T-2013-74
Oneil Lambert (Plaintiff)
v.
The Queen (Defendant)
and
The Attorney General of Canada, The Attorney
General of Quebec and The Minister of National
Revenue (Interveners)
Trial Division, Addy J.—Montreal, December 10,
1974; Ottawa, February 25, 1975.
Income tax—Reassessment—Registration of certificate cov
ering tax, penalties and interest—Minister collecting against
taxpayer's assets—Whether s. 223 of the Income Tax Act
violates audi alteram partem rule, and is ultra vires—Whether
s. 223 contrary to s. 2(e) of the Canadian Bill of Rights, and
null, void and of no effect—Income Tax Act, R.S.C. 1952, c.
148; S.C. 1970-71-72, c. 63, ss. 158(2), 165, 223—Canadian
Bill of Rights, S.C. 1960, c. 44, s. 2(e)—Quebec Code of Civil
Procedure, arts. 733 and 734.
The Minister reassessed plaintiff's income, and, though
plaintiff filed a contesting notice, the Minister registered a
judgment in the Federal Court for tax, penalties and interest
due. Plaintiff seeks a declaration that section 223 of the Income
Tax Act is ultra vires, as it offends the audi alteram partem
rule, or that section 223, in permitting the issuing and register
ing of a certificate, is null, void and of no effect because it is
contrary to section 2(e) of the Canadian Bill of Rights.
Held, dismissing the action, should assets be seized and it
later be established that there was no tax liability, the taxpayer
would be entitled to restitution. Audi alteram partem applies to
the question of final determination of liability which is different
from temporary deprivation, or even permanent loss of assets,
providing that a right to restitution or compensation exists.
Public policy behind the power to declare an amount payable
and steps taken to secure payment before final determination of
liability is to prevent tax avoidance by dissipation or removal of
assets. The powers given the Minister to collect taxes speedily
and effectively do not infringe the audi alteram partem rule or
the Canadian Bill of Rights.
INCOME tax appeal.
COUNSEL:
D. Desaulniers and G. Tremblay for plaintiff.
A. Garon, Q.C., and J. Ouellet for defendant.
M. Leduc for interveners.
SOLICITORS:
Stikeman, Elliott, Tamaki, Mercier and
Robb, Montreal, for plaintiff.
Deputy Attorney General of Canada, Ottawa,
for defendant.
Pouliot, Mercure, LeBel, Prud'homme, Verdy
and Desrochers, Montreal, for interveners.
The following are the reasons for judgment
rendered in English by
ADDY J.: The Minister of National Revenue,
pursuant to section 46 of the Income Tax Act', on
the 30th of October, 1973, issued notices of reas
sessment of the plaintiff for each of the four
taxation years, 1968 to 1971 inclusively, adding
some $454,000 to the plaintiff's taxable revenue.
The plaintiff duly filed, within the prescribed time,
a notice contesting the reassessment. Subsequent
ly, the plaintiff was informed that, pursuant to
section 223 of the aforesaid Act, a certificate,
having the same force and effect as a judgment,
had been registered in the Federal Court of
Canada covering income tax, penalties and interest
due on these reassessments, which totalled $209,-
020.26, as of the 13th of February 1974, and also
providing for interest at 6% per annum to be
calculated from the 13th of February 1974 on the
sum of $141,643.21.
At a subsequent date, demands on third parties
were served on some forty-nine debtors and banks,
who allegedly owed monies to or held monies
belonging to the plaintiff, and seizures were effect
ed of the shares of the plaintiff in four companies
and lien notices were registered against several
parcels of real estate owned by the plaintiff.
The plaintiff sues for a declaration that section
R.S.C. 1952, c. 148.
223 of the Income Tax Act 2 is unconstitutional
and ultra vires of the Parliament of Canada as
being contrary to the principles of natural justice
and of the Canadian Bill of Rights and to have the
said section declared null, void and of no effect.
He also requests a declaration to have the afore
said certificate, which was registered in the Feder
al Court by the defendant, declared null, void and
of no effect and also to have all the executions and
seizures lifted which the defendant caused to be
issued and taken thereunder.
The plaintiff argues that section 223 of the
Income Tax Act is ultra vires because it violates
the principle of audi alteram partem or, alterna
tively, that it is null, void and of no effect as being
contrary to section 2(e) of the Canadian Bill of
Rights on the grounds that it purports to give to
the Minister of National Revenue, without the
taxpayer being heard or notified, the right to issue
a certificate which purports to establish the
amount owed by the taxpayer and of subsequently
registering the certificate in the Federal Court,
following which the said certificate is purported to
have the same force and effect as a judgment.
Section 223 reads as follows:
223. (1) An amount payable under this Act that has not
been paid or such part of an amount payable under this Act as
has not been paid may be certified by the Minister
(a) where there has been a direction by the Minister under
subsection 158(2), forthwith after such direction, and
(b) otherwise, upon the expiration of 30 days after the
default.
