Baxter v. Attorney General of Canada et al, 2013 ONSC 3153
CITATION: Baxter v. Attorney General of Canada et al, 2013 ONSC 3153
COURT FILE NO.: 8936-12
DATE: 2013/05/24
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Gary R. Baxter (Applicant)
- and -
Attorney General of Canada et al (Respondents)
BEFORE: Justice A. D. Grace
COUNSEL: Lou Anne Farrell, for the Applicant
Ryan Gellings for the Respondent, Attorney General of Canada
HEARD: May 24, 2013
ENDORSEMENT
[1] Shares in Phoenix Media Group inc. (‘Phoenix’) were sold to Canwest Mediaworks Publications Inc. pursuant to a November 16, 2007 Share Purchase Agreement (tab G).
[2] The Applicant takes the position that the shares were held in trust pursuant to a handwritten Trust Agreement dated June 1, 1994 (tab C) and treated the proceeds of the Canwest transaction mentioned in paragraph 1 accordingly.
[3] The Canada Revenue Agency (‘C.R.A.’) audited the returns of the Baxter Family Trust and “concluded that a Trust did not exist.” (See its letter of August 30, 2011 at tab L).
[4] The C.R.A. concluded that the Applicant was the sole beneficial owner of the Phoenix Shares and on March 1, 2012 issued Notices of Reassessment (tab M).
[5] While not part of the factual material, I understand from the factum of the Attorney General of Canada (‘A.G.’) that a notice of objection was served pursuant to s. 165(1) of the Income Tax Act (‘ITA’) on May 30, 2012. Evidently, no decision has yet been made by the Minister.
[6] This application was issued December 31, 2012. It seeks declaratory relief: essentially a declaration that the Applicant held shares in trust for himself and the other members of his family (his spouse and their three children) who are co-respondents in this proceeding.
[7] The sole issue to be decided at this time is whether the Superior Court of Justice should accept or decline jurisdiction.
[8] For the reasons that follow I am of the view that the matter is one that must or at the very least should be determined by the Tax Court of Canada (‘TCC’). Despite Ms. Farrell’s effort, this court declines jurisdiction.
[9] I start by recognizing that the Superior Court has broad jurisdiction: “jurisdiction, power and authority historically exercised by courts of common law and equity in England and Ontario” to use the words of s. 11(2) of the Courts of Justice Act. It has the specific power to “make binding declarations of right”: Courts of Justice Act, s. 97.
[10] However, the reality is that the Superior Court of Justice is not the place where all disputes must be – or are – heard.
[11] One need look no farther than this case for an example. Albeit for tax purposes, the TCC decides a range of issues including ones that derive their historical roots from Courts of Equity.
[12] In Savoie v. H.M.Q. (1993), 93 D.T.C. 552, Bowman, T.C.C.J. described the TCC as a “statutory court” that “lacks the equitable jurisdiction exercised by provincial Superior Courts.” Nonetheless, the TCC stood ready to determine an issue involving a constructive trust. That decision was written before the 2003 amendment of section 3 of the Tax Court of Canada Act, R.S.C. 1985, c.T-2. The TCC is now “a superior court of record.” (see s. 3). The scope of its jurisdiction is addressed in the enabling statute.
[13] Pursuant to s. 12(1) of that statute, the TCC:
“...has exclusive original jurisdiction to hear and determine...appeals to the court on matters arising under...the Income Tax Act...when...appeals to the Court are provided for in those Acts.”
[14] As noted, the Applicant served a Notice of Objection on the Minister pursuant to s. 165(1) of the ITA. Section 169(1) provides that in those circumstances:
“...the taxpayer may appeal to the Tax Court of Canada to have the assessment vacated or varied...”
[15] Those sections, on their own, create a formidable hurdle for the Applicant. Ms. Farrell inventively submitted that the sections do not create a jurisdictional obstacle because the Applicant seeks a declaration that the alleged trust was validly created in June 1994 and leaves the Notices of Reassessment untouched.
[16] However, that submission does not withstand much pressure for two reasons: first, Ms. Farrell maintained that if the Applicant was successful, the attendance in the TCC to vacate the Notices of Reassessment would take “about two minutes.” That submission is a tacit acknowledgement that this proceeding plays a critical role in the Applicant’s attempt to reverse C.R.A’s decision. In substance, if not in form, this proceeding is an appeal of a tax ruling. Second, it is that ruling which prompted this proceeding. There is no lis between the Applicant and any of the respondents except the A.G. All other parties are members of the alleged Baxter Family Trust.
