Citation: 2009 TCC 581
Date: 20091110
Docket: 2008-597(IT)G
BETWEEN:
MEJRAM SLJIVAR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Rip, C.J.
[1]
The issue in this
appeal from an assessment for 2002
is whether a notice of waiver in respect of the normal reassessment period for
the 2002 taxation year ("waiver"), signed by the appellant
Mejram Sljivar on April 5, 2006, is valid: paragraphs 152(3.1)(b)
and subparagraph 152(4)(a)(ii) of the Income Tax Act. At trial
the appellant questioned the validity of the assessment, not its quantum. A
second issue would come into play if I find the waiver invalid, namely, whether
the appellant made any misrepresentation in filing his tax return for 2002 that
is attributable to neglect, carelessness or wilful default so as to permit the
Minister of National Revenue ("Minister") to reassess after the
normal reassessment period: paragraph 152(3.1)(b).
[2]
Mr. Sljivar was
born and raised in Bosnia where he had a grade 8 education. He
immigrated to Canada in 1993 and during 2002 was a partner in an aluminium
siding business, installing siding and eavestroughs. At time of trial he was
36 years old.
[3]
On his arrival in Canada, Mr. Sljivar did not speak, read or understand
English. He did attend courses where he was taught English as a second
language. He says he can now read "simple" words in English. He can
read "simple letters"; if there is a problem he says he asks his wife
to read for him. However, while the appellant conducts business in English, his
partner signs business documents. He declared that he never signs any contract.
[4]
Mr. Sljivar signed
his income tax return for 2002 on April 11, 2003 and the return was filed
with the Canada Revenue Agency ("CRA") soon thereafter. The return
was prepared by Paul S. Snider Consulting Inc. The notice of
assessment for 2002 was dated May 8, 2003 and was sent to
Mr. Sljivar. The Minister assessed as filed.
[5]
The "normal
reassessment period", as defined by paragraph 152(3.1)(b) of
the Income Tax Act ("Act") during which the Minister
may reassess Mr. Sljivar was to expire on May 8, 2006.
[6]
The sequence of events
leading to this appeal may assist the reader:
a) March 14,
2006: Mr. R. Sharma of the CRA informed Mr. Sljivar that he
was being audited for 2002;
b) March 20,
2006: A meeting arranged between Mr. Sljivar, his accountant at the
time, Mr. Snider, and Mr. Sharma for March 27 at the offices of the
CRA in Mississauga, Ontario. The meeting was subsequently
rescheduled to March 28.
c) March 28,
2006: Meeting between Mr. Sljivar, his accountant and Mr. Sharma.
Various matters relating to Mr. Sljivar's business were discussed.
Mr. Sljivar undertook to provide CRA with bank statements, deposit books,
sales invoices, etc. No mention was made of a possible request for
Mr. Sljivar to sign a form of waiver in respect of 2002. The meeting lasted
between one and two hours.
d) March 31 and
April 3, 2006: Telephone calls between Mr. Sljivar and
Mr. Sharma concerning the records Mr. Sljivar undertook to provide
and when he would provide them.
e) April 4,
2006: Mr. Sljivar brought records to CRA in Mississauga.
[7]
According to
Mr. Sljivar, he received a call on April 5, 2006 from Mr. Sharma
asking him to attend at CRA's office "to sign something".
Mr. Sljivar says he was not told what that something was. He had been at
the CRA the day before and nothing was mentioned about signing a document.
[8]
Mr. Sljivar
recalled he was very busy on April 5. Closings were taking place at a
subdivision where he was working and he complained he had lost three or four
days of work dealing with the CRA. In any event, he "went with my working
clothes around lunch" to CRA's offices to sign what Mr. Sharma
requested. He parked in front of the building and phoned Mr. Sharma to
tell him he was in the building. "Mr. Sharma came (down to the lobby)
with the file, showed me where to sign … I wrote “taxpayer” (under my name) …
Mr. Sharma helped me spell 'taxpayer'".
[9]
Mr. Sljivar said
Mr. Sharma put his finger on the place on the form where a signature was
required. Mr. Sharma had prepared the form earlier. Mr. Sljivar again
stated he was busy at work on April 5, did not read even the title on the
form and did not ask to take the form home to review.
