T-493-88
CAL Investments Ltd. (Plaintiff)
v.
Her Majesty the Queen (Defendant)
INDEXED AS: CAL INVESTMENTS LTD. V. CANADA (T.D.)
Trial Division, Joyal J.—Vancouver, May 23;
Ottawa, September 10, 1990.
Income tax — Reassessment — Limitation period — Senior
officer signing waiver on behalf of corporate taxpayer without
affixing corporate seal contrary to prescribed form
Although waiver mutually advantageous, corporate seal dis
cretionary provision for Minister's benefit — Deficiency in
waiver not creating nullity — Although officer lacking au
thority to affix seal and seal not in his possession, implied
authority to sign waiver — Intending to bind company —
Taxpayer estopped from repudiating waiver for non-compli
ance with condition.
Corporations — Use of corporate seal — Common law rule
corporation bound by contract only if under seal now subject
to so many exceptions that little remaining thereof — Senior
officer signing income tax reassessment waiver without affix
ing seal, contrary to prescribed form — Officer having implied
authority to sign waiver — On facts and case law, Minister's
prescription requiring seal discretionary — As for Minister's
benefit, may be waived.
This was an appeal from a reassessment for income tax for
1980. In September, 1985, near the end of the limitation
period, Revenue Canada's auditor submitted a waiver in the
form prescribed by the Minister to a Mr. Briggs, the plaintiff's
Vice-President, Finance. The latter signed the form, as he knew
that failure to do so would result in an immediate assessment.
He had signed previous corporate tax returns and did not feel
special authority was required. The corporate seal was not
affixed. Some weeks later when the auditor requested that the
seal be affixed, Briggs refused on the grounds that he had no
authority to do so and that the seal was not in his possession.
The form prescribes that whenever the taxpayer is a corpora
tion, its corporate seal must be affixed to the waiver. The
taxpayer challenged the validity of the waiver as not in pre
scribed form. It argued that a Minister's prescription deserves
the same recognition as a statutory provision and that when the
Minister prescribes that a corporate seal be affixed, it becomes
an essential requirement and non-compliance results in a nulli
ty. The Crown argued that a corporate seal was not necessary
to make the waiver valid. Alternatively, the form was substan
tially complete and in substantial compliance with the pre
scribed form. The Crown relied upon such curative provisions
as: Income Tax Act, subsection 152(8) (an assessment shall be
deemed to be valid notwithstanding any error, defect or omis-
Sion); subsection 152(3) (liability is not affected by an incorrect
or incomplete assessment); and section 166 (an assessment shall
not be vacated by reason only of any irregularity). It was
further argued that the plaintiff should be estopped from
denying the validity of the instrument or the authority of the
officer in executing it on the basis of the officer's conduct and
his own evidence. The Crown submitted that the common law
rule that no corporation is bound by contract except under seal
has been so eroded by exceptions that little remains of it, apart
from special statutory intervention. Finally, reference was made
to cases under the Income Tax Act in which strict adherence to
various prescriptions has been found wanting without affecting
the legality of the document. The issue was whether the
prescription was mandatory so that its absence made the waiver
null and void.
Held, the action should be dismissed.
The corporate seal is a discretionary provision for the Minis
ter's benefit and a deficiency in the waiver does not create a
nullity. The assessment subsequently issued was valid.
A waiver provides mutual advantages to the Crown and to
the taxpayer. It is an accommodation between the Crown and
the taxpayer for the better administration of the Income Tax
Act and to provide a more efficient determination of any
liability. A waiver allows the Crown to continue its assessment
or audit work without having to worry about limitation periods.
If forced to issue a premature assessment because of the
imminent expiry of the limitation period, the Crown may
include items it could otherwise omit. As the onus of proving an
assessment to be wrong is on the taxpayer, the burden upon him
might thus be increased. It is incumbent upon the Crown, in
accepting the waiver, to be satisfied that the taxpayer will be
bound by it. In that the authority of persons acting on behalf of
a corporation is best assured by the affixing of a corporate seal,
the requirement of a corporate seal would appear to be for the
Crown's benefit.
Upon a review of the facts and case law, it appeared that the
requirement of a corporate seal was directory only. The pre
scription was imposed by the Minister and was for his protec
tion. As such it could be waived by him in appropriate circum
stances. A waiver was not a statutory obligation to which
statutory defences might be raised, but a consensual arrange
ment between the taxpayer and the Crown to accept a delayed
process for an assessment for mutually advantageous reasons.
The signing officer had implied authority to agree to a waiver.
He signed the waiver with the intention of binding the com-
pany. The taxpayer could not later repudiate'the waiver on the
ground of non-compliance with one of its prescribed conditions.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Company Act, R.S.B.C. 1979, c. 59, ss. 124, 125.
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 152(3),
(4)(a)(ii),(8), 166, 220(1), 244(16), 248.
