Digests

Gibson v. Canada

T-958-03

2004 FC 809, Mosley J.

4/6/04

13 pp.

Judicial review in respect of any action or prospective action to be taken by Canada Customs and Revenue Agency (CCRA) to collect any tax, including interest and penalties, alleged to be owing by applicant for 1990, 1991 taxation years-- Applicant seeking declaration CCRA prohibited due to expiry of certain limitation periods from taking collection action against him for tax debts allegedly owing for 1990, 1991 taxation years--CCRA took no action to collect debts owing by applicant between December 1992, when it first issued notices of assessment, and November 1999, when it first responded to applicant's March 2, 1999 request to carry back business losses--Applicant to date has not paid any part of outstanding amounts--Whether CCRA statute barred, pursuant to either Crown Liability Proceedings Act (CLPA), s. 32 or former Limitations Act (LA), s. 45, from taking tax collection action against applicant--Pursuant to reasoning of majority in Markevich v. Canada, [2003] 1 S.C.R. 94, applicant's alleged federal tax debt arises pursuant to federal legislation (Income Tax Act (ITA)), and creates rights and duties between federal Crown and residents of Canada or those who have earned income within Canada--According to majority in Markevich, cause of action for such federal tax debt arises "otherwise than in a province", for purposes of CLPA, s. 32, and six-year limitation period provided in s. 32 applies, rather than provincial limitation legislation, for tax debts accrued pursuant to federal legislation--Determination of when cause of action arose in relation to federal tax debt governed by ITA, s. 225.1(1)--Notice of assessment for applicant's 1990 taxation year dated December 18, 1992, and notice of assessment for 1991 taxation year dated December 29, 1992--Pursuant to ITA, s. 225.1(1), CCRA restricted from taking collection action until 90 days after mailing of these notices of assessment--Therefore, when s. 225.1(1) read in combination with six-year limitation period set out in CLPA, s. 32, CCRA required to take collection action against applicant by March 18 and 29, 1999, for respective 1990, 1991 tax debts--Examples of situations in which s. 32 limitation period could be renewed or extended in context of tax collection by CCRA set out in Markevich distinguished-- March 2, 1999 request not express acknowledgment of tax debt claimed to be owing--Nothing in either brief cover letter from applicant or in forms signed by applicant requesting loss carry-back indicating acknowledgment of debt--Even if viewed as implied acknowledgment of indebtedness, letter cannot have effect of extending limitation period provided in CLPA, s. 32--In order to benefit from extension of such prescription, CCRA must demonstrate, with some positive step on its part, that it is following through with collection action within limitation period--Only in such manner is due diligence rationale with respect to limitation periods respected --Absent express acknowledgment by taxpayer, or some sort of concrete step initiated by CCRA in collection process, limitation period will not be renewed--Permitting CCRA to benefit from extended limitation period, when it took no action to preserve its rights to collect debt owing, not furthering underlying objectives of limitations provisions, i.e. to bring certainty to individuals so they can know whether old obligations will be addressed, to avoid proceedings based on stale evidence and to encourage due diligence on part of suing party--M.N.R. not pursuing one of "numerous avenues" available to it under ITA to demonstrate "minimum diligence" in taking action on collection of tax debts owed by applicant (Markevich)--As to applicability of Ontario's limitation legislation to applicant's provincial tax debt, Supreme Court in Markevich held federal Crown's right to collect provincial taxes must be delegated by province and collection of such subject to provincial limitation period legislation--Pursuant to Ontario's Income Tax Act (OITA), s. 49 and clause 1 of Memorandum of Agreement between Province of Ontario and Government of Canada in relation to tax matters, Ontario provincial government authorized Canada to collect tax debts as agent of province--Having regard to Markevich, Ontario's former LA and Limitations Act, 2002, federal Minister now precluded from collecting provincial tax debt allegedly owed by applicant for taxation years 1990, 1991--Limitations Act, 2002, s. 16(1)(i) provides that no limitation period for procee-ding to recover money owing to Crown in respect of fines, taxes and penalties, or interest added to tax or penalty under an Act--Here, former limitation period expired prior to effective date of new legislation, namely January 1, 2004-- Limitations Act, 2002, s. 24(3) (transitional provisions) therefore applicable to applicant's situation--Under former LA, s. 45(1)(h), CCRA had to commence collection action within two years after cause of action arose--Action for provincial tax debt had to be commenced within two years of March 18, 1993, and March 29, 1993 for 1990 and 1991 tax debts respectively (90 days beyond date of notices of assessment for each tax year in question)--Such time expired even prior to applicant's March 2, 1999 letter, therefore issue of extension of limitation period not arising with respect to provincial tax debt, and respondent statute barred from collecting provincial tax debt--CCRA statute barred from initiating or carrying through any action for collection against applicant of any federal and provincial tax debt allegedly owing by applicant for 1990, 1991 taxation years--Crown Liability and Proceedings Act, R.S.C., 1985, c. C-50, s. 32 (as am. by S.C. 1990, c. 8, s. 31)--Limitations Act, R.S.O., 1990, c. L.15, s. 45--Limitations Act, S.O. 2002, c. 24, Sch. B., ss. 16, 24(3)--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 225.1(as am. by S.C. 1998, c. 19, s. 225)--Income Tax Act, R.S.O., 1990, c. I.2, s. 49 (as am. by S.O. 1993, c. 29, s. 2; 1999, c. 9, s. 131; 2004, c. 31, s. 17).