Date: 19991130
Docket: T-2124-98
Ottawa, Ontario, November 30, 1999
Present: THE HONOURABLE MR JUSTICE DENAULT
Between:
YVETTE MARCOUX,
Applicant,
- and -
ATTORNEY GENERAL OF CANADA,
Respondent.
ORDER
The application for judicial review of the formal request for payment sent to The Manufacturers Life Insurance Company (Financière Manuvie) on March 5, 1998 under section 224 of the Income Tax Act is dismissed with costs.
| PIERRE DENAULT |
| J. |
Certified true translation
Bernard Olivier
Date: 19991130
Docket: T-2124-98
Between:
YVETTE MARCOUX,
Applicant,
- and -
ATTORNEY GENERAL OF CANADA,
Respondent.
REASONS FOR ORDER
DENAULT J.
[1] This is an application for judicial review seeking an order against the Minister of National Revenue for the purpose of revoking a peremptory request for payment under subsection 224(1) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1 (the "Act") requiring "The Manufacturers Life Insurance Company" (hereinafter "Financière Manuvie") to pay the Receiver General 30% of the wages or salary owing to the applicant.
[2] On June 26, 1997, the Department of National Revenue (the "Department") issued a notice of assessment against the applicant in the amount of $1,992.53 for the 1996 taxation year. On January 14, 1998, Ms. Joanne Potvin, an employee of the Department, mailed a collection letter to the applicant asking that she contact her and notifying her that if she failed to respond to this letter she would be subject without further notice to legal proceedings in regard to the amount she owed for the 1996 taxation year.
[3] On March 5, 1998, the Department issued a peremptory request for payment against Financière Manuvie in the amount of $1,956.11. This request covered a monthly annuity (#453-0340, certificates #0003 and 0004) payable to the applicant under a supplemental pension plan of the unionized employees of Vidéotron Ltée, Quebec division.1
[4] On November 16, 1998, the applicant filed this application for judicial review in the Registry of this Court. The only question the parties are asking this Court to answer is the following:
| May the federal Crown, notwithstanding articles 2377, 2378 and 2645 of the Civil Code of Québec and paragraph 553(7) of the Quebec Code of Civil Procedure, seize the applicant"s annuity vested in a supplementary pension plan through the peremptory request for payment procedure prescribed in subsection 224(1) of the Income Tax Act ? |
[5] The applicant argues in substance that these provisions of the Civil Code and the Code of Civil Procedure, which state that an annuity under such a plan is unseizable, warrant the revocation of the request for payment dated March 5, 1998.
[6] Subsection 224(1) of the Act allows the Department to garnish third parties for amounts they are required to pay to a tax debtor:
| ARTICLE 224: Saisie-arrêt (1) S'il sait ou soupçonne qu'une personne est ou sera, dans les douze mois, tenue de faire un paiement à une autre personne qui, elle-même, est tenue de faire un paiement en vertu de la présente loi (appelée "débiteur fiscal" au présent paragraphe et aux paragraphes (1.1) et (3)), le ministre peut exiger par écrit de cette personne que les fonds autrement payables au débiteur fiscal soient en totalité ou en partie versés, sans délai si les fonds sont immédiatement payables, sinon au fur et à mesure qu'ils deviennent payables, au receveur général au titre de l'obligation du débiteur fiscal en vertu de la présente loi. |
SECTION 224: Garnishment (1) Where the Minister has knowledge or suspects that a person is, or will be within one year, liable to make a payment to another person who is liable to make a payment under this Act (in this subsection and subsections (1.1) and (3) referred to as the "tax debtor"), the Minister may in writing require the person to pay forthwith, where the moneys are immediately payable, and in any other case as and when the moneys become payable, the moneys otherwise payable to the tax debtor in whole or in part to the Receiver General on account of the tax debtor's liability under this Act. |
[7] The question raised by the applicant is both limited and complex. It is limited in that the applicant is not disputing (a) that the Parliament of Canada has the power to make laws concerning, inter alia, "the raising of Money by any Mode or System of Taxation" (subsection 91(3) of the Constitution Act , 1867 (U.K.), 30 & 31 Vict., c. 3); (b) that this power includes the power to collect these taxes; and (c) that the Minister of National Revenue had the power to make the peremptory request for payment under section 224 of the Act.
[8] However, it is complex in that the applicant is pleading that by seizing her annuity, the Department is trenching upon an activity affecting property and civil rights, an activity within the jurisdiction of the provinces under subsection 92(13) of the Constitution Act, 1867.2 The federal Crown, she argues, is bound by the provisions of the Civil Code of Québec and the Code of Civil Procedure, which state that an annuity under a supplemental pension plan is exempt from seizure.
