L & M Wood Products Ltd, North Battleford Lumber and Post Sales LTD and Glaslyn Forest Products LTD v. Minister of National Revenue, [1972] CTC 556, 72 DTC 6483

Heald, J:—This is an application by Notice of Motion for an order striking out the Statement of Claim herein.

The three plaintiffs in this action are all corporations duly incorporated under the laws of the Province of Saskatchewan. The plaintiffs L & M Wood Products Ltd and North Battleford Lumber and Post Sales Ltd are appealing their income tax assessments by the defendant for the taxation years 1968 and 1969. The plaintiff, Glaslyn Forest Products Lid, is appealing its income tax assessment by the defendant for the taxation year 1969.

However, the problem is that the said income tax assessments are attacked in one single proceeding in the Federal Court. The Statement of Claim asserts that the defendant has deemed the three plaintiff taxpayers to be associated with each other for the purpose of section 39 of the Income Tax Act under the provisions of subsection 138A(2) of said Act and all three plaintiffs challenge that decision in this single proceeding. The impugned Statement of Claim is dated August 17, 1972 and was filed in the Court on August 18, 1972. These proceedings are accordingly governed by the provisions of the Statutes of Canada 1970-71-72, c 63, which came into force on January 1, 1972. The procedures for appeals under this Act are contained in Part I, Division J as set out in sections 169 to 180 inclusive.

The Statement of Claim alleges that all three taxpayers objected to the subject assessments which objections were rejected by the defendant on July 7, 1972 and this action is an appeal to this Court from said decision by the defendant.

The following sections of SC 1970-71-72, c 63, are pertinent to a proper consideration of this motion:

165. (1) A taxpayer who objects to an assessment under this Part may, within 90 days from the day of mailing of the notice of assessment, serve on the Minister a notice of objection in duplicate in prescribed form setting out the reasons for the objection and all relevant facts.

(2) A notice of objection under this section shall be served by being sent by registered mail addressed to the Deputy Minister of National Revenue for Taxation at Ottawa.

(3) Upon receipt of a notice of objection under this section, the Minister shall,

(a) with all due dispatch reconsider the assessment and vacate, confirm or vary the assessment or reassess, or

(b) where the taxpayer indicates in the notice of objection that he wishes to appeal immediately either to the Tax Review Board or to the Federal Court and that he waives reconsideration of the assessment and the Min- itser consents, file a copy of the notice of objection with the Registrar of the Tax Review Board or in the Registry of the Federal Court, as the case may be,

and he shall thereupon notify the taxpayer of his action by registered mail.

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 reassessed, 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 confirmed the assessment or reassessed.

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.

(2) Where a taxpayer has served a notice of objection to an assessment under section 165, he may, in place of appealing to the Tax Review Board under section 169, appeal to the Federal Court of Canada at a time when, under section 169, he could have appealed to the Tax Review Board.

In this case, the three plaintiff taxpayers have purported to appeal direct to this Court under subsection 172(2). They have, according to the pleadings, complied with the 90-day period stipulated in section 169 inasmuch as the subject assessments were apparently confirmed by the defendant as contemplated by subsection 165(3) on July 7, 1972.

The matter of institution of appeals is covered by section 175 of the Act, the relevant portions of which are as follows:

175. (1) An appeal to the Federal Court under this Act . . . shall be instituted,

(a) in the case of an appeal by a taxpayer,

(i) in the manner set forth in section 48 of the Federal Court Act, . . .

(3) An appeal instituted under this section shall be deemed to be an action in the Federal Court to which the Federal Court Act and the Federal Court Rules applicable to an ordinary action apply, except as varied by special rules made in respect of such appeals, and except that

(a) the Rules concerning joinder of parties and causes of action do not apply except to permit the joinder of appeals instituted under this section;

Subsection 175(1) provides for appeals being instituted “in the manner set forth in section 48 of the Federal Court Act’’, which provision authorizes the institution of a proceeding against the Crown by a document in the form set out in Schedule A to that Act, and that Schedule provides for a Statement of Claim or declaration with the person launching the proceeding described as “plaintiff” and “Her Majesty the Queen” described as “defendant”. This Court has decided that the preferable procedure in income tax appeals under section 175 is to join “Her Majesty the Queen” as defendant rather than “The Minister of National Revenue”.* [1]

In the case at bar, the Minister of National Revenue is the defendant. This is not fatal to the sufficiency of subject Statement of Claim but I refer to it because it !s at variance with the now established procedure in this Court.

