http://decisions.fct-cf.gc.ca/fc-cf/decisions/en/item/108403/index.do
McCartie v. Canada (February 23, 2015 – 2015 FC 222, Zinn J.).
Précis: Mr. McCartie had a long-standing GST dispute with CRA and was the subject of an ongoing prosecution. CRA reopened a previously closed GST account of Mr. McCartie in order to raise a GST assessment against him. It sent requests for information (RFIs) to several parties. He reached a collection agreement with CRA but CRA continued to investigate his assets and send an RFI to Pacesetter Trading Company Ltd., a company through which he allegedly channeled funds. He sought to judicially review that RFI, challenged the reissuance of a GST account to him by CRA and raised a constitutional question about the validity of the GST assessment raised against him by CRA. The Court found that the Pacesetter RFI was a valid part of CRA’s investigative efforts and not a collection proceeding. The attack on the reissuance of the GST account was a collateral attack on the assessment and therefore not within the jurisdiction of the Federal Court. The constitutional challenge was a challenge to the GST assessment and should be raised before the Tax Court. The application was dismissed with costs of $2,500.00 payable to the Crown.
Decision: Mr. McCartie had a protracted GST dispute with CRA:
[3] There is a long history of events between these parties. The following, which includes the relevant events, can only provide a flavour of that history.
[4] In February of 2010, CRA activated a previously closed GST registration number of Mr. McCartie in order to raise a GST assessment against him. Mr. McCartie commenced a judicial review proceeding for this action on April 6, 2010. The account was closed on May 26, 2010, and CRA was granted a motion dismissing the application on July 12, 2010.
[5] On March 23, 2011, the GST account was reopened. Mr. McCartie again filed an application for judicial review but later withdrew the application.
[6] In May 2011, the applicant was employed by Pattison Outdoor Advertising LLP [Pattison]. The CRA issued a Requirement to Pay to Pattison [Pattison RTP] at a rate of 60% of the applicant’s salary.
[7] After some negotiations between the CRA and Mr. McCartie, the Pattison RTP was decreased to 30% on July 5, 2011, provided that Mr. McCartie made certain disclosures and a written statement that his only household income was his T4 earnings and his only active bank accounts are those shared with his spouse.
[8] It appears that Mr. McCartie failed to provide requested documents and the Pattison RTP was increased to 45% on September 13, 2011.
[9] On January 25, 2012, Mr. McCartie notified the CRA that he was looking for work and that he was living off of credit cards and charity of friends and family. He had also applied for Employment Insurance [EI].
[10] On June 27, 2012, the CRA issued Requests for Information [RFI] to CIBC, Bank of Montreal and TD Canada Trust. It was determined that the applicant was earning income on a monthly basis above and beyond his EI and failed to notify the CRA.
[11] On August 21, 2012, the CRA sent a Statutory Set Off [SSO] notice at 40% to the agency in charge of EI. It was subsequently withdrawn on September 27, 2012.
[12] On August 22, 2012, the CRA sent a RTP to TD Canada Trust.
[13] In August 2012, the CRA and Mr. McCartie reached some agreement with respect to his GST debt. In a letter dated September 20, 2012, Mr. McCartie described that agreement, as follows:
You have agreed to postpone further collection action against Annie and I in lieu of the post-dated payments in your possession [of $100 per month], until such time as the current criminal proceedings against my wife and I are concluded. [emphasis added.]
The CRA agreed on the condition that Mr. McCartie provided full and frank disclosure of his income and assets. The CRA states that they did not agree to refrain from continuing investigation into the applicant. It distinguishes between investigation and collection – Mr. McCartie does not.
[14] On September 20, 2013, Mr. McCartie swore an affidavit that he was not an employee but was working in a non-commercial activity with no intent to profit. He was paid about $3400 a month. The CRA obtained bank statements that it says show that he channelled funds through Pacesetter Trading Company Ltd. [Pacesetter] to his personal account and that Mr. McCartie did not disclose this information.
[15] The CRA also says that Mr. McCartie opened a new bank account under a numbered company with a corporate income tax account but no GST/HST account. It says that money was also channelled from Pacesetter to this numbered company.
[16] On May 5, 2014, the CRA sent Pacesetter a RFI pursuant to subsection 289(1) of the ETA [the Pacesetter RFI]. This was the event that caused Mr. McCartie to file this application.
[17] As noted earlier, Mr. McCartie has filed objections to the assessments in question and the objections are currently being held in abeyance pending the criminal proceeding for tax evasion.
His first challenge was to the Pacesetter RFI. The Court rejected his arguments:
[27] I am further of the view that the one decision under review, the Pacesetter RFI, was reasonable. I am unable to agree with Mr. McCartie that it breached the terms of the agreement, which he himself described as an agreement that “further collection action” would be postponed in exchange for his monthly payments. I agree with the CRA that the Pacesetter RFI is not a collection action; rather, it is an investigation action. CRA is entitled to reasonably investigate whether Mr. McCartie has provided full and frank disclosure of his assets and income. If, as a result of its investigative action, it is ascertained that Mr. McCartie has breached their agreement, then it will be entitled to pursue further collection action.
The Court similarly rejected his arguments concerning the involuntary reissuance of his GST account and subsequent assessment and seizure of property:
[29] This court has held that “[CRA] is empowered to assign a GST number and assess an individual, whether or not that individual has voluntarily applied for a GST number” and that any attack on that assignment is a collateral attack on the GST assessment which is exclusively within the jurisdiction of the Tax Court of Canada:
Lewry v Canada (The Minister of National Revenue), Court File T-1430-11, Order dated December 23, 2011.
[30] Therefore, this court has no jurisdiction to address the issues Mr. McCartie has raised concerning the involuntary assigning of a GST number or the taking of his property without due process. All of those issues belong in the Tax Court of Canada.
Finally the Court concluded that the constitutional questions raised by Mr. McCartie went to the GST assessment and should be raised before the Tax Court:
[31] Because this application as it relates to the Pacesetter RFI is dismissed on the merits, and the court has no jurisdiction over the remaining issues, the constitutional question Mr. McCartie has raised does not arise and needs not be answered. The question relates to the earlier GST assessment made by CRA and is part and parcel of the challenge Mr. McCartie is making as to the validity of that assessment. I agree with CRA that that issue and the constitutional question are within the jurisdiction of the Tax Court of Canada.
The application was dismissed and $2,500.00 in costs were awarded to the Crown.