Interpretation Act, R.S.C., 1985, c. I-21, s. 2.
CASES JUDICIALLY CONSIDERED
APPLIED:
R. v. Hart Electronics Ltd. (1959), 29 W.W.R. 28 (Man.
C.A.); R. v. Simard-Beaudry Inc., [1971] F.C. 396
(T.D.); Liverpool Borough Bank v. Turner (1860), 2 De
G. F. & J. 502; Howard v. Bodington (1877), 2 P.D. 203
(Ct. of Arches).
CONSIDERED:
Pan American World Airways Inc. v. R., [1979] 2 F.C.
34; (1979), 96 D.L.R. (3d) 267 (T.D.); Waterous Engine
Co. v. Town of Capreol (1922), 52 O.L.R. 247; [1923] 3
D.L.R. 575 (C.A.); Guaranty Properties Ltd. v. Canada,
[1987] 2 F.C. 292; [1987] 1 C.T.C. 242; (1987), 87 DTC
5124; 9 F.T.R. 17 (T.D.); Wilchar Construction Ltd. v.
R., [1982] 2 F.C. 489; (1981), 124 D.L.R. (3d) 415;
[1981] CTC 415; 81 DTC 5318; 38 N.R. 578 (C.A.); R.
v. Kidd (1974), 6 O.R. (2d) 769; 74 DTC 6574 (H.C.);
Smerchanski v. Minister of National Revenue, [1974] 1
F.C. 554; (1974), 45 D.L.R. (3d) 254; [1974] C.T.C.
241; 74 DTC 6197; 2 N.R. 197 (C.A.); Optical Record
ing Corp. v. Canada, [1987] 1 F.C. 339; [1986] 2 C.T.C.
325; (1986), 86 DTC 6465; 6 F.T.R. 294 (T.D.).
AUTHORS CITED
Phipson, Sidney L. The Law of Evidence, 8th ed. London:
Sweet & Maxwell Ltd., 1942.
Wegenast, F. W. The Law of Canadian Companies,
Toronto: The Carswell Co. Ltd., 1979.
COUNSEL:
Ian H. Pitfield for plaintiff.
William Mah for defendant.
SOLICITORS:
Thorsteinsson, Mitchell, Little, O'Keefe &
Davidson, Vancouver, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
JOYAL J.: This is an appeal by the plaintiff, a
company incorporated under the laws of British
Columbia, from a reassessment for income tax
purposes for the taxation year 1980. The plaintiff
alleges that not only is the reassessment wrong on
the merits but that it was issued beyond the four-
year limitation period applicable at the relevant
period.
The plaintiff's challenge to the validity of the
reassessment is on the grounds that a waiver
signed on behalf of the plaintiff pursuant to sub-
paragraph 152(4)(a)(ii) of the Income Tax Act
[S.C. 1970-71-72, c. 63] was not in a "prescribed"
form and consequently is a nullity. The form pre
scribes that whenever the taxpayer is a corpora
tion, its corporate seal must be affixed to the
waiver. The corporate seal was not affixed.
After the parties had exchanged pleadings, they
agreed that the issue of the validity of the reassess
ment which involves of course the validity of the
waiver, should first be decided. The resolution of
that issue would either bring the litigation to an
end or otherwise provoke a second round of debate
on the merits of the reassessment itself.
THE FACTS
The facts surrounding the waiver issue are not in
dispute. Evidence was heard from James Findlay
Briggs, Vice-President, Finance, of the plaintiff
company and from Spencer William Holmes, an
auditor with Revenue Canada, Taxation. Both wit
nesses gave clear and forthright testimony and it
can be said that on all issues of substance, they
effectively corroborated each other.
It was late in January or early February, 1985,
that Mr. Holmes started an audit of the plaintiff's
books. In the course of the following seven or eight
months, he attended intermittently at the plain
tiff's offices to conduct his audit. His chief source
of information throughout that period was of
course Mr. Briggs whose duties and functions
specifically involved the administration of the
plaintiff's accounts and of its corporate records.
Mr. Briggs had held that position for some eight
years. He was not, however, a shareholder or
director of the plaintiff company. He also held the
title of corporate secretary but did not have unilat
eral authority to affix the corporate seal to docu
ments. Neither did he have possession of the cor
porate seal. The seal always remained in the care
of the plaintiff's solicitors.
By September of 1985, Mr. Holmes was alerted
to the fact that the limitation period was running
out and on September 12, 1985, he submitted to
Mr. Briggs a waiver document in the form pre
scribed by the Minister of National Revenue. The
required information on the form had already been
written and Mr. Briggs had simply to sign. Mr.
Briggs had not seen that kind of form before but
he assumed the four-year limitation was imminent.
He did not discuss the matter with anyone in his
company nor for that matter did Mr. Holmes ask
him if he had the necessary authority nor did he
request that the corporate seal be affixed. Mr.