[10]
Mr. Sljivar
insists that Mr. Sharma did not tell him what the document was. He says he
thought his signature was "part of the process". He signed the waiver
in the lobby of the building, next to the exit. Mr. Sharma did not explain
what the document was nor did Mr. Sharma advise him to speak to his
accountant before signing, Mr. Sljivar declared. Mr. Sljivar admitted
that he simply signed the waiver form without reading it. He repeated that he
was in a rush to get back to work.
[11]
Appellant's counsel
reviewed the waiver with him during examination‑in‑chief. He
explained that while he wrote "tax" under his name, in the line
describing the signatory’s title, Mr. Sharma spelt out "p‑a‑y‑e‑r"
to complete the word “taxpayer”. At Mr. Sharma's request, Mr. Sljivar
wrote the date on the form, correcting an earlier date entered by
Mr. Sharma.
[12]
When he signed the form
of waiver, Mr. Sljivar testified, he did not know what a waiver was. It
was only later on, when he received the notice of reassessment, that he was
told by his new accountant, James Simpson, that he had signed a waiver and was
told its purpose. Mr. Sljivar said he was angry when he learned what had
taken place; had he known what a waiver was, he would not have signed the form.
[13]
In cross-examination
Mr. Sljivar could not recall if Mr. Sharma told him on the telephone
that he was running out of time and would have to close the file if a waiver were
not signed.
[14]
Mr. Simpson was
referred to the appellant by Mr. Snider. Mr. Simpson is an income tax
preparer. He testified that both Mr. Sljivar and his partner were being
audited by the CRA in March 2006. Mr. Simpson stated that on May 4,
2006 Mr. Sljivar had received a 30 day letter, a letter from CRA
explaining a proposed assessment and giving the taxpayer 30 days to make
further representations. Mr. Simpson realized the CRA was close to the end of
the three‑year period to reassess 2002. He did not meet with
Mr. Sljivar and his partner until May 9, 2006 and then arranged a
meeting with CRA. It was then that he learned of the waiver.
[15]
On June 5, 2006,
Mr. Simpson met with Mr. Sharma. On June 15, Mr. Simpson
wrote Mr. Sharma to inform him that his clients, Mr. Sljivar and his
partner, had no recollection of signing a waiver. At a second meeting on
June 29, Mr. Simpson said he was told that CRA had the waivers and
"that's it".
[16]
Mr. Sharma denied
any “trickery”, as alleged by appellant's counsel, in having Mr. Sljivar
sign the form of waiver. He stated that after the meeting of March 28,
Mr. Snider never contacted him again and any dealings he had concerning
the audit was with Mr. Sljivar personally.
[17]
On April 5,
Mr. Sharma insisted, before Mr. Sljivar came to his office, he told
Mr. Sljivar that the CRA had three years to assess and if Mr. Sljivar
required more time to obtain supporting documents that he should sign the
waiver; otherwise CRA would assess. Mr. Sljivar said that he would come to
the CRA's office to sign. Mr. Sharma agreed that Mr. Sljivar signed
the waiver in the CRA's building's lobby and that he told him where to sign.
[18]
Mr. Sharma had prepared
the waiver on March 21. This, he said, was "normal procedure" to
follow "if the date was approaching … just in case".
[19]
Mr. Sharma could
not remember if Mr. Sljivar may have asked for help in signing the waiver.
He did ask, according to Mr. Sharma, "where do I sign"?
Mr. Sharma stated that he did offer to fax the form of waiver to
Mr. Sljivar.
[20]
Appellant's counsel
asked Mr. Sharma why he did not present the form of waiver to
Mr. Sljivar on March 28, when they met for about two hours.
Mr. Sharma replied that he did not have the records available then.
"I didn't mention the waiver." Mr. Sharma said he "waited
to see something" and how long it would take Mr. Sljivar to get his
records before he mentioned the waiver. Mr. Sharma repeated that he did
explain the significance of the waiver to Mr. Sljivar on April 5.
