Lafleur Estate (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Walsh J.—Montreal, November
26; Ottawa, December 14, 1973 and January 10,
1974.
Income tax—Preliminary decision of Tax Review Board—
Jurisdiction of Federal Court to review—Income Tax Act, ss.
171, 172.
The Tax Review Board, by a preliminary decision, con
firmed that the Minister of National Revenue had authority
under section 46(4)(a)(i) (R.S.C. 1952, c. 148 prior to the
amendment effected by 1970-71-72, c. 63, s. 1) to reassess
the income of the late L for the years 1954 to 1962 inclusive
on the ground of the latter's misrepresentation or fraud. The
plaintiff appealed but the defendant petitioned for a determi
nation as to whether the Federal Court has jurisdiction to
hear an appeal from the preliminary decision of the Tax
Review Board.
Held, the question is answered in the negative, i.e., the
Federal Court has no jurisdiction under the Act to hear an
appeal from a preliminary or interlocutory decision. The
plaintiff's appeal was premature since the "judgment" ren
dered by the Board was not a "decision" within the meaning
of section 172(1) from which an appeal can be brought to
the Federal Court.
PETITION for the determination of a question
of law.
COUNSEL:
Michel Cogger for plaintiff.
Marie-Claude Frenette-Coutu for defend
ant.
SOLICITORS:
Geoffrion and Prud'homme, Montreal, for
plaintiff.
Deputy Attorney General of Canada for
defendant.
WALSH J.—This is a petition by defendant to
determine a question of law set out as follows:
[TRANSLATION] Has the Federal Court, Trial Division,
jurisdiction to hear the action brought before it by plaintiff
on July 20, 1973 in view of the fact that the said action
results from a preliminary decision of the Tax Review
Board, which decision neither allowed nor dismissed the
appeal brought before the said Board by plaintiff, but only
confirmed that the Minister of National Revenue had the
authority to issue income tax assessments on the income of
the late J. S. Robert Lafleur by virtue of section 46(4)(a)(i)
of the Income Tax Act (R.S.C. 1952, c. 148) because the
latter had made a misrepresentation or had committed a
fraud for each of the tax years assessed?'
The years in question are 1954 to 1962 inclu
sive which were reassessed on May 2, 1968.
Plaintiff objected and the reassessments were
confirmed by the Minister in accordance with
the Act and an appeal was then brought to the
Tax Review Board. Although the declaration in
the proceedings brought before this Court
asking that the reassessments be annulled states
that the said Board rejected appellant's appeal
by judgment dated March 29, 1973 and
although the decision of the Board is entitled
"Judgment" it is common ground between the
parties that the only issue argued before the
Board was the question of the right of the
Minister to reassess for a period more than four
years from the date of the original assessment
on the basis of misrepresentation of fraud in
filing the returns for the years in question, and
that the question of the amount of tax to be paid
as a result of these reassessments was not
argued before or decided by the Board. The
"Judgment" reads:
The respondent having proved that the late Robert
Lafleur, Esq., made misrepresentations in filing his return of
income in respect of each of the taxation years 1954 to 1962
inclusively,
It is hereby decided that the respondent is entitled to
proceed with new assessments for the said years.
Plaintiff contends that there is a right to appeal
to this Court from the said decision and that it is
desirable that the right to make these reassess
ments should be settled as, if the appeal is
successful and leads to a final judgment in
favour of plaintiff, the reassessments would
automatically fail, so that it would only be in the
event that the appeal is not successful that the
Board would have to continue with the hearing
of the appeal for the years in question and
determine whether the assessments made
should be vacated, varied or referred back to
the Minister for reconsideration and assess
ment.
While this would appear to be a very practical
manner of proceeding, and counsel agreed that
the Tax Review Board usually proceeds on this
basis, what we have to determine is whether,
under the provisions of the Income Tax Act and
the Federal Court Act an appeal from such a
decision is permissible. Section 24 of the Feder
al Court Act merely states:
24. Except as otherwise provided by the Rules, the Trial
Division has original jurisdiction to hear and determine all
appeals that, under the Income Tax Act or the Estate Tax
Act, may be taken to the Court.
Section 172(1) of the Income Tax Act
provides:
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.
Section 169 reads as follows:
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 con
firmed the assessment or reassessed.
Under the heading "Disposal of Appeal" the
rights of the Board are set out as follows in
section 171(1):
171. (1) The Board may dispose of an appeal by
(a) dismissing it, or
(b) allowing it and
(i) vacating the assessment,
(ii) varying the assessment, or
(iii) referring the assessment back to the Minister for
reconsideration and reassessment.