[9] This case raises an essentially theoretical issue3 in that the applicant"s counsel frankly and candidly acknowledged that this application for judicial review, while having some potential practical application, was intended to get some clarification by the Court of an extremely difficult and complex question, asked by some authorities,4 as to the extent of the federal Crown"s privilege not to be bound by provincial legislation decreeing certain property exempt from seizure.
[10] In short, the applicant"s thesis is that in so far as the Civil Code of Québec and the Code of Civil Procedure constitute the Quebec equivalent of the common law, and the provincial legislature specifically rendered her annuity unseizable when it enacted articles 2377, 2378 and 2645 C.C. and paragraph 553(7) C.C.P.,5 the Department of National Revenue acted illegally in seizing it. The applicant bases her argument in part on the preamble to Bill C-50, to harmonize federal law with the civil law of the Province of Quebec and to amend certain Acts in order to ensure that each language version takes into account the common law and the civil law,6 and on the repeal, since the enactment of the Civil Code of Québec, of the old article 9 of the Civil Code of Lower Canada, under which no Act affects the rights of the Crown unless the Crown is mentioned.
[11] I will quickly dispose of the submission based on Bill C-50, since it was not enacted by Parliament and died on the order paper. I am also of the opinion that the facts of this case in no way involve the application of articles 2377 and 2378 of the Civil Code of Québec. Paragraph 553(7) C.C.P. cannot serve as a foundation for the applicant"s argument, in this case, in so far as the record, in the first place, does not disclose that the employer contributed to this supplemental pension plan on the applicant"s behalf.7 Furthermore, the record does not disclose whether the Supplemental Pension Plans Act, R.S.Q. c. 15.1, and more specifically subsection 264(2) thereof, which declares that a benefit is exempt from seizure, applies in this case, and the applicant"s counsel, no doubt deliberately, did not maintain any such argument.
[12] Judicial attacks on section 224 of the Act are not novel. In Pembina on the Red Development Corp. v. Triman Industries Ltd., [1991] 6 W.W.R. 481, it was argued that in enacting section 224 of the Act, Parliament had overridden the provinces" jurisdiction over property and civil rights. Although that litigation, it is true, involved subsection 224(1.2) of the Act, Chief Justice Scott rejected that submission while making the following comments, which are applicable to the case at bar, at pp. 489-91:
| The purpose of the Act [the Income Tax Act] is not only to levy tax, but to collect it. There is a strong public duty on employers to remit; indeed, this is central to the scheme of self-assessment under the Act. The machinery for collection and enforcement under the Act is part of the very subject matter of s.91(3) of the Constitution Act and not merely incidental to the raising of revenue [...] [pp.137-138] |
| In my opinion, the dominant or most important characteristic of the legislation in general falls squarely within the ambit of the raising of revenue for the purposes of taxation under subsection 91(3) of the Constitution Act. It is clearly necessarily incidental to the effective workings of the Act. [...] [p.138] |
| [...] In my opinion, collection is an integral part of Parliament's taxation scheme and clearly authorized by subsection 91(3) of the Constitution Act. That is the pith and substance of the section. Necessity or the wisdom of the technique is not the issue; rather, the question is whether the collection provisions fit within the scope of the federal legislation. This should be answered in the affirmative. |
[13] In Sun Life Assurance Company of Canada v. Canada, [1992] 4 W.W.R. 504, the plaintiff Sun Life challenged the peremptory request for payment addressed to it under subsection 224(1) of the Act. Sun Life argued, first, that this provision was ultra vires as an intrusion on the province"s jurisdiction, and, in the alternative, that the federal Crown was subject to section 19 of the Saskatchewan Pension Benefits Act , which exempted from seizure an annuity of the type garnished by the Department in the instant case. After finding that subsection 224(1) of the Act was not ultra vires, given Parliament"s power under subsection 91(3) of the Constitution Act, 1867 , Armstrong J. ruled as follows on the issue of whether the provincial legislation at issue was binding on the federal Crown (p. 511):
| The purpose of s. 19 of the Pension Benefits Act is not wholly frustrated by the same not being binding on the Crown in right of Canada any more than the purpose is wholly frustrated by the exceptions provided in s. 19(2) and 19(3). It remains available to protect recipient of pensions like Young against ordinary creditors. It is hard to imagine that it was ever intended to be unilaterally made effective against the Crown in right of Canada. |
| Professor Peter W. Hogg, Constitutional Law of Canada, 2nd ed., (Toronto: Carswell, 1985), suggests at p. 239: |
| In general where the federal Crown is engaging in activity which is regulated by provincial law, it should be bound by the law. |
| Whether this be so or not, the federal Crown in the present instance is not engaging in an activity regulated by provincial law. It is, rather, engaging in an activity which it is fully empowered to so engage by s. 91(3) of the Constitution Act, 1867, namely raising revenue. |
| [Emphasis added.] |
[14] The applicant does not dispute the Sun Life decision, but submits that in this case it should not be assigned the weight the respondent wishes to give it. She argues, in effect, that in so far as she relies on the provisions of the Civil Code of Québec and the Code of Civil Procedure, the Quebec equivalent of the common law, and not on a statutory provision, the exemption from seizure rules should prevail and bar this garnishment.
