Fabi v. Canada (Minister of National Revenue)

Fabi v. Canada (Minister of National Revenue) Court (s) Database Federal Court of Appeal Decisions Date 2006-01-20 Neutral citation 2006 FCA 22 File numbers A-21-05 Decision Content Date: 20060120 Docket: A-21-05 Citation: 2006 FCA 22 CORAM: LÉTOURNEAU J.A. NADON J.A. PELLETIER J.A. BETWEEN: DONALD FABI Appellant and THE MINISTER OF NATIONAL REVENUE Respondent Hearing held at Montréal, Quebec, on January 11, 2006. Judgment rendered at Ottawa, Ontario, on January 20, 2006. REASONS FOR JUDGMENT: LÉTOURNEAU J.A. CONCURRED IN BY: NADON J.A. PELLETIER J.A. Date: 20060120 Docket: A-21-05 Citation: 2006 FCA 22 CORAM: LÉTOURNEAU J.A. NADON J.A. PELLETIER J.A. BETWEEN: DONALD FABI Appellant and THE MINISTER OF NATIONAL REVENUE Respondent REASONS FOR JUDGMENT LÉTOURNEAU J.A. [1] Mr. Fabi is appealing from a judgment by Mr. Justice Lemieux of the Federal Court (the judge) dismissing his application for judicial review that challenged the legality of two requests for documents and information made by the Minister of National Revenue (the Minister). [2] Those requests were made pursuant to paragraph 231.2(1)(a) and (b) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1 (the Act). They sought to obtain from the appellant information as to the ownership or transfer of a building and/or lot owned by him in Florida. These applications, set out in an affidavit by a representative of the defendant, had three purposes: to determine the value of the appellant’s assets, to discover what had happened with the selling price of the building, if applicable, and to ascertain, if no purchase was made as the appellant claimed, what had happened with the money disbursed by the bank to acquire the properties. [3] The appellant submitted that the judge erred when he dismissed his argument that the Minister’s demands were illegal in the light of subsection 69.1(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3. [4] In particular, under paragraph 69.1(1)(a), set out below, creditors may not sue or commence any execution or recovery action on claims provable against a debtor who has filed a proposal, as in the appellant’s case: 69. (1) [Stay of proceedings – Division I proposals] Subject to subsections (2) to (6) and sections 69.4 and 69.5, on the filing of a proposal under subsection 62(1) in respect of an insolvent person, 69. (1) [Suspension des procédures en cas de dépôt d’une proposition] Sous réserve des paragraphes (2) à (6) et des articles 69.4 et 69.5, entre la date de dépôt d’une proposition visant une personne insolvable et : (a) no creditor has any remedy against the insolvent person or the insolvent person's property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy, until the trustee has been discharged or the insolvent person becomes bankrupt . . . a) soit sa faillite, soit la libération du syndic, les créanciers n’ont aucun recours contre elle ou contre ses biens et ne peuvent intenter ou continuer aucune action, exécution ou autre procédure en vue du recouvrement de réclamations prouvables en matière de faillite . . . [5] I am of the view that the judge correctly understood and determined the legal relationship existing between the provisions of the Act and the provisions of the Bankruptcy and Insolvency Act. [6] Indeed, the purpose of the actions taken by the Minister pursuant to subsection 231.2(1) was to determine and establish the existence and value of an asset which he had reason to believe was being concealed by the appellant at the expense of his creditors, including the Canada Customs and Revenue Agency (the Agency). [7] As the judge noted, referring to judgments of his colleagues Mr. Justice Beaudry in Carrefour Langelier Inc. v. Canada (Customs and Revenue Agency), 2003 FC 1403, and Mr. Justice Blais in Canada (Minister of National Revenue – MNR) v. Stern, 2004 FC 763, the information obtained through the requests may benefit creditors and the trustee responsible for administering the debtor’s proposal. [8] The appellant did try to distinguish Carrefour Langelier Inc., arguing that that was a request for information addressed to a third party and not the debtor, as in this case. However, I think this argument must be rejected as the purpose of the request for information in both cases was to establish the existence and value of an asset owned by the debtor. [9] The information which the Minister sought to obtain was also relevant and necessary to establish the appellant’s tax debt. The latter submitted that his tax debt had already been