Par
Sarah D. Pinsonnault
Revenu
Québec
Although the Quebec Superior Court is a court of “original general
jurisdiction”, pursuant to section 31 of the Civil Code of Procedure (“C.C.P.”),
it cannot hear a suit if another court has exclusive jurisdiction over the
matter in question. In the recent case Stephkan Holdings Inc. c. Canada
Revenue Agency, 2013 QCCS 643, the Petitioners are thus prevented from
circumventing the federal tax system by objecting to a federal income tax
assessment before the Superior Court, because it is the Tax Court of Canada
that has the “exclusive original jurisdiction” over this subject matter in
accordance with section 12(1) of the Tax Court of Canada Act.
Background
The Petitioners and the Canada Revenue Agency (“CRA”) signed a
settlement agreement, whose terms “provided that there would be “no
adjustment to taxable income” for certain tax years” under the condition
that the Petitioners carried out certain actions. Despite having performed the
latter, the Petitioners were nevertheless re-assessed for certain of the years in
question.
The Petitioners decided to submit, before the Superior Court of Quebec, a
motion seeking the homologation of the settlement agreement.
In response, the CRA presented a Motion for Preliminary Exception, by
virtue of section 163 C.C.P.,
alleging that the Superior Court lacks the jurisdiction and authority to hear
this matter. Ultimately, the CRA put forth the argument that the Petitioners
were, in seeking the homologation of the settlement agreement, trying to
contest the validity of the tax assessments. In doing so, the CRA claimed that
the Petitioners were circumventing the tax assessment appeal process
prescribed, by Parliament, under the subsections 165(1) and 169(1) of the Income
Tax Act.
Decision
Finally, the presiding judge, Justice Mark G. Peacock, granted the CRA’s
Motion to Decline Jurisdiction in accordance with the Supreme Court of Canada’s
guiding principle established in Canada c. Addison & Leyen Ltd., 2007 CSC 33:
“[15] This Court interprets Canada v. Addison & Leyen
Ltd.[10] to require the following. The Taxpayers should first of all object to
the impugned assessments to the Minister. If unsuccessful, the impugned
assessment could be contested before the Tax Court of Canada, with the
Taxpayers raising the Settlement Agreement as a defence. This specialized court
is in the best position to ensure a uniformity of jurisprudence in this complex
area by adjudicating on these inextricably connected issues: the validity of
the Settlement Agreement and the impugned assessments. Whereas the Superior
Court could only hear the homologation application, the Tax Court of Canada has
the necessary jurisdiction to hear the whole matter, including the legal effect
of the Settlement Agreement on the impugned assessments.
[16] To dismiss the C.R.A.’s Motion for Declinatory Exception and permit
this case to be heard on the merits of the homologation would run counter to
the Supreme Court of Canada’s guiding principle in Canada v. Addison
& Leyen Ltd. and would not be a judicious use of the court’s resources
– nor those of the federal government who otherwise may have to provide the
legal representation for the C.R.A. before the Tax Court of Canada and the
Superior Court.”
To read this decision in its entirety, click here.
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