Humby v. Canada

Humby v. Canada
Court (s) Database
Federal Court Decisions
Date
2013-11-08
Neutral citation
2013 FC 1136
File numbers
T-1363-09
Decision Content
Date: 20131108
Docket:
T-1363-09
Citation: 2013 FC 1136
Ottawa, Ontario, November 8, 2013
PRESENT: The Honourable Mr. Justice Phelan
BETWEEN:
ELI HUMBY
First Plaintiff
and
CENTRAL SPRINGS LTD.
Second Plaintiff
and
A&E PRECISION FABRICATION AND MACHINE SHOP INC.
Third Plaintiff
and
HER MAJESTY THE QUEEN
First Defendant
and
HER MAJESTY THE QUEEN IN RIGHT OF NEWFOUNDLAND AND LABRADOR, AS REPRESENTED BY THE OFFICE OF THE HIGH SHERIFF
Second Defendant
REASONS FOR JUDGMENT AND JUDGMENT
I. INTRODUCTION
[1] This was an action against the 1st Defendant, in fact the Canada Revenue Agency [CRA], and the Office of the High Sheriff of Newfoundland and Labrador, the 2nd Defendant, in respect to the enforcement of tax judgments against the Plaintiffs. The allegations are wide sweeping but, properly focused, relate to the seizure and sale of real and personal property in Gander and Benton, Newfoundland and Labrador.
[2] This has not been an easy matter to decipher and these Reasons attempt to organize the case into recognizable issues. The Court is cognizant of the emotional toll that this decision may cause the principal plaintiff, Eli Humby, but neither he nor his companies are entitled to any of the relief claimed.
[3] The corporate Plaintiffs were assessed taxes for, among other matters, failure to remit the employees’ source tax deductions. The amounts were certified in the Federal Court and collection actions commenced. The tax assessments were confirmed in part. Therefore, the Plaintiffs owed tax moneys which were not paid. The 1st Defendant was entitled to collect; the 2nd Defendant acted on the seizure and sale of assets owned by the Plaintiffs.
[4] The Plaintiffs claim damages for what they say were the unlawful acts of the Defendants in enforcing the confirmed assessments.
[5] As this Court has found, the Defendants’ actions were lawful; the corporate Plaintiffs owed the money and failed to pay. Collection was authorized and carried out in accordance with the law.
II. FACTUAL BACKGROUND
[6] The 1st Plaintiff, Eli Humby [Humby], is a director and the ultimate controlling shareholder of Central Springs Ltd. [Central Springs], the 2nd Plaintiff, and A&E Precision Fabrication and Machine Shop Inc. [A&E], the 3rd Plaintiff. Humby holds the same position in respect of Humby Enterprises Limited [HEL] which is not a party but plays a critical role in the background to and genesis of this action.
[7] HEL was in the logging business, principally in central and western Newfoundland. In 2000 its logging contract to cut wood was not renewed. The effect of the loss of the right to cut wood was to reduce HEL’s income by 90%. HEL commenced legal action against Corner Brook Pulp and Paper and A.L. Struckless & Sons Ltd. It was ultimately unsuccessful in this litigation which concluded in 2003.
[8] Also in 2000, HEL failed to remit payroll deduction amounts and GST. Active collection steps by CRA began in 2001 including the issuance of a Requirement to Pay.
[9] Also relevant to this litigation is the medical evidence that in this period of 2000-2001 Humby began to suffer both physical and emotional issues related to the problems with his businesses.
[10] In 2001, Humby and his representatives indicated to both CRA and the Province of Newfoundland and Labrador that HEL was in a desperate position, “at the brink of financial ruin”, and that without some help from government was in significant financial difficulty.
[11] HEL asked the provincial government for forgiveness of taxes and an allocation of wood supply on Crown lands. Whatever the wood supply granted, it did not continue and HEL and Humby sued the Province for breach of a promise to supply wood. This litigation took until May 2005 to conclude.
While unsuccessful at trial and on appeal, Humby relied on his expected success to suggest to CRA that it ought not to take collection action during the course of the litigation.
[12] In 2001, there was considerable contact between Humby and CRA concerning the arrears in remittance of payroll deductions of both the employer’s and employees’ tax amounts.
[13] In late 2002, balances on the payroll deductions and HST accounts for HEL were certified in the Federal Court and registered with the Judgment Enforcement Registry for Newfoundland and Labrador. A series of further Certificates were issued over the relevant time. The effect of the Certificates is that of a judgment of the Federal Court which led to the issuance of Writs of Seizure and Sale directed to the Sheriff of Newfoundland and Labrador.
