Stanley Foo Law Corporation

Wills & Probate

In 2004, the Canada Revenue Agency (CRA) filed certificates against the taxpayer company, Swiftsure Taxi Company (“Swiftsure”) for the taxation years 1997 to 2001. Swiftsure, however, disputed the certificates and said that the issue had to be tried, and it entered into a consent with CRA in tax court to be referred back for reconsideration and reassessment by the tax agency.

CRA then proceeded to try and seize the assets of the company, including the license plates based on those certificates. As the lawyer for Swiftsure, I brought a motion to restrain CRA from doing so, until a court of law determined if those certificates were valid. When the lawyer for the Department of Justice (DOJ) and I appeared before the Federal Court, Mr Justice Blanchard said that the three-part test, as set out by the Supreme Court of Canada in RJR MacDonald v AG [1994] 1 SCR 311 (“RJR”), was a) a serious issue to be tried, b) irreparable harm would result if the stay was not granted, and c) the balance of convenience favors a stay. 

This common-law test has been applied in other jurisdictions, so the RJR case did not make new law; it enforced the common-law. For the first part of the test, the DOJ conceded that there was a serious issue to be tried, so that was satisfied; for the second part, the DOJ said that there cannot be an irreparable harm, because the company could sue for damages. And Blanchard, J, however, ruled that, if CRA was to seize the license plates, it would destroy the company, and damages cannot truly compensate for a permanent loss. He then turned to the last part of the test, saying that the balance favors a stay, because the public interest would not be harmed, since the Tax Court did want an reassessment, while the company would be destroyed if its license plates were seized.

Judge Blanchard therefore ordered a stay, but he also ordered that Swiftsure could not dispose of any assets, including the licenses. He also imposed three other conditions, namely, that 1) Within 10 days, the company was to commence a proceeding in Federal Court to challenge the validity of the certificates, 2) the company would move promptly in both Federal and Tax Court, and 3) the company shall pay CRA, within 10 days, $13,590.13, which both sides agreed was owing. If this was not done, CRA would be at liberty to bring a motion before the Federal Court for the appropriate relief.

The CRA then appealed.

One of their grounds for appeal was that the Income Tax Act was a complete code, and the Federal Court had no jurisdiction. That was never brought at the first hearing, and the Federal Court of Appeal rejected it, because the public interest required a unified court system. In doing so, they applied the SCC in Brotherhood of Maintenance of Way Employees Canadian Pacific System Federation v Canadian Pacific Ltd [1996] 2SCR 495, where McLachlin J (as she then was), said that, where there were gaps, the courts must have residual power to provide the appropriate relief, and to do otherwise would be to reduce the rule of law to a patchwork system. 

The DOJ’s other ground of appeal was to say that the Crown Liability and Proceedings Act (CLPA) prevented the courts from applying a stay. The court ruled that this was a complex argument, which, again, the CRA never brought up initially and, since the CRA provided no case law, they would not consider it. Furthermore, in doing so, the DOJ contradicted their earlier position, in Federal Court, saying that the government could seize the assets, but the taxpayer could then sue for damages.

In the end, they dismissed the appeal unanimously – if I remember correctly, that hearing took less than an hour. And it was my first appellate case.