Section 222

The taxpayer sought a declaration that he had paid taxes between the years 1971 and 1984. Zinn J. found that the limitations period in s. 222 only applies to actions commenced by the Minister, and not to the taxpayer. Instead, the general limitations period in s. 32 of the Crown Liability and Proceedings Act applies. The taxpayer was beyond this limitation period, so his application was dismissed.

Zinn J. found in the alternative that the doctrine of laches would bar the taxpayer's application. The taxpayer had allowed far too long a delay before bringing his application, knowing full well of the tax debt claimed by the CRA.

The Tax Court lacked jurisdiction to consider the allegation of the taxpayer that an amount received by her from her employer was net of employee source deductions, so that she had already paid the tax in question. Such an allegation could be asserted by her in the Federal Court when the Minister attempted to recover the sums he considered to be payable.

Rothstein J.A. rejected the contention of the Minister that the Act was a complete code which provided for no limitation period in respect of collection procedures. Instead, Parliament's intention was that section 32 of the Crown Liability and Proceedings Act was to apply when Acts of Parliament (such as the Income Tax Act) were silent on the issue of limitations. Accordingly, the Minister was precluded by s. 3(5) of the Limitation Act (B.C.) from instituting collection proceedings against the taxpayer more than six year after the indebtedness of the taxpayer for federal and provincial income tax became collectible (i.e., six years after the expiry of the 90-day period referred to s. 225.1(1)).

Addy, J. stated that "it has long been firmly established that liability is created by statute and exists regardless of whether there has been an assessment by the Minister." An indebtedness arose when the taxpayer made a designation pursuant to s. 195(2) two months into its fiscal period, i.e., well before the end of its fiscal period, and the Minister was thereupon entitled to take whatever legal steps were available to ensure payment.

It was held that under the Act, a debt of the taxpayer to the Crown comes into existence the moment that taxable income is earned, notwithstanding that assessment is not made by the Minister until considerably later. The taxpayer corporation accordingly was insolvent for purposes of section 40 of the Business Corporations Act (Saskatchewan) by virtue of paying dividends equal to all its remaining net assets, including proceeds of disposition of land which it had reported as a capital transaction, notwithstanding that the taxpayer was not reassessed on the basis that the disposition had been on capital account until after the payment of the dividends.

In a meeting between the individual taxpayer and representatives of the Department, it was tentatively agreed that a global amount of $122,000 owed by the individual and 4 companies which he owned or ran, would be retired by him paying $1,000 per month. It was held that in the circumstances the choice of the Department as to which of the 5 accounts it applied the monthly payments bound the taxpayers.

Where two individuals, who carried on a construction business in partnership with each other as well as through 9 incorporated companies, knew that payments being made by them to the Receiver General respecting arrears of taxes of the partnership and the companies were being credited to the companies' accounts, they were later precluded from arguing that the payments should have been applied by the Department instead to reduce the amount of the debt owing by the partnership to the Receiver General.