T-911-90
Her Majesty the Queen (Plaintiff)
v.
B. M. Enterprises (Defendant)
INDEXED AS: CANADA V. B. Ai ENTERPRISES (T.D.)
Trial Division, Reed J.—Prince Albert, Saskatche-
wan, April 30; Ottawa, June 25, 1992.
Income tax — Practice — Income Tax Act s. 227(10) permit
ting M.N.R. to assess any person for amount payable under s.
224(4) — After obtaining Department of Justice opinion non
compliance with s. 224(1) notice to pay, and approval from
head office, auditor issuing s. 227(10) assessment on con
trolled form — Form sent under printed name of Deputy Minis
ter — Tax Court vacating s. 227(10) assessment on ground
should have been issued by Minister or lawfully authorized
official — Interpretation Act, s. 24(2) providing words empow
ering minister to do something including deputy — S. 900 of
Income Tax Regulations authorizing A.D.M.s to exercise
authority of Minister and containing specific delegations of
authority to other officials with respect to certain sections of
Act — Issue of implied delegation, relied upon in Doyle v.
M.N.R., not raised herein — Discussion of alter ego principle,
whereunder official constituting alter ego of Minister, since
subject of fullest control by superior — Degree of control cru
cial factor, not whether answerable to Parliament — Assess
ment issued by Deputy Minister, though not personally review
ing file — Also implied authority to subdele gate — Issuance of
assessment not of such discretionary nature Parliament
intended Minister to personally review each potential s.
227(10) assessment and decide whether or not should be
issued — Significant assessment not final — Discretion not
determinative of whether assessment valid.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Income Tax Act, R.S.C. 1952, c. 148 (as am. by S.C.
1970-71-72, c. 63), ss. 221(1), 224(1) (as am. by S.C.
1980-81-82-83, c. 140, s. 121), (4) (as am. idem, c. 48,
s. 103), 227(10) (as am. by S.C. 1985, c. 45, s. 117).
Income Tax Regulations, C.R.C., c. 945, s. 900 (as am. by
SOR/78-774, s. 1; SOR/79-803, s. 1; SOR180-162, s. 1;
SOR/81-449, s. 1; SOR/83-797, s. 1; SOR/86-445, s. 1;
SOR/87-470, s. 1; SOR/88-219, s. 1).
Interpretation Act, R.S.C., 1985, c. 1-21, s. 24(2).
CASES JUDICIALLY CONSIDERED
APPLIED:
R. v. Harrison, [1977] I S.C.R. 238; (1976), 66 D.L.R.
(3d) 660; [1976] 3 W.W.R. 536; 28 C.C.C. (2d) 279; 8
N.R. 47.
DISTINGUISHED:
Doyle v. M.N.R., [1990] 1 F.C. 94; [1989] 2 C.T.C. 270;
(1989), 89 DTC 5483; 30 F.T.R. 1 (T.D.).
CONSIDERED:
Re Golden Chemical Products Ltd, [1976] 2 All ER 543
(Ch. D.); Riendeau, L v. The Queen (1991), 91 DTC 5416
(F.C.A.).
REFERRED TO:
O'Reilly v Commissioner of State Bank of Victoria (1982),
44 ALR 27 (H. Ct.).
AUTHORS CITED
de Smith, S. A. Judicial Review of Administrative Action,
4th ed. by J. M. Evans, London: Stevens & Sons Ltd.,
1980.
Dussault, R. and Borgeat, L. Administrative Law: A Trea
tise, vol. 1, 2nd ed. Toronto: Carswell, 1985.
APPEAL from Tax Court decision (B. M. Enter
prises Ltd. v. M.N.R., [1990] 1 C.T.C. 2094; (1989),
90 DTC 1037 (T.C.C.)) vacating assessment. Appeal
allowed.
COUNSEL:
Helen C. Turner and Douglas Titosky for plain
tiff.
James H. W. Sanderson for defendant.
SOLICITORS:
Deputy Attorney General of Canada for plain
tiff.
Sanderson & Wilkinson, Prince Albert, Sas-
katchewan, for defendant.