[14] Turning back in time (and largely based on the findings of Justice Boyle of the Tax Court of Canada in the decision Central Springs Ltd v Canada, 2010 TCC 543, [2010] TCJ No 412), in 1995 or 1996 Central Springs was incorporated and in 1998 or 1999 A&E was incorporated. These corporations were established because HEL had started to carry on related precision mechanics and metal manufacturing business utilizing HEL employees who were servicing large machinery and equipment used in its wood harvesting business.
[15] The related businesses were transferred over to A&E and Central Springs but initially all the employees continued as employees of HEL. Appropriate chargebacks were made by HEL to A&E and Central Springs.
[16] Part way through 2002, A&E and Central Springs became the employers for those workers needed for the respective businesses. A&E and Central Springs had the obligation of withholding and remitting to CRA for the small number of employees in the respective companies.
[17] As a result of field visits to 325 Garrett Drive in Gander (the headquarters for Humby’s corporations), Jerry Peddle [Peddle], a CRA tax collector, noted certain discrepancies in the source deduction account of HEL and of the corporate Plaintiffs.
[18] An Enhanced Requirement to Pay was issued during this period with respect to the payroll debts and CRA instructed the Sheriff to execute against a Timberjack Porter owned by HEL.
[19] There is a suggestion in the evidence that Peddle, who was the principal CRA official dealing with the Humby-related collection files, took umbrage with Humby’s attempt to sell the Timberjack “out from under” CRA. Whether that is the source of the animus between Humby and Peddle, it is evident from the oral and documentary evidence that Humby disliked Peddle and made every effort to have Peddle removed from his files including complaints to the Minister of National Revenue.
[20] In June 2003, the parties reached an agreement with respect to the tax debts of HEL and the corporate Plaintiffs. Under that agreement HEL, Central Springs and A&E were to keep all accounts current (including payroll and HST); CRA would not file further certificates and the tax debts would be paid off at the conclusion of Humby’s litigation in the Supreme Court of Newfoundland and Labrador related to the failure to obtain a wood supply.
[21] Although the agreement was never signed, David Taylor [Taylor], Peddle’s team leader and direct supervisor, believed that there was an agreement to hold off collection action on condition that HEL and the corporate Plaintiffs complied with the terms. CRA did hold off but no further payments were made pursuant to the agreement.
I conclude that there was an agreement, the parties relied on it and the Humby companies failed to respect its terms largely because it could not afford to do so.
[22] Humby alleges that at this June 2003 meeting Peddle used words to the effect that he was going “to take Humby down”. Donald Farrell [Farrell], Humby’s long-time accountant, seems to confirm that statement.
Robert Anstey, counsel to the Plaintiffs and present at that meeting, never confirmed that version of events. There is insufficient corroboration of this statement. Absent better evidence, I am not satisfied that those words or something similar were said despite what was clearly a growing antagonistic environment between Humby and Peddle.
[23] Peddle caused a trust audit examination which, in July 2003, resulted in assessments against A&E and Central Springs for failure to remit payroll deduction, interest and penalties in respect of the tax years 2001, 2002 and 2003.
These are the assessments which Justice Bowie of the Tax Court (Central Springs Ltd v Canada, 2006 TCC 524, [2006] TCJ No 414) determined had not been sent to the taxpayers and therefore allowed them to proceed with the Notice of Objection and appeal process.
[24] Over the period between July 2003 and June 2004, CRA was in communication with Humby about the growing arrears of HEL, Central Springs and A&E. This led to a meeting in June 2004 which Humby says did not take place.
[25] It is noted that Humby’s recollection of many events was frequently flawed. The evidence suggests that Humby is a changed man and his medical problems may explain his recall issues. The Court has been cautious in accepting his version of events.
[26] According to Peddle and Taylor, Winnie Humby – the office manager – was also present at the June 2004 meeting but she was never called. Despite Humby’s position, largely because Peddle wrote a synopsis of the meeting, I find that such a meeting occurred and that Peddle’s synopsis is the best evidence available.
[27] At the meeting Humby was advised of the amounts owing and the requirement to make a lump sum payment, failing which the amounts would be certified. Again, no payment was made.
