Date: 20091005
Docket: A-552-08
Citation: 2009 FCA 287
CORAM: EVANS
J.A.
LAYDEN-STEVENSON
J.A.
TRUDEL
J.A.
BETWEEN:
HER MAJESTY THE QUEEN
IN RIGHT OF CANADA
Appellant
and
ROY G. QUIGLEY
Respondent
REASONS FOR JUDGMENT
EVANS J.A.
[1]
This is an
appeal by Her Majesty the Queen from the part of an Order of the Tax Court of
Canada, dated October 23, 2008, in which Justice Valerie Miller dismissed the
Crown’s motion to quash the appeal of Roy G. Quigley against his reassessments
under the Income Tax Act for the 2004 and 2005 taxation years. The Judge
also gave leave to Mr Quigley to amend his Notice of Appeal by including the
issue of the northern resident deduction. In the same Order, the Judge allowed
the Crown’s motion to quash Mr Quigley’s appeal with respect to the 2002 and
2003 taxation years.
[2]
Mr Quigley
filed no Notice of Appearance in response to the Crown’s Notice of Appeal from
the Judge’s Order and has not submitted a memorandum of fact or law, nor any
other documents, in connection with the appeal. On September 9, 2009, the Court
was advised by counsel for the Crown that she had received an e-mail
communication on August 24, 2009, from Mr Quigley’s spouse stating that Mr
Quigley would not attend the hearing of the Crown’s appeal on October 5, 2009, because
he had suffered a “massive heart attack while at work in Abu Dhabi”, where he
would remain until he is strong enough to return to Canada.
[3]
Although
Mr Quigley is unable to appear today because of his serious illness and has not
retained counsel, the Court did not adjourn the matter: he did not participate
in the appeal before he became ill, no adjournment has been requested, and the
Court is satisfied that it can dispose fairly of the appeal without hearing
from Mr Quigley.
[4]
Counsel
for the Crown states that the Judge erred in dismissing the motion to quash Mr
Quigley’s appeal against the Minister’s reassessments for the 2004 and 2005
taxation years, and in allowing him to amend his Notice of Appeal in order to
include the issue of the northern resident deduction. The basis of the
reassessments for those years, counsel says, was that, for the purpose of calculating
his liability for provincial income tax, the Minister found Mr Quigley to be a
resident of Newfoundland and Labrador, not Alberta as he claimed on his tax return.
[5]
The Tax
Court of Canada has no jurisdiction to hear appeals relating to provincial
income tax legislation unless the province in question has conferred
jurisdiction upon it: Gardner v. Canada 2001 FCA 401, 286 N.R. 314 at
para. 16. Newfoundland and Labrador has reserved to
itself jurisdiction to determine a person’s residence for the purpose of the
province’s income tax statute: Income Tax Act, 2000, S.N.L. 2000, c.
I-1.1, subparagraph 62(2)(a)(i). Accordingly, since Mr Quigley was reassessed
as a resident of Newfoundland and Labrador, counsel submits,
he should have appealed the Minister’s determination of his province of
residence to the Trial Division of the Supreme Court of Newfoundland and
Labrador. Further, counsel argues that since the Minister allowed the northern
resident deduction claimed by Mr Quigley for the taxation years 2004 and 2005
there is no dispute about his federal income tax liability, the Judge erred in not
quashing the appeal and permitting him to amend his Notice of Appeal to include
that issue.
[6]
The Judge
provided no reasons for her written Order. However, the fact that she gave Mr
Quigley leave to amend his Notice of Appeal “to include the issue of the northern
resident deduction” suggests that she thought that the dispute over his
province of residence may be relevant to that issue, and hence could affect his
federal income liability. There are two other reasons for concluding that this
was the basis of the Judge’s decision.
[7]
First,
during argument in the Tax Court on October 7, 2008, the Judge herself raised
the case of Hiscock v. Her Majesty, 2007 FCA 382, [2008] 2 C.T.C. 177 (“Hiscock”),
where this Court held that, although the case involved issues of residence, the
Tax Court had jurisdiction over the appeal because the taxpayer had claimed a northern
resident deduction against his federal tax. Second, in her oral reasons and
decision, delivered in Court on October 8, 2008, the Judge stated that “the
appellant has sought the northern resident deduction in his income tax returns”
for 2004 and 2005. On the basis of this claim, and Hiscock, she decided
to dismiss the Crown’s motion to quash Mr Quigley’s appeal of the reassessments
for those years.
[8]
In our
respectful view, the Judge erred in dismissing the Crown’s motion with respect
to the taxation years 2004 and 2005. It is true that Mr Quigley claimed a northern
resident deduction against his federal tax for those years, and had not claimed
it in 2002 and 2003. However, since the amounts that he had claimed in 2004 and
2005 were not altered by the Minister on the reassessments, the fact that he
had claimed this deduction on his returns could not affect his federal income
tax liability.
[9]
Thus, for
2004, Mr Quigley claimed a northern resident deduction of $2,817.11 (Appeal
Book, p. 120), and was allowed this amount on the reassessment (Appeal Book, p.
155). His return for that year showed a net federal tax of $13,113.85 (Appeal
Book p. 122); on reassessment, the amount was 85 cents more, namely, $13,114.70
(Appeal Book p. 155). For 2005, Mr Quigley claimed a northern resident
deduction of $2,593.85 (Appeal Book, p. 161), and calculated net federal tax
for that year as $40,900.02 (Appeal Book, p. 169). The Minister rounded the
northern resident deduction down by 85 cents to $2,593 (Appeal Book, p. 203),
and increased the net federal tax by 68 cents to $40, 900.70 (Appeal Book, p.
203).
[10]
Accordingly,
since the Minister allowed the northern resident deduction as claimed by Mr
Quigley, the Judge made a palpable and overriding error in concluding that his
claim for the deduction could affect his federal tax liability. The only issue
in dispute in Mr Quigley’s appeal to the Tax Court was whether the Minister had
erred in determining that he was resident in Newfoundland and Labrador for the taxation years 2004
and 2005 for the purpose of provincial income tax. As we have already noted, this
is a matter within the jurisdiction of the Supreme Court of Newfoundland and Labrador, not the Tax Court of Canada.
[11]
For these
reasons, the appeal will be allowed, the order of the Tax Court set aside with
respect to the taxation years 2004 and 2005, and the Crown’s motion to quash Mr
Quigley’s appeal of his income tax reassessments for the taxation years 2004
and 2005 allowed. Mr Quigley will be awarded any reasonable and proper costs that
he has incurred in respect of this appeal.
“John
M. Evans”
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