[15] That is not my opinion. For this argument to succeed, the applicant should first have explained the situation that existed under the common law of the other provinces in relation to the exemption from seizure of annuities before alleging Quebec"s parity under the Civil Code or the Code of Civil Procedure. This she did not do. Furthermore, a cursory analysis of the fate reserved by Parliament for a tax debtor subject to seizure, depending on whether the seizure pertains to chattels or is performed by way of garnishment is sufficient to persuade oneself that the rules exempting an annuity from seizure are not enforceable against the respondent. Section 225 states, in effect, that the Department may seize a tax debtor"s chattels unless they are exempt from seizure in the province in which the seizure is made.8 There is no similar restriction in the case of a garnishment under section 224. This to me indicates Parliament"s intention to deal differently with the seizure of the debtor"s property depending on whether it is chattels or amounts owing to him by third persons. In regard to the latter, Parliament even reserves the right to seize these amounts in whole or in part,9 thus excluding the rules of total or partial exemption from seizure enacted in the provinces as they affect the collection of taxes through section 224.
[16] But there is more. The courts have ruled many times on the self-sufficiency of tax laws, including the Income Tax Act, characterizing them as a "complete code".10 In the interests of the uniform application of this federal statute and the equality of taxpayers before the taxation authorities, I am of the opinion that Parliament, under subsection 224(1) of the Income Tax Act, has created a unique mechanism that gives its provision a genuine self-sufficiency in relation to private law.11
[17] For these reasons, the application for judicial review is dismissed, with costs.
| PIERRE DENAULT |
| Judge |
Ottawa, Ontario
November 30, 1999
Certified true translation
Bernard Olivier
APPENDIX: Legislation
Civil Code of Québec:
Art. 2377. La rente ne peut être stipulée insaisissable et inaliénable que lorsqu"elle est reçue à titre gratuit par le crédirentier; même alors, la stipulation n"a d"effet qu"à concurrence du montant de la rente qui est nécessaire au crédirentier en tant qu"aliments.
Art. 2378. Le capital accumulé pour le service de la rente est insaisissable, lorsque la rente doit être servie à un crédirentier et à celui qui lui est substitué, tant que ce capital demeure affecté au service d"une rente.
Il ne l"est, cependant, que pour cette partie du capital qui, suivant l"appréciation du créancier saisissant, du débirentier et du crédirentier ou, s"ils ne s"entendent pas, du tribunal, serait nécessaire pour servir, pendant la durée prévue au contrat, une rente qui satisferait les besoins d"aliments du crédirentier.
Art. 2645. Quiconque est obligé personnellement est tenu de remplir son engagement sur tons ses biens meubles et immeubles, présents et à venir, à l"exception de ceux qui sont insaisissables et de ceux qui font l"objet d"une division de patrimoine permise par la loi.
Toutefois, le débiteur peut convenir avec son créancier qu"il ne sera tenu de remplir son engagement que sur les biens qu"ils désignent.
Art. 2377. A stipulation to the effect that the annuity is unseizable and inalienable is without effect unless the annuity is received gratuitously by the annuitant and, even in such a case, the stipulation has effects only up to the amount of the annuity necessary for the annuitant as support.
Art. 2378. Any capital accumulated for the payment of the annuity is unseizable where the annuity is payable to the annuitant and to the person substituted for him, so long as the capital is applied to the payment of an annuity.
Only that part of the capital is unseizable, however, which, in the estimation of the seizing creditor, the debtor and the annuitant or, if they disagree, the court, would be necessary, for the duration fixed in the contract, for the payments of an annuity which would meet the requirements of the annuitant for support.
Art. 2645. Any person under a personal obligation charges, for its performance, all his property, movable and immovable, present and future, except property which is exempt from seizure or property which is the object of a division of patrimony permitted by law.
However, the debtor may agree with his creditor to be bound to fulfil his obligation only from the property they designate.
