Federal Court Decisions

Date: 19971212

Docket: T-112-97

BETWEEN:

     GARY WILLIAM CRAIB,

     Applicant,

     - and -

     HER MAJESTY THE QUEEN,

     Respondent.

     REASONS FOR ORDER

MULDOON, J.

[1]      This is an application for judicial review of a decision of the Minister of National Revenue (MNR) to set-off monies owed to Mr. Craib by the respondent against monies owed to the respondent by Mr. Craib. The applicant is a Canada Student Loans debtor, who defaulted on a $24,081.93 loan to a chartered bank which was guaranteed by the Crown. The Crown settled the applicant's debt in August 1994 after the lender bank filed a claim for reimbursement under the Canadian Student Loans Act. This payment of the applicant's debt effected a subrogation of the lender's rights to the Crown. The applicant is now a debtor to the Crown.

[2]      The application came on for hearing in Toronto on December 5, 1997, in the presence of the applicant in person, and of the respondent's counsel.

[3]      In April 1996, Revenue Canada assessed the applicant's 1994 tax return which reflected a refundable amount of $3,578.76. After a review of the applicant's account history, the collections officer determined that a sum of $15.70 was also owing as interest. Revenue Canada had received by that time a set-off notice from Human Resources Development for the outstanding amount of the defaulted student loan. Revenue Canada in turn withheld $3,284.76 from the amount otherwise payable to the applicant. A refund of $294.00 was issued to the applicant as this amount represented his Ontario tax credits. Revenue Canada has a policy of understandably not interfering with provincial tax credits. The applicant previously brought a motion to have the lien on his income tax account removed until final determination of this application. This motion was dismissed by Mr. Justice Gibson on July 14, 1997.

[4]      The applicant has objected to the Revenue Canada set-off of his return from the initial notice and has attempted to alleviate his situation through a number of channels, including writing to the Minister of National Revenue and to his Member of Parliament. The applicant finally resorted to the Federal Court after receiving a letter from the Acting Deputy Minister of Revenue Canada, William J. Crandall, which apparently expresses the decision which is the subject of this review. In his letter, dated December 24, 1996, the Acting Deputy Minister states that pursuant to section 155 of the Financial Administration Act, infra and subsection 164(2) of the Income Tax Act, the MNR is entitled to set off amounts owing to the applicant against amounts owed by the applicant.

[5]      Subsection 155(1) of the Financial Administration Act, R.S.C., c-F-10, s.1 runs in part:

155.(1) Where any person is indebted to

(a) Her Majesty in right of Canada, or

***

the appropriate Minister responsible for the recovery or collection of the amount of the indebtedness may authorize the retention of the amount of the indebtedness by way of deduction from or set-off against any sum of money that may be due or payable by Her Majesty in right of Canada to the person or the estate of that person.

Subsection 164(2) of the Income Tax Act reads as follows:

164.(2) Application to other debts - Instead of making a refund or repayment that might otherwise be made under this section, the Minister may, where the taxpayer is liable or about to become liable to make any payment to Her Majesty in right of Canada, apply the amount of the refund or repayment to that other liability and notify the taxpayer of that action.

[6]      The applicant submits that the set-off by the Minister of National Revenue amounts to an illegal seizure and is unconstitutional.

[7]      With respect to the applicant's constitutional challenge, he really did not adequately comply with the requirement of the Federal Court Act (s.57) which states that he must notify all the Attorneys General in Canada of the constitutional question. The Court's file reveals that on November 28, 1997 the applicant filed an affidavit of service (doc.23) in which he swore that "under section 57 of the Federal Court Act" * * * he * * * "notified all ten Provincial Attorney Generals [sic] and the federal Attorney General * * * that on December 5, 1997, at 330 University Avenue, in the city of Toronto: that" he would "present a charter question to the federal court dealing with individual rights as protected under the Charter of Rights and supporting rights defined under Revenue Canada's "Declaration of Taxpayer Rights". This document does not inform the Court as to when, and by what means, the applicant notified the attorneys general, so that proof of timely service under section 57 was and is not made out. Furthermore the text of the purported notice advises vaguely that "a constitutional question will be presented * * * [place and date] * * * dealing with the constitutional validity of Revenue Canada's actions and individual rights determined and protected by the Canadian Charter of Rights and Freedoms and Revenue Canada's Declaration of Taxpayer Rights". Such notice does not mention that the applicant intended to challenge the vires of Parliament's enactment of paragraph 155(1)(a) of the Financial Administration Act, and the enactment of subsection 164(2) of the Income Tax Act, so that if the provincial attorneys general anticipated any jeopardy to any similar provincial legislation they would have been induced to intervene. Because of the defects of the purported notice (even although it appears to be dated November 1, 1997) and of the affidavit of service, the Court declined to find compliance with section 57, and accordingly the applicant's constitutional challenge is not at issue in these proceedings.

