October 07, 2011

Deanne Ho-A-Shoo (Plaintiff) v. Attorney General of Canada, and the Minister of National Revenue (Defendants)

2000 DTC 6293
Ontario Superior Court of Justice
February 2, 2000

(Court File No. 99-CV-172125.)

Assessments — Interest — Taxpayer paying unassessed interest — Whether Minister statutorily entitled to collect unassessed interest from taxpayer — Whether taxpayer’s action in the Ontario Superior Court of Justice for the recovery of such unassessed interest should be dismissed on the Minister’s motion — Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, as amended, ss. 152, 160(1), 160(2), 161(1), 169 and 171.

From 1981 to 1984, gifts had allegedly been made to the taxpayer by a corporation (“Georgetown”) controlled by her father. Such gifts gave rise to an outstanding tax liability on Georgetown’s part. In 1992, the Deputy Minister issued four assessments against the taxpayer under the vicarious liability provisions of section 160 of the Act. Two of such assessments were superceded by two others, and the taxpayer appealed from these to the Tax Court of Canada. Following a negotiated settlement, the Minister issued two new reassessments to implement the consent judgment. In a letter of November 20, 1996, the Deputy Minister wrote to the taxpayer asking that the assessed interest shown in these reassessments be paid. However, the payment of unassessed interest accruing after July 19, 1993 was also requested. The taxpayer paid all amounts of assessed and unassessed interest as requested. She later instituted proceedings in the Ontario Superior Court of Justice for the recovery of the unassessed interest, alleging that it had been paid under compulsion and by mistake. The Minister brought a motion seeking to have the taxpayer’s action dismissed, alleging that it was an abuse of process, that the Court was without jurisdiction to hear it, or, in the alternative, that the Court should decline to hear it.

Held: The Minister’s motion was dismissed. The taxpayer’s claim related to unassessed interest. However, to claim interest, there must be a charging provision in the Act. Section 161 provides this authority in respect of tax payable. The amount payable by a transferee under section 160, however, is fixed by the “liability limit”, and is not “tax”. Rather, it is simply a debt owing to the Crown. Hence, section 161 does not afford the Minister the authority to levy interest in respect of this debt because the debt is not “tax” . As for the Minister’s motion, the issue of the Minister’s statutory authority to impose interest had not been canvassed before the Tax Court of Canada. The consent judgment, moreover, did not authorize the collection of unassessed interest. As a result, the Minister could not rely on the doctrine of issue estoppel in an attempt to have the taxpayer’s action dismissed as an abuse of process. As for the Superior Court’s jurisdiction, the taxpayer’s claim to recover unassessed interest was properly characterized as a cause of action for unjust enrichment and restitution. Such a claim was a separate cognizable cause of action not falling within the exclusive jurisdiction of the Federal Court of Canada (despite the taxpayer’s contention to the contrary). As a provincial court of general jurisdiction, moreover, the Ontario Superior Court of Justice was bound to take cognizance of all laws, whether enacted by Parliament or a provincial legislature. Hence the Minister could not oust the jurisdiction of the Ontario Superior Court of Justice by alleging that the Tax Court of Canada had jurisdiction, or that the Federal Court of Canada had exclusive jurisdiction. Finally, there were significant procedural advantages to the Ontario Superior Court of Justice retaining jurisdiction in this situation, given that it was in the nature of a class proceeding. Provided that the taxpayer’s action could meet the several prerequisite criteria for certification as a class proceeding, therefore, there was merit to the Ontario Superior Court of Justice retaining jurisdiction. Hence, the discretion to refuse jurisdiction should not be exercised. In light of all of the foregoing, the Minister’s motion to dismiss the action or to stay the proceedings was denied.