APPENDIX: Legislation
Code of Civil Procedure:
553. Sont insaisissables:
. . .
7. Les prestations accordées au titre d"un régime complémentaire de retraite auquel cotise un employeur pour le compte de ses employés, les autres sommes déclarées insaisissables par une loi régissant ces régimes ainsi que les cotisations qui sont ou doivent être versées à ces régimes;
553. The following are exempt from
seizure:
. . .
7. Benefits payable under a supplemental pension plan to which an employer contributes on behalf of his employees, other amounts declared unseizable by an Act governing such plans and contributions paid or to be paid into such plans.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
| FILE NO: T-2124-98 |
| STYLE: Yvette Marcoux v. Attorney General of Canada |
| PLACE OF HEARING: Québec, Quebec |
| DATE OF HEARING: October 20, 1999 |
REASONS FOR JUDGMENT OF DENAULT, J.
DATED: November 30, 1999
APPEARANCES:
Serge Bouchard for the Applicant
Patrick Vézina for the Respondent
SOLICITORS OF RECORD:
Pothier Delisle
Sainte-Foy, Quebec for the Applicant
Morris Rosenburg
Deputy Attorney General of Canada
Ottawa, Ontario for the Respondent
__________________1 According to the affidavit of Marcel Lajoie, an official in the Department of National Revenue, dated January 5, 1999, the Department had received $1,348.02 from Financière Manuvie.
2 92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say, " ... 13. Property and Civil Rights in the Province.
3 At the hearing it was apparent that the totality of the debt for the 1996 taxation year had been paid.
4 Luc Plamondon, "Insaisissabilité des contrats de rente viagère", 1997 Convention of the Association de la planification fiscale et financière, page 5.25; Patrice Garant, Droit administratif (3d ed., 1991), vol.1, page 50.
5 The text of these articles and this paragraph is reproduced in an appendix.
6 The preamble of Bill C-50 sets out the following principle: "Whereas the provincial law, in relation to property and civil rights, is the law that completes federal law when federal law is applied in a province, unless a law provides otherwise."
7 Exhibit R-2 (applicant"s record, p. 14), on which the applicant relies in paragraph 8 of her detailed affidavit (applicant"s record, p. 29), does not report any contribution by the employer.
8 ARTICLE 225: Saisie de biens meubles (1) Lorsqu'une personne n'a pas payé un montant exigible en vertu de la présente loi, le ministre peut lui donner un avis au moins de 30 jours avant qu'il procède, par lettre recommandée à la dernière adresse connue de cette personne, de son intention d'ordonner la saisie et la vente des biens meubles de cette personne; si, au terme des 30 jours, la personne est encore en défaut de paiement, le ministre peut délivrer un certificat de défaut et ordonner la saisie des biens meubles de cette personne.
SECTION 225: Seizure of chattels (1) Where a person has failed to pay an amount as required by this Act, the Minister may give 30 days notice to the person by registered mail addressed to the person's latest known address of the Minister's intention to direct that the person's goods and chattels be seized and sold, and, if the person fails to make the payment before the expiration of the 30 days, the Minister may issue a certificate of the failure and direct that the person's goods and chattels be seized. ... ... ...
(5) Insaisissabilité. Les biens meubles de toute personne en défaut qui seraient insaisissables malgré un bref d'exécution décerné par une cour supérieure de la province dans laquelle la saisie est opérée sont exempts de saisie en vertu du présent article.
(5) Exemptions from seizure. Such goods and chattels of any person in default as would be exempt from seizure under a writ of execution issued out of a superior court of the province in which the seizure is made are exempt from seizure under this section.
9 In the case at bar, Revenue Canada"s garnishment covered "[Translation ] ...30% of each payment made as ... salary": Applicant"s Record, p. 10.
10 Markevich v. Canada, dossier T-250-98 (February 19, 1999), par. 43, now on appeal under A-174-99; Marcel Grand Cirque Inc. v. Canada, [1995] ACF no. 1734 (F.C.), par. 6.
11 In "Droit fédéral et droit civil: Complémentarité, dissociation", (1996) 75 Can. Bar Rev. 297, at pp. 314-15, Jean-Maurice Brisson and André Morel, discussing the autonomy of federal law as a further source of dissociation of the civil law, write: "The federal Parliament, of course, has the power to create in its statutes any concept or legal institution that it considers useful in achieving the objectives it has set for itself, just as it can define any traditional common law or civil law concept as it understands it.... In so doing, it explicitly confers a genuine autonomy on its statute with respect to the private law of the provinces, because federal law prevails over any provincial law that is incompatible with it."