Canada (Attorney General) v, 2023 ABKB 357

Court of King’s Bench of Alberta Citation: Canada (Attorney General) v 18335898 Alberta Ltd (Whitecap Energy Inc), 2023 ABKB 357 Date: 20230614 Docket: 2303 08199 Registry: Edmonton Between: Attorney General of Canada Plaintiff - and - 18335898 Alberta Ltd (formerly known as Whitecap Energy Inc) Defendant _______________________________________________________ Reasons for Decision of Judge W.S. Schlosser _______________________________________________________ [ 1 ] This is an Application by the Attorney General of Canada to revive a dissolved corporation.

It is opposed by its (former) sole shareholder, Whitecap Resources Inc. The central issue is standing. [ 2 ] 1835898 Alberta Ltd, formerly known as Whitecap Energy Inc, was audited by the CRA in the 2013, 2014 taxation years. These audits quantified eligible capital losses. The capital losses were then used by the corporation in 2017 and 2018. The CRA has audited Whitecap Energy’s application of these capital losses and the Attorney General of Canada seeks to revive the corporation to permit the CRA to issue a Notice of Assessment. [ 3 ] Whitecap Energy was dissolved in 2020.

Any assets remaining in the company went to its sole shareholder Whitecap Resources Inc. This is the company that objects to the proposed revival. [ 4 ] There are four issues: 1. Whether the Attorney General of Canada is an interested person within the meaning of s 206.1(

a) of the Alberta Business

Corporations Act, RSA 2000, c B-9 (ABCA): which provides: 206.1 In this Part, “interested person” means (

a) a shareholder, a director, an officer, an employee and a creditor of a dissolved corporation, ... (emphasis added) 2. Whether the Attorney General of Canada is appropriately designated by the Court as an interested person under s 206.1(

d) of theABCA; 3. Whether the Court can grant relief based on a subsection of the ABCA that was not pleaded; and 4. Whether the Court would be acting without purpose by permitting a revival.

List of Authorities By the Applicant [5] Income Tax Act, RSC 1985, c 1 (5th Supp), s 152 (3) and 160, Alberta Business Corporations Act, RSA 2000, c B-9,subsections 206.1(a)(d), Judicature Act, RSA 2000, c J-2, s 8, Concrete Equities Inc (Re) 2022 ABQB 185, and Re PetrominesAcquisitions Ltd, 2001 ABQB 568, Alberta Rules of Court, Alta Reg 124/2010, r 1.3(2), Stackard v 1256009 Alberta Ltd, 2018 ABQB924, F(RJ) v F(CM), 2014 ABCA 165, Gramaglia v Alberta (Government Services Minister), 2007 ABCA 93, St Isidore Co-opLimited v AG Growth International Inc, 2020 ABCA 447.

By the Respondent [6] Enron Canada Corp v Husky Oil Operations Limited, 2007 ABCA 27, Rizzo & Rizzo Shoes Ltd, (SCC),[1998] 1 SCR 27, Canadian Petroleum Tax Journal, 8 – The Crown’s Reply to Notice of Appeal: What May She Plead and When MayShe Plead It? – Joel Nitikman, Canada (Attorney General) v Brogan Family Trust, 2014 ONSC 6354, Alberta Rules of Court, Alta Reg124/2010, r 3.14, Weir-Jones Technical Services Incorporated v Purolator Courier Ltd, 2019 ABCA 49, Noscenco v Bagayeva, 2016ABCA 242, 1536466 Alberta Ltd v Prestigious Properties Inc, 2017 ABQB 176, Knelsen Sand & Gravel Ltd v Harco Enterprises Ltd,2021 ABCA 385, 321665 Alberta Ltd v ExxonMobil Canada Ltd, 2012 ABQB 76, Motkoski Holdings Ltd v Yellowhead (County),2010 ABCA 72, Online Constructors Ltd v Speers Construction Inc, 2012 ABCA 132, Paniccia Estate v Toal, 2012 ABCA 397,Alberta Business Corporations Act, RSA 2000, c B-9, subsections 193, 210, 215, 242, 254.

By the Court [7] Alberta Rules of Court, Alta Reg 124/2010, r 13.6(3)(r), Poulin Estate v Niewchas, (1992) (AB KB), 4Alta LR (3d) 35, Robinson v Lewis, 2015 ABQB 385. Discussion Debt and Taxes [8] A creditor has standing to ask that a dissolved corporation be revived pursuant to s 206.1(

a) of the ABCA. The first issue iswhether the Attorney General of Canada is a creditor of the dissolved corporation, no Notice of Assessment having been issued. Thisissue reveals a technical and somewhat circular problem. [9] Taxpayers remain liable for tax when income is earned (s 152(3) ITA), notwithstanding that no return is filed. The liabilitydoes not become a debt until the taxes are assessed and a Notice of Assessment is issued (sections 158, 227, and 248(2) Income Tax Act,and cf Brogan Family Trust at paras 13, 14). In this case the audit is complete but no Notice of Assessment has been issued.