The following are the reasons for judgment ren
dered in English by
REED J.: The question to be decided in this case is a
very narrow one: was the notice of assessment which
was sent to the defendant (respondent), B. M. Enter
prises, by the plaintiff (appellant) pursuant to subsec-
tion 227(10) of the Income Tax Act [S.C. 1970-71-72,
c. 63 (as am. by S.C. 1985, c. 45, s. 117)] issued by
the proper person. A decision of the Tax Court
[[1990] 1 C.T.C. 2094] vacated that assessment on
the ground that it should have been issued by the
Minister of National Revenue or a lawfully author
ized official.
Facts
The defendant owed money to Simonot Equities
Ltd. ("Simonot"). Simonot owed monies to the plain
tiff on account of taxes payable pursuant to the
Income Tax Act, R.S.C. 1952, c. 148, as amended.
Both the defendant and Simonot are controlled by the
same shareholder, Mr. Marcel Simonot.
On December 17, 1984, the defendant was served
with a notice issued pursuant to subsection 224(1) [as
am. by S.C. 1980-81-82-83, c. 140, s. 121] of the
Income Tax Act. That notice required the defendant to
pay some of the money which it owed Simonot, to
the Receiver General of Canada instead of Simonot.
Subsection 224(1) of the Income Tax Act provides:
224. (1) Where the Minister has knowledge or suspects that
a person is or will be, within 90 days, liable to make a payment
to another person who is liable to make a payment under this
Act (in this section referred to as the "tax debtor"), he may, by
registered letter or by a letter served personally, require that
person to pay forthwith, where the moneys are immediately
payable, and, in any other case, as and when the moneys
become payable, the moneys otherwise payable to the tax
debtor in whole or in part to the Receiver General on account
of the tax debtor's liability under this Act.
On April 30, 1985, in defiance of this notice, the
defendant paid money to Simonot. The defendant
thereby became directly liable to the Crown for the
amount of taxes owed by Simonot. Subsection 224(4)
[as am. by S.C. 1980-81-82-83, c. 48, s. 103] of the
Income Tax Act states:
224....
(4) Every person who fails to comply with a requirement
under subsection (1) or (3) is liable to pay to Her Majesty an
amount equal to the amount that he was required under subsec
tion (1) or (3), as the case may be, to pay to the Receiver Gen
eral.
Mr. McKenzie is an auditor with the Collection
Investigation Branch of the Prince Albert Office of
Revenue Canada. In the course of his duties he inves
tigated what was suspected to be non-compliance by
the defendant with the subsection 224(1) notice to
pay. He reviewed the books of both the defendant
and Simonot. He reached the conclusion that non
compliance had occurred. He then followed depart
mental practice and sent the information he had
obtained to the Department of Justice seeking coun
sel's opinion as to whether there had been non-com
pliance. An affirmative response was received. He
then wrote, following departmental practice, to the
head of the Programs and Operations—Collections
Division of Revenue Canada, in Ottawa, for permis
sion to issue a subsection 227(10) assessment. There
is no authority in the local district office to issue such
assessments until approval from head office in
Ottawa has been obtained.
The letter seeking approval was addressed by Mr.
McKenzie to someone in the Programs and Opera-
tions—Collections Division, in Ottawa, a Mike
Robillard. The response back was signed by Mr.
MacDonald, Chief of the Programs and Operations—
Collections Division, and was sent to Mr.
McKenzie's supervisor, a Mr. Hewson, Chief of Col
lections in the Saskatoon District Office. This, again,
was in accordance with usual departmental practice.
In this case approval was not immediately given.
The local office was asked to obtain further informa
tion from the Department of Justice. Such informa
tion was obtained and sent to Mr. MacDonald's divi
sion. On November 5, 1986, a letter was sent from
Mr. MacDonald to Mr. Hewson authorizing the issu
ance of an assessment against the defendant pursuant
to subsection 227(10).
Mr. McKenzie then obtained, from clerical staff,
the appropriate subsection 227(10) form. This form is
a controlled form and is only given to officials who
demonstrate that they have authority to use one.
