Citation: 2009 TCC 311
Date: 20090629
Docket: 2008-3239(IT)G
BETWEEN:
ROBERT KUBBERNUS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers J.
[1]
This is a motion by the
respondent seeking an order quashing the appeal, or in the alternative, an
order extending to a date that is 21 days after the date of the Court's order on
this motion the time within which the respondent is required to file and serve
a reply to the notice of appeal.
[2]
The Minister of
National Revenue (the "Minister") reassessed for the appellant's 2000
taxation year on October 16, 2006 to allow a capital loss carryforward of $545.
The reassessment was triggered by an application for relief under the
"Taxpayer Relief" legislation formerly known as the "fairness"
legislation. As for the appeal, the principal issue raised is whether the
Minister erred in including in computing the appellant's employment income for
the 2000 taxation year $1,997,525 in respect of exercised stock options.
[3]
The affidavit (with
exhibits) of Emil Varden, a litigation officer with the Canada Revenue Agency
was submitted by the respondent and the affidavit (with exhibits) of Agnes
Predota, an employee of the appellant's counsel, was submitted on behalf of the
appellant. The appellant's 2000 taxation year was initially assessed under the Income
Tax Act (the "Act") on May 25, 2001. The Minister did not
receive a notice of objection from the appellant with respect to this initial
assessment. On February 18, 2002, the appellant submitted a T1 Adjustment Request
regarding a capital gain reserve for the 2000 taxation year. On July 6, 2002,
the appellant further requested a loss carryback for the 2000 taxation year.
[4]
As a result of the
above, the Minister reassessed for the appellant's 2000 taxation year on September
3, 2002 on the basis of the T1 Adjustment Request, and on October 3, 2002, there
was a further reassessment to permit the recognition of a capital loss for the
2000 taxation year. No notice of objection was received by the Minister with
respect to these two reassessments.
[5]
On or about June 29,
2006, the Minister received an application for relief under subsection 152(4.2)
or 164(1.5) of the Act with respect to the appellant's 2000 taxation
year. As a result, the Minister issued on October 16, 2006 a notice of
reassessment in respect of the appellant's 2000 taxation year permitting a
capital loss carryforward of $545. The October 16, 2006 reassessment clearly
states on its face that the Minister adjusted the appellant's tax return under
the fairness provisions of the Act and that as a result a notice of
objection cannot be filed. The relevant statement reads as follows:
As you requested, we have adjusted your return. In the past, you
had to make such a request within three years of the date we mailed you the
"Notice of Assessment" for that return. However, the fairness
provisions of the "Income Tax Act" allow us to make adjustments
beyond the usual three-year period. Since we allowed you an adjustment under
these provisions, you cannot file a "Notice of Objection" regarding
this reassessment.
[6]
Notwithstanding the
above, the appellant objected to the reassessment on or about January 15, 2007.
The Canada Revenue Agency considered the appellant's objection and issued a
notice of confirmation on July 15, 2008 in respect of his 2000 taxation year.
Consequently, the appellant filed a notice of appeal with this Court on October
14, 2008, which appeal the respondent now seeks to have quashed.
[7]
Counsel for the
respondent submits that the 2006 reassessment was issued pursuant to subsection
152(4.2) of the Act. Subsection 165(1.2) of the Act provides that
no objection can be made to a reassessment issued under subsection 152(4.2). He
further maintains that in order to appeal a reassessment to this Court, the
appellant must first meet the requirements set out in subsection 169(1) of the Act,
which requires that a notice of objection be served on the Minister under
section 165. If no valid objection can be made to the reassessment, it follows
that there can be no appeal to this Court.
[8]
Counsel for the
appellant raises four arguments in opposing the motion. It is submitted firstly
that the statutory authority for the reassessment was subparagraph 152(4)(b)(i)
and subsection 152(6) of the Act rather than subsection 152(4.2).
The appellant's objection to the 2006 reassessment is not prohibited by
subsection 165(1.2) as this provision does not apply to reassessments made
under subparagraph 152(4)(b)(i).
[9]
Secondly, counsel for
the appellant argues that subsection 169(1) of the Act does not
prohibit an appeal from a reassessment issued under subsection 152(4.2).
