Carlson v. The Queen, 2000 DTC 2556 (TCC)

Date: 20000905

Docket: 1999-2193-IT-APP

BETWEEN:

DENNIS CARLSON,

Applicant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Order

Porter, D.J.T.C.C.

[1] This is an application to the Court to extend the time in which an objection to an assessment might be made to the Minister of National Revenue (the "Minister") under subsections 166.1(1) and (7) of the Income Tax Act (the "Act"). The application arises out of a rather unfortunate set of circumstances. The Applicant has become embroiled in a situation, which was not of his own making, save that he attempted to help out the primary tax payer, one Avery Broadbent ("Avery"), without any thought of reward or compensation for himself.

[2] The evidence revealed that in 1992, the Applicant was asked and he agreed to help Avery, who was having difficulty with the City of Edmonton, in obtaining the necessary permits to do renovations to a rental property, in which the girlfriend of the Applicant rented a suite. The Applicant agreed in October 1992 to the property being transferred into his own name so that he could make the necessary applications to the City for the permits, leaving out the name of Avery. No money changed hands and there was no consideration for the transfer. He was simply a bare trustee. Although lawyers were involved in the transfer, no trust document was drawn up. The transfer showed a value of $76,000.00, but the property was subject to a mortgage and thus there was little or no equity in it at the time of the transfer. Avery continued to collect all rents for his own account and the Applicant had nothing to do with the administration of the properties, except to make application for the permits to the City of Edmonton.

[3] Avery ran into further difficulties over the next year or so, at one time ending up in jail for unknown activities. His behaviour became of such concern to the Applicant that in the summer of 1994, he insisted upon returning the title to him. In July 1994, a lawyer engaged by Avery prepared a transfer of the title to the son of Avery, one Robert Broadbent. The Applicant signed the transfer, had no lawyer acting for him and received no consideration or money.

[4] Unfortunately for the Applicant, on August 17, 1993, Revenue Canada had served upon him a Notice of Assessment in the amount of $43,000.00 in the following terms:

"This assessment is issued pursuant to the provisions of subsection 160(2) of the Income Tax Act in respect of transfers from Sunwapta Construction Ltd. on or about September 1, 1992 of real estate located at 9543 and 9547 – 103 Avenue, Edmonton, Alberta, legally described as Lots 18 and 19, Block 8, Plan D R.L. 12 and 14."

[5] Evidence was given by the Applicant that upon receipt of the assessment, he telephoned an unknown person at Revenue Canada to whom he explained the situation and who said that he would make inquiries and get back to the Applicant. That person never did get back to him. I have no reason to disbelieve what the Applicant says in this respect, and I accept his evidence on this. According to the Applicant, no further demands were made upon him until he was talking to Revenue Canada about another unrelated matter many years later in late 1998 or early 1999 and this assessment came up on the computer screen. No letter of explanation was ever sent to him to tell him what the assessment was about, and I am satisfied that he did not understand it.

[6] A more educated or sophisticated person would no doubt have sought some professional advice from a lawyer or accountant, but the Applicant is a simple working man with, I would consider, a very limited education. All he did was to call Revenue Canada and also discuss it with Avery who said that he would look after it. That was good enough for the Applicant who gave it no further thought until the matter arose again in 1998.

[7] Counsel, now retained by the Applicant for the purposes of this application, has argued that as a trustee there was no beneficial interest passed to the Applicant, and has cited case law in support, to the effect that the assessment is not valid in such circumstances. The evidence also reveals that there was no equity transferred to the Applicant in that the mortgage and other liens against the property exceeded its fair market value.

