2016 FCA 100, 2016 FCA 100

[2016] 4 F.C.R. 375 A-319-15 2016 FCA 100 1455257 Ontario Inc. ( Appellant ) v. Her Majesty the Queen ( Respondent ) Indexed as: 1455257 Ontario Inc. v. Canada Federal Court of Appeal, Dawson, Near and Boivin JJ.A.—Toronto, February 17; Ottawa, March 30, 2016.

Income Tax — Corporations — Appeal from Tax Court of Canada (T.C.C.) decision concluding appellant lacked capacity as dissolved corporation to initiate appeal to T.C.C. from assessment issued against it — Appellant, incorporated pursuant to Ontario Business Corporations Act (BCA), dissolved — Issued notice of assessment — T.C.C. adjourning appellant’s appeal to allow it to revive corporate status — Analysing authorities having considered Ontario BCA, s. 242(1) (b) (dealing with revival of dissolved corporations) — Distinguishing 495187 Ontario Ltd. v.

Canada (Minister of National Revenue) (‘187 Ontario), 460354 Ontario Inc. v.

M.N.R. (‘354 Ontario), on basis that subsequent to these decisions (holding dissolved corporations could pursue appeal), Ontario BCA amended to provide at s. 241(5) that corporation “shall be deemed for all purposes to have never been dissolved” upon revival — T.C.C. holding that dissolved corporation lacking capacity to pursue appeal of assessment until revived — Whether T.C.C. erred by concluding that appellant lacked capacity to initiate appeal — T.C.C. not erring by adjourning appeal — Erring in assessment of impact of amendment to s. 241(5) — No distinction of substance between previous, current version of s. 241(5) — ‘187 Ontario not distinguishable — T.C.C. bound to follow ‘187 Ontario — But Federal Court of Appeal authorized to depart from prior decisions — Here, concluding ‘187 Ontario no longer good law — Rationale for ‘187 Ontario based upon Supreme Court of Canada decision in Johnson v.

Minister of National Revenue — Johnson not concluding that appeal to courts by taxpayer continuation of administrative proceeding initiated when taxpayer assessed — Contrary to situation in Johnson, Minister playing no role in commencement of proceeding before T.C.C. — No provision deeming matter to be action or proceeding — Filing notice of appeal in T.C.C. constituting initiation of legal proceeding — Ontario BCA, s. 242(1) not authorizing dissolved corporation to initiate civil proceeding — Appeal dismissed.

This was an appeal from a decision of the Tax Court of Canada (T.C.C.) concluding that the appellant lacked the capacity as a dissolved corporation to initiate an appeal to the T.C.C. from an assessment issued against it under the Income Tax Act . The appellant, incorporated pursuant to the provisions of the Ontario Business Corporations Act (BCA), was dissolved, and its corporate certification cancelled. The Minister of National Revenue (Minister) issued a notice of assessment against the appellant in respect of the tax indebtedness of a related corporation. The appellant filed a notice of appeal in the T.C.C.

The T.C.C. granted the respondent’s motion seeking an order adjourning the appeal so as to allow the appellant to revive its corporate status. The T.C.C. analysed the authorities that have considered paragraph 242(1) (

b) of the Ontario BCA, which deals with the revival of dissolved corporations, including 495187 Ontario Ltd. v. Canada (Minister of National Revenue) ( ‘187 Ontario ) and 460354 Ontario Inc. v. M.N.R. ( ‘354 Ontario ). The T.C.C. distinguished ‘187 Ontario and ‘354 Ontario , wherein it was held that the dissolved corporations could pursue their appeal, on the basis that subsequent to these decisions, the Ontario BCA was amended to provide, at subsection 241(5) , that upon revival a corporation “shall be deemed for all purposes to have never been dissolved”.

