Laurie – Tax Court of Canada finds that a taxpayer had failed to establish due diligence re a repeated failure to file T1135s

The taxpayer filed a voluntary disclosure regarding her failure for her 2012 to 2014 taxation years to file T1135 returns reporting her foreign investments, which the CRA accepted. In the course of preparing her 2021 taxation return, she realized that she had failed to file T1135 returns for her 2019 and 2020 taxation years. CRA refused a second voluntary disclosure, and she appealed the imposition on her of s. 162(7) penalties.

Graham J. found that the jurisprudence had established that a due diligence defence was available under s. 162(7). In rejecting a Crown submission that Parliament had turned its mind in s. 233.5 (respecting due diligence in seeking unavailable information) regarding the only relevant circumstances in which due diligence could be a defence, Graham J. stated (at para. 8):

I cannot see how, in providing a due diligence defence for information returns under sections 233.2 and 233.4 that were filed on time but were incomplete, Parliament could in any way be said to have indirectly precluded a due diligence defence to the late filing of all information returns covered by subsection 162(7).

However, he went on to find that in these (repeat mistake) circumstances, the taxpayer had failed to establish that she satisfied the Résidences Majeau due diligence tests.

A somewhat analogous issue arises, regarding the s. 245(5.1) GAAR penalty, as to whether the extremely narrow statutory defence under s. 245(5.2) implies that there is no Résidences Majeau due diligence defence (although the analogy is perhaps complicated by the availability of the alternative defence for voluntary disclosure under s. 237.3). The final version of the Explanatory Notes on s. 245(5.2) notably added a statement that:

It is not intended to replace any other defences that may be available under applicable law.

Neal Armstrong. Summary of Laurie v. The King, 2025 TCC 130 under s. 162(7).