[8]      The applicant has provided the Court with a number of cases and other documentation which allegedly support his contention that Revenue Canada is not entitled to withhold his tax return. The applicant's circumscribed and incomplete book of authorities provides a shotgun blast of jurisprudence, little of which finds its mark. The applicant's argument centres around his attempt to distinguish Mintzer v. The Queen, (1997) 95 D.T.C. 6027 (F.C./A) (hereinafter Mintzer) by stating that the MNR can set off only tax debts. Although the Mintzer matter dealt with a set-off of previously owed tax debts, there is nothing in the Income Tax Act or the decision of the Court of Appeal in Mintzer, supra, which limits set-off to that type of debt. Here is what Mr. Justice Stone wrote, in abridged part, on behalf of the Court:

The appellant submits that the provisions of subsection 65(1.1), which became effective on July 13, 1995, prohibits [sic] the setting-off of benefits against a debt for unpaid taxes because such a set-off amounts to "seizure and execution". The respondent advances three arguments against the words "seizure" and "execution" being construed so as to override the right of set-off under section 224.1 of the Income Tax Act. First, [not applicable here]. Secondly, that just as "set-off" and "attachment" are distinct legal concepts, so too are "set-off", "seizure" and "execution". * * *

*** *** ***

In Sigurdson v. R. in Right of B.C., [1982] 2 W.W.R. 579 (B.C.C.A.), Carrothers, J.A., speaking for a majority, dealt with the concept of set-off at page 592, as follows:

The law relating to true set-off is well settled. A true set-off of indebtedness can take place only between two debtors who are at the same time one another's creditors. A set-off is merely the remission or cancellation pro tanto of reciprocal debts by applying one's credit receivable from another against one's debt owed to that other. A set-off is a cross-claim for money's worth respecting mutual or reciprocal debts due and owing and to the same parties in the same right.

It is apparent that "set-off" is a quite different legal concept than either "seizure" or "execution" at common law or in equity.

(pp. 6033-34)

But, even if such set-off were a seizure, which it is not, there is nothing unreasonable about it, so long as resort may be had to adjudication by a Court of competent jurisdiction. After all if an ordinary defendant in a (say) contracts case may assert a set-off against the plaintiff's claim, ought the Government of Canada, on behalf of all citizens and all taxpayers, to be deprived of the same simple and reasonable right?

[9]      It is clear from the working of both the Income Tax Act and the Financial Administration Act that Parliament did not intend to limit the powers of the Minister of National Revenue to collect only tax debts owed to her Majesty in Right of Canada under the cited legislation, but intended rather to empower the collection or set-off of any outstanding indebtedness, and liability for payment, to the Crown in Right of Canada.

[10]      The "Declaration of Taxpayer Rights", a copy of which is exhibited as page 10 of the applicant's record, appears to have no statutory or constitutional basis. It is summary common sense, which can be construed as a public relations gesture. However, the applicant, who apparently cannot afford to engage a lawyer, was taken in by this passage in the document:

It is our [i.e. Revenue Canada] job to collect only the correct amount of tax, no more and no less.

This statement gave the applicant some reason to believe that the above cited statutory set-off provisions were ultra vires. In that sense the government's self-righteous "no more and no less" piety is terribly flawed in not announcing to the uninitiated that there are, nevertheless, provisions for set-offs.

[11]      The real reason for these proceedings is the applicant's sense of hurt at the government's collection agency's almost mindless, insensitive and seemingly ruthless drive to collect what the applicant owes. There is surely a possibility of conflict of interest on the part of a collection agency, depending on how it is remunerated. Now if the applicant would stop his juveniley provocative name-calling and if responsible government officials (not collection agents) would calmly and rationally deal with the applicant surely some compassionate, but repayment effective composition could be worked out between the parties. Such a dialogue is, of course, none of this Court's business. This Court's business is to adjudicate the applicant's judicial review application and dispose of it. For the reasons above expressed, the application is dismissed.

[12]      Today and herein, in recognition of rule 1618, and the absence of special reasons, no further costs are awarded for or against either party. Perhaps the respondent, although not obliged to do so, will relent on the costs already previously awarded on October 23, 1997.

    

Judge

Ottawa, Ontario

December 12, 1997