The T.C.C. preferred the line of authority that supported the view that, until revived, a dissolved corporation lacks the capacity to pursue an appeal of an assessment to the Tax Court. At issue was whether the T.C.C. erred by concluding that the appellant lacked the capacity to initiate an appeal to the T.C.C. Held , the appeal should be dismissed. The T.C.C. did not err by adjourning the appeal and requiring the appellant to revive its corporate status so that it could continue the appeal. The T.C.C. did err in its assessment of the impact of the amendment made to subsection 241(5) of the Ontario BCA .

There is no distinction of substance between the words “in the same manner and to the same extent as if it had not been dissolved” found in subsection 241(5) at the time ‘187 Ontario was decided, and the current words “shall be deemed for all purposes to have never been dissolved.” It follows that ‘187 Ontario was not distinguishable from the situation before the T.C.C. The T.C.C. should have indicated that it was bound to follow ‘187 Ontario , while explaining why this decision is problematic. The Federal Court of Appeal on the other hand is authorized to depart from its prior decisions.

In the present case, it was held that ‘187 Ontario is no longer good law. The rationale for ‘187 Ontario is found in the reasons of ‘354 Ontario , which relied upon the decision of the Supreme Court of Canada in Johnson v. Minister of National Revenue for the proposition that a judicial appeal taken against an assessment continues to be directed against the assessment. Johnson did not conclude that an appeal to the courts by a taxpayer was a continuation of the administrative proceeding initiated when a taxpayer is assessed or reassessed by the Minister.

Contrary to the situation before the Supreme Court in Johnson , the Minister plays no role in the commencement of a proceeding before the T.C.C. under

section 17.2 of the Tax Court of Canada Act . There is no provision that deems the matter to be an action or proceeding. Filing a notice of appeal in the T.C.C. constitutes the initiation of a legal proceeding. The fact that the legal proceeding is directed against the Minister’s assessment is a separate issue that does not detract from the conclusion that by filing a notice of appeal in the T.C.C. one institutes a legal proceeding. Subsection 242(1) of the Ontario BCA does not authorize a dissolved corporation to initiate a civil proceeding.

STATUTES AND REGULATIONS CITED Business Corporations Act , R.S.O. 1990, c. B.16, ss. 241(5), 242(1) . Income Tax Act , R.S.C., 1985 (5th Supp.), c. 1, s. 160.

Income War Tax Act, R.S.C. 1927, c. 97, ss. 60, 63(2). Tax Court of Canada Act, R.S.C., 1985, c. T-2, s. 17.2. Tax Court of Canada Rules (General Procedure), SOR/90-688a, s. 21(1). CASES CITED NOT FOLLOWED: 495187 Ontario Ltd. v. Canada (Minister of National Revenue), (FCA), [1993] 2 C.T.C. 113, (1993), 156 N.R. 398(F.C.A.). APPLIED: Miller v. Canada (Attorney General), 2002 FCA 370, 220 D.L.R. (4th) 149. CONSIDERED: 460354 Ontario Inc. v. M.N.R., , 95 D.L.R. (4th) 351 (F.C.T.D.); Canada v. Craig, 2012 SCC 43, [2012] 2 S.C.R. 489;Queensland v.

Commonwealth, [1977] HCA 60 (AustLII), (1977), 139 C.L.R. 585; Johnson v. Minister of National Revenue, (SCC), [1948] S.C.R. 486, [1948] 4 D.L.R. 321. appEAL from a Tax Court of Canada (T.C.C.) decision (2015 TCC 173, 47 B.L.R. (5th) 161) concluding that the appellant lacked thecapacity as a dissolved corporation to initiate an appeal to the T.C.C. from an assessment issued against it under the Income Tax Act.Appeal dismissed. APPEARANCES Domenic Marciano and Raphael Rutman for appellant. Craig Maw and Christa Akey for respondent. SOLICITORS OF RECORD Marciano Beckenstein LLP, Concord, Ontario, for appellant.