(2) On production to the Federal Court of Canada, a certifi
cate made under this section shall be registered in the Court
and when registered has the same force and effect, and all
proceedings may be taken thereon, as if the certificate were a
judgment obtained in the said Court for a debt of the amount
specified in the certificate plus interest to the day of payment
as provided for in this Act.
(3) All reasonable costs and charges attendant upon the
registration of the certificate are recoverable in like manner as
if they had been certified and the certificate had been regis
tered under this section.
It is, in my view, settled law that though the
registration of the certificate has, pursuant to sub
section (2) above, the same force and effect as a
judgment it is not, at law, a judgment. (Refer
2 S.C. 1970-71-72, c. 63.
M.N.R. v. Bolduc 3 and M.N.R. v. Simard 4 .)
However, the bare fact that the certificate does
not constitute a judgment, does not prevent section
223, under which the certificate is issued, from
being ultra vires as infringing against the rule of
audi alteram partem or of being ineffective as
being contrary to section 2(e) of the Canadian Bill
of Rights.
Generally speaking, even an administrative act
or procedure, where it involves a decision, which
results in a final determination of rights, is subject
to the common law rule as to the right to be heard
and also to the provisions of section 2(e) of the
Canadian Bill of Rights as aforesaid, while one
that does not result in a final determination of
rights is not subject to either. Cartwright J. (as he
then was), in delivering reasons on behalf of the
Supreme Court of Canada in its unanimous deci
sion in the case of The Queen v. Randolph 5 stated
at page 266:
Generally speaking the maxim audi alteram partem has refer
ence to the making of decisions affecting the rights of parties
which are final in their nature, and this is true also of s. 2(e) of
the Canadian Bill of Rights upon which the respondents relied.
The following passage in Broom's Legal Maxims, 10th ed., at
p. 117 is in point:
Although cases may be found in the books of decisions
under particular statutes which at first might seem to con
flict with the maxim, it will be found on consideration that
they are not inconsistent with it, for the rule, which is one of
elementary justice, only requires that a man shall not be
subject to final judgment or to punishment without an oppor
tunity of being heard.
This principle was reaffirmed in a majority deci
sion of the Supreme Court of Canada in Le Syndi-
cat des Employés du Transport de Montreal
(CSN) v. The Attorney General of the Province of
Quebec 6 and also Guay v. Lafleur'.
It seems however that even where private rights
are affected, the obligation of a person or board
wielding the power, to act judicially, as opposed to
3 [1961] Ex.C.R. 115 at p. 118.
4 [1962] C.T.C. 310 at pp. 314 and 315.
[1966] S.C.R. 260.
6 [1970] S.C.R. 713.
[1965] S.C.R. 12 at 16.
a right of the person affected to be heard, is not an
absolute one to be applied in all cases wherever
private rights are affected. Pigeon J., when pro
nouncing judgment on behalf of the majority of
the Supreme Court of Canada in the recent case of
Howarth v. National Parole Board', stated as
follows:
In Calgary Power Ltd. v. Copithorne ([1959] S.C.R. 24),
this Court rejected the contention that the duty to act judicially
arose whenever private rights were affected. Martland J. said
for the Court (at p. 30):
... the respondent submitted that a function is of a judicial
or quasi-judicial character when the exercise of it effects the
extinguishment or modification of private rights or interests
in favour of another person, unless a contrary intent clearly
appears from the statute. This proposition, it appears to me,
goes too far in seeking to define functions of a judicial or
quasi-judicial character. In determining whether or not a
body or an individual is exercising judicial or quasi-judicial
duties, it is necessary to examine the defined scope of its
functions and then to determine whether or not there is
imposed a duty to act judicially. As was said by Hewart
L.C.J., in Rex v. Legislative Committee of the Church
Assembly ([1928] 1 K.B. 411 at 415):
In order that a body may satisfy the required test it is not
enough that it should have legal authority to determine
questions affecting the rights of subjects; there must be
super-added to that characteristic the further characteris
tic that the body has the duty to act judicially.
This passage was cited with approval by the Judicial Com
mittee of the Privy Council in Nakkuda Ali v. M.F. DeS.
Jayaratne ([1951] A.C. 66; [1950] 2 W.W.R. 927).
The legal issue turns on whether the issuing of
the certificate and the registering thereof in the
Federal Court of Canada constitute in effect a
final determination of any fundamental rights of
the plaintiff.
It is clear that where a judgment fixes the
liability for taxes and the amount thereof, there
will be no further right to be heard on the merits
of the case unless some error had occurred on the
conduct of the trial or in the making of the deci
sion which flows at law from the evidence adduced
at the trial or from the facts alleged in the plead-
ings in the case of a judgment in default of either
appearance or pleading. In the case of a certificate
issued under section 223, however, there is a full
right to be heard on the merits if an objection to
the assessment is made within the time limited for
making such an objection, and section 165 pro
8 (1975) 18 C.C.C. (2d) 385.
vides for the method of objecting, imposes an
obligation on the Minister to reconsider the assess
ment and also confers the right on a taxpayer to
appeal directly to the Tax Review Board or to the
Federal Court.
