http://decisions.fca-caf.gc.ca/fca-caf/decisions/en/item/108304/index.do 
Johnson v. Canada (February 23, 2015 – 2015 FCA 51, Nadon, Webb (Author), Boivin JJA).
Précis: This decision, which I have labelled (No. 1), is the first in two separate appeals by Mr. Johnson handed down by the Federal Court of Appeal on February 23, 2015. This appeal is from a decision of the Federal Court in which Mr. Johnson sought to review assessment and collection activity taken against him under the provisions of the
Excise Tax Act (the “Act). On April 9, 2012 the RCMP seized $13,000 from Mr. Johnson’s home as part of a drug investigation. On April 17, 2012 the RCMP provided details of their investigation to CRA. On April 20, 2012 CRA issued a Requirement to Pay Restorable Money (“RTP”) in respect of Mr. Johnson and his alleged accomplices; the RTP totalled $292,700. Four days later on April 24, 2012, a GST assessment was issued against them in the same amount. On May 3, 2012 the RCMP turned over the cash seized from Mr. Johnson’s residence to CRA. Two additional assessments were issued against Mr. Johnson in 2013. The Court declined to issue a declaratory judgment in respect of the validity of the assessments. The Tax Court had exclusive jurisdiction over the assessments and such a declaration would likely have no effect. The Federal Court of Appeal did however have jurisdiction over the collection actions of CRA and quashed the RTP since it had been issued prior the 2012 assessment. There was no costs order as the success was mixed.
Decision: This decision arose out of an RCMP drug investigation of Mr. Johnson and his colleagues. In the course of that investigation money was seized from Mr. Johnson’s residence:
[3] In August 2011, the RCMP began an investigation into whether Mr. Johnson and others were involved in the trafficking of cocaine and other substances. The investigation ultimately led to a search of Mr. Johnson’s vehicle and house on April 9, 2012. Approximately $13,000 in cash was seized from the residence of Mr. Johnson. He was not charged with any offence at that time.
The RCMP turned over evidence from their investigation to CRA who began audit, assessment and collection action:
[5] On April 17, 2012, the RCMP provided to the Minister a summary of their investigation and items seized. The summary identified nine individuals, including Mr. Johnson, and included details of observed transactions during the period from January 2012 to April 2012.
[6] Following the receipt of this information from the RCMP, on April 18, 2012 an auditor with the Canada Revenue Agency (CRA) opened a GST/HST account for a partnership. The auditor identified Mr. Johnson, Mr. Le and Ms. Laing as the three partners of this partnership. The effective date of registration was January 1, 2011. The estimated annual revenue was stated to be $3 million from a business activity described as “cocaine distribution”. The address for the partnership was stated to be the address for the CRA.
[7] On April 19, 2012, the auditor referred the matter to a Collections/Enforcement Liaison Officer with the CRA who, on the same day, “took steps to initiate the creation of the Partnership Assessment by entering the necessary data into the CRA’s computer system to generate the Partnership Assessment” (Affidavit of Mandeep Gill, paragraph 14, page 468 of the Appeal Book). The following day, the liability for the GST/HST was posted on the CRA’s computer system.
[8] On April 20, 2012, a Requirement to Pay Restorable Money (RTP) was issued under subsection 320(1) of the Act against Mr. Le, Ms. Laing and Mr. Johnson on the basis that they were each jointly and severally liable for the GST/HST liability of the partnership under subsection 272.1(5) of the Act. The maximum amount payable under this RTP was $292,700. The RTP was sent by fax to the RCMP together with a covering letter also dated April 20, 2012.
[9] On April 24, 2012, the Minister issued a notice of assessment for the net tax, interest and penalty of the partnership of Mr. Le, Ms. Laing and Mr. Johnson for the following amounts:
| Reporting Period |
Net Tax |
Interest and Penalty |
Total Amount |
| July 1, 2011 to September 30, 2011 |
$141,120 |
$6,690 |
$147,810 |
| October 1, 2011 to December 31, 2011 |
$141,120 |
$3,770 |
$144,890 |
| |
|
|
$292,700 |
[10] This notice of assessment was addressed to Mr. Le, Ms. Laing and Mr. Johnson, c/o the CRA auditor at the address for the CRA in Surrey, BC. Also on April 24, 2012, a notice of assessment was issued under subsection 272.1(5) of the Act in respect of the joint and several liability of each of the three identified partners for the unremitted net tax, interest and penalties of the partnership. This notice of assessment was sent to Mr. Johnson at his last known address on the same day. These assessments were referred to in the reasons of the Federal Court Judge as the First Assessments.
[11] On April 26, 2012, the notice of assessment that had been issued in relation to the joint and several liability of Mr. Johnson “was registered in Federal Court and a Writ of Seizure and Sale was obtained by the Minister” (paragraph 10 of the reasons of the Federal Court Judge).
[12] On May 3, 2012, the Minister hand delivered the RTP to the RCMP and received the cash that the police had seized from the residence of Mr. Johnson.