Deputy Attorney General of Canada for respondent. The following are the reasons for judgment rendered in English by [1] Dawson J.A.: A single issue is raised on this appeal: did the Tax Court of Canada err by concluding that the appellant, as adissolved corporation, lacked the capacity to initiate an appeal to the Tax Court from an assessment issued against it under the IncomeTax Act, R.S.C., 1985 (5th Supp.), c. 1 (Act)? Flowing from this conclusion, the Tax Court adjourned the appellant’s pending appeal for60 days in order to allow the appellant the opportunity to take steps to revive its corporate status.

The appellant did not avail itself of thisopportunity. Instead, it appealed the order of the Tax Court to this Court. This is that appeal. [2] For the following reasons, I conclude that the Tax Court reached the correct result. However, I reach this conclusion by way of adifferent analysis than that conducted by the Tax Court. I. The Facts [3] The facts are simple and undisputed. [4] The appellant was incorporated in 2000 pursuant to the provisions of the Ontario Business Corporations Act, R.S.O. 1990, c.B.16 (Ontario BCA).

It was dissolved, and its corporate certification cancelled, early in 2007. [5] On October 18, 2010, the Minister of National Revenue issued a notice of assessment against the appellant pursuant to section160 of the Act in respect of the tax indebtedness of a related corporation. The appellant objected to the assessment. However, theMinister confirmed her assessment. [6] As a result, the appellant filed a notice of appeal in the Tax Court. The respondent then brought a motion seeking an orderadjourning the appeal so as to allow the appellant to revive its corporate status.

For reasons cited as 2015 TCC 173, 47 B.L.R. (5th) 161[1455257 Ontario Inc. v. The Queen], the Tax Court granted the respondent’s motion. II. The relevant legislation [7] The pertinent provisions of the Ontario BCA are subsections 241(5) and 242(1) which deal with the revival of dissolvedcorporations and actions that may be taken by or against corporations after their dissolution: 241. … Revival

(5) Where a corporation is dissolved under subsection (4) or any predecessor of it, the Director on the application of any interested

person, may, in his or her discretion, on the terms and conditions that the Director sees fit to impose, revive the corporation; uponrevival, the corporation, subject to the terms and conditions imposed by the Director and to the rights, if any, acquired by any personduring the period of dissolution, shall be deemed for all purposes to have never been dissolved. … Actions after dissolution 242.

(1) Despite the dissolution of a corporation under this Act, (

a) a civil, criminal or administrative action or proceeding commenced by or against the corporation before its dissolution may becontinued as if the corporation had not been dissolved; (

b) a civil, criminal or administrative action or proceeding may be brought against the corporation as if the corporation had not beendissolved; (

c) any property that would have been available to satisfy any judgment or order if the corporation had not been dissolved remainsavailable for such purpose; and (

d) title to land belonging to the corporation immediately before the dissolution remains available to be sold in power of saleproceedings. [Emphasis added.] III. The decision of the Tax Court [8] The Tax Court began its analysis, at paragraph 16, by noting that the principal focus on the motion was the correct

interpretationof paragraph 242(1)(

b) of the Ontario BCA and what the Court characterized to be the conflicting lines of authority that have consideredthis provision. Included in such authorities was the decision of this Court in 495187 Ontario Ltd. v. Canada (Minister of NationalRevenue), (FCA), [1993] 2 C.T.C. 113 (F.C.A.) (‘187 Ontario). [9] In ‘187 Ontario, a notice of reassessment was issued after the corporation was dissolved. The corporation appealed theassessment unsuccessfully to the Tax Court and then sought to appeal the decision of the Tax Court to the Federal Court by way of a trialde novo.

This Court held that the dissolved corporation could pursue the appeal for the reasons given by Associate Chief Justice Jeromein 460354 Ontario Inc. v. M.N.R., , 95 D.L.R. (4th) 351 (F.C.T.D.) (‘354 Ontario). [10] In ‘354 Ontario, Associate Chief Justice Jerome considered the then relevant legislative provision which was substantiallysimilar to what is now subsection 242(1) of the Ontario BCA.

