Tax Court considers legal capacity of undischarged bankrupt to commence or continue appeal

In Paul L. Schnier v. Her Majesty the Queen, the Tax Court of Canada dismissed the motion brought by the Respondent under Rule 53(3)(c) of the Tax Court of Canada Rules (General Procedure) to quash the appeal on the basis that the Appellant, who was an undischarged bankrupt at the time of filing his Notice of Appeal, had failed to obtain permission of the trustee in bankruptcy at the outset to initiate the appeal.

Justice Bocock determined that an appeal before the Tax Court is a thing in action, and therefore property within the meaning of the Bankruptcy and Insolvency Act (the “BIA”).  Accordingly, pursuant to section 71 of the BIA, a bankrupt has no capacity to deal with his appeal without the action or consent of the trustee in bankruptcy.  However, Justice Bocock held that the Tax Court’s discretion to quash an appeal should not be used lightly and that an undischarged bankrupt may gain legal capacity by obtaining from the trustee in bankruptcy an after-the-fact expression of prior consent to commence the appeal or a permission to continue the appeal.


Prepared by: Florence Sauve

Florence Sauve is a partner in the Toronto office of Thorsteinssons LLP. Florence’s practice focuses on all aspects of taxpayer representation and tax litigation and also includes personal and corporate tax planning.  She assists her clients in managing and resolving… more »