[28] Subsequent to that meeting, CRA moved forward with certifying the debts of the corporate Plaintiffs. The debts of HEL had previously been certified and registered. Amounts were certified in the Federal Court and registered in the Judgment Enforcement Registry as follows:
Date of Certificate
Debtor
Amount
Act
Exhibit Reference
November 2002
HEL
$98,805.47
ITA
ID32
November 2002
HEL
$17,488.58
ETA
ID33
August 2004
Central
$18,663.61
ETA
ID27
August 2004
A&E
$16,668.42
ITA
ID28
August 2004
A&E
$2,046.14
ITA
ID29
December 2004
Central
$73,664.16
ITA
ID30
December 2004
A&E
$62,441.91
ITA
ID31
The last four entries relate to the failure to remit.
[29] In January 29, 2005, CRA began the enforcement actions which individually and cumulatively form a major basis for the Plaintiffs’ claim in this litigation. On that day Peddle instructed the Office of the High Sheriff to begin enforcement against the assets of HEL, A&E and Central Springs, by seizing and selling the equipment and inventory of all three companies.
[30] There is some question as to what precipitated the enforcement action. It was suggested that Peddle acted on information from a third party (a Mr. Mahoney who was never called) who was a competitor of Humby’s. The gist of the information allegedly received from Mr. Mahoney was that assets were being removed from the Garrett property in Gander.
[31] Messrs. Freake and Cross, Sheriff’s officers in Gander and Benton respectively, took charge of the operation. Freake testified and I find his evidence to be credible. Some aspects are lost in time and there may be some crossover of dates and who initiated which conversations with and within the High Sheriff’s Office but none of that undermines the veracity of his narrative.
On this point, Pauline Butler, now retired from the High Sheriff’s Office and the key connection between CRA and the High Sheriff, also testified. Her recollection was clear, dispassionate and entirely credible. Where there is a conflict or confusion between her evidence and any other witness’, I accept her evidence.
[32] At the time of the seizures in Gander, Humby reacted very emotionally, as he had throughout his dealings with CRA. He barricaded himself in his office, ordered everyone to leave the premises and locked the place down. There is no corrobative evidence that Humby or anyone acting for him removed any assets as CRA had believed.
[33] The following day, Freake, acting through instructions from Peddle, secured Bailee Undertakings from Humby, the effect of which was to allow the personal property to remain on site. The evidence is that the use of Bailee Undertakings in this type of situation is unusual. The usual practice is to seize personal property, and remove and store it off site.
[34] The letter of instructions to the High Sheriff’s Office from CRA required the execution of Bailee Undertakings, the taking of inventory and 24-hour security. Freake determined that insurance was in place. Humby agreed to these terms and any suggestion that he did not understand what he was doing must be rejected. There is no evidence that he lacked legal capacity and he had his counsel intimately involved in most, if not all, aspects of the dealings with CRA and the High Sheriff’s Office.
[35] On February 2, 2005, Plaintiffs’ counsel, Robert Anstey, wrote to the High Sheriff’s Office to obtain the release from seizure of the Benton property because it was not owned by the judgment debtors. Peddle instructed the High Sheriff to release the property and the Plaintiffs were informed that instructions to sell land and buildings at Benton were discontinued.
[36] On March 4, 2005, Butler instructed Freake to obtain an appraisal, not only of real property which is required under the Newfoundland Judgment Enforcement Act, SNL 1996, c J-1.1, but on the personal property as well. This was done so that the High Sheriff’s Office had some guidance on what it should be seeking by way of payment for the assets, even though such an appraisal is not required.
[37] On the same day, March 4, 2005, Anstey advised the Defendants that his clients could no longer afford to keep insurance on the buildings.
[38] During this period of February-April, the sale of assets was postponed by the High Sheriff, David Jones, with a new date to be set for the sale of personal property and the land at Garrett Drive. In a manner consistent with other seizures, issues of third party objections to the seizures of property over which third parties claimed ownership or interest therein were dealt with during this period as well.
[39] By late March, Butler recognized that there was a need to move the assets in Gander. There was no insurance, there was no electrical power and the Bailee Undertakings were in jeopardy. There were issues of access to the property which impacted the ability to take inventory.
[40] Although Humby objected to any moving of the property, he had no reasonable alternative to offer. The Defendants recognized the cost of moving and the problem of dismantling the assets, but also recognized that it would be impossible to sell assets from unheated, unpowered premises.
[41] On March 29, 2005, CRA instructed that the assets be moved. The High Sheriff’s Office proceeded with the move and with obtaining appraisals. This was not an easy task as appraisals came from local Grand Falls companies where the assets had been moved.