Details of the proposed use are recorded by the staff
who control the forms. The number on the form is
recorded together with details respecting the tax lia
bility and the person to whom the form is being sent.
Mr. McKenzie gave the form thus obtained to a typ
ist, together with the relevant information needed to
complete the form. The information was typed onto
the form. The form was returned to Mr. McKenzie
for proofreading and then it was mailed.
I would note that the form is expressed to be sent
under the printed name of:
H.G. ROGERS
Deputy Minister of National Revenue for Taxation
The original of this assessment notice was not
before the Tax Court. The assessment filed with the
Tax Court was the plaintiff's office copy on which
there is no reference to Mr. Rogers or his position.
Analysis
Subsection 227(10) of the Income Tax Act states:
227... .
(10) The Minister may assess
(a) any person for any amount payable by that person under
subsection (8) or 224(4) or (4.1) or section 227.1 or 235, and
(b) any person resident in Canada for any amount payable
by that person under Part XIII,
The defendant argues that it is the Minister alone
who has authority to issue subsection 227(10) assess
ments.
It cannot seriously be contended that the Deputy
Minister does not have authority to exercise the Min
ister's authority under subsection 227(10). A specific
statutory provision conferred such authority. Subsec
tion 24(2) of the Interpretation Act, R.S.C., 1985,
c. I-21 states:
24....
(2) Words directing or empowering a minister of the Crowr
to do an act or thing, or otherwise applying to that minister b)
his name of office, include
(c) his or their deputy.
In addition to subsection 24(2) of the Interpreta
tion Act, subsection 221(1) of the Income Tax Act
authorizes the making of regulations authorizing des
ignated officials to exercise the authority of the Min
ister. Regulations have been issued which authorize
Assistant Deputy Ministers to exercise the authority
of the Minister ([Income Tax Regulations] C.R.C., c.
945, section 900 [as am. by SOR/78-774, s. 1;
SOR/79-803, s. 1; SOR/80-162, s. 1; SOR/81-449, s.
1; SOR/83-797, s. 1; SOR/86-445, s. 1; SOR/87-470,
s. 1; SOR/88-219, s. 1]). Regulation 900 also con
tains specific delegations of authority to other offi
cials with respect to certain sections of the Act. Sub
section 227(10) is not among those listed.
A situation was discussed in Doyle v. M.N.R.,
[1990] 1 F.C. 94 (T.D.) in which an official below
the rank of Assistant Deputy Minister exercised
authority which was conferred by the statute on the
Minister but which was not the subject of express
delegation under regulation 900. It was held that the
doctrine of implied delegated authority still operated,
despite the absence of express mention in regulation
900, to allow someone below the rank of Assistant
Deputy Minister to make the decision in question.
The decision was to suspend prosecution of a taxpay
er's appeal pending the outcome of other litigation.
Counsel for the defendant argues that the reasoning
in the Doyle case does not apply in the present case
because the action taken in this case is not a routine
or minor matter but is of an extraordinary nature. He
notes that until recently such assessments could not
be issued without a judgment of the Court. 1
I am not convinced that this case raises an issue of
implied delegation as such. In the Doyle case, the
decision was taken in the name of, and by the very
officer who represented himself as having made the
decision. In this case the assessment was issued in the
I The authority of the Minister to issue such assessments
was added to the Act by S.C. 1985, c. 45, s. 117, which amen
ded subsection 227(10) to include, for the first time, a specific
reference to liability arising pursuant to subsection 224(4).
Prior to 1985, it would appear that there was no statutory pro
vision authorizing the Minister to issue assessments such as
the one in question here.
name of the Deputy Minister and he clearly has
authority to take such action. The question is whether
he personally must review and approve the sending
of the assessment or whether an assessment which is
sent out in accordance with practices and procedures
which he controls and by officials over whom he has
control is sufficient. The issue is whether the situa
tion is one which can be said to be governed by what
has been labelled the alter ego principle.