In his view, the argument that the dissolved corporation could not defenditself against a “civil, criminal or administrative action or proceeding” commenced against it after its dissolution was “untenable”. [11] Associate Chief Justice Jerome rejected the argument that the plaintiff’s appeal to the Federal Court from the decision of the TaxCourt represented the initiation of a legal proceeding. In his view, once the Minister issues a notice of assessment, it must be open to thetaxpayer to exercise the rights of appeal set out in the Act.

Although the appeal to the Federal Court was by way of a trial de novo, suchappeal did not represent the commencement of an action. Rather, it was the final stage of the appeal procedure.

Therefore, the dissolvedcorporation was held to have the requisite capacity to conduct an action challenging assessments and a reassessment issued by theMinister. [12] The Tax Court distinguished ‘187 Ontario and ‘354 Ontario on the basis that subsequent to these decisions the Ontario BCA wasamended to provide that upon revival a corporation “shall be deemed for all purposes to have never been dissolved” and this differedfrom the previous wording. [13] Having distinguished the jurisprudence of this Court, the Tax Court reviewed the conflicting jurisprudence from the OntarioCourts and a previous decision of the Tax Court.

Ultimately, the Tax Court preferred the line of authority that supported the view that,until revived, a dissolved corporation lacks the capacity to pursue an appeal of an assessment to the Tax Court. IV. Standard of Review [14] I accept the submission of the parties that the question of whether the appellant as a dissolved corporation has the legal capacityto initiate and continue an appeal in the Tax Court is a question of law, reviewable on the standard of correctness. V.

Application of the Standard of Review [15] In my respectful view, the Tax Court erred in its assessment of the impact of the amendment made to subsection 241(5) of theOntario BCA. [16] At the time ‘187 Ontario was decided by this Court, the provision of the Ontario BCA dealing with revival was subsection241(5), which read: 241– … Revival

(5) Where a corporation is dissolved under subsection (4) or any predecessor thereof, the Director on the application of any interestedperson immediately before the dissolution, made within five years after the date of dissolution, may, in his or her discretion, on suchterms and conditions as the Director sees fit to impose, revive the corporation and thereupon the corporation, subject to the terms andconditions imposed by the Director and to any rights acquired by any person after its dissolution, is restored to its legal position,including all its property, rights and privileges and franchises, and is subject to all its liabilities, contracts, disabilities and debts, as of the

date of its dissolution, in the same manner and to the same extent as if it had not been dissolved. [Emphasis added.] [17] For ease of reference, I again set out subsection 241(5) of the current legislation: 241. … Revival

(5) Where a corporation is dissolved under subsection (4) or any predecessor of it, the Director on the application of any interestedperson, may, in his or her discretion, on the terms and conditions that the Director sees fit to impose, revive the corporation; uponrevival, the corporation, subject to the terms and conditions imposed by the Director and to the rights, if any, acquired by any personduring the period of dissolution, shall be deemed for all purposes to have never been dissolved. [Emphasis added.] [18] Read together, there is no distinction of substance between the words “in the same manner and to the same extent as if it had notbeen dissolved” and “shall be deemed for all purposes to have never been dissolved.” It follows that ‘187 Ontario was notdistinguishable from the situation before the Tax Court.

In this circumstance, the appropriate course of action would have been for theTax Court to indicate that it was bound to follow ‘187 Ontario, it being a decision of this Court, while explaining why this decision isproblematic (Canada v. Craig, 2012 SCC 43, [2012] 2 S.C.R. 489, at paragraph 21). [19] Before us, the matter presents itself differently as this Court is authorized to depart from its prior decisions where specialcircumstances warrant such a departure. [20] Departing from a precedent of this Court is a serious matter.