[42] At that time no one foresaw that it would take two years to complete the disposal of the assets. The responsibility for the delay cannot fairly be laid at the feet of either CRA or the High Sheriff’s Office. Humby continued to object to the sale of assets, to litigate and to impede the orderly disposition of the assets because he felt that the whole process was unjustified.
[43] In April 2005, the Plaintiffs filed proceedings in the Supreme Court of Newfoundland and Labrador challenging the executions in January 2005. The applications were adjourned and not resumed until 2006.
[44] In 2006, the Plaintiffs agreed with CRA that in exchange for the return of assets at Benton, Humby would sign a release on behalf of himself, HEL, Central Springs and A&E. That release was witnessed by Plaintiffs’ counsel in this action, Mr. Anstey.
[45] The Plaintiffs continued to object to the sale of assets in August 2005 and the sale was postponed in September.
[46] The sale of the seized assets of Central Springs and A&E occurred on June 28, 2006 by bids. The proceeds were not very far off the appraised value for those sold assets. Assets which did not attract over 75% of appraised value were not sold.
[47] Commencing in August 2005, the Plaintiffs filed Notices of Objection in respect to the payroll account assessments. Having been notified that the Notices were filed out of time, the Plaintiffs sought an extension of time from the Tax Court of Canada.
[48] On September 26, 2006, Justice Bowie ruled that CRA had not proven that the Notices of Assessment were sent and received and therefore the time for filing the Notices of Objection had not expired. This matter ultimately ended in the judgment of Justice Boyle of the Tax Court of Canada (Central Springs Ltd v Canada, 2006 TCC 524, [2006] TCJ No 414).
[49] On October 22, 2007, Justice Heneghan of this Court dismissed a motion by CRA to continue the seizure of property and sale of Central Springs’ property. A few days later the remaining unsold items were returned to the Plaintiffs.
[50] On March 13, 2006, CRA instructed the High Sheriff’s Office to sell the seized personal property. The real estate at Garrett Drive was not to be sold and has not been sold pursuant to the writs of executions.
[51] In December 2010, Justice Boyle of the Tax Court of Canada (Central Springs Ltd v Canada, 2010 TCC 543, [2010] TCJ No 412) clarified and amended his judgment in respect of the payroll deductions covered by the Notice of Objection for the years 2001-2003. The learned judge held that the assessments for 2001 and part of 2002 prior to the reorganization of employees and the “deemed employer” claim by CRA were not supported.
Of critical importance is that Justice Boyle found that the assessments for the remainder of 2002 and 2003 in respect to payroll deductions were valid and were confirmed.
[52] To complete the relevant facts, A&E was dissolved on August 26, 2008 and has not been revived.
The Plaintiffs’ Statement of Claim was filed August 17, 2009.
III. ANALYSIS
A. General
[53] Before proceeding with the legal basis for the Plaintiffs’ claim, it is important to set out some general and preliminary matters: the relevant tax provisions, issues of limitations and the dissolution of A&E.
(1) Tax Provisions
[54] Counsel for CRA sets out in her Written Submissions a helpful analysis of the relevant statutory provisions to which the Plaintiffs have no counter. The analysis is clear and has the added advantage of being correct. I adopt those submissions and summarize them in the following paragraphs.
[55] Section 225.1 of the Income Tax Act, RSC, 1985, c 1 (5th Supp) [ITA] limits, with certain exceptions, the Minister’s right to recover unpaid taxes where the taxpayer disputes his assessed amounts and an impartial hearing has not been concluded.
225.1 (1) If a taxpayer is liable for the payment of an amount assessed under this Act, other than an amount assessed under subsection 152(4.2), 169(3) or 220(3.1), the Minister shall not, until after the collection-commencement day in respect of the amount, do any of the following for the purpose of collecting the amount:
(a) commence legal proceedings in a court,
(b) certify the amount under section 223,
(c) require a person to make a payment under subsection 224(1),
(d) require an institution or a person to make a payment under subsection 224(1.1),
(e) [Repealed, 2006, c. 4, s. 166]
(f) require a person to turn over moneys under subsection 224.3(1), or
(g) give a notice, issue a certificate or make a direction under subsection 225(1).
(1.1) The collection-commencement day in respect of an amount is
(a) in the case of an amount assessed under subsection 188(1.1) in respect of a notice of intention to revoke given under subsection 168(1) or any of subsections 149.1(2) to (4.1), one year after the day on which the notice was mailed;
(b) in the case of an amount assessed under section 188.1, one year after the day on which the notice of assessment was sent; and
(c) in any other case, 90 days after the day on which the notice of assessment was sent.
