Mahoney, J.A.:—This is an appeal from a judgment of the Trial Division which, on a preliminary argument, dismissed the appellant's action for declaratory relief without hearing evidence. That judgment is reported [[1990] 1 C.T.C. 71; 90 D.T.C. 6080] so it is unnecessary that we recite the background facts. The prayer for relief, not recited by the learned trial judge, is set out in abridged form in the appendix to these reasons.
This case is to be distinguished from this Court's decisions in M.N.R. v. Parsons, [1984] C.T.C. 352; 84 D.T.C. 6345 and Optical Recording Laboratories v. Canada, [1990] 2 C.T.C. 524; 90 D.T.C. 6647 because the validity of the assessment is not challenged here. In each of those cases, the issue as to liability for income tax depended on the alleged invalidity of the assessment. In such a case, we have no doubt, the denial of liability can only be litigated by an appeal against the assessment as provided by the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the"Act").
We are all of the view that the learned trial judge erred in characterizing this action for declaratory relief as an appeal against the assessment in issue. Rather, many of the declarations sought are to the effect that, in law, the debt confirmed by the assessment has been extinguished.
An action for declaratory relief does not entirely fail simply because some of the declarations sought may not be available. It follows that, whatever he might properly have done as to specific declarations claimed had it been sought to strike them, the trial judge erred by entirely dismissing the action on the basis that the issues could have been dealt with by way of an appeal against the assessment and that the Trial Division was, therefore, without jurisdiction to entertain it.
The appeal will be allowed with costs. Pursuant to subparagraph 52(b)(ii) of the Federal Court Act, R.S.C. 1985, c. F-7, the matter will be referred back to the Trial Division for a new trial.
Appendix
98. Therefor the Plaintiff seeks from this Honourable Court one or more of the following declarations, that is to say, a declaration that:
(1) The receipt by the Defendant's agents, servants, employees or officials of the bank guarantee payable on demand was tantamount to payment of the income tax balances reflected in the Notice of Reassessment dated November 10, 1983 and in the Notice of Reassessment dated January 29, 1985;
(2) The making of the demand for payment upon the Bank of Montreal on September 13, 1984 pursuant to the bank guarantee and Revenue Canada's decision not to accept payment, as between the Plaintiff and Defendant, constituted payment of the Reassessment amount or the amount claimed;
(3) By making a demand for payment pursuant to the bank guarantee on September 13, 1984 and choosing not to accept payment or cash but rather a renewal of the guarantee, the Defendant by Her agents etc. accepted all risks for so doing and effectively waived any recourse it might have against the Plaintiff and/or released or discharged the Plaintiff from any liability for or the payment of the Reassessment amount or the amount claimed;
(4) The receipt by the Defendant's agents etc. of the bank guarantee was tantamount to the payment of the income tax balances reflected in [the said Notices of Reassessment] subject to a condition, namely demand, over which the Defendant, Her agents etc. had the entire control,which demand the Defendant through the default of Her agents etc. failed to make prior to the expiry of the bank guarantee as a result of which the Plaintiff is relieved from paying the [said] income tax balances;
(5) The Defendant by Her agents etc. recognized The Dale Corporation as the person responsible for the payment of the [said] income tax balances and did thereby waive any recourse it may have had against the Plaintiff for the payment of the [said] income tax balances;
(6) The Defendant by Her agents etc. recognized [Dale] as the person responsible for the payment of the [said] income tax balances and did thereby release the Plaintiff from any liability for the payment of the [said] income tax balances;
(7) The Defendant, by Her agents etc. recognized [Dale] as the person responsible for the payment of the [said] income tax balances and entered negotiations and arrangements with [Dale] to the exclusion of the Plaintiff and did thereby waive any recourse it may have had against the Plaintiff for the payment of the [said] income tax balances;
(8) The Defendant, by Her agents etc. recognized [Dale] as the person responsible for the payment of the [said] income tax balances and entered negotiations and arrangements with [Dale] to the exclusion of the Plaintiff and did thereby release the Plaintiff from any liability for the payment of the [said] income tax balances;
(9) The Defendant, by Her agents etc. knew or ought to have known that the Plaintiff would rely on the conduct of the Defendant's agents etc. and based thereon would not pursue the court action which it had commenced against [Dale] to the Plaintiff's detriment and accordingly, the Defendant, Her agents etc. are estopped from acting upon [the said Notices of Reassessment];
(10) The Defendant, by Her agents etc. knew or ought to have known that the Plaintiff would rely on [their] conduct and based thereon would not pursue the court action which it had commenced against [Dale] to the Plaintiff's detriment and accordingly, the Plaintiff is relieved from paying the [said] income tax balances;
(11) The Defendant by Her agents etc. was trustee of the bank guarantee for the Plaintiffs benefit and failed to exercise that trusteeship in the manner of a reasonable and prudent trustee, and accordingly, the Defendant, Her agents etc. are estopped from acting upon [the said Notices of Reassessment];
(12) The Defendant by Her Agents etc. was trustee of the bank guarantee for the Plaintiff’s benefit and failed to exercise that trusteeship in the manner of a reasonable and prudent trustee, and accordingly, the Plaintiff is relieved from paying the [said] income tax balances;
(13) Revenue Canada had an equitable obligation as a fiduciary to handle the bank guarantee in a manner beneficial to the Plaintiff which obligation it breached, and accordingly, the Plaintiff is relieved from paying the [said] income tax balances;
(14) The Defendant by Her agents etc. owed a duty to the Plaintiff to carefully handle the bank guarantee, which duty, to the Plaintiff's detriment, they failed to perform, and accordingly, the Plaintiff is relieved from paying the [said] income tax balances;
(15) For the reasons stated in paragraphs (1) to (8) and paragraphs (13) and (14) above, the Defendant, Her agents etc. are estopped from acting on [the said Notices of Reassessment] to the Plaintiff's prejudice.
Appeal allowed and referred back to the Federal Court-Trial Division.