Briggs did not read the printed words in the
waiver. He contented himself to reading the typed
words which Mr. Holmes had inserted. Without
further ado, Mr. Briggs signed the form.
Mr. Briggs admitted in his evidence that he
assumed that it was within his sphere of responsi
bility as Vice-President, Finance, to sign the form.
He knew enough from his experience as a char
tered accountant that, should he refuse to sign it,
an assessment would immediately issue. Further
more, all previous corporate tax returns and
amended returns had been signed by him. He felt
that no special authority was required.
It was some weeks later that Mr. Holmes' col
leagues in Revenue Canada alerted him to the
absence of the corporate seal on the waiver docu
ment. On October 18, 1985, he returned to Mr.
Briggs' office and requested that this be done. Mr.
Briggs informed him that he had no authority to
affix the corporate seal and that in any event the
seal was not in his possession. Mr. Briggs consult-
ed the plaintiff's solicitors and on October 24,
advised Mr. Holmes that no further action would
be taken by the plaintiff and that the corporate
seal would not be affixed.
The result is the issue as framed.
THE CASE FOR THE PLAINTIFF
The plaintiff's argument may be summarized as
follows:
1. Subsection 152(4) of the Income Tax Act pro
vides for the waiver rule and states that a waiver
must be filed or completed in the prescribed form;
2. Part XVII of the statute deals with interpreta
tion and in subsection 248(1) thereof, the word
"prescribed" in the case of a form means pre
scribed by order of the Minister;
3. Subsection 220(1) further stipulates that it is
the duty of the Minister to administer and to
enforce the Act.
4. In furtherance of the Minister's duties, a form
of waiver was prescribed and on the reading of it,
it sets forth in unequivocal terms the manner in
which a corporation may waive a statutory right.
5. Further, says plaintiff's counsel, the Minister's
prescription is deserving of the same recognition as
a provision of a statute or of a regulation. Under
section 2 of the Interpretation Act, R.S.C., 1985,
c. I-21, as complemented by statutory authority
conferred on the Minister under the Income Tax
Act, the word "enactment" and a Minister's
"direction" have equal force and effect.
6. It can therefore be said that the Minister
intended that the corporate seal be affixed to a
corporation's waiver and there is no reason to
suggest that the requirement is permissive or dis
cretionary or elective.
7. Although plaintiff's counsel readily concedes
that a corporate seal in contemporary terms might
be regarded as an anachronism and indeed certain
provincial corporation statutes have done away
with it, the requirements of a corporate seal to
bind a corporation is still there. The Company Act
of British Columbia [R.S.B.C. 1979, c. 59] in
section 124, provides for a seal. If the Minister
should then prescribe that such a seal be affixed to
a waiver, it becomes an essential requirement to its
validity and has binding effect.
In support of the foregoing arguments, plain
tiff's counsel relies inter alia on the case of Pan
American World Airways Inc. v. R., a 1979 deci
sion of Mahoney J., then of the Trial Division of
this Court, and reported at [1979] 2 F.C. 34. In
that case, regulations pursuant to section 4 of the
Aeronautics Act [R.S.C. 1970, c. A-3] authorized
the responsible Minister to impose charges on
aircraft owners flying within Canada for use of
public services and provided for the enforceable
collection of these charges. Section 5 of the stat
ute, however, authorized the Minister to "pre-
scribe" charges which in effect were imposed on
overflights of aircraft in Canada on international
routes. Section 5, by some anomaly in drafting
perhaps, did not provide for enforceable collection.
The argument advanced by Pan Am, of course,
was that the Act failed to impose a liability for the
payment of these charges and that this was a fatal
gap in the legislative scheme.
Faced with this hard question, Mahoney J. said
this at pages 47-48:
"Prescribing" as used in section 5 is the gerund of the word
"prescribe", a transitive verb. It is not used in a medical
context nor can it be found that, Parliament intended to use it in
one of its obsolete meanings. As a word having a technical legal
meaning "prescribing" may be a word relating to the loss of a
right by effluxion of time but it is plainly not employed in that
sense in section 5. It is to be given its ordinary English
meaning.
The Oxford English Dictionary (1933) defines the current,
transitive, verb "prescribe" as follows:
"To write or lay down as a rule or direction to be followed; to
appoint, ordain, direct, enjoin.
Funk and Wagnall's New "Standard" Dictionary of the Eng-
lish Language (1961) has the following definition:
"To set or lay down authoritatively for direction or control;
give as a law or direction.
Webster's Third New International Dictionary (1961) defines
it in the following terms:
to lay down authoritatively as a guide, direction or rule of
action: impose as a peremptory order; DICTATE, DIRECT,
ORDAIN.