[8] Counsel for the Minister takes the position that these might all be good arguments on an appeal against the assessment, but are irrelevant to the actual application before the Court. She relies on a number of cases which support this position:

"(a) Peach v. Her Majesty the Queen, 99 D.T.C. 199, [1999] 1 C.T.C. 2310

(b) Cameron v. Her Majesty the Queen, [1997] 2 C.T.C. 3070, 97 D.T.C. 356

(c) Casey v. Her Majesty the Queen, [1999] 2 C.T.C. 2681

(d) Carew v. Canada (Minister of National Revenue), [1992] F.C.J. No. 1020, DRS 94-13191"

[9] The relevant portions of the Act read as follows:

"165(1) A taxpayer who objects to an assessment under this Part may serve on the Minister a notice of objection, in writing, setting out the reasons for the objection and all relevant facts,

(a) where the assessment is in respect of the taxpayer for a taxation year and the taxpayer is an individual (other than a trust) or a testamentary trust, on or before the later of

(i) the day that is one year after the taxpayer’s filing-due date for the year, and

(ii) the day that is 90 days after the day of mailing of the notice of assessment; and

(b) in any other case, on or before the day that is 90 days after the day of mailing of the notice of assessment."

(It would appear that 90 days after the date in question under this section would be November 15, 1993)

"165(2) Service. A notice of objection under this section shall be served by being addressed to the Chief of Appeals in a District Office or a Taxation Centre of the Department of National Revenue and delivered or mailed to that Office or Centre."

"166.1(1) Where no notice of objection to an assessment has been served under section 165, nor any request under subsection 245(6) made, within the time limited by those provisions for doing so, the taxpayer may apply to the Minister to extend the time for serving the notice of objection or making the request.

(2) Contents of application. An application made under subsection (1) shall set out the reasons why the notice of objection or the request was not served or made, as the case may be, within the time otherwise limited by this Act for doing so.

(7) When order to be made. No application shall be granted under this section unless

(a) the application is made within one year after the expiration of the time otherwise limited by this Act for serving a notice of objection or making a request, as the case may be; and

(b) the taxpayer demonstrates that

(i) within the time otherwise limited by this Act for serving such a notice or making such a request, as the case may be, the taxpayer

(A) was unable to act or to instruct another to act in the taxpayer’s name, or

(B) had a bona fide intention to object to the assessment or make the request,

(ii) given the reasons set out in the application and the circumstances of the case, it would be just and equitable to grant the application, and

(iii) the application was made as soon as circumstances permitted."

(It would be apparent that the date by which the application for an extension would have to be made to the Minister in this case, would be November 15, 1994.)

"166.2(1) A taxpayer who had made an application under subsection 166.1 may apply to the Tax Court of Canada to have the application granted after either

(a) the Minister has refused the application, or

(b) 90 days have elapsed after service of the application under subsection 166.1(1) and the Minister has not notified the taxpayer of the Minister’s decision,

but no application under this section may be made after the expiration of 90 days after the day on which notification of the decision was mailed to the taxpayer.

166.2(4) Powers of Court. The Tax Court of Canada may grant or dismiss an application made under subsection (1) and, in granting an application, may impose such terms as it deems just or order that the notice of objection be deemed to have been served on the date of its order.

166.2(5) When application to be granted. No application shall be granted under this section unless

(a) the application was made under subsection 166.1(1) within one year after the expiration of the time otherwise limited by this Act for serving a notice of objection or making a request, as the case may be; and

(b) the taxpayer demonstrates that

(i) within the time otherwise limited by this Act for serving such a notice or making such a request, as the case may be, the taxpayer

(A) was unable to act or to instruct another to act in the taxpayer’s name, or

(B) had a bona fide intention to object to the assessment or make the request,

(ii) given the reasons set out in the application and the circumstances of the case, it would be just and equitable to grant the application, and

(iii) the application was made under subsection 166.1(1) as soon as circumstances permitted."

[10] It is apparent that the Applicant filed his Notice of Objection, shortly after his second telephone conversation with Revenue Canada on February 11, 1999 and it was received by Revenue Canada on February 16, 1999.

