L. & M. Wood Products Ltd., North Battleford
Lumber and Post Sales Ltd., and Glaslyn Forest
Products Ltd. (Plaintiffs)
v.
Minister of National Revenue (Defendant)
Trial Division, Heald J.—Saskatoon, Saskatche-
wan, November 17; Ottawa, November 22,
1972.
Income tax—Practice—Companies assessed as associated
companies—Companies appeal in one action—Statement of
claim struck out—Income Tax Act 1972, s. 175(3)—Federal
Court Rules 1714, 1715.
In assessing the three plaintiff companies the Minister
deemed them to be associated with each other for certain
purposes under the Income Tax Act. The three plaintiffs
appealed from that decision in a single action.
Held, the statement of claim must be struck out. Having
regard to the provisions of section 175(3) of the Income Tax
Act 1972 and Federal Court Rules 1714 and 1715, each of
the three taxpayers should have instituted a separate appeal,
though, semble, after the pleadings are closed section 175(3)
would permit the separate appeals to be joined.
MOTION.
David W. Beaubier for plaintiffs.
Frank Dubrule, Q.C., and Bob Crump for
defendant.
HEALD J.—This is an application by notice of
motion for an order striking out the statement
of claim herein.
The three plaintiffs in this action are all cor
porations duly incorporated under the laws of
the Province of Saskatchewan. The plaintiffs L.
& M. Wood Products Ltd. and North Battleford
Lumber and Post Sales Ltd. are appealing their
income tax assessments by the defendant for
the taxation years 1968 and 1969. The plaintiff,
Glaslyn Forest Products Ltd., is appealing its
income tax assessment by the defendant for the
taxation year 1969.
However, the problem is that the said income
tax assessments are attacked in one single pro
ceeding in the Federal Court. The statement of
claim asserts that the defendant has deemed the
three plaintiff taxpayers to be associated with
each other for the purpose of section 39 of the
Income Tax Act under the provisions of section
138A(2) of said Act and all three plaintiffs chal
lenge that decision in this single proceeding.
The impugned statement of claim is dated
August 17, 1972 and was filed in the Court on
August 18, 1972. These proceedings are accord
ingly governed by the provisions of the Income
Tax Act 1972 which came into force on January
1, 1972. The procedures for appeals under this
Act are contained in Part I, Division J as set out
in sections 169 to 180 inclusive.
The statement of claim alleges that all three
taxpayers objected to the subject assessments
which objections were rejected by the defend
ant on July 7, 1972 and this action is an appeal
to this Court from said decision by the
defendant.
The following sections of the Income Tax Act
1972 are pertinent to a proper consideration of
this motion:
165. (1) A taxpayer who objects to an assessment under
this Part may, within 90 days from the day of mailing of the
notice of assessment, serve on the Minister a notice of
objection in duplicate in prescribed form setting out the
reasons for the objection and all relevant facts.
(2) A notice of objection under this section shall be
served by being sent by registered mail addressed to the
Deputy Minister of National Revenue for Taxation at
Ottawa.
(3) Upon receipt of a notice of objection under this
section, the Minister shall,
(a) with all due dispatch reconsider the assessment and
vacate, confirm or vary the assessment or reassess, or
(b) where the taxpayer indicates in the notice of objec
tion that he wishes to appeal immediately either to the
Tax Review Board or to the Federal Court and that he
waives reconsideration of the assessment and the Minis
ter consents, file a copy of the notice of objection with
the Registrar of the Tax Review Board or in the Registry
of the Federal Court, as the case may be,
and he shall thereupon notify the taxpayer of his action by
registered mail.
169. Where a taxpayer has served notice of objection to
an assessment under section 165, he may appeal to the Tax
Review Board to have the assessment vacated or varied
after either
(a) the Minister has confirmed the assessment or reas
sessed, or
(b) 180 days have elapsed after service of the notice of
objection and the Minister has not notified the taxpayer
that he has vacated or confirmed the assessment or
reassessed;
but no appeal under this section may be instituted after the
expiration of 90 days from the day notice has been mailed
to the taxpayer under section 165 that the Minister has
confirmed the assessment or reassessed.
172. (1) The Minister or the taxpayer may, within 120
days from the day on which the Registrar of the Tax
Review Board mails the decision on an appeal under section
169 to the Minister and the taxpayer, appeal to the Federal
Court of Canada.
(2) Where a taxpayer has served a notice of objection to
an assessment under section 165, he may, in place of
appealing to the Tax Review Board under section 169,
appeal to the Federal Court of Canada at a time when,
under section 169, he could have appealed to the Tax
Review Board.
In this case, the three plaintiff taxpayers have
purported to appeal direct to this Court under
section 172(2). They have, according to the
pleadings, complied with the 90 day period
stipulated in section 169 inasmuch as the sub
ject assessments were apparently confirmed by
the defendant as contemplated by section
165(3) on July 7, 1972.