(2) If a taxpayer has served a notice of objection under this Act to an assessment of an amount payable under this Act, the Minister shall not, for the purpose of collecting the amount in controversy, take any of the actions described in paragraphs (1)(a) to (g) until after the day that is 90 days after the day on which notice is sent to the taxpayer that the Minister has confirmed or varied the assessment.
(3) Where a taxpayer has appealed from an assessment of an amount payable under this Act to the Tax Court of Canada, the Minister shall not, for the purpose of collecting the amount in controversy, take any of the actions described in paragraphs 225.1(1)(a) to 225.1(1)(g) before the day of mailing of a copy of the decision of the Court to the taxpayer or the day on which the taxpayer discontinues the appeal, whichever is the earlier.
(4) Where a taxpayer has agreed under subsection 173(1) that a question should be determined by the Tax Court of Canada, or where a taxpayer is served with a copy of an application made under subsection 174(1) to that Court for the determination of a question, the Minister shall not take any of the actions described in paragraphs 225.1(1)(a) to 225.1(1)(g) for the purpose of collecting that part of an amount assessed, the liability for payment of which will be affected by the determination of the question, before the day on which the question is determined by the Court.
(5) Notwithstanding any other provision in this section, where a taxpayer has served a notice of objection under this Act to an assessment or has appealed to the Tax Court of Canada from an assessment and agrees in writing with the Minister to delay proceedings on the objection or appeal, as the case may be, until judgment has been given in another action before the Tax Court of Canada, the Federal Court of Appeal or the Supreme Court of Canada in which the issue is the same or substantially the same as that raised in the objection or appeal of the taxpayer, the Minister may take any of the actions described in paragraphs 225.1(1)(a) to 225.1(1)(g) for the purpose of collecting the amount assessed, or a part thereof, determined in a manner consistent with the decision or judgment of the Court in the other action at any time after the Minister notifies the taxpayer in writing that
(a) the decision of the Tax Court of Canada in that action has been mailed to the Minister,
(b) judgment has been pronounced by the Federal Court of Appeal in that action, or
(c) judgment has been delivered by the Supreme Court of Canada in that action,
as the case may be.
(6) Subsections 225.1(1) to 225.1(4) do not apply with respect to
(a) an amount payable under Part VIII;
(b) an amount required to be deducted or withheld, and required to be remitted or paid, under this Act or the Regulations;
(c) an amount of tax required to be paid under section 116 or a regulation made under subsection 215(4) but not so paid;
(d) the amount of any penalty payable for failure to remit or pay an amount referred to in paragraph 225.1(6)(b) or 225.1(6)(c) as and when required by this Act or a regulation made under this Act; and
(e) any interest payable under a provision of this Act on an amount referred to in this paragraph or any of paragraphs 225.1(6)(a) to 225.1(6)(d).
(7) If an amount has been assessed under this Act in respect of a corporation for a taxation year in which it was a large corporation, or in respect of a particular amount claimed under section 110.1 or 118.1 where the particular amount was claimed in respect of a tax shelter, then subsections (1) to (4) do not limit any action of the Minister to collect
(a) at any time on or before the particular day that is 90 days after the day of the sending of the notice of assessment, 1/2 of the amount so assessed; and
(b) at any time after the particular day, the amount, if any, by which the amount so assessed exceeds the total of
(i) all amounts collected before that time with respect to the assessment, and
(ii) 1/2 of the amount in controversy at that time.
(8) For the purposes of this section and section 235, a corporation (other than a corporation described in subsection 181.1(3)) is a “large corporation” in a particular taxation year if the total of the taxable capital employed in Canada of the corporation, at the end of the particular taxation year, and the taxable capital employed in Canada of any other corporation, at the end of the other corporation’s last taxation year that ends at or before the end of the particular taxation year, if the other corporation is related (within the meaning assigned for the purposes of section 181.5) to the corporation at the end of the particular taxation year, exceeds $10 million, and, for the purpose of this subsection, a corporation formed as a result of the amalgamation or merger of 2 or more predecessor corporations is deemed to be the same corporation as, and a continuation of, each predecessor corporation.