In Craig, Justice Rothstein, writing for the Supreme Court, quotedwith approval at paragraph 26 the following passage from Queensland v. Commonwealth, [1977] HCA 60 (AustLII), (1977), 139 C.L.R.585: No Justice is entitled to ignore the decisions and reasoning of his predecessors, and to arrive at his own judgment as though the pages ofthe law reports were blank, or as though the authority of a decision did not survive beyond the rising of the Court. A Justice, unlike alegislator, cannot introduce a programme of reform which sets at nought decisions formerly made and principles formerly established.

Itis only after the most careful and respectful consideration of the earlier decision, and after giving due weight to all the circumstances,that a Justice may give effect to his own opinions in preference to an earlier decision of the Court. [21] Thus, in Miller v. Canada (Attorney General), 2002 FCA 370, 220 D.L.R. (4th) 149, this Court held that to protect the values ofcertainty and consistency, it will only depart from one of its prior decisions if satisfied that the previous decision is manifestly wrong. [22] In the present case, I am satisfied that ‘187 Ontario is no longer good law.

I reach this conclusion for the following reasons. [23] As set out above, the rationale for this Court’s decision in ‘187 Ontario is found in the reasons of Associate Chief Justice Jeromein ‘354 Ontario. There, Associate Chief Justice Jerome relied upon the decision of the Supreme Court in Johnson v. Minister of NationalRevenue, (SCC), [1948] S.C.R. 486, for the proposition that a judicial appeal taken against an assessment continues to bedirected against the assessment. From this proposition he reasoned that when an appeal is launched in a Court, such appeal is not theinitiation of a proceeding.

Rather, the court proceeding is the “final stage of the appeal procedure” that is commenced by the filing of anotice of objection. [24] In Johnson Justice Rand, writing for the majority, stated at page 489 that: Notwithstanding that it is spoken of in section 63(2) as an action ready for trial or hearing, the proceeding is an appeal from the taxation;and since the taxation is on the basis of certain facts and certain provisions of law either those facts or the application of the law ischallenged.

Every such fact found or assumed by the assessor or the Minister must then be accepted as it was dealt with by these personsunless questioned by the appellant. If the taxpayer here intended to contest the fact that he supported his wife within the meaning of theRules mentioned he should have raised that issue in his pleading, and the burden would have rested on him as on any appellant to showthat the conclusion below was not warranted. [25] Two points arise from this passage.

First, the Supreme Court did not conclude that an appeal to the courts by a taxpayer was acontinuation of the administrative proceeding initiated when a taxpayer is assessed or reassessed by the Minister. Rather, Justice Randexplained that it is the product of the assessment, that is the taxation, which is at issue on an appeal to the courts. [26] Second, Justice Rand was disposing of the taxpayer’s argument about the question of onus. Johnson remains good law withrespect to which party bears the onus of proof. [27] Moreover, Johnson raised a question of the correct

interpretation of a

schedule to the Income War Tax Act, R.S.C. 1927, c. 97. Ofrelevance to this appeal is the difference between the scheme under this Act when compared with that in existence both now and when‘354 Ontario was decided. Under the Income War Tax Act, a person objecting to an assessment was entitled to appeal the assessment tothe Minister. If the Minister rejected the appeal, the taxpayer could serve a “notice of dissatisfaction” [section 60] upon the Minister. Insuch notice, the taxpayer was required to state that he wished to have his appeal set down for trial.

The taxpayer was required to forwardwith the notice of dissatisfaction a final statement of such further facts, statutory provisions and reasons that the taxpayer intended tosubmit to the Court in support of the appeal that were not included in the original notice of appeal filed with the Minister.

In thealternative, the taxpayer could file a recapitulation of all facts, statutory provisions and reasons included in the notice of appeal, togetherwith such further facts, provisions and reasons as the taxpayer intended to submit to the Court in support of the appeal. [28] The Minister was then required to reply to the notice of dissatisfaction and to then transmit to the Exchequer Court the relevantincome tax return, the notice of assessment, the notice of appeal, the Minister’s decision, the notice of dissatisfaction, the Minister’sreply to the notice of dissatisfaction and all other documents and papers relevant to the assessment under appeal.