[17] With respect, there is absolutely no part of the dispute that is unrelated to the C.R.A.’s determination that the trust did not exist.
[18] It is clear from the ITA (see subdivision K) and the authorities (see, for example, Antle v. R. (2010) 61 E.T.R. (3d) 13 (Fed. C.A.) and David v. R., 2008 TCC 31, [2008] 4 C.T.C. 2123) that the TCC is well equipped to hear, analyze and decide the issues which arise in this case. Trusts are well known tax vehicles. Issues involving the taxation of a trust are within the TCC’s jurisdiction and expertise.
[19] The authorities cited by the Applicant go even further. The TCC has, for income tax purposes, decided whether a claim to a constructive trust has merit or not: see Savoie, supra and Vidamour v. R. 2009 TCC 414.
[20] I also agree with the A.G. that it would be inappropriate for this court to assume jurisdiction in circumstances where an element of the dispute is admittedly left to the TCC to resolve in any event; namely, the income tax consequences of the finding the Applicant seeks.
[21] While, as noted, the Applicant maintains that would take no time at all because the result of this proceeding would dictate that result too, that position is not necessarily correct.
[22] As set forth at note 20 of the A.G’s factum, s. 152(a) of the ITA allows the Minister to advance an alternative basis in support of an assessment. An analysis of the section and of the competing arguments the parties may make is not required. Suffice to say that the determination sought in this proceeding may not be as nearly dispositive as the Applicant maintains.
[23] In my view, this case is analogous to and the result should accord with the situations facing Low J. in Felsen Foundation v. Jabs Construction Ltd., 1998 CarswellBC 482 (S.C.J.); the Supreme Court of Canada in Addison & Leyen Ltd. v. Canada, 2007 SCC 33, [2007] 2 S.C.R. 793 and Cumming J. in GLP NT Corp. v. Canada (Attorney General) (2003), 2003 CanLII 41554 (ON SC), 65 O.R. (3d) 840 (S.C.J.).
[24] In Felsen Foundation, supra, Low J. concluded at para. 7:
“The only place there is an issue is in the Income Tax Act proceedings. In my opinion, this court either does not have jurisdiction to determine whether there was a valid gift or it should decline jurisdiction. The petitioner...seeks an opinion of the court under the guise of a declaratory order. The sole use of that opinion would be...to place it before the Tax Court of Canada...”
[25] Substitute the word “trust” for “gift” in the above quotation and you have this fact situation exactly.
[26] Cumming J. reached the same conclusion in GLP NT Corp., supra, at paras. 17-21. While the Applicant has not yet appealed to the TCC – unlike GLP NT. Corp., the Applicant has taken the necessary and preliminary step of serving a Notice of Objection.
[27] In short, the Applicant has a potential remedy- just not in this court.
[28] As a unanimous court wrote in Addison & Leyen Ltd. at para. 11:
“The integrity and efficacy of the system of tax assessments and appeals should be preserved. Parliament has set up a complex structure to deal with a multitude of tax-related claims and this structure relies on an independent and specialized court, the Tax Court of Canada.”
[29] While that passage was written in the context of an application for judicial review, it applies, in my view, to any attempt to litigate a tax dispute between a taxpayer and the C.R.A. in a provincial Superior Court: see, too, Stephken Holdings Inc. v. Canada (Revenue Agency), 2013 CarswellQC 1210 (S.C.J.).
[30] For the reasons given, this court declines jurisdiction. I will leave to the parties to discuss whether the application should be dismissed or perpetually stayed.
[31] At my request counsel discussed the issue of costs and agreed that the all inclusive sum of $6,500 would be payable by the unsuccessful party to the successful one. The Applicant shall pay that sum to the A.G. within thirty (30) days. I am obliged to counsel for their assistance.
“Justice A. D. Grace”
Justice A. D. Grace
Date of Reasons for Judgment: May 24, 2013
Date of Release of typewritten version: May 29, 2013
CITATION: Baxter v. Attorney General of Canada et al, 2013 ONSC 3153
COURT FILE NO.: 8936-12
DATE: 2013/05/24
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Gary R. Baxter
Applicant
- and –
Attorney General of Canada
Respondent
ENDORSEMENT
Grace J.
Date of Reasons for Judgment: May 24, 2013
Date of Release of typewritten version: May 29, 2013