However, this Statement of Claim is, in my view, fatally defective because it does not comply with subsection 175(3) of the Act. Subsection 175(3) makes applicable to this procedure the Federal Court Rules excepting that said Rules concerning joinder of parties and causes of action do not apply except to permit the joinder of appeals instituted under section 175.

The applicable Federal Court Rules are Rules 1714 and 1715 which read as follows:

1714. (1) A plaintiff may in one action claim relief against the same defendant in respect of more than one cause of action

(a) if the plaintiff claims, and the defendant is alleged to be liable, in the same capacity in respect of all the causes of action, or

(b) with the leave of the Court.

(2) An application for leave under paragraph (1) may be made ex parte before commencement of the action.

1715. (1) Two or more persons may be joined together in one action as plaintiffs or as defendants with the leave of the Court or where

(a) if separate actions were brought by or against each of them, as the case may be, some common question of law or fact would arise in all the actions, or

(b) all rights to relief claimed in the action (whether they are joint, several or alternative) are in respect of or arise out of the same fact, matter or thing.

(2) Where the plaintiff in any action claims any relief to which any other person is entitled jointly with him, all persons so entitled shall, subject to the provisions of any Act and, unless the Court gives leave to the contrary, be made parties to the action and any of them who does not consent to being joined as a plaintiff shall, subject to any order made by the Court on an application for leave under paragraph (1), be made a defendant.

Were it not for the specific prohibition contained in subsection 175(3) of the Income Tax Act, it may well be that the plaintiffs here could bring themselves within the provisions of said Rules so as to permit several taxpayers to appeal their income tax assessments in one proceeding. However, reading subsection 175(3) with Rules 1714 and 1715 and taking said section in the context of the income tax statute as a whole, I have the view that each taxpayer must “institute” his appeal separate and apart from any other taxpayer. The scheme of the statute applies to separate taxation years and to separate taxpayers. Each assessment in each year is, it seems to me, a separate cause of action. The object of the appeal procedures set out in the Act is to obtain an adjudication of the issues which have arisen between a particular taxpayer and the Minister of National Revenue as to his liabilities under the statute for a particular taxation year.

I am therefore of the opinion that the three separate taxpayers in this case should have commenced separate appeals against the income tax assessments complained of. Once this were done and the Minister had pleaded thereto, and the pleadings were closed, I believe that paragraph 175(3)(a) would permit the appeals to be joined for the purposes of trial, if, as submitted by plaintiffs’ counsel, the three appeals depend on common facts and on the same legal issues.

I have therefore concluded that the present Statement of Claim cannot be allowed to stand and must be struck out. I reach this conclusion with some reluctance because the plaintiffs have very definitely indicated their intention to appeal the Minister’s assessments to this Court within the time limit prescribed by the Act and they should be given every opportunity to do so. However, their right to appeal is statutory and is contingent upon compliance with the conditions set out in that part of the statute conferring on them the right to appeal.

My decision to strike out this Statement of Claim would leave the plaintiffs in a difficult position because of the expiration of the 90-day appeal time limit under section 169 were it not for the relieving provisions of subsection 167(4) which read as follows:

167. (4) Where no appeal to the Federal Court of Canada under section 172 has been instituted within the time limited by that section, an application may be made to the Federal Court of Canada by notice filed in the Court and served on the Deputy Attorney General of Canada at least 14 days before the application is returnable for an order extending the time within which such appeal may be instituted and the Court may, if in its opinion the circumstances of the case are such that it would be just and equitable to do so, make an order extending the time for appealing and may impose such terms as it deems just.

This subsection enables the plaintiffs to make the application for extension of time contemplated thereunder provided the conditions set out in subsection 167(5) are complied with.

The Statement of Claim herein is therefore ordered to be struck out. No costs were asked for and, in the circumstances, I will make no order as to costs.