Mr. Sharma said he understood Mr. Sljivar's English. He said he
required the waiver so as to give Mr. Sljivar more time to provide
documents and information.
[21]
Mr. Sljivar gave his
accountant, Mr. Snider at the time, all his papers for Mr. Snider to prepare
his tax return for 2002. Once the return was prepared and ready for signature
he attended at Mr. Snider’s office. He did not verify or look over the return
for errors or omissions. He only checked to see how much tax he had to pay. As
he said, he checked the result. Mr. Sljivar did not ask Mr. Snider any
questions or ask him to explain the return.
[22]
As far as Mr. Sljivar
was concerned all business and personal income and amounts that could be
deducted from income were determined by Mr. Snider. The claim for an office at
his residence was Mr. Snider’s decision as was a claim for capital cost
allowance for a sofa which was purchased in 2000 for $2,319 for Mr. Sljivar’s
home.
[23]
In his submissions appellant’s
counsel concentrated on what Mr. Sharma should have and could have done to
prevent Mr. Sljivar signing the waiver. For example, counsel stated that Mr.
Sharma “could have” presented the waiver form at the meeting of March 23 and if
Mr. Sharma had done so, Mr. Snider “could have” informed Mr. Sljivar of the
consequences of signing a savvier. I note Mr. Snider did not appear as a
witness.
[24]
Counsel also submitted
that Mr. Sharma knew of Mr. Sljivar’s limited English and wanted to deal with
him as opposed to Mr. Snider. There was absolutely no evidence of the truth of
this allegation. Counsel ought to be more cautious and avoid making such
reckless accusations.
[25]
Finally, counsel for
the appellant argued that the appellant was “new to Canada” – he had been in
Canada for 13 years – and did not understand what was happening, that signing
the document was part of the process. Counsel added that even after signing the
waiver his client continued to provide Mr. Sharma with documents. Only later,
when he met with Mr. Simpson, did Mr. Sljivar realize was he signed.
[26]
The appellant referred
to Saunders v. Anglia Building Society
in support of his argument that the appellant was not capable of both reading
the form of waiver and sufficiently understanding it and therefore the waiver
was invalid. He cited Lord Pearson:
In my opinion, the plea of non est factum ought to be available in a
proper case for the relief of a person who for permanent or temporary reasons
(not limited to blindness of illiteracy) is not capable of both reading and
sufficiently understanding the deed or other document to be signed. By
“sufficient understanding” I mean understanding at least to the point of
detecting a fundamental difference between the actual document and the document
as the signer had believed it to be. There must be a proper case for such
relief. There would not be a proper case if: (a) the signature of the document
was brought about by negligence of the signer in failing to take precautions
which he ought to have taken; or (b) the actual document was not fundamentally
different from the document as the signer believed it to be. I will say
something later about negligence and about fundamental difference.
[27] In counsel’s view his
client was incapable of reading and understanding the waiver. Also, he said,
Mr. Sharma was negligent in not cautioning Mr. Sljivar before he signed the
waiver.
[28] Counsel also referred to Canadian
Bank of Commerce v. Shotbolt et al
where at page 747, Kroft J. stated that:
… On the one hand, it is of importance
particularly in the world of commerce that documents apparently signed and
executed in the ordinary course should be relied upon. On the other, there is a
reluctance to impose a burden on someone who probably would never have affixed
his signature to a document had he understood its true nature and intent. This
is particularly so when the gain or benefit attached to the signing is small in
relation to the burden imposed.
[29] Finally, in Northside Economic Development
Assistance Corporation (“NEDAC”) v. James Andrew Strickland and Robena
Elizabeth Strickland, a decision of the Supreme Court of Nova Scotia, Trial
Division, by Glube, C.J., as she then was, the Court found that there was a
responsibility by the Royal Bank of Canada and NEDAC to ensure that the parties
to loans secured by two chattel mortgages and promissory notes understood what they
were signing, in particular the person who was not involved in the negotiation
of the loans. The evidence before the Chief Justice was that one of the
defendants had no knowledge and did not understand that she was personally
responsible. She believed she had to sign because she was the other defendant’s
wife. She did not understand what a chattel mortgage was at the time she signed
the mortgages and related documents.