[11] A strict interpretation of the Act, applied to the facts in the case, clearly reveals that the application for an extension of time is many years out of time. According to counsel for the Minister, this is obsolete. There is no discretion left by the Act either in the Minister or in the Court to do anything after the passing of the time limits. I posed an hypothetical question to counsel for the Minister about a situation where perhaps as a result of a computer error, an off-the-wall and invalid assessment was issued to a taxpayer who, for one reason or another, filed a Notice of Objection. My hypothetical question was whether in those circumstances the assessment would stand and her reply was in the affirmative. It seems to me, with respect, to be an untenable position that an invalid assessment with no foundation can stand and be enforced simply because the time limit has gone by and thus nobody in law can do anything about it.

[12] I have considered in great length a number of the decisions of the Supreme Court of Canada relating primarily to time limits and statutes of limitations across the country (see below). These necessary involve the question whether civil law suits be allowed to proceed, sometimes many years after the expiration of the statutory time limits. Whilst these involve civil law suits, and the application before me involves interpretation of the Income Tax Act, these are not substantive matters being dealt with but procedural situations in each case. What is at stake in those cases, as in the present situation, is the fundamental question of the right of a person to present his case in appropriate circumstances.

[13] In each of those cases, the Plaintiff had endured an intervening lack of ability to understand and appreciate the situation at hand, and his or her rights to take action. The Supreme Court of Canada in those cases has allowed for the time limits not to start to run, until each one of those persons had the opportunity to fully and clearly appreciate his or her legal rights.

[14] These cases are based upon a principle which the Supreme Court has termed "the discoverability rule". The line of cases deals with situations in which statutory time limits have been held to not be a bar to proceedings being commenced. They range from suits against incestuous offenders through claims relating to personal injuries sustained in motor vehicle accidents, to matters of municipal affairs. The subject matter of the limitation period seems to be of no import and the rule would thus appear to be generic in its nature.

[15] In K. (M.) v. H. (M.), [1992] 3 S.C.R. 6, in dealing with a case of incest, LaForest J. enunciated the rule as follows:

"... The tort claim, although subject to limitations legislation, does not accrue until the plaintiff is reasonably capable of discovering the wrongful nature of the defendant's acts and the nexus between those acts and her injuries. In this case, that discovery took place only when the appellant entered therapy, and the lawsuit was commenced promptly thereafter... Similarly, I do not find it necessary to deal with the question of whether the appellant was of unsound mind, although it seems to me that such a pejorative term is inappropriate in this context."

[16] Later in the same judgment, the LaForest J. said this:

"The appellant argues that her cause of action did not accrue until she went through a form of therapy, because her psychological injuries were largely imperceptible until later in her adult life and thus not reasonably discoverable until she was able to confront her past with the assistance of therapy. During the hearing, counsel for the respondent conceded that the doctrine of reasonable discoverability had application to an action grounded in assault and battery for incest. He submitted, however, that the appellant was aware of her cause of action no later than when she reached the age of majority. In order to determine the time of accrual of the cause of action in a manner consistent with the purposes of the Limitations Act, I believe it is helpful to first examine its underlying rationales. There are three, and they may be described as the certainty, evidentiary, and diligence rationales; see Rosenfeld, "The Statute of Limitations Barrier in Childhood Sexual Abuse Cases: The Equitable Estoppel Remedy" (1989), 12 Harv. Women's L.J. 206, at p. 211.

Statutes of limitations have long been said to be statutes of repose; see Doe on the demise of Count Duroure v. Jones (1791), 4 T.R. 301, 100 E.R. 1031, and A'Court v. Cross (1825), 3 Bing. 329, 130 E.R. 540. The reasoning is straightforward enough. There comes a time, it is said, when a potential defendant should be secure in his reasonable expectation that he will not be held to account for ancient obligations. In my view this is a singularly unpersuasive ground for a strict application of the statute of limitations in this context. While there are instances where the public interest is served by granting repose to certain classes of defendants, for example the cost of professional services if practitioners are exposed to unlimited liability, there is absolutely no corresponding public benefit in protecting individuals who perpetrate incest from the consequences of their wrongful actions. The patent inequity of allowing these individuals to go on with their life without liability, while the victim continues to suffer her consequences, clearly militates against any guarantee of repose.