According to the implied exception rule endorsed by the Supreme Court of
Canada, to express the mirrored limitations and prohibitions in section 169
without reference to subsection 152(4.2) is to exclude subsection 152(4.2).
[10]
Thirdly, counsel
submits that the Minister's actions in this case give rise to estoppel, and the
Minister is thus estopped from questioning the validity of the objection.
Finally, counsel submits that the respondent has not satisfied the test for
granting an extension of time to file a reply. The motion for an extension of
time should accordingly be dismissed and the allegations of fact contained in
the notice of appeal should be presumed to be true for the purpose of the
appeal.
[11]
The issue is therefore
whether the 2006 reassessment was issued pursuant to subsection 152(4.2) of the
Act, thereby precluding the appellant from objecting to and appealing
the assessment.
[12]
The relevant provisions
of the Act relied upon by the parties read as follows:
152(4.2) Reassessment with taxpayer's consent — Notwithstanding subsections (4), (4.1) and (5), for the
purpose of determining, at any time after the end of the normal reassessment
period of a taxpayer who is an individual (other than a trust) or a
testamentary trust in respect of a taxation year, the amount of any refund to
which the taxpayer is entitled at that time for the year, or a reduction of an
amount payable under this Part by the taxpayer for the year, the Minister may,
if the taxpayer makes an application for that determination on or before the
day that is ten calendar years after the end of that taxation year,
(a) reassess tax, interest or
penalties payable under this Part by the taxpayer in respect of that year; and
(b) redetermine the amount, if
any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or
(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the
taxpayer's tax payable under this Part for the year or deemed by subsection
122.61(1) to be an overpayment on account of the taxpayer's liability under
this Part for the year.
. . .
[13]
The relevant parts of
subsection 152(6) of the Act are as follows:
152(6) Reassessment where certain deductions claimed [carrybacks] — Where a taxpayer has filed for a particular taxation year the
return of income required by section 150 and an amount is subsequently claimed
by the taxpayer or on the taxpayer's behalf for the year as
. . .
(b) a deduction under section 41 in
respect of the taxpayer's listed-personal-property loss for a subsequent
taxation year,
. . .
(c) a deduction under section 118.1 in respect of a gift made in
a subsequent taxation year or under section 111 in respect of a loss for a
subsequent taxation year,
. . .
(d) a deduction under subsection 127(5) in respect of property
acquired or an expenditure made in a subsequent taxation year,
by filing with the Minister, on or before the day on or
before which the taxpayer is, or would be if a tax under this Part were payable
by the taxpayer for that subsequent taxation year, required by section 150 to
file a return of income for that subsequent taxation year, a prescribed form
amending the return, the Minister shall reassess the taxpayer's tax for any
relevant taxation year (other than a taxation year preceding the particular
taxation year) in order to take into account the deduction claimed.
[14]
Subsections 165(1.1)
and (1.2) of the Act provide as follows:
165(1.1) Limitation of right to object to assessments or determinations — Notwithstanding subsection (1), where at any time the
Minister assesses tax, interest, penalties or other amounts payable under this
Part by, or makes a determination in respect of, a taxpayer
(a) under subsection 67.5(2) or
152(1.8), subparagraph 152(4)(b)(i) or subsection 152(4.3) or (6),
161.1(7), 164(4.1), 220(3.4) or 245(8) or in accordance with an order of a
court vacating, varying or restoring an assessment or referring the assessment
back to the Minister for reconsideration and reassessment,
(b) under subsection (3) where the
underlying objection relates to an assessment or a determination made under any
of the provisions or circumstances referred to in paragraph (a), or
(c) under a provision of an Act of
Parliament requiring an assessment to be made that, but for that provision,
would not be made because of subsections 152(4) to (5),
the taxpayer
may object to the assessment or determination within 90 days after the day of
mailing of the notice of assessment or determination, but only to the extent
that the reasons for the objection can reasonably be regarded
(d) where the assessment or
determination was made under subsection 152(1.8), as relating to any matter or
conclusion specified in paragraph 152(1.8)(a), (b) or (c),
and
(e) in any other case, as relating
to any matter that gave rise to the assessment or determination
and that was not conclusively determined by the court, and
this subsection shall not be read or construed as limiting the right of the
taxpayer to object to an assessment or a determination issued or made before
that time.