The matter of institution of appeals is cov
ered by section 175 of the Act, the relevant
portions of which are as follows:
175. (1) An appeal to the Federal Court under this
Act ... shall be instituted,
(a) in the case of an appeal by a taxpayer,
(i) in the manner set forth in section 48 of the Federal
Court Act,
(3) An appeal instituted under this section shall be
deemed to be an action in the Federal Court to which the
Federal Court Act and the Federal Court Rules applicable to
an ordinary action apply, except as varied by special rules
made in respect of such appeals, and except that
(a) the Rules concerning joinder of parties and causes of
action do not apply except to permit the joinder of
appeals instituted under this section;
Section 175(1) provides for appeals being
instituted "in the manner set forth in section 48
of the Federal Court Act," which provision
authorizes the institution of a proceeding
against the Crown by a document in the form
set out in Schedule A of that Act, and that
Schedule provides for a statement of claim or
declaration with the person launching the pro
ceeding described as "plaintiff" and "Her
Majesty the Queen" described as "defendant".
This Court has decided that the preferable
procedure in income tax appeals under section
175 is to join "Her Majesty the Queen" as
defendant rather than "the Minister of National
Revenue". (See Mastino Developments Ltd. v.
The Queen [1972] F.C. 532, judgment of Noël
A.C.J. See also Weintraub v. The Queen [1972]
F.C. 611, judgment of Noël A.C.J. affirmed by
the Federal Court of Appeal [1972] F.C. 619.)
In the case at bar, "the Minister of National
Revenue" is the defendant. This is not fatal to
the sufficiency of subject statement of claim
but I refer to it because it is at variance with the
now established procedure in this Court.
However, this statement of claim is, in my
view, fatally defective because it does not
comply with section 175(3) of the Act. Subsec
tion (3) makes applicable to this procedure the
Federal Court Rules excepting that said Rules
concerning joinder of parties and causes of
action do not apply except to permit the joinder
of appeals instituted under section 175.
The applicable Federal Court Rules are Rules
1714 and 1715 which read as follows:
RULE 1714. (1) A plaintiff may in one action claim relief
against the same defendant in respect of more than one
cause of action
(a) if the plaintiff claims, and the defendant is alleged to
be liable, in the same capacity in respect of all the causes
of action; or
(b) with the leave of the Court.
(2) An application for leave under paragraph (1) may be
made ex parte before commencement of the action.
RULE 1715. (1) Two or more persons may be joined
together in one action as plaintiffs or as defendants with the
leave of the Court or where
(a) if separate actions were brought by or against each of
them, as the case may be, some common question of law
or fact would arise in all the actions; or
(b) all rights to relief claimed in the action (whether they
are joint, several or alternative) are in respect of or arise
out of the same fact, matter or thing.
(2) Where the plaintiff in any action claims any relief to
which any other person is entitled jointly with him, all
persons so entitled shall, subject to the provisions of any
Act and, unless the Court gives leave to the contrary, be
made parties to the action and any of them who does not
consent to being joined as a plaintiff shall, subject to any
order made by the Court on an application for leave under
paragraph (1), be made a defendant.
Were it not for the specific prohibition con
tained in section 175(3) of the Income Tax Act,
it may well be that the plaintiffs here could
bring themselves within the provisions of said
Rules so as to permit several taxpayers to
appeal their income tax assessments in one pro
ceeding. However, reading section 175(3) with
Rules 1714 and 1715 and taking said section in
the context of the income tax statute as a
whole, I have the view that each taxpayer must
"institute" his appeal separate and apart from
any other taxpayer. The scheme of the statute
applies to separate taxation years and to sepa
rate taxpayers. Each assessment in each year is,
it seems to me, a separate cause of action. The
object of the appeal procedures set out in the
Act is to obtain an adjudication of the issues
which have arisen between a particular taxpay
er and the Minister of National Revenue as to
his liabilities under the statute for a particular
taxation year.
I am therefore of the opinion that the three
separate taxpayers in this case should have
commenced separate appeals against the
income tax assessments complained of. Once
this were done and the Minister had pleaded
thereto, and the pleadings were closed, I believe
that section 175(3)(a) would permit the appeals
to be joined for the purposes of trial, if, as
submitted by plaintiffs' counsel, the three
appeals depend on common facts and on the
same legal issues.
I have therefore concluded that the present
statement of claim cannot be allowed to stand
and must be struck out. I reach this conclusion
with some reluctance because the plaintiffs
have very definitely indicated their intention to
appeal the Minister's assessments to this Court
within the time limit prescribed by the Act and
they should be given every opportunity to do
so. However, their right to appeal is statutory
and is contingent upon compliance with the
conditions set out in that part of the statute
conferring on them the right to appeal.
My decision to strike out this statement of
claim would leave the plaintiffs in a difficult
position because of the expiration of the 90 day
appeal time limit under section 169 were it not
for the relieving provisions of section 167(4)
which read as follows:
167. (4) Where no appeal to the Federal Court of Canada
under section 172 has been instituted within the time limited
by that section, an application may be made to the Federal
Court of Canada by notice filed in the Court and served on
the Deputy Attorney General of Canada at least 14 days
before the application is returnable for an order extending
the time within which such appeal may be instituted and the
Court may, if in its opinion the circumstances of the case
are such that it would be just and equitable to do so, make
an order extending the time for appealing and may impose
such terms as it deems just.
This subsection enables the plaintiffs to make
the application for extension of time contem
plated thereunder provided the conditions set
out in secticn 167(5) are complied with.
The statement of claim herein is therefore
ordered to be struck out. No costs were asked
for and, in the circumstances, I will make no
order as to costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.