225.1 (1) Si un contribuable est redevable du montant d’une cotisation établie en vertu des dispositions de la présente loi, exception faite des paragraphes 152(4.2), 169(3) et 220(3.1), le ministre, pour recouvrer le montant impayé, ne peut, avant le lendemain du jour du début du recouvrement du montant, prendre les mesures suivantes :
a) entamer une poursuite devant un tribunal;
b) attester le montant, conformément à l’article 223;
c) obliger une personne à faire un paiement, conformément au paragraphe 224(1);
d) obliger une institution ou une personne visée au paragraphe 224(1.1) à faire un paiement, conformément à ce paragraphe;
e) [Abrogé, 2006, ch. 4, art. 166]
f) obliger une personne à remettre des fonds, conformément au paragraphe 224.3(1);
g) donner un avis, délivrer un certificat ou donner un ordre, conformément au paragraphe 225(1).
(1.1) Le jour du début du recouvrement d’un montant correspond :
a) dans le cas du montant d’une cotisation établie en vertu du paragraphe 188(1.1) relativement à un avis d’intention de révoquer l’enregistrement délivré en vertu du paragraphe 168(1) ou l’un des paragraphes 149.1(2) à (4.1), un an après la date de mise à la poste de l’avis d’intention;
b) dans le cas du montant d’une cotisation établie en vertu de l’article 188.1, un an après la date d’envoi de l’avis de cotisation;
c) dans les autres cas, 90 jours suivant la date d’envoi de l’avis de cotisation.
(2) Dans le cas où un contribuable signifie en vertu de la présente loi un avis d’opposition à une cotisation pour un montant payable en vertu de cette loi, le ministre, pour recouvrer la somme en litige, ne peut prendre aucune des mesures visées aux alinéas (1)a) à g) avant le quatre-vingt-onzième jour suivant la date d’envoi d’un avis au contribuable où il confirme ou modifie la cotisation.
(3) Dans le cas où un contribuable en appelle d’une cotisation pour un montant payable en vertu de la présente loi, auprès de la Cour canadienne de l’impôt, le ministre, pour recouvrer la somme en litige, ne peut prendre aucune des mesures visées aux alinéas (1)a) à g) avant la date de mise à la poste au contribuable d’une copie de la décision de la cour ou la date où le contribuable se désiste de l’appel si celle-ci est antérieure.
(4) Dans le cas où un contribuable convient de faire statuer conformément au paragraphe 173(1) la Cour canadienne de l’impôt sur une question ou qu’il est signifié au contribuable copie d’une demande présentée conformément au paragraphe 174(1) devant la Cour canadienne de l’impôt pour qu’elle statue sur une question, le ministre, pour recouvrer la partie du montant d’une cotisation, dont le contribuable pourrait être redevable selon ce que la cour statuera, ne peut prendre aucune des mesures visées aux alinéas (1)a) à g) avant la date où la cour statue sur la question.
(5) Malgré les autres dispositions du présent article, lorsqu’un contribuable signifie, conformément à la présente loi, un avis d’opposition à une cotisation ou en appelle d’une cotisation devant la Cour canadienne de l’impôt et qu’il convient par écrit avec le ministre de retarder la procédure d’opposition ou la procédure d’appel jusqu’à ce que la Cour canadienne de l’impôt, la Cour d’appel fédérale ou la Cour suprême du Canada rende jugement dans une autre action qui soulève la même question, ou essentiellement la même, que celle soulevée dans l’opposition ou l’appel par le contribuable, le ministre peut prendre les mesures visées aux alinéas (1)a) à g) pour recouvrer tout ou partie du montant de la cotisation établi de la façon envisagée par le jugement rendu dans cette autre action, à tout moment après que le ministre a avisé le contribuable par écrit que, selon le cas :
a) le jugement de la Cour canadienne de l’impôt dans l’action a été posté au ministre;
b) la Cour d’appel fédérale a rendu jugement dans l’action;
c) la Cour suprême du Canada a rendu jugement dans l’action.
(6) Les paragraphes (1) à (4) ne s’appliquent pas :
a) aux montants payables en application de la partie VIII;
b) aux montants à déduire ou à retenir, et à remettre ou à payer, en application de la présente loi ou de son règlement;
c) à l’impôt à payer en application de l’article 116 ou d’un règlement d’application du paragraphe 215(4) et qui n’a pas encore été payé;
d) aux pénalités payables pour défaut de remettre ou de payer un montant visé à l’alinéa b) ou c) de la manière et dans le délai prévus à la présente loi ou à sone règlement;
e) aux intérêts payables en application de la présente loi sur l’un des montants visés au présent alinéa ou aux alinéas a) à d).
