Mueller v. Canada

Published in: (1993), 1 Canadian Tax Cases 143


Reinhard G. Mueller



Her Majesty the Queen


Action Nos. T-1141-92, T-1052-92

Federal Court of Canada - Trial Division
Edmonton, Alberta
Jerome A. C. J.

Heard: October 2, 1992
Judgment: February 5, 1993


The plaintiff commenced an action challenging the constitutional validity of the Income Tax Act which he said was ultra vires the federal Parliament for encroaching provincial power to raise revenue within province by taxation. He also challenged the constitutionality of the GST enacted under Part IX of the Excise Tax Act. The defendants moved to strike out the pleadings for disclosing no reasonable cause of action.

HELD: Application granted. Pleadings would be struck where it was beyond doubt that the plaintiff had no chance of success at trial. The plaintiff had a right to make constitutional challenges to any legislation. But the questions of law which he sought to raise were contrary to established jurisprudence.


Federal Court Rules, Rule 419(1).
Income Tax Act, R. S. C. 1952, c. 148.
Excise Tax Act, R. S. C. 1985, c. E-15.
Constitution Act, 1867, ss. 29(2), 91(3), 92(2).



Reinhard G. Mueller, on his own behalf.
Brad Hardstaff, for the Defendant.


JEROME A. C. J. (Reasons for Order):— The defendant brings an application in each of these actions for an order pursuant to Rule 419(1) of the Federal Court Rules, striking out the plaintiff's statements of claim on the grounds that they disclose no reasonable cause of action.

Mr. Mueller, a resident of Edmonton, Alberta, commenced these actions by way of statement of claim in May of 1992. He alleges that the provisions of the Income Tax Act, R. S. C. 1952, c. 148 as am., are constitutionally invalid on the grounds that they are ultra vires the Parliament of Canada, in that they offend subsection 29(2) of the Constitution Act, 1867, because they impose a direct taxation within a province in order to raise revenue for provincial purposes. The plaintiff also questions the constitutional validity of the Federal Goods and Services Tax (GST), enacted by Part IX of the Excise Tax Act, R. S. C. 1985, c. E-15, on the same grounds.

The defendant now seeks to have the statements of claim struck since issues raised therein have already been decided by established jurisprudence.

For reasons given orally on October 2, 1992, I granted the defendant's application and indicated that these reasons would follow.

There is no question that the plaintiff has the right to come to this Court in order to challenge the constitutional validity of these two taxing statutes, so Mr. Mueller's actions cannot be considered to be frivolous or vexatious. Indeed, it is the right of all citizens to come to this Court to contest the legality of federal legislative enactments which directly affect them. Pleadings will be struck, however, where it is beyond doubt that the plaintiff has no chance of success at trial. In Carole Sylvestre v. The Queen [1984] 2 F. C. 516, Denault J. said at p. 519:

"In a motion such as the one made by the defendant, it is well established that the action should not be dismissed unless the allegations of fact it contains, which are taken as established at this stage of the proceedings, do not disclose any reasonable cause of action. In case of doubt the Court will decline to strike out the statement of claim at this stage in the proceedings and will allow the plaintiff to try to prove her allegations.

Sexual orientation is not the subject of a fundamental freedom or legal right recognized in the Charter, but the provisions on this subject contained in the Queen's Regulations and Orders for the Canadian Forces, which are different from those that apply to other Canadian citizens, may be reviewed on the merits.

An analysis of the statement of claim in this case leaves a serious doubt in my mind that justifies me in dismissing this motion. Without regard to other arguments that might be raised, a reading of the statement of claim does not indicate whether the authorities followed the standard judicial process or whether a mere administrative decision terminated the plaintiff's service, or the circumstances in which that decision was made. In addition, the new Charter seems to impose new legal limits on the exercise of the royal prerogative, and the decision that will be handed down by the Supreme Court in Operation Dismantle Inc., et al. v. The Queen, et al., [1983] 1 F. C. 429 (T. D.) [reversed [1983] 1 F. C. 745 (C. A.)], inter alia, will undoubtedly shed new light on this question.

For these reasons the motion is dismissed with costs."

That decision was reversed by the Federal Court of Appeal in The Queen v. Carole Sylvestre [1986] 3 F. C. 51 where Pratte, J. said at page 53:

"The Trial Judge nevertheless dismissed the motion to strike because he held that the adoption of the Charter could give to the respondent's action a legal basis which it would formerly have lacked. We consider that in this respect he was in error.

The respondent cannot rely on section 15 of the Charter, in view of the date of her release. She therefore based her action solely on section 7, which guarantees a right to "life, liberty and security".

In the submission of the respondent, the right to liberty protected by section 7 includes a right to be a homosexual. It follows, she argued, that her release was unlawful. The answer to this argument, apart from the fact that it is doubtful whether the scope of section 7 is that wide, is that the decision and orders impugned in no way impaired the respondent's liberty to be a homosexual. If she was deprived of anything by the decision and orders, it was only of her right to be in the Armed Forces (assuming that she has such a right). This argument must therefore be dismissed.

The respondent further contended that the decision and orders challenged by her contravened section 7 for another reason, namely that they impaired her right to security, since as a consequence of the decision she had been deprived of paid employment. In her submission, it follows that the decision terminating her military service should have been made in accordance with "the rules of natural justice", and this was not done.

It seems clear that this argument must also be dismissed. Even giving a broad and liberal interpretation to section 7, it cannot be said, in our view, that the mere decision to release a soldier is an invasion of her security.

The appeal will therefore be allowed, the decision a quo set aside, the motion to strike made by the appellant granted and the statement of claim of the plaintiff-respondent struck accordingly, the whole with costs at trial and on appeal.

In Reference Re GST, [1992] 2 S. C. R. 445, the Supreme Court of Canada held that the GST Act is a valid exercise of the federal taxation power under subsection 91(3) of the Constitution Act, 1867. The tax withheld to be properly characterized as being in relation to a mode or system of taxation, the sole purpose of which is to raise revenue for the federal government. The Court concluded that the effects produced by the Act on matters within provincial jurisdiction over property and civil rights was incidental to this purpose.

Similarly, in Winterhaven Stables Ltd. v. Attorney General of Canada, [1989] 1 W. W. R. 193, the appellant argued that the imposition of tax upon it under the Income Tax Act was unconstitutional because it violated subsection 92(2) of the Constitution Act, 1867, as being in part "Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes", rather than federal taxation authorized under section 91. The Alberta Court of Appeal rejected this argument, holding that the power to raise money by taxation given to the federal government under subsection 91(3) of the Constitution Act, 1867, is a general and wide power, and there is no nexus between the raising of money to be paid into the consolidated revenue fund and the transfer of money to the provinces.

I am satisfied, therefore, that the questions of law raised by the plaintiff in these statements of claim are contrary to established jurisprudence.

Accordingly, on October 2, 1992, I granted the defendant's motion to strike the statements of claim.