Referring to the same dictionaries, the Oxford's pertinent
definition of "impose" is:
To lay on, as something to be borne, endured or submitted to;
to inflict (something) on or upon; to levy or enforce
authoritatively or arbitrarily.
Funk & Wagnail's definition is:
To lay or place, as something to be borne or endured; levy or
exact as by authority, as to impose a tax, toll, or penalty.
Webster's definition is:
to make, frame or apply (as a charge, tax, obligation, rule,
penalty) as compulsory, obligatory or enforceable; LEVY,
INFLICT.
The words are synonyms. They have the same general mean
ing. Parliament may have intended to make a significant
distinction between the authorities delegated by using "impos-
ing" in section 4 and "prescribing" in section 5; however, that is
not the most reasonable construction to be put on the sections.
The corollary of the plaintiffs argument would, it seems, be
that when the Governor in Council "imposes" a charge under
section 4, he does everything necessary but fix the amount of
the charge and that there is no authority for him to do that,
thereby rendering the legislative scheme fatally deficient. It is
not, I think, to be assumed that Parliament, speaking in
ordinary English, intends synonyms necessarily to have very
different meanings, thereby rendering a legislative scheme as
incomplete as the plaintiff would have this one. It is not an
argument that would have occurred to any but a lawyer nor,
very likely, even to a lawyer had the sections not appeared in
immediate proximity.
I therefore conclude that when the Governor in Council or
Minister of Transport, with due authority, which is not ques
tioned in this action, makes a regulation prescribing a charge
under section 5 of the Aeronautics Act for the use of any
facility or service, he not only fixes the charges for such use but
imposes on their user a legal obligation to pay the charges.
I take it that counsel's reliance on the foregoing
case is to emphasize the seriousness and impor
tance of any prescribed term or condition and to
have the Court conclude that if the authority to
"prescribe" in the Aeronautics Act includes the
authority to impose and collect, it should follow
that where a Minister prescribes that a corporate
seal be affixed to a waiver, non-compliance results
in a nullity.
Counsel for the plaintiff also cites the case of
Waterous Engine Co. v. Town of Capreol (1922),
52 O.L.R. 247, a judgment of the Court of Appeal
of Ontario where the Court set aside a claim on a
note issued and signed by the mayor and treasurer
of a municipal corporation on the grounds that the
note was not under seal and no by-law authorizing
the note to be used had been passed. This case
suggests again that whenever formalities, such as a
corporate seal or by-law are imposed by law, non
compliance with those formalities have substantive
results.
It is in the case of Guaranty Properties Ltd. v.
Canada, [1987] 2 F.C. 292 (T.D.), that counsel
for the plaintiff finds support for the proposition
that a defect in the waiver cannot be cured. In that
case, Rouleau J. of this Court, after reviewing the
statutory provisions of the Income Tax Act
respecting corporate amalgamation, found that a
reassessment issued in error against one corpora
tion, could not be retroactively validated against
another corporation where such a reassessment
had become statute-barred. Rouleau J. points out
in that case, at page 308, that:
The curative provisions of the Income Tax Act will not assist
the defendant in this case. It is clear from the facts that a
number of errors have plagued the defendant throughout this
matter. The auditor who should have been made aware of the
amalgamation was not advised and, by the time this was
discovered and matters rectified, the time limit prescribed by
statute for reassessing Dixie's 1976 taxation year had expired.
Equity alone would prevent the use of curative provisions such
as those contained within the Income Tax Act to correct a
substantive error of this nature. I am of the opinion that the
legislation does not contemplate the amendment of a reassess
ment after the expiry of a limitation period.
Finally, counsel for the plaintiff quotes from
Phipson on Evidence, 8th Ed., page 667, as quoted
in Wilchar Construction Ltd. v. R., [1982] 2 F.C.
489 (C.A.), at page 496, as follows:
Estoppels of all kinds, however, are subject to one general
rule: they cannot override the law of the land .... Thus, where
a particular formality is required by statute, no estoppel will
cure the defect ....
On that basis, argues counsel, it matters not
what binding effect a document issued without a
corporate seal would have on a corporation and no
matter if the intention of Mr. Briggs in signing the
waiver was to make of it an effective waiver, it
cannot make up by way of estoppel the absence of
a prescribed corporate seal.
THE CASE FOR THE CROWN
Crown counsel takes the position that a corpo
rate seal on the waiver form is not necessary to
make it valid. Alternatively, says counsel, if a seal
is necessary, the form is substantially complete
and is in substantial compliance with the pre
scribed form to make it valid.
Furthermore, counsel finds the necessary cura
tive provisions in subsection 152(3), subsection
152(8) and in section 166 of the Income Tax Act.
Subsection 152(8) provides that "An assessment
shall, subject to being varied or vacated on an
objection or appeal under this Part and subject to
a reassessment, be deemed to be valid and binding
notwithstanding any error, defect or omission
therein or in any proceeding under this Act relat
ing thereto."