(7) Lorsqu’une cotisation est établie en vertu de la présente loi relativement à une société pour une année d’imposition au cours de laquelle elle est une grande société ou relativement à une somme qui est déduite en application des articles 110.1 ou 118.1 et qui a été demandée relativement à un abri fiscal, les paragraphes (1) à (4) n’ont pas pour effet de limiter les mesures que le ministre peut prendre pour recouvrer :
a) à tout moment jusqu’au quatre-vingt-dixième jour suivant la date d’envoi de l’avis de cotisation, la moitié du montant de la cotisation ainsi établie;
b) à tout moment après le 90e jour suivant la date de mise à la poste de l’avis de cotisation, l’excédent éventuel du montant de la cotisation ainsi établie sur le total des montants suivants :
(i) les montants recouvrés avant ce moment relativement à la cotisation,
(ii) la moitié de la somme en litige à ce moment.
(8) Pour l’application du présent article et de l’article 235, une société, sauf celle visée au paragraphe 181.1(3), est une « grande société » au cours d’une année d’imposition donnée si le total de son capital imposable utilisé au Canada, à la fin de cette année, et du capital imposable utilisé au Canada de toute autre société, à la fin de la dernière année d’imposition de celle-ci se terminant au plus tard à la fin de l’année donnée, qui est liée (au sens de l’article 181.5) à la société en cause à la fin de l’année donnée, excède 10 000 000 $. Pour l’application du présent paragraphe, la société issue de la fusion ou de l’unification de plusieurs sociétés remplacées est réputée être la même société que chacune de ces sociétés et en être la continuation.
[56] Subsection 225.1(1) of the ITA provides that, with certain exceptions, the Minister shall not take any of the listed collection actions against a taxpayer until after the day that is 90 days after the day that a Notice of Assessment (or Reassessment) is mailed to the taxpayer, or if the taxpayer files a notice of objection or an appeal of the assessment, until the objection or appeal has been dealt with finally. These listed collection actions are:
(a) commence legal proceedings in a court;
(b) certify the amount under section 223;
(c) require a person to make a payment under subsection 224(1);
(d) require an institution or a person to make a payment under subsection 224(1.1);
(e) require a person to turn over moneys under subsection 224.3(1); or
(f) give a notice, issue a certificate or make a direction under subsection 225(1).
[57] It should be noted that the collections restrictions found in subsection 225.1(1) of the ITA exclude the issuance of a requirement to make a payment under subsection 224(1.2) of the ITA, which is often referred to as the “enhanced garnishment” provisions of the ITA. In addition, exceptions to subsection 225.1(1) of the ITA are found in subsection 225.1(6) of the ITA. In effect, the 90-day collection restriction does not apply in respect of the employees’ deductions from payroll of the amount for withholding and remission to CRA; a critical matter in this case.
[58] Paragraph 225.1(6)(b) is important to this litigation:
225.1 (6) Subsections 225.1(1) to 225.1(4) do not apply with respect to
…
(b) an amount required to be deducted or withheld, and required to be remitted or paid, under this Act or the Regulations;
225.1 (6) Les paragraphes (1) à (4) ne s’appliquent pas :
…
b) aux montants à déduire ou à retenir, et à remettre ou à payer, en application de la présente loi ou de son règlement;
[59] As a result of paragraph 225.1(6)(b) of the ITA, source deductions (payroll amounts) which are required to be deducted or withheld and remitted pursuant to subsection 153(1) and Regulation 101 of the ITA, are not subject to the collections restrictions imposed by subsection 225.1(1) of the ITA. In addition, penalties and interest payable as a result of the failure to remit an amount referred to in paragraph 225.1(6)(b) are also not the subject of collections restrictions.
[60] Amounts deducted or withheld pursuant to subsection 153(1) of the ITA are deemed held in trust for Her Majesty pursuant to subsection 227(4) of the ITA.
[61] There are no collections restrictions with respect to amounts collected and not remitted under the Excise Tax Act, RSC 1985, c E-15 [ETA] pursuant to section 315 of the ETA. Such amounts are deemed held in trust for Her Majesty pursuant to subsection 222(1) of the ETA.
[62] An assessment is deemed to be valid and binding notwithstanding an error, defect or omission in the assessment or in any proceeding under the ITA relating thereto, subject to being varied or vacated at objection or appeal pursuant to subsection 152(8) of the ITA. A taxpayer’s liability for tax is not affected by an incorrect or incomplete assessment or by the fact that no assessment has been made.