The alter ego principle is described in S. A. de
Smith, Judicial Review of Administrative Action, 4th
ed. by J. M. Evans (London: Stevens, 1980), at page
307:
Special considerations arise where a statutory power vested in
a Minister or a department of State is exercised by a depart
mental official. The official is the alter ego of the Minister or
the department, and since he is subject to the fullest control by
his superior he is not usually spoken of as a delegate. (A differ
ent analysis must, of course, be adopted where powers are
explicitly conferred upon or delegated to an official by a law-
making instrument.) The courts have recognised that "the
duties imposed on Ministers and the powers given to Ministers
are normally exercised under the authority of the Ministers by
responsible officials of the department. Public business could
not be carried on if that were not the case." In general, there
fore, a Minister is not obliged to bring his own mind to bear
upon a matter entrusted to him by statute but may act through a
duly authorised officer of his department. The officer's author
ity need not be conferred upon him by the Minister personally;
it may be conveyed generally and informally by the officer's
hierarchical superiors in accordance with departmental prac
tice. [Underlining added; footnotes omitted.]
And at page 304, the following is said:
The degree of control (a priori or a posteriori) maintained by
the delegating authority over the acts of the delegate or sub-
delegate may be a material factor in determining the validity of
the delegation. In general the control preserved (e.g. by a
power to refuse to ratify an act or to reject a recommendation)
must be close enough for the decision to be identifiable as that
of the delegating authority. [Footnote omitted.]
In Re Golden Chemical Products Ltd, [1976] 2 All
ER 543 (Ch. D.), at page 547 it was said with respect
to ministerial powers:
(1) As a general rule a Minister is not required to exercise per
sonally every power and discretion conferred on him by an
Act. It is otherwise if there is a context in the Act which
shows that the power is entrusted to the Minister personally.
(2) As a general rule, it is for the Minister or his appropriate
officials to decide which of his officers shall exercise a particu
lar power. (3) Unless the level at which the power is to be
exercised appears from the Act, it is not for the courts to
examine the level or to enquire whether a particular official
entrusted with the power is the appropriate person to exercise
that power. (4) As a general rule, officers of a government
department exercise powers incidental and appropriate to their
functions. In the absence of a statutory requirement, it is
neither necessary nor usual for specific authority to be given
orally or in writing in relation to a specific power. (5) Consti
tutionally there is no delegation by a Minister to his officers.
When an officer exercises a power or discretion entrusted to
him, constitutionally and legally that exercise is the act of the
Minister. [Underlining added.]
See also Dussault and Borgeat, Administrative Law:
A Treatise, vol. 1, 2nd ed. (Toronto: Carswell, 1985),
at page 263.
The question arises as to whether the alter ego
principle applies to ministers only, because ministers
are answerable to the legislature for their actions, or
whether it also applies in other circumstances where
the individual is not directly answerable to the legis
lature. In my view, the crucial factor is not the consti
tutional relationship of the Minister to the legislature
but the degree of control which is exercised by the
individual who is responsible for the decision being
taken. See O'Reilly v Commissioner of State Bank of
Victoria (1982), 44 ALR 27 (H. Ct.) for a discussion
of this situation.
In the present case, the assessment in question was
done in the name of the Deputy Minister; it was
done, as has been noted, in accordance with proce
dures controlled by him and by officials acting
according to his directions. It cannot be said that the
assessment was issued by Mr. McKenzie even though
he physically supervised the preparation of the notice
which was sent. The assessment was issued as a
result of the participation of a number of individuals,
not the least of which was the legal advice given by
officers of the Department of Justice. In the circum
stances, I think it is appropriate to consider the issu
ing of the assessment as the act of the Deputy Minis
ter even though he did not personally review the file.
If I am wrong in thinking that in this case the acts
of the officials below the rank of deputy minister
should be taken to be the act of the Deputy Minister,
then, it is necessary to consider whether there was an
implied authority allowing the Deputy Minister to
subdelegate.
The applicable law was summarized in R. v. Harri-
son, [1977] 1 S.C.R. 238, at pages 245-246:
In my opinion there is implied authority in the Attorney
General to delegate the power to instruct, in s. 605(1). I do not
think that s. 605(1) requires the Attorney General personally to
appeal or personally to instruct counsel to appeal in every case.