Subsection 152(3) states that "Liability for the
tax under this Part is not affected by an incorrect
or incomplete assessment or by the fact that no
assessment has been made."
Section 166 of the Act provides that "An assess
ment shall not be vacated or varied on appeal by
reason only of any irregularity, informality, omis
sion or error on the part of any person in the
observation of any directory provision of this Act."
Finally, counsel for the Crown argues that on
the basis of Mr. Briggs' conduct and of his own
evidence in relation to the execution and delivery
of the waiver form, the plaintiff must be estopped
from denying the validity of the instrument or the
authority of Mr. Briggs in executing it on behalf of
the company.
With respect to the mystique or legal fiction of a
corporate seal, counsel for the Crown quotes from
F. W. Wegenast, The Law of Canadian Compa
nies, Carswell, 1979, at pages 268-270 as follows:
Section 36 of the Canadian Act provides that "every deed
which any person, lawfully empowered in that behalf by the
company as its attorney, signs on behalf of the company and
seals with his seal, shall be binding on the company and shall
have the same effect as if it was under the seal of the
company." So that it is not so much a matter of affixing the
corporate seal as it is of affixing a seal.
As to the necessity of the seal in contracts, section 37 of the
Canadian Act provides that "every contract, agreement,
engagement or bargain made, and every bill of exchange
drawn, accepted or endorsed, and every promissory note and
cheque made, drawn or endorsed on behalf of the company, by
any agent, officer or servant of the company, in general accord
ance with his powers as such under the by-laws of the company,
shall be binding upon the company. In no case shall it be
necessary to have the seal of the company affixed to any such
contract, agreement, engagement, bargain, bill of exchange,
promissory note or cheque or to prove that the same was made,
drawn, accepted or endorsed, as the case may be, in pursuance
of any by-law or special vote or order. No person so acting as
such agent, officer or servant of the company shall be thereby
subjected individually to any liability whatever to any third
person."
This statutory provision is conclusive as to a number of
questions which were formerly the cause of much difficulty.
The general rule of the common law was that a corporation was
not bound by contracts unless under seal, though even in early
times it was recognized that the seal was not necessary for
every corporate act. In modern times the common law rule has
become so eaten up with exceptions that little remains of it,
apart from special statutory intervention. It has been laid down
in the first place that in all matters of trifling importance and
frequent occurrence a contract duly entered into by any corpo
ration would be binding both on the corporation and the other
party, notwithstanding the absence of the corporate seal. Again
it is well settled that in the case of executed contracts, that is to
say contracts in which one of the parties, whether the corpora
tion or the other party, had done its part, the corporation was
liable though the contract was not under the corporate seal.
Further, it has been clearly established that all contracts of
trading corporations within the scope of their objects are
binding on the corporation without the corporate seal. Finally,
it has been laid down that even in the case of non-trading
corporations a contract may be binding without the corporate
seal so long as the contract is within the special purposes of the
corporation's charter. It has been held under some of the
provincial Acts that important appointments such as that of
manager or a chief engineer should be made under seal; but
this would not be so under the Canadian Act except in the sense
that the appointment to be regular, should, be by by-law, or at
least under the authority of a general by-law. But, as already
said, the provision of the Canadian Act seems thoroughly to
cover the subject, and incidentally to assimilate, in the case of
Canadian companies, the law of Quebec with that of the other
provinces in the matter of the use of the corporate seal.
Practically speaking, therefore, and apart from section 37,
the use of the seal is required of a corporation only where it
would be of an individual, that is to say upon such documents
as deeds, powers of attorney, etc. In this connection the reader
may be reminded that a seal "imports" both consideration and
delivery: that is to say, where a contract is under seal it is not
necessary to prove either consideration or the delivery of the
contract, consideration not being necessary in the case of a
contract under seal and delivery being presumed. But that is
not to say that want of consideration may not be proved or that
a deed or contract under seal may not be held in escrow. It is a
matter of fact and intention whether delivery has taken place,
but prima facie delivery may be presumed; and where an
instrument is produced under the seal of a company it is
presumed to have been properly executed, though this presump
tion may be rebutted.
Crown counsel relies heavily on the statement in
the foregoing extract that in modern times, the
common law rule to the effect that no corporation
is bound by contract except under seal, has become
so eaten up with exceptions that little remains of
it, apart from special statutor•' intervention. It is
argued that in the circumst, ces the prescribed
"corporate seal" on a waiver document is not an
essential requirement to establish a document valid
on its face and binding on the company.
Crown counsel also finds comfort in sections 124
and 125 of the Company Act, R.S.B.C., 1979, c.
59, which appears to establish that whatever is
required between natural persons to enter into
binding contracts applies as well to companies.
These sections read as follows:
124. (1) Every contract that, if made between natural per
sons would by law be required to be in writing and under seal,
may be made for a company in writing under seal and may, in
the same manner, be varied or discharged.