[63] The net effect of these provisions is that in respect of the employees’ deduction from payroll of the amount for withholding and remission to CRA, CRA can take collection action immediately and does not have to wait the 90-day period otherwise generally preventing CRA enforcement action.
[64] The policy behind this result is that the money for the employees’ tax liability is their money not the employers. The employee remains liable for his/her taxes and the failure of an employer to remit becomes a disguised form of employee financing for the employer.
[65] The situations which usually give rise to this trust relationship and the ability of CRA to move quickly are those where there are third party claims against an employer and both the government and the employee need to be protected. However, that does not preclude the type of situation here where CRA may move to collect immediately despite the absence of third party claimants against the assets of the employer.
[66] The extent to which CRA can combine other tax liabilities which have collection restrictions in the same assessment with employee deductions which do not and thereby seize assets immediately which it might otherwise not be able to do is an interesting but, in this case, theoretical issue as referred to later in these Reasons.
(2) Dissolution of A&E
[67] On August 26, 2008, before the Statement of Claim was issued, A&E was dissolved pursuant to section 331 of the Newfoundland Corporations Act, RSNL 1990, c C-36, as evidenced by a certificate of dissolution dated on that day. Pursuant to subsection 331(4) of that Corporations Act, A&E ceased to exist on that day.
331. (4) A body corporate is revived on the date shown on the certificate of revival, and afterward the body corporate, subject to the reasonable terms that may be imposed by the registrar and in the case of an insurance company the Superintendent of Insurance and to the rights acquired by a person after its dissolution, has the rights and privileges and is liable for the obligations that it would have had if it had not been dissolved.
[68] While no Newfoundland authority was cited to me as to the effect of dissolution on a later filed action in the dissolved corporation’s name, the finding in Swale Investments Ltd v National Bank of Greece (Canada), [1997] OJ No 4997, 51 OTC 144, sets out the applicable legal principle that the dissolved corporation, ceasing to exist, cannot bring an action. The action is a nullity.
[69] There is no evidence that the corporation was revived. Therefore, the action, as far as it relates to A&E, is a nullity and any claim would be dismissed on this ground alone.
(3) Limitation Periods
[70] Both Defendants raise the provincial Limitations Act, SNL 1995, c L-16.1 as grounds to dismiss some of the causes of action pleaded.
[71] The federal Crown Liability and Proceedings Act, RSC, 1985, c C-50, incorporates the provincial limitations of actions law in force in the province in which the cause(s) of action arose. Newfoundland and Labrador is the applicable limitations regime.
[72] While it is sometimes difficult to determine with precision what causes of action are claimed, at least some fall within paragraphs 5(a), (c), (d) and (g) of the provincial Limitations Act.
5. Following the expiration of 2 years after the date on which the right to do so arose, a person shall not bring an action
(a) for damages in respect of injury to a person or property, including economic loss arising from the injury whether based on contract, tort or statutory duty;
(b) for damages in respect of injury to person or property including economic loss arising from negligent misrepresentation and professional negligence whether based on contract, tort or statutory duty;
(c) for trespass to property not included in paragraph (a);
(d) for defamation other than defamation referred to in section 17 of the Defamation Act;
(e) for false imprisonment;
(f) for malicious prosecution;
(g) for conspiracy to commit a wrong referred to in paragraphs (a) to (e);
(h) which is a civil action, to recover a fine or other penalty and to recover a fine or penalty imposed by a court or law;
(i) under the Fatal Accidents Act; or
(j) under the Privacy Act.
[73] Sections 6 and 7 of that Act set limitation periods of six and ten years for other actions. The most pertinent is paragraph 6(a) which establishes a limitation period of six years for causes of action related to damages for conversion or detention of goods.
[74] The Plaintiffs plead jurisdictional grounds such as the lack of authority of CRA to take any action, the prematurity of authorized action by CRA, unreasonable conduct, and bad faith. This aspect of the Plaintiffs’ action is not subject to the provincial Limitations Act. These are not claims of breach of statutory duty as much as they are claims of absence of jurisdiction or exceeding of jurisdiction.
[75] However, the Plaintiffs do claim in defamation, and in negligence and with respect to the High Sheriff’s Office’s breach of statutory duty, all of which are caught by the two-year limitation. To the extent that the Plaintiffs’ claim is grounded as well in intentional tort and civil conspiracy, these two claims are caught by the two-year limitation period. Therefore, all of this part of the Plaintiffs’ action would be dismissed on grounds of limitation period. In addition, for reasons to follow, they are dismissed on their merits.
[76] The CRA owes no specific