determined in the proposal and amounted to $183,621.09, according to the proof of claim filed by the respondent with the trustee. I am ready to follow the appellant in this respect, but the tax debt does not include debts to come, that is, a debt which has not yet been determined and which might relate to undeclared or concealed taxable assets. [10] Indeed, the appellant’s undeclared assets may give rise to a taxable income if they exist. The affidavit by Mr. Phaneuf, who is employed by the Agency, indicates at paragraph 14 that the purpose of the request for information was to determine whether the appellant’s undeclared assets had been transferred, in which case the transfer or disposition, especially to related persons, could give rise to a tax debt for the appellant. [11] With respect, I am of the view that the requests for information by the Minister, made in this case to determine, for tax purposes, the existence or value of an asset which might be concealed or the amount of its selling price or price of disposal, do not constitute an action in view of collecting claims provable in bankruptcy. The Minister is responsible for implementing and enforcing the Act. This duty, which he performs in the public interest, includes the determination of a taxpayer’s tax debt. Determining a taxpayer’s tax obligation is an objective relating to the administration and enforcement of the Act. In order to carry out this duty properly, the Minister must be able to ask questions in order to obtain and determine the facts and amounts: Tower v. M.N.R., [2004] 1 F.C.R. 183 (F.C.A.). [12] At this stage, according to the evidence, this is the objective pursued by the requests for production of information and documents made by the Minister. If the Minister thereafter wishes to proceed to the next stage, that is the collection of the new tax debt so established, if any, then paragraph 69.1(1)(a) of the Bankruptcy and Insolvency Act will come into play. It cannot be assumed at this point, and there is no evidence to this effect in the record, that the Minister will ignore paragraph 69.1(1)(a) of the Bankruptcy and Insolvency Act and will not proceed to collect the new tax debt by way of an amended claim, as he is allowed to do by section 121 of that Act. [13] In support of his arguments, the appellant relied on subsection 222(1) of the Act, which contains a definition of the word “action”, added by S.C. 2004, c. 22, s. 50. I set out below this definition found in the section “Collection”, which solely applies in relation to section 222: Collection Section 222: [Limitation Period for Collection of Tax Debts] Recouvrement Article 222 : Définitions. (1) Definitions. The following definitions apply in this section. “action” means an action to collect a tax debt of a taxpayer and includes a proceeding in a court and anything done by the Minister under subsection 129(2), 131(3), 132(2) or 164(2), section 203 or any provision of this Part. (1) Les définitions qui suivent s’appliquent au présent article. « action » Toute action en recouvrement d’une dette fiscale d’un contribuable, y compris les procédures judiciaires et toute mesure prise par le ministre en vertu des paragraphes 129(2), 131(3), 132(2) ou 164(2), de l’article 203 ou d’une disposition de la présente partie. [Emphasis added.] I would add that this section deals with the prescription of actions to collect a tax debt. [14] The appellant read, in the language used – “includes . . . anything done by the Minister under . . . any provision of this Part” – a prohibition against the Minister requiring a person to provide information. He came to this conclusion because the relevant power is found at section 231.2 and, like section 222, that section stands in “this Part”, namely Part XV of the Act. [15] I am of the view that this reading by the appellant of subsection 222(1) ignores the very first parts of the definition of the word “action”: the action must be “an action to collect” a tax debt. I agree with the judge, who thus ruled at paragraph 49 of his reasons: the Minister’s power set out at section 231.2 of the Act does not relate to collection. The power is not a collection action. [16] Further, although section 232.1 does stand in Part XV of the Act, it does not stand in the “Collection” section. Rather, it is under the heading “General”, which includes the obligation of keeping books of account and registers, including registers of political contributions, powers of inspection, audit, search and seizure necessary to apply and enforce the Act, prohibitions