I’m often forced to explain to clients that, when it comes to tax debts and assessments, the “usual” limitation periods don’t apply. Mr. Justice Juriansz, in Danso-Coffey v. Ontario, 2010 ONCA 171, wrote that “time limits and limitation periods serve a valuable function in the legal process by promoting finality.” That principle is true for you and me, but the government is special, after all, and so “finality” doesn’t really apply to tax debts and the ability of the government to issue assessments in many cases. The Ontario government, in particular, with all its money and resources, can take its time about collecting debts or issuing assessments, and often does. Browning v. The Queen, 2010 TCC 487, then, is a refreshing reminder that sometimes even the government needs to respect limitation periods.
In Browning, the taxpayer became indebted to her husband’s corporation in the late 80s under a mortgage. The corporation became indebted to the CRA, and so the CRA issued garnishment orders to the taxpayer under section 224 of the Income Tax Act (Canada), which she failed to pay at various times. Ms. Browning stopped making payments under the mortgage to the husband’s corporation in 1994. The CRA continued to issue garnishment orders into 2000, past the time in the BC Limitation Act when the corporation could enforce the debt.
Ms. Browning failed to pay the garnishments issued in 2000, and so the CRA assessed her under subsection 227(10). She appealed and argued that, at the time the 2000 garnishments were issued, she was no longer indebted to the corporation and so the garnishments were invalid. The Crown tried to argue that section 222, which was enacted in response to Markevich and provides for generous limitation periods for the collection of debts under the Act, applied so that the assessment against Ms. Browning was valid.
The Tax Court was having none of it. The Court held that the Limitation Act applied so that Ms. Browning was not indebted to her husband’s corporation beginning in 2000. The CRA could not pretend that the debt still existed and, therefore, form the basis of a garnishment under section 224. Section 222 could not extend the time to collect a debt to the Crown that was based on an assessment that was invalid.
[35] In these circumstances, there is no need to consider the Respondent’s arguments in respect of section 222. The Minister cannot use that provision to bootstrap his way over the criteria in section 224 upon which his power to assess under subsection 227(10) depends.
[36] Notwithstanding the amendments to section 222 consequent to Markevich, that case still stands for the proposition that the Minister has a duty to act with some dispatch in collecting tax debts. Here, the Minister’s practice of issuing requirements to pay to Ms. Browning in dribs and drabs over a 15-year period in respect of Berkeley’s 1989-90 tax debt falls somewhat short of the ideal expressed by Major, J. in paragraph 20 of the Supreme Court of Canada decision:
… If the Minister makes no effort to collect a tax debt for an extended period, at a certain point a taxpayer may reasonably come to expect that he or she will not be called to account for the liability, and may conduct his or her affairs in reliance on that expectation. As well, a limitation period encourages the Minister to act diligently in pursuing the collection of tax debts. In light of the significant effect that collection of tax debts has upon the financial security of Canadian citizens, it is contrary to the public interest for the department to sleep on its rights in enforcing collection.