165(1.2)
Limitation on objections — Notwithstanding subsections (1) and (1.1), no
objection may be made by a taxpayer to an assessment made under subsection
118.1(11), 152(4.2), 169(3) or 220(3.1) nor, for greater certainty, in respect
of an issue for which the right of objection has been waived in writing by the
taxpayer.
[15]
Subsection 169(1) of
the Act provides as follows:
169(1) Appeal — Where
a taxpayer has served notice of objection to an assessment under section
165, the taxpayer may appeal to the Tax Court of Canada to have the assessment
vacated or varied after either
(a) the Minister has confirmed the assessment or
reassessed, or
(b) 90 days have elapsed after service of the
notice of objection and the Minister has not notified the taxpayer that the
Minister has vacated or confirmed the assessment or reassessed,
but no appeal under this section may be instituted after the
expiration of 90 days from the day notice has been mailed to the taxpayer under
section 165 that the Minister has confirmed the assessment or reassessed.
[16]
Subsection 152(4.2) of
the Act is part of the "Taxpayer Relief" legislation formerly
known as the "fairness" legislation and introduced on May 24, 1991 as
part of the "Fairness Package". That subsection as it now reads is
intended to provide relief to an individual taxpayer who becomes aware, after
the normal reassessment period, that he may be entitled to a refund or a
reduction of an amount payable. The application for such a determination must
be made within ten calendar years after the end of the taxation year.
Notwithstanding a taxpayer's right to object to an assessment under section 165
of the Act, subsection 165(1.2) precludes a taxpayer from objecting to
an assessment made under certain provisions of the Act, including
subsection 152(4.2). The reasoning behind that is that a reassessment under subsection
152(4.2) is made at the Minister's discretion.
[17]
It has been held in
many decisions of this Court, subsequently upheld in the Federal Court of
Appeal, that a taxpayer is precluded from appealing to this Court as he cannot
object to a reassessment made pursuant to subsection 152(4.2) of the Act.
Madam Justice Valerie Miller of this Court stated the following in Groulx v.
The Queen., 2008 TCC 445, a decision that was upheld by the Federal Court
of Appeal, 2009 FCA 10:
[11] The taxpayer is precluded from
appealing his 1997 and 1998 taxation years to the Tax Court as he cannot object
to the reassessments for those years as they have been made in accordance with
subsection 152(4.2). Justice O'Connor had this to say in his decision in Mellish:
[10] The Court has previously considered the interplay
between these three subsections and has consistently concluded that there is no
right of appeal to the Tax Court of Canada for a reassessment issued under
subsection 152(4.2)
* Yaremy – Once satisfied that the reassessment was
issued under subsection 152(4.2), the Court concluded, at paragraph 10,
"that subsection 165(1.2)
applies and no valid objection could be made by the Appellant. If no valid
objection can be made, then no valid appeal can be commenced under subsection
169(1)."
* Haggart – The Court concluded, at paragraph 37,
"that it is not possible to file a valid Notice of Objection nor a Notice
of Appeal to a Reassessment that was issued under subsection 152(4.2) of the
Act."
* Chou – The Court concluded, at paragraph 15, that
"as the appellant could not validly file a notice of objection to
the...reassessment issued pursuant to subsection 152(4.2) of the Act, she was consequently barred under subsections
165(1.2) and 169(1) of the Act from instituting an
appeal from that reassessment before this Court."
[18]
Notwithstanding the
above-mentioned case law, the appellant submits that the principles of
statutory interpretation, specifically the presumption against redundancy and
the implied exception rule, warrant a reconsideration of those cases that have
held that there is no right of appeal from an assessment made under subsection 152(4.2)
of the Act.
[19]
With respect to the
presumption against redundancy, the appellant reviewed and compared subsections
165(1.2) and 169(2.2) of the Act, noting that there is an explicit
statutory prohibition against disputing assessments where a taxpayer has filed
a waiver in respect of a right to object. That prohibition is repeated in both
subsections 165(1.2) and 169(2.2). Subsection 169(2.2) reads as follows:
169(2.2) Waived issues — Notwithstanding
subsections (1) and (2), for greater certainty a taxpayer may not appeal
to the Tax Court of Canada to have an assessment under this Part vacated or
varied in respect of an issue for which the right of objection or appeal has
been waived in writing by the taxpayer.
