Taggart, J.A.: —By this application the appellant, The Minister of National Revenue represented by The Deputy Attorney General of Canada, seeks a stay of the effect of an order made by Madam Justice Southin from which the appeal has been taken.
The background is that the petitioners filed no income tax returns for the taxation years 1983 and 1984. In 1985 and 1986, the Minister, acting under the provisions of the Income Tax Act, required them to file returns for those two years. They complied. Mr. Griffin showed in his returns no tax payable in either year. Ms. Chudina showed no tax payable for 1983 and a refund of tax paid of just over $1,000 for 1984. Assessments were then issued by the Minister. In the case of Mr. Griffin, the assessment issued on August 9, 1985 showed no tax owing in either 1983 or 1984. In the case of Ms. Chudina, the assessment issued on September 3, 1986 showed no tax owing for 1983 and a refund of just over $1,000 for 1984.
On December 13, 1986, Griffin and Ms. Chudina, who were living together as man and wife, left for holidays in Mexico. The Minister did not know this. On December 16, 1986, the Minister acted under subsection 225.2(1) of the Income Tax Act. He sent by registered post assessments for the years 1983 and 1984. In the case of Ms. Chudina, the aggregate amount said to be owing for those two tax years was $197,005. In the case of Mr. Griffin, the aggregate amount said to be owing was $318,435.90. The assessments were in part based on the net worth basis of Mr. Griffin and in part on the provisions of section 160 of the Income Tax Act. That section has to do with the transfer of assets between spouses.
The Minister also gave notice to the petitioners that it might reasonably be considered that collection of the amounts assessed would be jeopardized by delay in collection and he demanded payment forthwith of the amounts claimed in the assessments.
Subsection 225.2(1) of the Income Tax Act provides:
225.2 (1) Collection in jeopardy. — Notwithstanding section 225.1, where it may reasonably be considered that collection of an amount assessed in respect of a taxpayer would be jeopardized by a delay in the collection thereof, and the Minister has, by notice served personally or by registered letter addressed to the taxpayer at his latest known address, so advised the taxpayer and directed the taxpayer to pay forthwith the amount assessed or any part thereof, the Minister may forthwith take any of the actions described in paragraphs 225.1 (1)(a) to (g) with respect to that amount or that part thereof.
The registered letters were mailed at 8:25 and 8:35 a.m. on December 16, 1986. On the same day, acting under subsections 223(1) and (2), the Minister got judgment against the respondents in the amount claimed to be owing and took execution proceedings on that judgment in the Federal Court. In addition the judgment was registered against real property owned by the respondents, or one or other of them, or their nominees. The following day, December 17, 1986, the Sheriff levied execution in accordance with the proceedings taken under the Federal Court Act.
Madam Justice Southin in her reasons for judgment dated December 8, 1987, said this:
6. The reason the Minister sent letters instead of serving the petitioners personally was to ensure surprise. As Mr. Casey, the solicitor for the petitioners, put it in his affidavit:
5. When I asked those officials why they did not give actual notice to my clients of the assessments and reassessments and of the Minister’s direction under section 225.2 of the Income Tax Act prior to taking execution proceedings, I was advised in words to the effect that Revenue Canada purposely refrained from giving the Petitioners actual notice because Revenue Canada feared that such notice defeats the purpose of section 225.2 of the Income Tax Act by removing the element of surprise.
The reference to "officials" is to those officers of the Department of National Revenue with whom Mr. Casey met on December 30, 1986. The substance of paragraph 5 is not controverted in the evidence adduced by the respondents.
I conclude that the officials of the Department knew full well when the process was invoked that the taxpayer would have no opportunity whatever to pay up the assessment.
I hold:
1. That the Minister could not have had any rational belief that either or both of the documents could come into the hands of the petitioners before execution proceedings began on December 17.
2. That when the Minister began on the 17th to take actions described in paragraphs 225.1(1)(a) to (g) he had no belief that the petitioners could not conveniently be found. He believed that the petitioners were at home.