The Board in the present case did none of these
things. The appeal to the Tax Review Board
appealed against the assessments for each of the
years in question as well as for the years 1963,
1965 and 1966 on the grounds that the amounts
added to plaintiff's revenue had been paid to
him on account of disbursements incurred or to
be incurred for the account of clients and were
never paid to him, and secondly that the reas
sessments for the years 1954 to 1963 (sic) were
illegal and null by virtue of section 46(4)(b) of
the former Income Tax Act in force at the time.
The decision therefore did not dispose of the
appeal but merely of the second issue, namely
whether the respondent was entitled to proceed
with the reassessments for the years in ques
tion. In fact the Reasons for Judgment conclude
with the sentence:
This is my finding, and the parties will shortly receive a
new notice of hearing for this case, which will undoubtedly
require a very lengthy hearing.
It cannot be said, therefore, that plaintiff's
appeal was "dismissed", for only one part of it,
the objection to the use by the Minister of
section 46(4)(a)(î) of the former Act was dis
missed, but the question of any change which
might be made in the amounts claimed as a
result of the reassessments for the years in
question and the other years was left unsettled.
Certainly the assessment was not, as a result of
the "Judgment", either "vacated", "varied" or
"referred back to the Minister for reconsidera
tion and reassessment" so that by a strict
application of section 171(1) it cannot be said
that the Board has "disposed of the appeal". I
do not believe therefore that the "Judgment"
rendered by the Board on March 29, 1973 is a
"decision" within the meaning of section 172(1)
from which an appeal can be brought to the
Federal Court of Canada.
While no criticism is implied of the manner in
which the Board proceeded, I can find no auth
ority in the Act permitting the appeal of what
amounts to a preliminary or interlocutory deci
sion. The Board will therefore have to now
resume the hearing of the case as foreseen in
the Reasons for Judgment, and when a final
decision is made disposing of the appeal in one
of the ways permitted by section 171(1) of the
Act, this decision may then be appealed, at
which time the rights of respondent to reassess
for the years 1954 to 1962 inclusive on which
the present action is based can be dealt with by
the Court, together with any appeal made with
respect to the amounts involved or for the other
years which were reassessed. I therefore find
the present proceedings to be premature and
answer the question submitted on the question
of law in the negative.
In view of the fact that this is the first time
that this issue has been raised there will be no
costs on this petition.
* * *
REASONS FOR CORRECTING JUDGMENT
WALSH J.—The attorney for defendant by
letter addressed to the Administrator of the
Court, dated December 21, 1973, no copy of
which was apparently sent to attorney for plain
tiff, invokes the application of the "slip" rule,
which is Rule 337, to correct the pronounce
ment of the judgment dated December 14, 1973
in that although the question of law was
answered in the negative, the pronouncement
states: "Petition dismissed without costs". The
point is well made that this might indicate that
defendant's petition seeking determination of a
question of law was dismissed whereas the
negative answer was that which was sought by
defendant.
While the procedure adopted by defendant to
invoke the "slip" rule does not comply with
Rule 337(5) in that it is not in the form of a
motion, the Court can itself make the correction
by virtue of Rule 337(6) so I will apply this
Rule.
Part of the confusion arises from the proce
dure adopted by defendant in the first instance,
which was by way of a petition for decision of a
question of law by virtue of Rule 474 and
merely asks for an answer to the question.
While it is evident that as a result of the answer
plaintiff's action to which defendant had already
pleaded will be subject to dismissal as being
premature, upon a proper motion to this effect
being made, the Court could not do this on the
petition before it, which was not a petition to
strike plaintiff's action nor did the petition even
ask for a negative answer to the question of law,
merely posing same to be answered by the
Court.
While defendant's petition was therefore cer
tainly not dismissed, it could only be said to
have been granted in the sense that the Court
accepted it, heard argument on the question of
law, and answered the question.
I have therefore reached the conclusion that
the proper pronouncement would be "The ques
tion is answered in the negative without costs"
and I hereby amend the judgment accordingly.
' Section 46(4)(a)(i) read as follows:
46. (4) The Minister may at any time assess tax, interest
or penalties under this Part or notify in writing any person
by whom a return of income for a taxation year has been
filed that no tax is payable for the taxation year, and may
(a) at any time, if the taxpayer or person filing the return
(i) has made any misrepresentation or committed any
fraud in filing the return or in supplying any information
under this Act, or
re-assess or make additional assessments, or assess tax,
interest or penalties under this Part, as the circumstances
require.
whereas, in the absence of a waiver by the taxpayer, the
Minister could in all other circumstances by virtue of sec
tion 46(4)(b) only reassess within 4 years from the day of
mailing a notice of an original assessment or a notification
that no tax was payable for the year in question.
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.