The legislation provided[subsection 63(2)] that “[t]he matter shall thereupon be deemed to be an action in the said Court ready for trial or hearing”.

[ 29 ] This procedure differs significantly from that now in place and in place at the time ‘354 Ontario was decided (a point not considered by Associate Chief Justice Jerome). [ 30 ] Under

section 17.2 of the Tax Court of Canada Act , R.S.C., 1985, c. T-2 a proceeding is instituted before the Tax Court by filing “[a]n originating document” as prescribed by the Tax Court of Canada Rules (General Procedure) , SOR/90-688a [ subsection 21(1) ]. The proceeding is deemed to be “instituted” on the day the originating document is received by the Registry of the Tax Court. Contrary to the situation before the Supreme Court in Johnson , the Minister plays no role in the commencement of the proceeding; the material before the Minister is not transmitted directly to the Tax Court by the Minister.

There is no provision that deems the matter to be an action or proceeding. [ 31 ] When this legislative regime is considered, in my respectful view, it is no longer correct to say that the filing of a notice of appeal in the Tax Court does not constitute the initiation of a legal proceeding. Filing a notice of appeal in the Tax Court does constitute the initiation of a legal proceeding.

The fact that the legal proceeding is directed against the Minister’s assessment is a separate issue that does not detract from the conclusion that by filing a notice of appeal in the Tax Court one institutes a legal proceeding. [ 32 ] Subsection 242(1) of the Ontario BCA does not authorize a dissolved corporation to initiate a civil proceeding.

It follows that the Tax Court did not err by adjourning the appeal and requiring the appellant to revive its corporate status so that it could continue the appeal. [ 33 ] As explained above, I have reached this conclusion on the basis of what was in issue in Johnson and the significant change in procedure subsequent to the decision of the Supreme Court. This said, this

interpretation avoids the mischief that concerned the Tax Court. Of concern to the Tax Court was who is entitled to instruct counsel for the dissolved corporation and who is responsible for paying counsel and using the assets of the corporation, before forfeiture, to pay the legal costs and other required expenditures. [ 34 ] Finally, during oral argument, counsel for the appellant submitted that not all dissolved Ontario corporations can be revived.

Thus, the appellant argued that unless dissolved corporations are permitted to commence and prosecute appeals in the Tax Court, some dissolved corporations will be unable to appeal against assessments and reassessments issued against them under the Act . [ 35 ] As this was a novel and important argument, the Court sought and received supplemental submissions on this point. [ 36 ] On the basis of those submissions, I accept that the revival provision found in subsection 241(5) of the Ontario BCA applies only to corporations which have been dissolved by the Director appointed under that Act after being noted in default of certain specified obligations.

Therefore, corporations that are voluntarily dissolved, corporations that are dissolved for cause or corporations dissolved more than 20 years prior to the intended revival cannot be revived pursuant to the administrative provision found in the Ontario BCA. [ 37 ] However, I am satisfied that in the perhaps unlikely event that a party wishes to take proceedings against such a dissolved corporation, a mechanism exists to effect revival. When articles of revival cannot be filed under subsection 241(5) of the Ontario BCA , the dissolved corporation may be revived by a Private Act of the Ontario Legislature.

This right is real and not illusory because the Ontario Legislative hears Private Acts to revive corporations on a regular basis. [ 38 ] Thus, I reject the submission that corporations that cannot be revived administratively cannot be revived. VI. Conclusion [ 39 ] It follows that I would dismiss the appeal with costs. I would continue the adjournment of the pending appeal ordered by the Tax Court for a further 60 days from the date of the judgment of this Court in order to allow the appellant to revive its corporate status. Near J.A. : I agree. Boivin J.A.: I agree.