[20]
The appellant further
argues on this point that if the prohibition under subsection 169(2.2) is to
have any meaning and not be redundant, the only reasonable conclusion is that
the legislator did not intend the prohibition of an objection with regard to a
waived issue to operate so as to prohibit an appeal; consequently, that the
legislator must not have intended the prohibition in subsection 165(1.2) to
apply to appeals. The appellant also states that if the sections prescribing limitations
on appeals are to have any meaning, then the limitations on appeals must be
different than the limitations on objections.
[21]
Subsection 169(2.2) was
enacted to provide, for greater certainty, that no appeal could be instituted
in this Court in respect of an issue for which the right of objection or appeal
has been waived in writing by the taxpayer. If a taxpayer waives his right of
objection, it follows that he may not appeal to this Court given that no valid
objection can be made and the precondition in subsection 169(1) cannot be met.
In my opinion, the word "or" suggests that a taxpayer may not appeal
to this Court if he has waived his objection rights or if he has waived his
appeal rights without waiving his objection rights. Either way, he is barred
from appealing to this Court. Subsection 169(2.2), in my opinion, is not
redundant.
[22]
The appellant further
argues that section 169 does not prohibit an appeal under subsection 152(4.2)
of the Act. He submits that the legislator chose to repeat the
prohibition on disputing waived items in subsections 165(1.2) and 169(2.2) and
chose to repeat the limitation on disputing prescribed items in subsections
165(1.1) and 169(2) of the Act. The appellant contends that if the
legislator meant to deprive this Court of jurisdiction to hear an appeal from a
reassessment made under subsection 152(4.2) of the Act, there would have
to be an explicit deprivation of jurisdiction and the legislator's failure to
mention that section is grounds for inferring that it was deliberately
excluded. Thus, there is no prohibition on appeals from reassessments under
subsection 152(4.2) of the Act or, at minimum, there is ambiguity, which
should be resolved in favour of the taxpayer.
[23]
Statutory
interpretation must be done in accordance with the directives found in Canada
Trustco Mortgage Co. v. Canada, [2005] 5 C.T.C. 215 (S.C.C.) at paragraph
10:
It has been long established as a
matter of statutory interpretation that "the words of an Act are to be
read in their entire context and in their grammatical and ordinary sense
harmoniously with the scheme of the Act, the object of the Act, and the
intention of Parliament": see 65302 British Columbia Ltd. v. Canada,
[1999] 3 S.C.R. 804, at para. 50. The
interpretation of a statutory provision must be made according to a textual,
contextual and purposive analysis to find a meaning that is harmonious with the
Act as a whole. When the words of a provision are precise and unequivocal, the
ordinary meaning of the words play a dominant role in the interpretive process.
On the other hand, where the words can support more than one reasonable
meaning, the ordinary meaning of the words plays a lesser role. The relative
effects of ordinary meaning, context and purpose on the interpretive process
may vary, but in all cases the court must seek to read the provisions of an Act
as a harmonious whole.
[24]
With that in mind, it
seems logical to say that the legislator did not repeat the prohibition for
there was no need to do so. The Act already provides that in order to
appeal to this Court, a notice of objection must be filed with the Minister
under subsection 169(1) of the Act. It seems clear that by enacting
subsection 165(1.2) prohibiting an objection to assessments made under
subsection 152(4.2), the legislator was aware that no appeal could then be
instituted to this Court with respect to such a reassessment and that it was
thus intended that the prohibition apply to appeals. In my opinion, section 169
of the Act is not ambiguous. There is therefore no right of appeal from
a reassessment under subsection 152(4.2) of the Act.
[25]
The second point raised
by the appellant has to do with subsection 152(6) of the Act. The
appellant submits that the Minister has the statutory authority under that
subsection to make an adjustment with respect to a loss from a later year up to
six years after the date of mailing of the original notice of assessment. He
suggests that the Minister recomputed the loss carryforward in October 2006 and
issued a reassessment, to which he objected. He therefore maintains that the
2006 reassessment was authorized pursuant to subparagraph 152(4)(b)(i).