Although there is a general rule of construction in law that a
person endowed with a discretionary power should exercise it
personally (delegatus non potest delegare) that rule can be dis
placed by the language scope or object of a particular adminis
trative scheme. A power to delegate is often implicit in a
scheme empowering a Minister to act. As Professor Willis
remarked in "Delegatus Non Potest Delegare", (1943), 21 Can.
Bar Rev. 257 at p. 264:
... in their application of the maxim delegatus non potest
delegare to modern governmental agencies the Courts have
in most cases preferred to depart from the literal construc
tion of the words of the statute which would require them to
read in the word "personally" and to adopt such a construc
tion as will best accord with the facts of modern government
which, being carried on in theory by elected representatives
but in practice by civil servants or local government
officers, undoubtedly requires them to read in the words "or
any person authorized by it".
See also S. A. DeSmith, Judicial Review of Administrative
Action, 3d ed., at p. 271. Thus, where the exercise of a discre
tionary power is entrusted to a Minister of the Crown it may be
presumed that the acts will be performed, not by the Minister
in person, but by responsible officials in his department:
Carlton, Ltd. v. Commissioners of Works ([1943] 2 All E.R.
560 (C.A.)). The tasks of a Minister of the Crown in modern
times are so many and varied that it is unreasonable to expect
them to be performed personally. It is to be supposed that the
Minister will select deputies and departmental officials of
experience and competence, and that such appointees, for
whose conduct the Minister is accountable to the Legislature,
will act on behalf of the Minister, within the bounds of their
respective grants of authority, in the discharge of ministerial
responsibilities. Any other approach would but lead to admin
istrative chaos and inefficiency. [Underlining added.]
Counsel for the plaintiff argues that if the Minister,
or presumably the Deputy Minister, were required to
personally review all assessments administrative
chaos would result. She argues that there are numer
ous sections of the Act which are similarly worded to
subsection 227(10) and which result in thousands of
assessments being issued.
Counsel for the plaintiff argues that the nature of a
subsection 227(10) assessment is one with respect to
which there is virtually no discretion. In Riendeau, L.
v. The Queen (1991), 91 DTC 5416 (F.C.A.), at page
5417, the Court discusses this fact with respect to
other assessment provisions of the Act:
As the cases and statutory provisions which were cited by
Cullen J. well show, liability for tax is created by the Income
TaxAct, not by a notice of assessment. A taxpayer's liability to
pay tax is just the same whether a notice of assessment is mis
taken or is never sent at all. In Belle-Isle v. M.N.R., 63 DTC
347 (T.A.B.), Boisvert, Q.C., after quoting the texts of what
are now section 166 and subsections 152(8) and 152(3) of the
Act, said, at page 349:
Where the above texts are concerned, it matters little
under what section of the Act an assessment is made. What
does matter is whether tax is due.
See also M.N.R. v. Minden, 62 DTC 1044 (Ex. Ct.), at page
1050.
In the present case, the amounts assessed remained the same
throughout. What is disputed is that the assessments were orig
inally said to have been made on the basis of repealed subsec
tion 74(5) of the Act which, the appellant says, rendered the
assessments invalid notwithstanding that the Minister after
ward corrected this mistake by confirming the assessments on
the basis of sections 3 and 9 of the Act.
In our view, the Minister's mental process in making an
assessment cannot affect a taxpayer's liability to pay the tax
imposed by the Act itself.
I could not conclude that the issuance of an assess
ment in this case is of such a discretionary nature that
Parliament intended the Minister, or even the Deputy
Minister or an assistant deputy minister to personally,
review each potential subsection 227(10) assessment
and decide whether or not it should be issued. It is
significant in this regard that the assessment is not
final in nature. It can always be challenged in the
courts if it is not properly issued. That is, to the
extent that there is any exercise of discretion
involved in the issuing of the assessment, that discre
tion is not ultimately determinative of whether or not
the assessment is valid. I would conclude therefore,
that it is appropriate to find an implied authority
allowing the Deputy Minister to subdelegate in these
circumstances.
For the reasons given the plaintiff's claim is
allowed. The plaintiff is entitled to her costs of the
action.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.