taxpayer in relation to his circumstances. Such assessments and all information regarding taxpayers’ affairs are strictly confidential. There is no list or record of assessments which can be inspected by other taxpayers. Nor is there any common fund of the produce of income tax in which income taxpayers as a whole can be said to have any interest. The produce of income tax, together with that of other inland revenue taxes, is paid into the Consolidated Fund which is at the disposal of Parliament for any purposes that Parliament thinks fit.

The position of taxpayers is therefore very different from that of ratepayers. As explained in Arsenal Football Club Ltd. v. Ende, [1977] 2 All E.R. 267, [1979] AC 1, the amount of rates assessed on ratepayers is ascertainable by the public through the valuation list. The produce of rates goes into a common fund applicable for the benefit of the ratepayers. Thus any ratepayer has an interest, direct and sufficient, in the rates levied on other ratepayers; for this reason, his right as a “person aggrieved” to challenge assessments on them has long been recognised and is so now in the General Rate Act 1967, s. 69. This right was given effect to in Ende's case.

The structure of the legislation relating to income tax, on the other hand, makes clear that no corresponding right is intended to be conferred on taxpayers. Not only is there no express or implied provision in the legislation on which such a right could be claimed, but to allow it would be subversive of the whole system, which involves that the commissioners’ duties are to the Crown, and that matters relating to income tax are between the commissioners and the taxpayer concerned. No other person is given any right to make proposals about the tax payable by any individual; he cannot even inquire as to such tax. The total confidentiality of assessments and of negotiations between individuals and the Revenue is a vital element in the working of the system. As a matter of general principle I would hold that one taxpayer has no sufficient interest in asking the court to investigate the tax affairs of another taxpayer or to complain that the latter has been underassessed or overassessed; indeed there is a strong public interest that he should not.

At 107-108 of the same report Lord Fraser of Tullybelton states:

The rules of court give no guidance as to what is a sufficient interest for this purpose. I respectfully accept from my noble and learned friends who are so much more familiar than I am with the history of the prerogative orders that little assistance as to the sufficiency of the interest can be derived from the older cases. But while the standard of sufficiency has been relaxed in recent years, the need to have an interest has remained and the fact that r 3 of Ord 53 requires a sufficient interest undoubtedly shows that not every applicant is entitled to judicial review as of right.

and again at 108:

The correct approach in such a case is, in my opinion, to look at the statute under which the duty arises, and to see whether it gives any express or implied right to persons in the position of the applicant to complain of the alleged unlawful act or omission. On that approach it is easy to see that a ratepayer would have a sufficient interest to complain of unlawfulness by the authorities responsible for collecting the rates. Even if the General Rate Act 1967 had not expressly given him a right to propose alteration in the valuation list if he is aggrieved by any entry therein, he would have an interest in the accuracy of the list which is the basis for allocating the total burden of rates between himself and other ratepayers in the area. The list is public and is open for inspection by any person. The position of the taxpayer is entirely different. The figures on which other taxpayers have been assessed are not normally within his knowledge and the Commissioners of Inland Revenue and their officials are obliged to keep these matters strictly confidential: see the Inland Revenue Regulation Act 1890, ssl(1) and 39 and the Taxes Management Act 1970, 551 and 6 and Sch 1. The distinction between a ratepayer and a taxpayer that was drawn in Arsenal Football Club Ltd. v. Ende [1977] 2 All E.R. 267, [1979] A.C. 1 for the purposes of defining a person aggrieved under the General Rate Act 1967 is also relevant to the present matter.

The facts of that case, of course, are not the same as the present case where what is eventually sought is not disclosure of the details of a tax return for Safety-Com Limited but rather the right of applicants to challenge the assessment made by the Minister which is a challenge which normally would be made by the company pursuant to procedures set out in the Income Tax Act.

Defendant argues that the fact that the Minister obtained possession of funds to which applicant Hart felt he was entitled does not make him an aggrieved party as he himself had no proprietary interest in the money, other creditors including Gunther Building Centre Ltd. having some interest. To decide that he has a proprietary interest in the funds would involve a decision that the seizure by the Minister was unlawful and applicant Hart cannot acquire standing on the basis of an assumption that the Minister's action in making the seizure was unlawful. While he had the funds under seizure first, such proprietary interest as he may have had would only revert to him in the event of the seizure being quashed. This alone might decide the issue on the basis of a finding that applicant Hart had no status to bring the present proceedings.

However, there is another issue upon which, I believe, the application must fail, although the situation is still controversial and not fully decided.

Reference was made to the case of W.T.C. Western Technologies Corporation v. M.N.R., [1986] 1 C.T.C. 110; 86 D.T.C. 6027, a judgment of Justice Collier in which he distinguished a judgment of the Federal Court of Appeal in the case of Parsons et al v. M.N.R., [1984] C.T.C. 352; 84 D.T.C. 6345 which held categorically that section 29 of the Federal Court Act prohibits any proceedings under section 18 challenging assessments under the Income Tax Act including the Minister's legal authority to make the assessment as the Act itself provided for an appeal.

In the case before Justice Collier the issue was an assessment by the Minister for taxation under the scientific research and development section, Part VIII of the Act, made before the taxpayer had filed a return. Certiorari was granted by Justice Collier on the grounds that the issue was not whether the Minister was right or wrong in this assessment but whether he had any jurisdiction to make the assessment at all, which it was found he did not. The assessment accordingly was quashed as well as the certificate resulting from it and seizure made of funds held in escrow.

However, in the case of Bechthold Resources Limited v. M.N.R., [1986] 1 C.T.C. 195; 86 D.T.C. 6065, Justice Addy had the same issue before him and disagreed with the judgment of Justice Collier whose judgment he discussed as well as that of the Court of Appeal in the Parsons case, by which he considered himself bound, refusing to accept the distinction drawn by Justice Collier. He points out that subsection 192(2) of the Act requires the taxpayer to pay 50 per cent of the amounts received with respect to a share or debt obligation issued in connection with the scientific tax credit before the last day of the following month. He concludes that liability to pay tax or any amount on account of tax does not depend on any notice of assessment but is created by statute, referring to the cases of The Queen v. Simard Beaudry et al, 71 D.T.C. 5511; O’Neil Lambert v. The Queen, [1976] C.T.C. 61; 76 D.T.C. 6373; The Queen v. Cyrus J. Moulton Limited, [1976] C.T.C. 416; 76 D.T.C. 6239 and Coleman C. Abrahams v. M.N.R., [1966] C.T.C. 690; 66 D.T.C. 5451. He concludes that while it is true that an assessment is normally made after an income tax return has been filed, or should have been filed, the provisions of section 195 and Part VIII of the Act justify the assessment by the Minister on the basis of information provided by the taxpayer by its designation pursuant to Part VIII of the Act.

Both that case and the case of W.T.C. Western Technologies Corporation are now under appeal so the two conflicting judgments have not yet been reconciled, but in view of the opinion expressed by the Court of Appeal in the Parsons judgment it may well be that the Trial Division is obliged to follow it as Justice Addy decided and cannot consider the issue of a prerogative writ by virtue of the provisions of section 29 of the Federal Court Act.

For all of the above reasons I conclude that applicants’ motion must be dismissed with costs.

Motion dismissed.