Section 225.2

The fact that the taxpayer was discovered to have approximately $213,000 in cash stored in his apartment, in a safety deposit box and in a cold storage depot locker together with the nature of the reassessments against him (which indicated a range of income quite out of scale with the income disclosed by him in his tax returns) were found to provide reasonable grounds for the belief referred on s. 225.2(2).

In setting aside an order of the trial judge, Marceau J.A. found that where, on the basis of the material put before the Court, it appears that the Minister had reasonable grounds for believing that the taxpayer would waste, liquidate or otherwise transfer his assets so as to become less able to pay the amount assessed thereby jeopardizing the Minister's debt, the judge has no alternative but to grant the application.

The taxpayer was able to raise a reasonable doubt on a review application under s. 225.2(8) that the Crown's collection process would in fact be jeopardized, notwithstanding the instability of the taxpayer's business location, the taxpayer's reluctance to file returns on time, the transfer of the taxpayer's various assets to its shareholders, the virtual stoppage of its operations, and the departure of one of the taxpayer's principal shareholders.

The taxpayer's application to have an ex parte order set aside was allowed in light of the absence of evidence that delay would jeopardize collection (including the absence of evidence of an intention to flee the country) and the failure of the Crown to make full disclosure on the ex parte application.

On December 17, 1986, the Minister assessed the taxpayer, mailed the assessment and a demand for payment, obtained a judgment under s. 223(2) and obtained process of execution, and on the next day executed that process. The Minister had no such right to take such jeopardy proceedings because a condition precedent to the taking of such proceedings was that the taxpayer have been given an opportunity to pay.

Applications under s. 225.2(2) to vacate s. 225.2(1) directions were dismissed. "The only reasonable conclusion to be drawn from the uncontradicted evidence of transfers of substantial sums of money following shortly upon service of requests to pay and notices requiring information on the applicants is that the majority of such transfers were carried out to avoid efforts by officers of the tax department to enforce payment of outstanding taxes ... [T]he purchase of gold sovereigns outside Canada suggest[s] that steps were being taken to place assets of the corporation beyond the reach of the Minister.

The Minister was unable to establish on balance of probabilities that failure to act under s. 225.2 would result in the taxpayer wasting, liquidating or otherwise transferring its assets to escape the tax authorities.

The issue under s. 225.2(1) "is not whether the collection per se is in jeopardy but rather whether the actual jeopardy arises from the likely delay in the collection thereof. "The taxpayer's inability to pay accordingly was insufficient justification for the direction to pay".

Various actions of the taxpayer, who had been charged with a drug trafficking offence, such as being apprehended transporting $14,000 in cash underneath his car into the United States, withdrawing $11,000 in cash from the T-D Bank, placing funds for investment purposes through the hands of a third party, and telling a police officer, respecting the $11,000 withdrawal: "I have it, I stashed it and you will never find it", raised a reasonable apprehension justifying jeopardy proceedings.

Joyal J. stated, obiter: "I would think that it is incumbent on the Minister in exercising his executory powers under paragraph 225.1(1) to limit the freeze to those assets which roughly equal the amount at risk."

"When the evidence submitted by the taxpayer applicant raises reasonable doubt about the sufficiency of evidence originally provided by the Crown in an ex parte application, it is implicit in the process established by paragraph 225.2(8) that the Court considering review of the authorization once made may consider evidence originally presented on behalf of the Minister in support of the jeopardy order and any additional evidence by affidavit or from cross-examination of affiants, presented by either party in relation to the motion for review."

A taxpayer cannot proceed on a motion pursuant to s. 225.2(2) until the Minister has made a jeopardy determin