So what it comes to is that all in one day, the Minister assessed for tax asserted due, sent a letter of assessment with a demand for payment, obtained a judgment, and obtained process of execution, and the next day executed that process. Of all this, the petitioners had no knowledge until they returned home from their holiday.
When the respondents returned home at the end of December 1986, they found that the following property had been seized by the Sheriff.
Category 1
Category 1 consisted of furnishings in the petitioners' residence in Surrey. Virtually everything in the house that could be moved and was of any value was taken by the Sheriff. The petitioners applied for the return of those goods and chattels. They were released and are now in the possession of the respondents.
Category 2
Category 2 arises from three garnishing proceedings taken by the Minister. The first of the three was a garnishing proceeding taken on December 16, 1986 in which the garnishee was the Surrey Credit Union. Some $10,633.09 was attached in those proceedings and that money is now in the possession of the Minister of National Revenue. The second garnishing proceeding was taken against a debtor whose name, I believe, is Prisco. He appears to owe the respondents, or one or other of them, money. Nothing appears to have been attached as a result of those garnishing proceedings. The third garnishing proceedings related to the employer of Ms. Chudina, who is employed in a restaurant in New Westminster. Those garnishing proceedings attach $100 in each month from her wages. I was told by counsel that those garnishing proceedings are still operating to attach each month that amount of money.
Category 3
Category 3 consists of two real properties. The first is what has been described as the Surrey residence and against which the judgment obtained by the Minister was registered. The Surrey property is in the name of a limited company but it is clear that it acts as a nominee for Ms. Chudina. The second property involved was the Abbotsford property registered again in the name of a nominee of Ms. Chudina. The judgment obtained by the Minister of National Revenue was registered against this property.
Category 4
The fourth category of assets consists of shares in brokerage accounts owned by one or other, or both, of the respondents. Proceedings were taken against Canerim Investments and shares and/or money was attached. If shares were attached they were sold. Something in the order of $4,000 representing the proceeds of the sale of shares or cash in the brokerage account was attached and is now held by the Minister of National Revenue.
Category 5
The fifth category of property were motor vehicles. There were three in all — a Cadillac owned by Ms. Chudina, and a Mercedes and motorhome owned, I believe by Mr. Griffin. The Cadillac was released by an order made by Mr. Justice Taylor on condition that it not be sold. The Mercedes and motorhome were released by Mr. Justice Hutcheon of this Court on the basis that possession would be in Mr. Griffin as the nominee of the bailiff to maintain possession of the property on the bailiff’s behalf.
That was the property attached by the Minister and any disposition that may have been made of the property attached. The petitioners brought these proceedings seeking relief from the seizures and attachments made on behalf of the Minister. They also sought such other relief that may be deemed just in the circumstances.
I emphasize that the single issue decided by Madam Justice Southin was whether the seizures were valid. In effect the question she posed was whether the Minister acted in accordance with the provisions of the Income Tax Act. Her conclusions were summed up in this way:
My view is that the relief which is just is a declaration that as of December 17, 1986 the Minister had no lawful right to take any of the actions so described.
When Madam Justice Southin used the term “so described”, she had reference to the description given to what the Minister might do under the provisions of subsection 225.2(1) and section 225.1. Her conclusion was based on her interpretation of the language of subsection 225.2(1) and especially her interpretation of the notice requirements of that section. She described the process taken by the Minister in this case as being analogous to a "Mareva injunction process". Having so described the proceedings she said this:
In my opinion, the concept underlying section 225.2 is simple. The taxpayer must pay up right away or the Minister will use the full panoply of his powers. The amount assessed is effectively treated as a demand debt upon the non-payment of which then and there the taxpayer is in the position he was before the 1985 amendments.
But how can the taxpayer avoid the seizure of his property by paying up unless he knows that he owes the money (i.e. has been assessed) and that the Minister insists on having it?