[30] However, a year later, Estey J. writing for
the Supreme Court
held that:
… As between an innocent party (the appellant) and the respondents,
the law must take into account the fact that the appellant was completely
innocent of any negligence, carelessness or wrongdoing, whereas the respondents
by their careless conduct have made it possible for the wrongdoers to inflict a
loss. As between the appellant and the respondents, simple justice requires
that the party, who by the application of reasonable care was in a position to
avoid a loss to any of the parties, should bear any loss that results when the
only alternative available to the courts would be to place the loss upon the
innocent appellant. …
[31] When Mr. Sljivar went to the CRA on April 5,
2006, he was in a rush to get back to work. Even if I accept that at the time
his English was weak, he did have the ability to read the title of the form,
that is “waiver”, and if he did not understand what it meant, he could have
asked Mr. Sharma what the word meant if Mr. Sharma had not already explained
the document. My impression of Mr. Sljivar’s evidence is that he was in a hurry
and wanted to get back to work as soon as possible. Hence, he neglected to take
simple precautions before signing the waiver.
[32] Mr. Sljivar was not in the same position as Mr.
and Mrs. Strickland where interests of the debtor and creditor are opposite.
Here, we are dealing with a waiver and signing a waiver may be just as much to
the interest of the taxpayer as the fisc. As Joyal J. commented in Cal
Investments:
A waiver of the sort at issue in this case, might be
interpreted as an accommodation between the Crown and a taxpayer for the better
administration of the Income Tax Act and to provide a more efficient
determination of any liability thereunder. In the light of the limitations on
assessments under s. 152 of the Act, the Crown requests a waiver so that
it may continue its assessment or audit work in a normal administrative mode
without having to worry about limitations. The taxpayer, on the other hand,
knows full well that on an assessment being made, he alone has the burden of
proving it wrong. That burden becomes much heavier if the Crown, facing the end
of the limitation period, issues what might be termed a premature assessment
which, for purposes of abundant caution, would include many sundry items which
the taxpayer would have to traverse one by one. The taxpayer in those
circumstances would look upon a waiver as being to his own benefit as well as
the Crown's and would ordinarily comply with the Crown's request.
In many cases, also, the waiver might be limited to
specified issues, i.e., those where assessing or auditing processes have not
been completed and which in fact remain the only outstanding items on which the
Crown can ultimately decide to assess or reassess. This narrows the field of the
assessment and again provides mutual advantages to both the Crown and the
taxpayer.
[33] There is no evidence that Mr. Sharma resorted
to trickery to have Mr. Sljivar sign the waiver. The CRA could have assessed on
the day the waiver was signed and in any event before May 8, 2006. It did not
require the waiver. And that Mr. Sljivar continued to provide documents to Mr.
Sharma after he signed the waiver demonstrates that the waiver was serving its
purpose – to permit the taxpayer to provide additional information to prevent
the proposed assessment.
[34] If the waiver was invalid and therefore the
reassessment was made outside the normal reassessment period, the second issue
would arise. On the facts before me, Mr. Sljivar was negligent in not even
making a cursory review of his tax return for 2002, accepting everything his
accountant reported in, or omitted from, the return.
[35] Appellant’s counsel submitted that since the
Minister did not assess a penalty under subsection 163(2) of the Act,
the Minister cannot reassess after the normal reassessment period. The
negligence required for a penalty under subsection 163(2) is gross negligence,
that is, negligence that involves greater neglect than simply a failure to use
reasonable care.
In the appeal at bar Mr. Sljivar did not use reasonable care in checking his
return to make sure that he did not claim expenses he clearly was not entitled
to, for example, an office in his home and capital cost allowance on personal
property.
[36] In such circumstances Mr. Sljivar was
negligent or careless in filing his return of income for 2002 and it was open
for the Minister to reassess after the normal reassessment period: subsection
152(4).
[37] The appeals are therefore dismissed. Costs in
favour of the respondent.
Signed at Ottawa, Canada, this 10th
day of November 2009.
“G.J. Rip”
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