Canada v. National Trust Co.
A-969-96
Isaac C.J.
3/7/98
28 pp.
Appeal from Tax Court judgment, allowing respondent's appeal from assessment under Income Tax Act for failure to comply with requirement to pay-Income Tax Act, s. 224(1) permitting Minister to require person "liable to make a payment" to tax debtor to pay to Receiver General moneys otherwise payable to tax debtor-S. 244(4) imposing civil penalty for failure to comply equal to amount required to be paid pursuant to s. 224(1)-In 1987, tax debtor establishing self-directed RRSP with respondent-Funds invested in five-year guaranteed investment certificate (GIC)-When requirements to pay served, GIC had matured for almost one year; tax debtor had issued instructions to respondent to cancel plan, deposit proceeds in daily interest savings account or pay proceeds directly to him after deducting therefrom withholding tax-Respondent refusing to comply with requirement to pay-Minister issuing notice of assessment-Tax Court holding RRSP not terminated, but continued as trust, and no moneys payable by respondent to tax debtor-Holding s. 224(1) applies only to person under obligation to pay debt-Since respondent as trustee not owing debt to tax debtor, not liable to make payment to tax debtor-(1) Whether respondent required to comply with s. 224(1) requirement; (2) if so, whether liable to pay to appellant, pursuant to s. 224(4) amount required to pay to Receiver General pursuant to s. 224(1) requirement-Appeal allowed-Ordinary meaning of "liable" in legal context denoting fact person responsible at law-S. 224(1) requirement not confined to debtor-creditor relationship, as is garnishee order: Discovery Trust Co. v. Abbott, (1982), 38 B.C.L.R. 55 (S.C.)-Extends to any case where trustee "liable to make payment to taxpayer"-Tax Court erred in limiting "liable to make a payment" to debtor-creditor situations-Only relevant question: did respondent have responsibility at law to make payment to tax debtor on February 1, 1994?-Respondent did have such responsibility-Terms and conditions of tax debtor's RRSP contemplating establishment of trust, under which tax debtor settlor and cestui que trust and respondent trustee-Tax debtor as settlor and cestui que trust having right, exercisable at his discretion, to withdraw all or portion of trust res on 30 days written notice to respondent-Tax debtor's instructions clear: after GIC matured wanted net proceeds of RRSP for own use, enjoyment-Tax debtor having contractual right, enforceable in law, to have net proceeds paid to him-Respondent having corresponding contractual obligation to make payment requested-Legal obligation sufficient to bring respondent within scope of "person liable to make a payment" to tax debtor within meaning of s. 224(1)-Ordinary dictionary meaning of "payable": when claimant in position at law to enforce payment: Canada (Attorney General) v. Yannelis (1995), 130 D.L.R. (4th) 632 (F.C.A.)-Proceeds of RRSP payable to tax debtor when requested payment following maturity of GIC-Consequently when s. 224(1) requirement issued, three conditions precedent in s. 224(1) satisfied-Requirement to pay valid-Respondent obliged to comply therewith-Since respondent not offering explanation, excuse to avoid application of s. 224(4), Minister correctly issuing assessment-Per McDonald J.A. (concurring in result): given equitable obligations placed upon trustee, in absence of express language stating s. 224(1) applies to trustee, strong argument s. 224(1) should be confined to creditor-debtor relationship-Helpful if legislation clearly set out intention trustee to breach fiduciary obligation-Applicability of s. 224(1) to trustee limited-Only reason respondent within confines of s. 224(1) because tax debtor instructed trustee to pay proceeds of RRSP directly to him within 90 days of respondent receiving Revenue Canada's demand letter-Respondent therefore becoming person liable to make payment to tax debtor-If terms of trust forbidding tax debtor from cashing out trust, respondent not within confines of s. 224(1)-Similarly if no request for payment by tax debtor, s. 224(1) not applicable-S. 224(1) implying trustee only caught under it if payment requested being paid directly to tax debtor, not someone else-Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 224(1) (as am. by S.C. 1994, c. 21, s. 101), (4).