It was therefore not necessary to resort to the discretionary assessment
provisions of subsection 152(4.2) of the Act, as the adjustment was
made within three years of the end of the normal reassessment period. Accordingly,
the objection to the October 2006 reassessment is not prohibited by subsection
165(1.2) because it does not apply to reassessments made under subparagraph
152(4)(b)(i).
[26]
The appellant further
advances that the restrictions in subsections 152(4.01), 165(1.1) and 169(2) do
not prohibit the assessment at issue because it is an assessment that can
reasonably be regarded as relating to an assessment, reassessment or additional
assessment to which subparagraph 152(4)(b)(i) applies, and that the wording
"can reasonably be regarded as relating" is to be given a large and
liberal interpretation. In this regard, the appellant relies on Chevron
Canada Resources Ltd. v. Canada, [1997] 2 C.T.C.
2624 (T.C.C.) and Agazarian v. Canada, [2004] 3 C.T.C. 101 (F.C.A.). In Agazarian,
it was held that the Minister had the power to reassess income tax returns more
than once beyond the normal reassessment period provided the reassessments take
place within the extended reassessment period.
[27]
I agree that the
Minister may issue a subsequent assessment arising from a subsection 152(6)
assessment if necessary in the circumstances. I cannot agree, though, with the
appellant's statement that the restrictions in subsections 152(4.01), 165(1.1)
and 169(2) of the Act do not prohibit the subject assessment because it
is an assessment that can reasonably be regarded as relating to an assessment
or reassessment under subparagraph 152(4)(b)(i). In Agazarian (supra),
the Court merely stated that the Minister is empowered to reassess more than
once under paragraph 152(4)(b). It did not say that one may object
to matters other than those provided for in the special provisions.
[28]
It is important to
remember here that the appellant did not object to the loss carryforward in
this instance. He objected, rather, to the inclusion of certain employment
income received from exercised stock options. To suggest that the matter that
gave rise to the reassessment is the income of the taxpayer would be to defeat
the limitations prescribed in subsection 165(1.1) of the Act.
[29]
Subsection 165(1.1) of
the Act was enacted to prevent a taxpayer from taking advantage of an
assessment or reassessment made under special provisions by objecting to
unrelated matters which could not otherwise have been objected to because the
time for objecting to a prior assessment or reassessment had expired.
Subparagraph 152(4)(b)(i) of the Act allows reassessments to be
made after the normal reassessment period where they are reassessments that are
required under subsection 152(6) of the Act with respect to claims of
certain deductions or credits, for example, in relation to a loss carryback to
a particular taxation year from a subsequent taxation year. Subsection 152(6)
is not concerned with inclusion of employment income. A dispute in respect of
the inclusion of certain employment income cannot "reasonably be regarded
as relating" to a reassessment regarding a loss carryback or carry-forward.
In this instance, the loss does not relate in any way to the disputed
employment income. The appellant is therefore precluded from objecting to a
matter unrelated to the 2006 reassessment pursuant to subsections 165(1.1),
152(4.01) and 169(2) of the Act.
[30]
In addition, the
evidence does not disclose that any of the conditions set out in subsection
152(4), which are required in order for the Minister to be able to assess after
the normal assessment period, have been met here. No evidence was adduced that
would permit me to conclude that the October 2006 reassessment was issued
pursuant to subparagraph 152(4)(b)(ii) or subsection 152(6) of the Act.
The evidence, on the contrary, supports a finding that the reassessment was
made under the "fairness" legislation, and the Minister reassessed for
the appellant's 2000 taxation year in accordance with his request. As a
consequence, no valid objection may be made; hence, no appeal can be filed
before this Court.
[31]
The appellant's third
argument is that the Minister's actions give rise to estoppel. Despite the fact
that the 2006 reassessment clearly stated that the Minister had adjusted the
appellant's 2000 tax return under the fairness provisions of the Act and
that no notice of objection could be filed, the appellant did object and the
subsequent actions of the Minister were such that the objection was treated as
valid. That conduct by the Minister, it is submitted, also precluded the
appellant from pursuing an application to the Federal Court for judicial review
with respect to the Minister's failure to adjust the return following the
objection. On this point, the appellant relies on Burnet v. Canada,
[1998] F.C.J. No. 364 (QL), Wong v. Canada, [2007] F.C.J. No. 842 (QL) and Von Teichman v. Canada, [2003]
T.C.J. No. 505 (QL).
