S. Suite Property Management Inc. v. Canada Revenue Agency

[Indexed as: S. Suite Property Management Inc. v. Canada (Revenue Agency)]

Ontario Reports

Ontario Superior Court of Justice,

D.A. Wilson J.

August 16, 2013

117 O.R. (3d) 161 | 2013 ONSC 5249

Case Summary

Courts — Jurisdiction — Superior Court of Justice — Applicant collecting moneys on behalf of landlords and depositing them into trust account — Applicant owing back taxes — Canada Revenue Agency ("CRA") seizing funds from trust accounts pursuant to requirements to pay — Applicant applying in Superior Court of Justice for declarations that funds were property of landlords and that CRA could not seize them and for order directing return of seized funds to landlords — Court not having jurisdiction to make those orders — Applicant essentially seeking injunctive relief against federal board, commission or tribunal — Federal Court having exclusive jurisdiction under s. 18 of Federal Court Act — Federal Court Act, R.S.C. 1985, c. F-7, s. 18.

The applicant, a property manager, collected rent moneys on behalf of landlords and placed them in trust accounts. As the applicant owed back taxes, the respondent seized funds from the trust accounts pursuant to two requirements to pay. The applicant brought an application in the Superior Court of Justice for a declaration that the funds were the property of the landlords, a declaration that the respondent could not seize them and an order directing the return of the seized funds to the landlords.

Held, the application should be dismissed.

The court lacked jurisdiction to grant the requested orders. For jurisdictional purposes, it was the substance of the application and the relief sought that governed, not the form of the application. Essentially, the applicant was seeking injunctive relief against the respondent, which was a federal board, commission or tribunal. The Federal Court had exclusive jurisdiction under s. 18 of the Federal Court Act.

861808 Ontario Inc. v. Canada (Revenue Agency), [2013] O.J. No. 80, 2013 ONSC 152, [2013] 2 C.T.C. 95, [2013] G.S.T.C. 3, 224 A.C.W.S. (3d) 602 (S.C.J.); Burkes v. Canada (Revenue Agency), [2010] O.J. No. 2877, 2010 ONSC 3485, 2010 D.T.C. 5133, [2010] G.S.T.C. 104, [2010] 6 C.T.C. 295 (S.C.J.) [Leave to appeal refused [2010] O.J. No. 5019, 2010 ONSC 6059, [2011] 2 C.T.C. 40, [2010] G.S.T.C. 176 (Div. Ct.)]; Haswell v. Canada (Attorney General), [1998] O.J. No. 526, 56 O.T.C. 143, 77 A.C.W.S. (3d) 541 (Gen. Div.); Puttkemery v. Air Canada, [2003] O.J. No. 2686 (Div. Ct.); Telezone Inc. v. Canada (Attorney General), [2010] 3 S.C.R. 585, [2010] S.C.J. No. 62, 2010 SCC 62, 273 O.A.C. 1, 410 N.R. 1, 2011EXP-42, J.E. 2011-18, 56 C.E.L.R. (3d) 1, 327 D.L.R. (4th) 527, 96 C.L.R. (3d) 1, 196 A.C.W.S. (3d) 98, affg (2008), 94 O.R. (3d) 19, [2008] O.J. No. 5291, 2008 ONCA 892, 86 Admin L.R. (4th) 163, 40 C.E.L.R. (3d) 183, 245 O.A.C. 91, 303 D.L.R. (4th) 626, consd

Other cases referred to

80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd., 1972 535 (ON CA), [1972] 2 O.R. 280, [1972] O.J. No. 1713, 25 D.L.R. (3d) 386 (C.A.); Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634, 188 O.A.C. 201, 48 C.P.C. (5th) 56, 132 A.C.W.S. (3d) 15 (C.A.); [page162] Ho-A-Shoo v. Canada (Attorney General) (2000), 2000 22328 (ON SC), 47 O.R. (3d) 114, [2000] O.J. No. 265, [2000] 2 C.T.C. 155, 2000 D.T.C. 6293, 94 A.C.W.S. (3d) 800 (S.C.J.); Mousseau v. Canada (Attorney General), 1993 NSCA 167, [1993] N.S.J. No. 382, 107 D.L.R. (4th) 727, 126 N.S.R. (2d) 33, 19 C.P.C. (3d) 137, 18 C.R.R. (2d) 375, 43 A.C.W.S. (3d) 688 (C.A.)