The procedure laid down in the Act gives full
right to the taxpayer to contest the assessment
either before or after the certificate is registered
depending on when the Minister has issued and
registered the certificate. It is clear that the issu
ing of the certificate does not put an end to the
normal right of the taxpayer to contest any assess
ment. It does, however, permit execution against
the assets of the taxpayer to take effect even
before the case as to liability has been finally
heard, in the event of the taxpayer failing to pay
the tax in the meantime. The obligation to pay the
tax, pending final determination of the liability to
do so, is not a final determination of the taxpayer's
liability for the tax, since, notwithstanding any
such payment, it is still open to him to contest the
assessment and, if successful, to claim the return
of any overpayment after final determination.
These are obviously two different matters.
Although it might be argued that the right to
register a certificate, before the liability to pay the
taxes has been finally determined, is an extraordi
nary one, and although that right carries with it a
right to a writ of execution which in turn carries
with it the right to have the assets seized and
subsequently disposed of by sale or otherwise, the
execution aspect is merely a means of guarantee
ing or of assuring the payment of the tax by the
taxpayer either before or after the liability for
same has been finally established.
Another important consideration in determining
the issue before this Court is that the taxpayer has
the right to apply to a court to prevent a sale or
disposition of any assets seized and, pending final
determination of the liability for tax, should a
prima facie case be shown against the assessment
and should it also be established that the taxpayer
would be prejudiced by interim sale of the assets,
he would be entitled to have any proposed sale or
disposal of the assets stayed or, in special circum
stances to have the execution lifted against certain
assets which might be likely to spoil or deteriorate.
It has been held that there is nothing unreason
able, oppressive, unusual or extraordinary in the
summary procedure where Parliament has pro
vided enacting legislation providing for the regis
tration of a certificate or in the effects which flow
therefrom, where an execution has issued, notwith
standing an appeal against the assessment. See
Morch v. M.N.R. 9 .
It has also been previously held that this Court
has the right to examine the facts upon which the
rights of the Minister to issue and register the
certificate are founded. Refer M.N.R. v. Bolduc,
(supra) at pages 118-119.
The obligation to pay the tax, subject to the
right of contesting the ultimate liability for same,
arises from the moment the assessment is made.
But again, there is nothing extraordinary in this
procedure, and it has for many years been used in
other taxing statutes. In municipal law, for
instance, the land becomes charged with the liabil
ity for taxes the moment the assessment is made
and the tax rate is struck, subject again to the
right to contest the assessment within the time
limited in the relevant assessment Act. The right
to seize assets, without the owner of the assets
having had the opportunity of being heard has
been in existence for many years and is found for
instance in various provincial statutes pertaining to
absconding debtors. Under such legislation, an
alleged creditor has always been allowed to apply
ex parte for a writ of seizure of his alleged debtor's
assets, on satisfactory proof being furnished that
he believes that an alleged debtor has absconded
the jurisdiction for the purpose of avoiding service
of a legal process or of avoiding arrest or of
defrauding his creditors. Following such seizure,
the alleged creditor has also been entitled to have
certain of the perishable goods of his alleged
debtor sold without the debtor being heard. There
exists for instance in the Province of Quebec,
where the plaintiff in the present action resides, a
procedure under articles 733 and 734 of the Code
of Civil Procedure which allows seizure before
judgment.
9 [1949] Ex.C.R. 327.
In the case of the Income Tax Act should the
assets of a taxpayer be seized and should it be
established at a later date that there was in fact no
liability for taxes, then obviously he would be
entitled to restitution. The principle of audi
alteram partem applies to the question of final
determination of liability which is a completely
different question from the temporary deprivation
of assets or even from the permanent loss of assets,
providing there exists a right of restitution of the
assets or of compensation for their loss.
The public policy behind the power in many
taxing statutes to declare an amount payable
before final liability for the amount has been
determined and to take effective steps of securing
such payment by means of seizure of assets and of
sale of same if necessary, is of course founded on
the principle that the tax collector must be fur
nished some means of preventing tax avoidance by
dissipation of assets or by the taxpayer removing
them from the jurisdiction. Where the fundamen
tal right of the taxpayer to have his liability for
taxes ultimately determined on the merits is pre
served, such as in the Income Tax Act, the powers
given the Minister of National Revenue by section
223 to ensure speedy and effective tax collection
do not infringe the principle of audi alteram
partem or the Canadian Bill of Rights. The sec
tion must, of course, be read with the other provi
sions of the Act to which I have referred.
The action is therefore dismissed with 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.