(2) Every contract that, if made between natural persons
would by law be required to be in writing and signed by the
parties to be charged, may be made for the company in writing
signed by a person acting under its authority, express or
implied, and may in the same manner be varied or discharged.
(3) Every contract that, if made between natural persons
would by law be valid although made orally and not reduced to
writing, may be made in like manner for the company by a
person acting under its authority, express or implied, and may
in the same manner be varied or discharged.
(4) Every contract made according to this section is effectu
al in law, and shall bind the company and its successors and all
other parties to it.
(5) Every bill of exchange or promissory note shall be
deemed to have been made, accepted or endorsed on behalf of a
company if made, accepted or endorsed in the name of, or by,
or on behalf of, or on account of, the company by a person
acting under its authority.
125. A document that requires authentication or certifica
tion by a company may be authenticated or certified by a
director, or officer of the company, or by the solicitor for the
company, and need not be under its common seal.
There is also reference by Crown counsel to a
number of cases under the Income Tax Act where
strict adherence to various prescriptions has been
found wanting without affecting the legality of the
document.
In R. v. Hart Electronics Ltd. (1959), 29
W.W.R. 28 (Man. C.A.), the taxpayer company
was charged with failure to file tax returns. In
fact, an officer of the company had forwarded a
letter to National Revenue enclosing unsigned T-2
return forms showing no tax payable and on which
certain remarks and information had been filled
in. No documents were attached to the forms.
The Manitoba Court of Appeal dismissed an
appeal by the Crown from a magistrate's dismissal
of the charge. At page 30, the Court stated:
The form was not signed but was enclosed with a letter. The
omission to sign the form does not render the return a nullity. If
a cheque had been enclosed it could not be argued that there
was no return. If it appears that no tax is payable it also is a
return though the form was not signed. In my opinion a form
T2, which gives certain information sent by letter though the
form is not signed, does constitute an income tax return.
A similar finding occurred in R. v. Kidd (1974),
6 O.R. (2d) 769. Lacourcière J., then of the
Ontario High Court, refused to entertain a defence
of wilful tax evasion on the grounds that the
accused taxpayer had not signed his tax returns
when he had failed to declare his true income. His
Lordship stated at page 772:
The unsigned income tax returns for the 1970 and 1968
taxation years were complete and sufficient to constitute a
defence on a failure to file charge: The Queen v.. Hart Elec
tronics Ltd., 59 D.T.C. 1192. If the appellant intended that the
return should form the basis of his tax assessment — and there
cannot be any other conclusion — he cannot rely on his
omission to sign it. He, cannot have it both ways: the return
cannot be a defence to a charge of non-filing as well as a
defence, because it is unsigned, to a charge of evasion ....
Noël A.C.J. of this Court faced an analogous
issue in the case of R. v. Simard-Beaudry Inc.,
[1971] F.C. 396. The defendant in 1964 had pur
chased most of the assets of Simard & Frères Cie
Limitée and had undertaken to pay the seller's
debts incurred prior to January 1, 1965.
When the seller was reassessed in 1969 for
substantial amounts of taxes covering the years
1954-1964, the Crown claimed the unpaid taxes
from the defendant. In resisting the claim, the
defendant pleaded the invalidity of certain waivers
it had signed on behalf of the other company. His
Lordship's comments on that issue are found at
page 405:
Defendant's argument that the waivers signed by it for the
mis en cause for 1961 and 1962 — as regards which it claims
that there were no misrepresentations or fraud and where, as a
result, the prima facie presumption of validity of the assess
ments would not apply — are not valid because they were not
signed by the taxpayer cannot be raised here. Defendant held
itself out as the agent, or apparent agent, of the mis en cause,
and plaintiff, relying on these waivers, subsequently allowed the
four years specified in s. 46(4) to elapse with respect to the
years in question. In the circumstances plaintiff [sic] is in no
position to plead the invalidity of these waivers. Moreover, I do
not think it is too surprising that the waivers were signed by the
purchaser of the rights and property of the vendor, since the
purchaser, in which some of the persons having an interest also
had interests in the mis en cause, is the very same company
which continued the vendor's operations and must have collect
ed the profits therefrom.
It was in the case of Srnerchanski v. Minister of
National Revenue, [1974] 1 F.C. 554 (C.A.), that
Mackay D.J. raised the issue of estoppel on which
Crown counsel relies. His Lordship said at page
568:
Hanbury's Modern Equity 9th ed., pp. 664 and 666, defines
estoppel as a doctrine which prevents a person acting inconsist
ently -with a representation which he has made to the other
party, in reliance on which the other party has acted to his
detriment. It is necessary that there should be an unambiguous
representation of existing fact upon which the representee is
intended to act and does act to his detriment.
