CITATION: Dunn v. Canada (Attorney General), 2016 ONSC 6533

COURT FILE NO.: 16-67837

DATE: October 20, 2016

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: LINDA F. DUNN et al., Applicants

AND:

ATTORNEY GENERAL OF CANADA et al., Respondents

BEFORE: JUSTICE CALUM MACLEOD

COUNSEL: Helmut R. Brodmann, for the Applicants

Stephanie Lauriault, for the Respondents

HEARD: October 13, 2016

ENDORSEMENT

1The applicants ask this court to order that the Canada Revenue Agency return certain funds seized from a tax debtor (Conrad T. Eagan) and pay them into court. The applicants contend that those funds were stolen from them and were not the property of Mr. Eagan. They have brought a proceeding against Mr. Eagan and his employer and they want the funds paid into court to await the outcome of those proceedings.

2The Attorney General resists the application. First, she denies that this court has the jurisdiction to make such an order. Secondly, she denies that the order is appropriate. The first of these contentions is important of course but as I agree with the second contention, I would not make the requested order in any event. On that basis alone, the application should be dismissed.

3I reserved my decision in order to give written reasons.

Background

4Conrad Eagan was the executor under the last will and testament of the late Joan D. Kidd. The applicants are the residual beneficiaries under that will. Mr. Eagan was also a financial advisor and a registered mutual fund salesman. The applicants allege that Mr. Eagan misappropriated approximately $950,000 from the estate. They are supported in this belief by an investigation conducted by the Mutual Fund Dealers’ Association and by the police. Mr. Eagan is also facing criminal charges.

5Allegedly, Mr. Eagan victimized other clients as well as the estate. At one time there was almost $1.5 million in a TD Waterhouse Canada trading account held in his name. On June 6, 2013 Judith Girling was able to obtain an order directing TD Waterhouse to liquidate some of the securities and to pay approximately $160,000 out of the account. (Court file13-57374 – “the Polowin order”.)

6On January 30, 2014 Linda Allen successfully obtained an order that $1.2 million in the TD Waterhouse account be frozen and that approximately $171,000 be paid to her. (Court file 13-59363 – “the James order”.)

7On March 20, 2015, the applicants, as plaintiffs in the action against Mr. Eagan and his employers, obtained an order removing Mr. Eagan as executor of the estate and vesting all of the assets of the estate in the applicants Linda and Jennifer Dunn. (Court action 15-63217 – “the Smith order”) On August 28, 2015 the applicants obtained an order from this court that $353,676.85 be paid to them out of the TD Waterhouse account and that the balance of the account be liquidated and paid into court. (Court file 15-64760 – “the Sheard order”.)

8In the meantime, as a consequence of tax liabilities owed by Mr. Eagan, Canada Revenue Agency had served TD Waterhouse with a “requirement to pay”. $821,515.16 was paid to CRA in obedience to this notice on February 3, 2014. The effect of this was to thwart the intention of the Sheard order because the account had been largely depleted. These are the funds that the applicants wish me to order paid into court.

Analysis

9CRA contends firstly that the court has no jurisdiction to make the requested order. Neither CRA nor the federal crown are parties to any of the proceedings mentioned above. The Attorney General and CRA are the respondents to this proceeding but no cause of action is asserted against the federal crown. The only allegation is that the funds seized by CRA under its garnishment were not the property of Mr. Eagan and should be returned.

10It is the position of the Attorney General that the order sought is in the nature of certiorari or mandamus or is injunctive in nature. If that is the case then pursuant to s. 18 (1) of the Federal Courts Act, R.S.C. 1985, c. F.7 the Federal Court has exclusive jurisdiction and it is outside the jurisdiction of a provincial superior court. While the Attorney General’s assertion that an injunction restraining CRA from collecting taxes is clearly outside the competence of this court, it does not follow that an order requiring funds to be paid into court should be categorized in this manner. Section 17 (2) of the Act provides that the Federal Court has concurrent jurisdiction with the superior courts in cases in which the “land, goods or money of any person is in the possession of the Crown”.

11Of course all rights of action against the Crown are ultimately statutory rights and in the case of the federal Crown must come within the provisions of the Crown Liability and Proceedings Act, R.S.C. 1985, c. C.50. Section 22 (1) of that Act prohibits injunctive relief or an order for specific performance and in lieu thereof provides for declaratory relief. Caution is required before concluding that any order for payment of money falls into one of these categories.

12In an action in which the recovery of personal property is claimed, s. 104 of the Courts of Justice Act, R.S.O. 1990, c. C.43 permits this court to make an order for interim recovery of that property. Rule 45.02 permits an order that a specific fund be paid into court where the ownership of the fund is in question. This is essentially the relief claimed in this application but it is not brought as interlocutory motion in an action against the federal Crown. Rather it is a free standing application.

13An order under Rule 45.02 requires the existence of a specific identifiable fund. There is little doubt that if the court had been asked to make the order before the TD Waterhouse funds had been seized by CRA such an order could have been granted. It is far less clear that funds in the hand of the Receiver General of Canada continue to constitute a specific fund. To the contrary, funds seized by CRA become part of the general revenues of Canada contained in the consolidated revenue fund.

14Whether or not the seized monies constitute a distinct fund within the meaning of Rule 45.02, in my view there is no need to make the requested order. The purpose of the Rule and of the section of the Courts of Justice Act is to preserve a fund pending a determination of ownership. Even if the court has jurisdiction to order the federal government to pay funds into court (which I specifically decline to decide) there is no need to make such an order to preserve the funds. The funds are no more or less identifiable or exigible today, tomorrow or in several years. If CRA received funds to which it was not entitled, the funds are no less secure in the hands of the Receiver General than they would be in the hands of the Accountant of this court.

15There is a practical distinction. If I make the order requested by Mr. Brodmann then it would be up to CRA (which is not presently a party to the actions claiming ownership of the Eagan brokerage account) to take steps to assert its claim. If I do not make the order then the applicants may have to add CRA and take positive steps to assert a cause of action against the Crown. This, however, is not a proper consideration.

16I note in passing that there is no wrongdoing asserted against the Crown. The applicant’s simply assert that the funds seized (or paid by TD Waterhouse in obedience to the notice to pay) were not the property of the tax debtor.

Conclusion

17In conclusion, I decline to make the requested order whether or not the court has jurisdiction.

18I am inclined to the view that this is not a case for costs but there may be factors I am not aware of. If the Attorney General seeks costs, counsel should agree on a timetable for exchange of brief written submissions and I will entertain them within the next 30 days.

October 20, 2016