Statutes referred to

Federal Court Act, R.S.C. 1985, c. F-7, ss. 2 [as am.], 17 [as am.], 18 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04(1), 57

Authorities referred to

Law Society of Upper Canada, Rules of Professional Conduct (Toronto: Law Society of Upper Canada)

APPLICATION for declarations with respect to certain funds and for an order directing the return of those funds.

Jeffrey Radnoff, for applicant.

Christopher Lee and Shahana Kar, for respondent.

[1] Endorsement of D.A. WILSON J.: — This application is brought for a declaration that the funds held in certain accounts at a bank are the property of various landlords and for a declaration that the respondent cannot seize funds from these accounts. Further, an order is sought directing the respondent to return the funds that were seized back to the account from which they were obtained. The application is opposed in its entirety by the respondent.

[2] I heard argument on the application and then requested counsel re-attend to make submissions on the issue of jurisdiction. I will have more to say about this later in these reasons.

Background

[3] The facts giving rise to this application, for the most part, are not in dispute. The applicant, S. Suite Property Management Inc. ("S. Suite"), is in the business of managing properties owned by various landlords in Toronto, and other areas of Southern Ontario. Roxane Bernhard is the president of S. Suite. Pursuant to a property management agreement ("the agreement"), the applicant collects rent moneys from the tenants, pays various expenses associated with the property and forwards the balance of the funds to the landlords. The agreement was attached as an exhibit to the affidavit of Ms. Bernhard sworn May 31, 2013. The agreement requires the applicant to collect rents and security deposits, to "deposit all receipts collected in a trust account" from which all expenses would be paid. Following this, [page163] the applicant is required to "promptly deposit the rent collected, less the management fee and any other expenses, into the owners' bank account".

[4] The applicant acknowledges that there is a debt owing to the respondent for taxes from 2011 plus interest and penalties. The applicant retained counsel in January 2013, to negotiate payment of the outstanding amounts.

[5] The respondent issued a requirement to pay ("RTP") on February 18, 2013, which was sent to Bank of Montreal (the "bank"), where the applicant kept a number of accounts. Pursuant to this RTP, funds in the amount of $24,274.38 were garnisheed from various accounts of the applicant at the bank. By letter dated March 10, 2013, the solicitor for the applicant contacted the respondent and advised that the account from which the moneys were obtained is a trust account which consisted of moneys received on behalf of property owners and requested a return of the moneys from the trust account.

[6] The respondent refused to do so. By letter dated March 12, 2013 (exhibit H to the Bernhard affidavit), there seems to be an acknowledgement that the funds were taken from trust accounts, but no explanation is provided for the refusal to return the monies.

[7] The respondent issued a second RTP on May 7, 2013; it received $45,433.40 from the bank accounts in the name of the applicant. The total received by the respondent pursuant to the RTPs is $76,344.21.

[8] Included in the materials of the moving party is the affidavit of Ahmad Charles sworn July 4, 2013. Mr. Charles is the accountant for the applicant and he reviewed the banking records. He confirms that no GST or HST or payroll remittances were ever deposited into the landlords's bank accounts; rather, the taxes and payroll remittances were deposited into a different account, one which was not seized pursuant to the RTPs.

[9] The affidavit of Ms. Bernhard states that the moneys collected by the applicant belong to the landlords and the funds are administered by the applicant.

Positions of the Parties

[10] The applicant concedes that the applicant owes back taxes. However, Mr. Radnoff argues that the moneys garnisheed do not belong to the applicant, but rather were held in trust for the various landlords and, as such, the seizure of the moneys was improper. It is submitted that the applicant administers the properties on behalf of the landlords, which is a trustee/ beneficiary relationship, and the CRA was not entitled to take [page164] money from the trust accounts to pay a debt owed by the applicant. It is submitted that the seizure of the bank accounts was unlawful and the moneys must be returned to the accounts from which the funds were taken.

[11] On the issue of jurisdiction, Mr. Radnoff describes this as a "throw away issue". There are numerous decisions of the Superior Court where the court has made declarations similar to what is being sought in this case. If there is jurisdiction in the provincial superior court over the action, then the court has the jurisdiction to make interim orders so as to give effect to its primary orders.

[12] The respondent submits that this court has no jurisdiction to grant the relief being sought by the applicant. Instead, it is argued, the Federal Court has been tasked with the supervision of federal bodies pursuant to s. 18 of the Federal Court Act, R.S.C. 1985, c. F-7 ("FCA" or the "Act") and the nature of the relief sought is akin to an injunction, which is within the exclusive jurisdiction of the Federal Court.

Analysis

[13] ...

Application dismissed.

End of Document