Finally, Crown counsel cites the dictum of Mul-
doon J., of this Court, in the case of Optical
Recording Corp. v. Canada, [ 1987] 1 F.C. 339, at
page 359:
Printed forms are part of the essential mystique of govern
ments in the twentieth century, but one must not be dazzled by
printed forms even when they are officially prescribed. The
printed form itself, carries no legal force.
THE FINDINGS
The issue remains whether the absence of a
corporate seal on a prescribed waiver document
renders it null and void. To determine this, the
following elements, in my view, should be
considered.
1. Nature of a Waiver
A waiver of the sort at issue in this case, might
be interpreted as an accommodation between the
Crown and a taxpayer for the better administra
tion of the Income Tax Act and to provide a more
efficient determination of any liability thereunder.
In the light of the limitations on assessments under
section 152 of the Act, the Crown requests a
waiver so that it may continue its assessment or
audit work in a normal administrative mode with
out having to worry about limitations. The taxpay
er, on the other hand, knows full well that on an
assessment being made, he alone has the burden of
proving it wrong. That burden becomes much
heavier if the Crown, facing the end of the limita
tion period, issues what might be termed a prema
ture assessment which, for purposes of abundant
caution, would include many sundry items which
the taxpayer would have to traverse one by one.
The taxpayer in those circumstances would look
upon a waiver as being to his own benefit as well
as the Crown's and would ordinarily comply with
the Crown's request.
In many cases, also, the waiver might be limited
to specified issues, i.e., those where assessing or
auditing processes have not been completed and
which in fact remain the only outstanding items on
which the Crown can ultimately decide to assess or
reassess. This narrows the field of the assessment
and again provides mutual advantages to both the
Crown and the taxpayer.
2. Requirements of a prescribed form of waiver
If by its nature, a waiver under the Income Tax
Act may be said to be a mutual affair, it might
nevertheless be incumbent upon the Crown in
accepting a waiver to be satisfied that the taxpayer
will be bound by it. This would normally present
no problem when the taxpayer is an individual. It
is otherwise, however, when the taxpayer is a
corporation which can only become bound by the
hand of a person or persons acting on its behalf.
The authority of such person or persons would of
course be best assured by the affixing of the
corporate seal. The corporate seal would thus pro
vide a sufficient degree of validity or authenticity
on which the Crown could rely.
Viewed in that light, the requirements of a
corporate seal could be said to be for the benefit of
the Crown.
3. The statutory basis for the prescribed form
Subsection 244(16) of the Act provides that
"Every form purporting to be a form prescribed or
authorized by the Minister shall be deemed to be a
form prescribed by order of the Minister under
this Act unless called in question by the Minister
or some person acting for him or Her Majesty."
Subparagraph 152(4)(a)(ii) provides that a
Minister may reassess at any time when a taxpay
er "has filed with the Minister a waiver in pre
scribed form within 4 years". [My emphasis.]
The prescribed form of waiver in 1985 declares
that it is authorized and prescribed by the Minis
ter. The form also includes on its face a series of
instructions which the form indicates must be ful-
filled in order for the waiver to be valid. It must be
signed by the taxpayer himself, if an individual, or
if a corporation, by the authorized signing officer
with the authority to bind the corporation. In the
case of a corporation, the corporate seal must be
affixed.
This is in line with plaintiff's argument that the
corporate seal requirement is mandatory. Its
absence renders the waiver null and void. It is not
a valid waiver and the statute prescribes that a
valid waiver it must be. Furthermore, according to
this line of thinking, the waiver cannot be accepted
as valid if the signing officer as Vice-President,
Finance, enjoying the ostensible authority to bind
the company, did not have, on the evidence, any
authority on his own to affix the corporate seal.
This of course is to suggest that even if by some
circumstance or other, Mr. Briggs had had posses
sion of the corporate seal at the time the waiver
was submitted to him, his affixing it without the
required authority would not have bound the
company.
4. General Rules re Corporate Seal
It may be briefly stated that according to sec
tions 124 and 125 of the Company Act of British
Columbia, it would not have been ordinarily
required to affix the seal to the waiver document
to make it valid and binding on the company. In
the circumstances, the issue of the waiver's validity
rests exclusively on whether or not the prescription
is of such a mandatory nature that its absence
makes the document null and void.
5. Mandatory or Directory "Enactment"
This requires an interpretation of the "pre-
scribed" conditions. The attachment of a corporate
seal is either a mandatory requirement or a discre
tionary one. Whether it is one or the other requires
consideration of the purpose of the prescription,
the context within which it is deemed to apply and
the general intendment of either Parliament or of
its servant in imposing it. I subscribe in this
respect to the words of Lord Campbell in the case
of Liverpool Borough Bank v. Turner (1860), 2 De
G. F. & J. 502 where he stated at pages 507-508:
No universal rule can be laid down for the construction of
statutes as to whether mandatory enactments shall be con
sidered directory only or obligatory only with an implied nullifi
cation for disobedience. It is the duty of Courts of Justice to try
to get at the real intention of the Legislature by carefully
attending to the whole scope of the statute to be construed.