[13] On May 15, 2012, personal property and vehicles of Mr. Johnson were seized. On May 24, 2012, a certificate of title was registered against Mr. Johnson’s property. Mandeep Gill, in his affidavit, stated that he had issued a Requirement to Pay, pursuant to subsection 317(3) of the Act, to Mr. Johnson’s bank on May 28, 2012. However, the Requirement to Pay that is included in the Appeal Book is not dated.
Additional assessments were issued in 2013.
Mr. Johnson was unsuccessful in the Federal Court in attacking the assessments, collection activity and RTP:
[18] The Federal Court Judge concluded that Mr. Johnson’s application for judicial review, in relation to the assessments that were issued, was a collateral attack on the validity of the assessments and therefore was a matter that was not within the jurisdiction of the Federal Court (paragraph 31 of the reasons). The Federal Court Judge also concluded that the Tax Court of Canada had exclusive jurisdiction to address the issue of whether the RTP was properly issued. Notwithstanding this finding in relation to the RTP, he noted that even if the Federal Court did have jurisdiction, he would have found that the RTP was properly issued under the Act.
[19] In addition, the Federal Court Judge rejected Mr. Johnson’s arguments that:
-
the First Assessments and the Second Assessments were not made for a proper purpose;
- the Second Assessments gave rise to a reasonable apprehension of bias;
- the Minister was functus officio when he issued the Second Assessments; and
-
a stay should be granted in respect of the CRA’s collection action pending the outcome of the appeal of the assessments to the Tax Court of Canada.
Before the Federal Court of Appeal he raised the following arguments:
[20] In this appeal, Mr. Johnson raises the following issues:
a) Does the Federal Court have jurisdiction to review the actions of the Minister in relation to the First Assessments and the Second Assessments?
i. If the Federal Court has such jurisdiction, does the conduct or motive of the Minister, in this case, warrant a declaration that the assessments should not have been issued?
b) Does the Federal Court have the jurisdiction to review the collection actions of the Minister?
ii. If the Federal Court has such jurisdiction, was the Minister’s action in issuing the RTP in this case unlawful?
The Court found that the issuance of a declaratory judgment would be inappropriate since the jurisdiction to deal with the assessment was in the Tax Court:
[39] In
Roitman, the alleged abuse related to a question of law. In the present appeal, the alleged abuse relates to questions of fact and whether there was a factual basis for the assessments as issued. Just as in
Roitman, the declaration sought by Mr. Johnson would be a meaningless declaration separated from the real question of whether the assessments that were issued were valid assessments under the Act.
[40] As noted by the Supreme Court of Canada in
Terrasses Zarolega Inc. v. Québec (Régie des installations olympiques), [1981] 1 S.C.R. 94, 124 D.L.R. (3d) 204:
Finally, a declaratory judgment will not be rendered when it will serve little or no purpose.
[41] Issuing a declaratory judgment that could not quash or vacate the assessments would serve little or no purpose. As noted, the Federal Court does not have the jurisdiction to quash or vacate the assessments that were issued under the Act. Mr. Johnson would still have to pursue his appeal to the Tax Court of Canada even if such declaratory judgment would have been rendered. As noted by C. Miller J. in
Obonsawin, at paragraphs 15 and 16, it does not necessarily follow that the Tax Court of Canada would automatically vacate the assessments if such a declaration is issued.
[42] As a result, I would dismiss the appeal in relation to the judicial review of the Minister’s actions in issuing the assessments.
The Federal Court of Appeal did, however, have jurisdiction over the collection activities:
[46] As noted by this Court in
Walker v. The Queen, 2005 FCA 393, [2005] F.C.J. No. 1952:
15 An application for judicial review may be made to the Federal Court to challenge the legality of collection measures taken by the Minister to collect taxes allegedly due.
[47] This was reaffirmed by this Court in
JP Morgan at paragraph 96.
[48] As a result, the Federal Court does have the jurisdiction to judicially review the collection action of the Minister in issuing the RTP in this case.
The Court concluded that the RTP was invalid but because of the divided success did not award any costs on the appeal:
[61] As noted above, the assessment of Mr. Johnson was deemed to have been made on April 24, 2012 but the RTP was issued four days earlier on April 20, 2012. Since the RTP was issued before Mr. Johnson was assessed for the purposes of the Act, it was not validly issued under the Act. The Crown argued that, since the RTP was not personally served on the RCMP until after the notice of assessment was sent to Mr. Johnson, it should be considered to be valid. However, this simply means that an invalid RTP was served on the RCMP. This delivery of the RTP after the First Assessment was sent to Mr. Johnson does not change the fact that the RTP was issued before he was assessed and does not cure the defect.
…
[63] Therefore the remedies that may be granted in relation to the issuance of the RTP are limited to a declaration of invalidity or quashing the RTP.
[64] As a result, I would allow the appeal of Mr. Johnson in relation to the issuance of the RTP, issue a declaration that the RTP was not validly issued under the Act and quash the RTP. Since, as noted above, I would dismiss the appeal in relation to the decisions of the Minister to issue the assessments, I would not award any costs.