McClung, Hetherington and Stratton, JJ.A.:—This appeal involves the interpretation of certain sections of the Alberta Corporate Income Tax Act, R.S.A. 1980, c. A-17 (now the Alberta Corporate Tax Act) ("the Act").
The appellant, a director of NFS Group Engineering and Management Consultants Ltd. ("NFS Ltd.”), was convicted by a provincial court judge of failing to file certain income tax returns and other financial material relating to NFS Ltd., "after requirement sent the seventeenth day of January, A.D. 1989 under section 64(1) of (the Act) contrary to section 76(1) of (the Act)".
The sections of the Act referred to in this memorandum are quoted in full in appendix "A" attached [not reproduced].
In dismissing an appeal to Queen's Bench, the learned summary appeal court judge ruled that "the procedure was proper and the evidence was then before the learned trial judge”. For the reasons following, we would allow the appeal from that decision.
The text of the demand letter dated January 17, 1989, from the respondent to the appellant and written under the authority of subsection 64(1) of the Act, reads as follows:
For purposes related to the administration of the Alberta Corporate Income Tax Act, I require from you in accordance with section 64(1):
An Alberta Corporate Income Tax Return and applicable schedules, a copy of the Federal Income Tax Return and applicable schedules and financial statements of NFS Group, Engineering and Management Consultants Ltd. for the taxation period ended February 20, 1988.
Failure to file this return constitutes an offence under section 76 of the Act, for which you may be subject to prosecution in Provincial Court.
You are required to file the above return with Alberta Corporate Tax Administration, 9811 — 109 Street, Edmonton, Alberta, T5K 2L5 within 30 days.
The appellant did not respond to that demand and a charge was laid under subsection 76(1).
That section is offended if subsection 64(1) can properly be said to have required the appellant to attend to a matter mentioned in subsection 76(1). The appellant argues that subsection 64(1) does not of itself serve that purpose as it is simply an enabling section authorizing the Treasurer to demand certain information and documents. Thus, it is argued, there is no contravention of subsection 76(1) because that section makes it an offence to fail"to provide or produce information or a document as and when required by this Act” [emphasis added].
The respondent's position, on the other hand, is that subsection 64(1) standing alone, is a sufficient requirement "by the Act” to trigger the offence under subsection 76(1). The respondent argues, in the alternative, that if we consider the language of subsection 64(1) to be inadequate, or, as his counsel states in his factum, to "suffer from the absence of mandatory language”, then he relies on section 68 of the Act as clearly mandating a response to the January 17 letter.
It is obvious that the omission targeted by the charging section is the appellant's failure to provide or produce the material asked for as and when "required by this Act” — the emphasized words being the critical ones. Clearly, specified material was "required" by the letter written under the authority of subsection 64(1). But is that sufficient to support the conviction? We think not.
The contrast between the language used in subsection 64(1) with that of subsection 36(1) and (2) is striking. The two last mentioned subsections command a corporation to do certain things. For example under subsection 36(2) a corporation is required, by the express terms of the section, to file within the time stipulated in the demand letter. The section goes much further than merely authorizing a demand letter. The legislature could have used similar language in subsection 64(1) but it chose not to do so. Instead, section 64 established a different procedure which recognizes that a person who is not the taxpayer and to whom a subsection 64(1) notice may be directed, would not necessarily have possession or control of the information or documents required by the treasurer or that they may not be relevant. But this does not leave the treasurer without recourse against a person who does not respond to the demand letter. Subsection 64(2) allows the treasurer to apply, on only two days' notice to a judge who may order production if he is satisfied of the two requirements set out, namely relevancy and possession or control. Moreover, the judge may impose conditions on the production of the documents or the information in question.
The result of a person not complying with an order issued under subsection 64(2) would then surely be a failure to produce" when required by the Act” — not merely in accordance with the subsection 64(1) notice. The legislature’s intent to distinguish between a requirement under the notice and a requirement under the Act is demonstrated by subsection 64(2) which allows a court application if the recipient of the notice "does not provide or produce . . .in accordance with the notice".
To read subsection 64(1) in isolation and without regard to subsection 64(2) in the circumstances of this case, in our view, runs contrary to the scheme or framework of the Act and such a result should be avoided (see E.A. Driedger, The Construction of Statutes, page 17).
Moreover the interpretation given by the respondent to subsection 64(1) could lead to what would seem to be an unreasonable and unintended result. For example, if a recipient of a subsection 64(1) notice did not have possession or control of the material demanded but nevertheless responded to that effect in a timely manner, he could nevertheless be charged. The unreasonableness of that result illustrates the need to read subsection 64(1) and (2) together for the purpose of determining whether there exists a failure under subsection 76(1) to provide or produce the material required by the Act.
We thus conclude that the failure of this appellant to respond to the subsection 64(1) notice is not sufficient, in the circumstances of this case, to support a conviction under subsection 76(1).
The respondent's alternative argument is set out in his factum as follows:
If one is concerned that the vitality of subsection 64(1) . . . suffers from the absence of mandatory language contained therein, then the respondent would rely upon s. 68 of the Act which clearly mandates a response from the recipient of a subsection 64(1) demand.
The respondent relies on the decision in R. v. O'Donnell (1957), 119 C.C.C. 153, 57 D.T.C. 1287 (Ont. C.A.) as authority for that proposition. However that decision is based on provisions of the federal Income Tax Act as it then existed which differ significantly from the key section presently before us. In the Ontario case, O’Donnell was charged with failing to file his income tax return “following requirement therefor. . .contrary to subsection 131(2) of the Income Tax Act" (C.C.C. 153, D.T.C. 1287). Subsection 131(2) is comparable to subsection 76(1) under which this appellant has been charged. The comparable section under the federal statute to our subsection 64(1) is subsection 126(2). The section in the federal Act which governed the Ontario decision and which the respondent compares to section 68 of our Act, is subsection 126(6) which reads as follows:
No person shall hinder or molest or interfere with any person doing anything that he is authorized by or pursuant to this section to do or prevent or attempt to prevent any person doing any such thing and notwithstanding any other law to the
contrary, every person shall, unless he is unable to do so, do everything he is required by or pursuant to this section to do.
In O’Donnell, supra, subsection 131(2) of the federal Act created the offence of failing to comply with or contravening, inter alia, section 126 of that Act. Thus the charging section in O'Donnell expressly included the mandate contained in subsection 126(6). In contrast to that situation, the charging section (76.1) in the case before us contains no reference to section 68.
Contrary to the respondent's argument that the decision in O’Donnell supports his argument, that judgment accepts the opposite position by point ing to the need that a section such as the one under consideration must clearly and expressly set out the taxpayer's duty. Writing for the Court, Schroeder, J.A. said at page 155 (C.C.C., D.T.C. 1288):
It becomes apparent at once that s. 131(2) makes non-compliance with or a contravention of s. 126 an offence, but the offence is not stated to be the failure to comply with or contravention of a demand made by the Minister, and unless the statute clearly and expressly casts upon the taxpayer a duty or obligation to comply with a demand of the Minister made pursuant to subsection 126(2), such failure can hardly constitute an offence against the Act. This is so plain as to require no discussion.
Thus, the respondent's alternative argument must also fail.
For the foregoing reasons we would allow the appeal and direct that the appellant be acquitted of the charge laid against him.
Appeal allowed; accused acquitted.