A similar approach was adopted by Lord Pen-
zance in Howard v. Bodington (1877), 2 P.D. 203
(Court of Arches) at page 211:
I believe, as far as any rule is concerned, you cannot safely
go further than that in each case you must look to the subject-
matter; consider the importance of the provision that has been
disregarded, and the relation of that provision to the general
object intended to be secured by the Act; and upon a review of
the case in that aspect decide whether the matter is what is
called imperative or only directory.
THE CONCLUSION
A review of the particular facts before me as
well as of the extensive case law referred to by
counsel leads me to the conclusion that the
requirement of the corporate seal is directory only.
I view the prescription imposed by the Minister in
that regard as one to provide the Minister with an
assurance that he can safely postpone his reassess
ment and that he may rely on the corporate tax
payer being bound by it. The taxpayer would not,
absent unusual circumstances such as a forged
signature, be in a position to repudiate it when the
limitations have run out.
On the facts before me, no such unusual circum
stances apply. There is no doubt in my mind that
Mr. Briggs, as Vice-President, Finance, had an
implied authority to agree to a waiver. He knew
full well the purpose of the waiver and although he
had not previously been called upon to deal with a
waiver on behalf of his company, he knew from his
previous experience as a chartered accountant
what a waiver was all about. He had no hesitation
in signing it. He assumed, correctly in my view,
that without a waiver, an immediate assessment
would issue. He did not feel the need to bring the
matter to the attention of his directors. He felt it
was part of his basic responsibility as Vice-Presi
dent, Finance, to deal with it. For some years, as a
matter of fact, he had dealt with the company's
tax matters and had signed several T-2 tax returns
in previous years. Mr. Briggs of course had no
specific authority to use the seal but I must find,
on the evidence, he had no less an implied author
ity to sign a waiver than he had to sign corporate
tax returns.
The other aspect material to the case is that the
prescription imposed by the Minister is, in my
view, for the benefit of the Minister. For reasons
already stated, it is the Minister's measure of
protection and may, in appropriate circumstances,
be waived by him. The Minister's position in that
regard is analogous to any person's prerogative to
waive a condition prescribed in his favour.
A further element in the matter before me is
that this waiver, however prescribed in its form, is
not a statutory obligation imposed on a taxpayer
over which, in appropriate cases, statutory
defences might be raised. A waiver, as prescribed
in this case, is no more, no less a consensual
arrangement between the taxpayer and the Crown
to accept a delayed process for an assessment to be
made for reasons which are mutually advanta
geous. It is clear from the evidence that Mr.
Briggs willingly signed the waiver with the inten
tion of making of it a valid waiver binding on the
company. From the realities of the situation as I
have described it, the waiver, in the eyes of Mr.
Briggs, was no big deal.
In such circumstances, can it now be said that in
the absence of such a ministerial prescription as a
corporate seal on the waiver form, the document
should be considered null and void and bereft of
any legal weight? To do so, in my respectful view,
would be to endorse the arguments advanced by
plaintiff's counsel that the subject—matter be treat
ed within the narrow perimeters of the prescribed
form, within the even narrower context of the
Minister's printed postulates and that the sub
stance and mutuality of the waiver process itself be
disregarded. It would require a strict or literal
interpolation of the several doctrines of interpreta
tion suggested by plaintiff's counsel and confer on
the prescriptions of the waiver form a sovereign
and inviolate character which, in my respectful
view, is not warranted.
If an unsigned tax return can be found to be a
valid return as in the Hart Electronics case, or if a
waiver signed by one company can be found to
bind another company, as in the Simard-Beaudry
case, I can see no reason why, in the particular
circumstances of the case before me, a document
intended to bind the company, signed on its behalf
by a senior officer with the very least an implied
authority to do so, could now be repudiated on
grounds of non-compliance with one of its pre
scribed conditions. It may be said that the Minis
ter was at risk when he accepted the plaintiff's
waiver without its corporate seal. It does not,
however, leave it open to the plaintiff to repudiate
the waiver on that ground.
I should therefore find that, despite the ingeni
ous arguments of the plaintiff's counsel to the
contrary, the corporate seal is a discretionary
provision for the Minister's benefit, that the defi
ciency in the waiver does not create a nullity and
that the assessment subsequently issued is valid in
all respects.
Further to the parties' consent to a hearing and
adjudication of this preliminary yet very much
substantive issue, the plaintiff's action is dismissed.
Subject to any appeal, the parties may now move
to set down for trial on the merits of the plaintiff's
appeal against the defendant's assessment.
Costs shall be in the cause.
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.