A Noticeof Assessment cannot be issued until the company is revived. The CRA’s deadline for issuing a Notice of Assessment is June 19, 2023.The Attorney General of Canada has no standing as a ‘creditor’ until the Notice of Assessment is issued and the Notice of Assessmentcannot be issued until the company is revived. [10] While the Attorney General of Canada might become a creditor presently, it is not a creditor now, within the plain andordinary meaning of s 206.1(a).

The Applicant admits as much. [11] The Attorney General of Canada does not have standing to revive the dissolved corporation as a creditor under s 206.1(

a) ofthe ABCA on the facts now before the Court. Designation [12] The Court has the power to designate someone as an interested person pursuant to s 206.1(

d) of the ABCA. [13] I am not aware of any decided cases (and the parties could find none) that would inform or constrain the Court’s discretion to

designate someone as an interested person under s 206.1(d). Designating an individual as an interested person is discretionary and that the discretion ought to be exercised judicially and for no improper purpose. [ 14 ] I am satisfied that the Attorney General of Canada has a valid interest in revival and seeks this remedy in furtherance of its valid interest for a legitimate purpose; which is to convert liability for taxes into a debt. I am also satisfied that this purpose cannot be accomplished until the corporation is revived. If it is not done shortly, the opportunity will be lost. Rule 13.6(3)(r) [ 15 ] The Respondent objects to relief being granted under s 206.1(

d) when only s 206.1(

a) was named as the basis for this in the Originating Application. [ 16 ] Rule 13.6(3)(

r) requires a party to state the provisions of an enactment that may take another party by surprise. [ 17 ] Some statutes are required to be pleaded specifically and the failure to do so bars relief (examples are the Statute of Frauds or the Limitations Act, RSA 2000, c L-12 ). This is not the case here. [ 18 ] In this case, the relief is revival under s 210. The route, was expressed to be s 206.1(

a) but was determined properly to be 206.1(d), which was not specifically identified by the Applicant’s materials. [ 19 ] The pleading, in this case an Originating Application, is clear about the relief sought. If the specific subsection that provides the vehicle for this relief is not pleaded, but the facts otherwise support the relief claimed, the inquiry turns to surprise. [ 20 ] The status of the Attorney General of Canada as an interested person under both ss 206.1(

a) and (

d) was fully canvassed at the hearing. The hearing was adjourned for further submissions abut the applicability of s 206.1(d). Neither side was able to find any authority that would assist the Court’s determination about whether the Attorney General of Canada should be designated an interested person under s 206.1(d). [ 21 ] Absent a requirement to plead a specific enactment, relief supported by the facts pleaded is available, even where a wrong statute is pleaded (see Poulin Estate at para 10 , Robinson ). In this case the surprise is lost and there is no unfairness.

Without Purpose [ 22 ] There is one final argument to be addressed . [ 23 ] The revived corporation would have no assets and no property, no directors, and no shareholders; notwithstanding that a dissolved corporation that has been revived is deemed always to have existed by the operation of section 210(9) of the A BCA . [ 24 ] In these circumstances the only recourse would likely be against the (former) sole shareholder.

Section 227 of the A BCA permits a person with a claim against the dissolved corporation to sue a shareholder who has received corporate property. The time limit under the A BCA is two years from dissolution (s 227(4)), which parallels the time limit in the Limitations Act . [ 25 ] An action may be commenced against a shareholder prior to judgment against the corporation ( Enron at paras 22-26). However, this time has now passed.

We are now more than two years after dissolution. [ 26 ] The Attorney General of Canada argues that if they were to pursue Whitecap Resources, which seems inevitable, as it is their only remaining recourse, they would proceed under s 160 of the Income Tax Act , not s 227 of the Alberta Business Corporations Act . They would use the remedy under the Income Tax Act in a bid to impugn the transfer of assets on dissolution as non-arms length and for less than the fair market value. This remedy is not subject to the same time limits and it remains open. I note that the two year time limit in the predecessor

section of the A BCA (then 219(2)(b)) was held not to be an absolute limitation in Re Petromines Acquisitions Ltd case (at para 47 ). [ 27 ] The main battleground is likely to be the Tax Court, where the substance of the claim can be fully canvassed. [ 28 ] I am satisfied that the Attorney General of Canada should be designated as an interested person under s 206.1(

d) of the A BCA and is entitled to revive this corporation; there being no objection from the Registrar of Corporations. I am also satisfied that to do so, is not without purpose, and will permit of the substance of the issues to be dealt with in the Federal Court. [ 29 ] The real fight is not here. It is time to pick five smooth stones from the river. [ 30 ] The application is allowed. Heard on the 9 th day of June, 2023 with supplemental written argument June 12, 2023 and June 13, 2023. Dated at Edmonton, Alberta this 14 th day of June, 2023.

W.S. Schlosser A.J.C.K.B.A. Appearances: George F. Bódy and Callie Matz Department of Justice Canada for the Plaintiff Craig Alcock Burnet Duckworth & Palmer LLP for the Defendant