[32]
The factors giving rise
to estoppel were examined by Judge Bowman (as he then was) in Goldstein v.
Canada, 1995 CarswellNat 438, [1995] 2 C.T.C. 2036 (T.C.C.) at paragraphs
21 and 22:
21 There is much authority relating
to the question of estoppel in tax matters and no useful purpose would be
served by yet another review of the cases. I shall endeavour however to set
out the principles as I understand them, at least to the extent that they are
relevant. Estoppels come in various forms — estoppel in pais, estoppel
by record and estoppel by deed. In some cases reference is made to a concept of
"equitable estoppel", a phrase which may or may not be accurate. (See Canadian Pacific Railway Co. v. The King, [1931] A.C.
414 at page 429. Cf. Central London Property Trust Ltd. v. High Trees House
Ltd., [1947] 1 K.B. I30.) It is sufficient to say that the only type
of estoppel with which we are concerned here is estoppel in pais. In Canadian
Superior Oil Ltd. v. Paddon-Hughes Development Co., [1970] S.C.R.
932 at pages 939-40 Martland J. set out the factors
giving rise to an estoppel as follows:
The essential
factors giving rise to an estoppel are I think:
(1) A representation
or conduct amounting to a representation intended to induce a course of conduct
on the part of the person to whom the representation is made.
(2) An act or
omission resulting from the representation, whether actual or by conduct, by
the person to whom the representation is made.
(3) Detriment to
such person as a consequence of the act or omission.
22 Estoppel is no longer merely a
rule of evidence. It is a rule of substantive law.
Lord Denning calls it "a principle of justice and of equity".
(See Moorgate Mercantile Co. v. Twitchings, [1976] 1 Q.B. 225, at page
241.)
[33]
The respondent's
concedes that the Minister erred in considering the Notice of Objection and
issuing a Notice of Confirmation to the appellant. Counsel for the respondent
argues though, that the error cannot change the requirements prescribed in law
and that this Court cannot be bound by the error. The respondent adds that the
error cannot have the effect of giving the appellant objection and appeal
rights that are denied to him, and to all other taxpayers in similar
circumstances. The respondent relies on M.N.R. v. Inland Industries Ltd.,
[1974] S.C.R. 514 (S.C.C.) and Goldstein, supra, in which it was held
that the courts are not bound by representations, opinions or admissions by the
parties regarding the law.
[34]
In the present fact
situation, I do not believe that the appellant was misled by the Minister when
he decided to file a notice of objection. In fact, it was he himself who set
the wheels in motion by ignoring the prohibition set out in subsection 165(1.2)
of the Act and referred to in the 2006 reassessment. As noted by Judge
Bowman (as he then was) in Goldstein, supra, this Court has an
obligation to decide cases (or motions) in accordance with the law. I am
therefore not bound by erroneous representations or interpretations of the Act
by CRA officials. Accordingly, no estoppel can be said to have arisen in the
instant case if the representations were not in accordance with the law. The situation
in the cases cited by the appellant differs from that in the instant case as, in
those cases, they were in accordance with the law.
[35]
As for the appellant's being
precluded from making an application to the Federal Court for judicial review,
I understand from the evidence that the appellant requested a loss carryback
for his 2000 taxation year and that the request was accepted by the Minister.
Nothing in the evidence indicates that the appellant requested an adjustment to
his employment income in respect of the exercised stock options.
[36]
Under the fairness
provisions, a second review may be sought and an extension of time may be had
for the purpose of seeking judicial review. In my opinion, the appellant was
not prejudiced in any way nor was he precluded from seeking judicial review of
the CRA's actions.
[37]
The motion to quash the
appeal is allowed with costs. There is no need to consider the fourth question concerning
an extension of time to file a reply.
Signed at Edmundston, New Brunswick, this 29th day of June 2009.
"François Angers"
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