of a public official from disclosing confidential information or giving access to it, provisions relating to the solicitor-client privilege, those relating to information statements which every association of individuals must make, and so on. [17] With respect, it seems clear to me that the words “anything done by the Minister under . . . this Part” are qualified by the fact that a collection action must be at stake, and therefore that the action taken pursuant to this Part referred to by subsection 222(1) is a collection measure. The words “under this Part” contained in the definition of subsection 222(1) do not have the effect of transforming a power of investigation into a collection action. [18] Finally, in the same context, the appellant referred the Court to subsection 222(8) of the Act, which provides that periods of limitation for bringing a collection action are extended when the collection action the Minister may bring in respect of a tax debt is restricted by the Bankruptcy and Insolvency Act: 222. (8) Extension of limitation period. 222. (8) Prorogation du délai de prescription. In computing the day on which a limitation period ends, there shall be added the number of days on which one or more of the following is the case: Le nombre de jours où au moins un des faits suivants se vérifie prolonge d’autant la durée du délai de prescription : (a) the Minister may not, because of any of subsections 225.1(2) to (5), take any of the actions described in subsection 225.1(1) in respect of the tax debt; a) en raison de l’un des paragraphes 225.1(2) à (5), le ministre n’est pas en mesure d’exercer les actions visées au paragraphe 225.1(1) relativement à la dette fiscale; (b) the Minister has accepted and holds security in lieu of payment of the tax debt; b) le ministre a accepté et détient une garantie pour le paiement de la dette fiscale; (c) if the taxpayer was resident in Canada on the applicable date described in paragraph (4)(a) in respect of the tax debt, the taxpayer is non-resident; or c) la personne, qui résidait au Canada à la date applicable visée à l’alinéa (4)a) relativement à la dette fiscale, est un non-résident; (d) an action that the Minister may otherwise take in respect of the tax debt is restricted or not permitted under any provision of the Bankruptcy and Insolvency Act, of the Companies’ Creditors Arrangement Act or of the Farm Debt Mediation Act. d) l’une des actions que le ministre peut exercer par ailleurs relativement à la dette fiscale est limitée ou interdite par une disposition quelconque de la Loi sur la faillite et l’insolvabilité, de la Loi sur les arrangements avec les créanciers des compagnies ou de la Loi sur la médiation en matière d’endettement agricole. [19] He infers from this paragraph, wrongly in my opinion, that Parliament has extended the limitation periods applicable to the exercise by the Minister of his power to require a taxpayer to provide information. [20] I say wrongly because, firstly, the appellant’s reasoning is based on the premise that the section 232.1 power of investigation is a collection action or an action taken in view of collection, subject to the limitation period. As we have already noted, that is false. [21] Secondly, the appellant has ignored the comment made by this Court in Tower v. M.N.R., supra; at paragraph 32 of that decision, the Court recalled that “there is no statutory time limit” applicable to the exercice of this power. The Court has thus implicitly but necessarily concluded that the Minister’s power to impose a requirement to provide information is not a collection action, still less an action aiming at the collection of a tax debt already determined when, as in this case, its purpose is to determine the existence of a new tax debt and to ascertain its amount. [22] For these reasons, I would dismiss the appeal with costs. “Gilles Létourneau” J.A. I concur. Marc Nadon J.A. I concur. J.D. Denis Pelletier J.A. Certified true translation François Brunet, LLB, BCL FEDERAL COURT OF APPEAL SOLICITORS OF RECORD DOCKET: A-21-05 STYLE OF CAUSE: DONALD FABI v. THE MINISTER OF NATIONAL REVENUE PLACE OF HEARING: Montréal, Quebec DATE OF HEARING: January 11, 2006 REASONS FOR JUDGMENT BY: Létourneau J.A. CONCURRED IN BY: Nadon J.A. Pelletier J.A. DATED: January 20, 2006 APPEARANCES: Richard Généreux FOR THE APPELLANT Chantal Comtois FOR THE RESPONDENT SOLICITORS OF RECORD: Généreux, Côté, Solicitors Drummondville, Quebec FOR THE APPELLANT John H. Sims, Q.C. Deputy Attorney General of Canada Montréal, Quebec FOR THE RESPONDENT