In the case before me, the assessment and the demand for payment were both posted on December 16, and the seizure took place the next day. This course of action was deliberately adopted so that the taxpayer would not have a chance to pay Up.
To adopt a course of action deliberately intended as this was to deprive the taxpayer of the opportunity however brief of paying up before the seizure of all his property is, in my opinion, to misuse the power conferred. It is a subversion of Parliamentary intention. The thrust of these sections is that the taxpayer is to be given the opportunity to appeal and the opportunity to pay. Section 225.2 is a special power for a limited purpose.
The principles applicable on applications such as this one have been frequently stated. A very succinct and useful statement of the principles is found in the judgment of Mr. Justice Macfarlane in Bolton et al. v. Forest Pest Management Institute et al. (1985), 66 B.C.L.R. 126 (C.A.). I refer especially to this language at pages 135-36:
The next question is whether an interim injunction should be granted to the plaintiffs to preserve their rights pending the hearing of the appeal. Section 10(2)(b) of the Court of Appeal Act authorizes such an order to prevent prejudice. I think the principles used in deciding whether to grant a stay of proceedings, when there is an order to be stayed, are appropriate for consideration on an application under s.10(2)(b). Those principles may be stated in this way. The Court of Appeal has the power to grant a stay of proceedings pending disposition of an appeal in a proper case. It is discretionary, and should only be exercised when it is necessary to preserve the subject matter of the litigation pending final decision of the court, to prevent irremedial damage, or where there are other special circumstances. On such an application, the court must attempt to do justice between the parties, that is, not prevent an appellant from prosecuting an appeal, while at the same time not causing prejudice to the respondents.
This court does not lightly deprive parties of the benefit of the judgment which they have obtained in a trial court, but nevertheless, a function of this court is to review orders made in the lower courts and to make appropriate orders in this court to see that justice is done.
Here the principal arguments were as to the merits of the appeal and as to the necessity to preserve the subject matter of the appeal. As to the merits, counsel for the Minister submitted that subsection 244(14) and subsection 248(7) dealing with the mailing process contemplated by subsection 225.2(1) support the conclusion the Minister acted within the provisions of the Act. Subsections 244(14) and 248(7) relate to times when notices such as those given in this case are deemed to have been mailed and received. Counsel for the respondents contended that subsections 244(14) and 248(7) and especially subsection 244(14), are not sections which conclusively deem what are the mailing date and receipt date of the notices. Subsection 244(14) in his submission does no more than raise a presumption as to the mailing date. Since it is only a presumption, it is rebuttable and in this case, was rebutted by the material presented to Madam Justice Southin.
I cannot say there is no argument to be made on behalf of the Minister of National Revenue on this appeal. But as I view the matter, it is at best an argument which is highly technical and provides scant support for the stay of proceedings sought by the Minister. That is especially so when one compares the statute as it was before amendments were made in 1985 with the amended statute.
As to the second aspect which the Minister must overcome, that of preserving the subject matter of the appeal, it is clear beyond question that the circumstances now obtaining are markedly different from those which existed when the Minister made his declaration in December of 1986. The Minister seems to have acted on the premise the respondents were absconding, or intended to abscond in the future, to a jurisdiction where their assets would not be attachable by the Minister. The evidence as to that is hotly contested by the respondents and their position is supported to a considerable extent by independent affidavit evidence which was before Madam Justice Southin.
The Minister may also have been influenced by criminal charges arising out of drug transactions in which the respondent Griffin was alleged to be involved. Some of those were conspiracy charges, some possession and some trafficking. All of them have now been dismissed. The respondent Griffin was convicted of a threatening charge but he has appealed that conviction and the appeal is pending.
In the circumstances it is my opinion that the merits of the appeal do not support the application for a stay, and certainly, no ground has been shown upon which it can be said that it is necessary for the protection of the Minister that the subject matter of the appeal be preserved.
Accordingly it is my opinion that the application must be dismissed. Costs must follow the event.
Application dismissed.