The second rationale is evidentiary and concerns the desire to foreclose claims based on stale evidence. Once the limitation period has lapsed, the potential defendant should no longer be concerned about the preservation of evidence relevant to the claim; see Dundee Harbour Trustees v. Dougall (1852), 1 Macq. 317 (H.L.), and Deaville v. Boegeman (1984), 48 O.R. (2d) 725 (C.A.). However, it should be borne in mind that in childhood incest cases the relevant evidence will often be "stale" under the most expedient trial process. It may be ten or more years before the plaintiff is no longer under a legal disability by virtue of age, and is thus entitled to sue in her own name; see Tyson v. Tyson, 727 P.2d 226 (Wash. 1986), at p. 232, per Pearson J. (dissenting). In any event, I am not convinced that in this type of case evidence is automatically made stale merely by the passage of time. Moreover, the loss of corroborative evidence over time will not normally be a concern in incest cases, since the typical case will involve direct evidence solely from the parties themselves.

Finally, plaintiffs are expected to act diligently and not "sleep on their rights"; statutes of limitation are an incentive for plaintiffs to bring suit in a timely fashion. This rationale again finds expression in several cases of some antiquity. For example in Cholmondeley v. Clinton (1820), 2 Jac. & W. 1, 37 E.R. 527, the Master of the Rolls had this to say in connection with limitation periods for real property actions, at p. 140 and p. 577, respectively:

The statute is founded upon the wisest policy, and is consonant to the municipal law of every country. It stands upon the general principle of public utility. Interest reipublicoe ut sit finis litium, is a favorite and universal maxim. The public have a great interest, in having a known limit fixed by law to litigation, for the quiet of the community, and that there may be a certain fixed period, after which the possessor may know that his title and right cannot be called in question. It is better that the negligent owner, who has omitted to assert his right within the prescribed period, should lose his right, than that an opening should be given to interminable litigation, exposing parties to be harassed by stale demands, after the witnesses of the facts are dead, and the evidence of the title lost. The individual hardship will, upon the whole, be less, by withholding from one who has slept upon his right. ... [Emphasis added.]

There are, however, several reasons why this rationale for a rigorous application of the statute of limitations is particularly inapposite for incest actions."

[17] And later again, he said:

"The foregoing discussion has examined the policy reasons for limitations from the perspective of fairness to the potential defendant. However this Court has also said that fairness to the plaintiff must also animate a principled approached to determining the accrual of a cause of action. In Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2, one of the issues that arose was whether the plaintiff's action was statute-barred by the British Columbia Municipal Act, R.S.B.C. 1960, c. 255, where the plaintiff first became aware of the damage after the one year prescription. Wilson J., writing for the majority, observed that the injustice which statute-bars a claim before the plaintiff is aware of its existence takes precedence over any difficulty encountered in the investigation of facts many years after the occurrence of the allegedly tortious conduct.

This principle was later adopted in Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147, where the Court held that the reasonable discoverability rule was as applicable to cases involving professional negligence as it was to actions involving injury to property. Le Dain J. thus articulated the general rule, at p. 224:

... a cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence ...

That essentially mirrors the delayed discovery doctrine developed in the United States, where the rationale most often cited is the plaintiff who is "blamelessly ignorant" of his injury; see Urie v. Thompson, 337 U.S. 163 (1949)."

[18] Finally, he said this:

"In my view the only sensible application of the discoverability rule in a case such as this is one that establishes a prerequisite that the plaintiff have a substantial awareness of the harm and its likely cause before the limitations period begins to toll. It is at the moment when the incest victim discovers the connection between the harm she has suffered and her childhood history that her cause of action crystallizes." (emphasis added)

[19] In 1993, the Supreme Court revisited the principle in a highway traffic case, Murphy v. Welsh; Stoddard v. Watson et al, [1993] 2 S.C.R. 1069. Although in that case Major J. held that the claim of one of the Plaintiffs was incurably statute-barred, he reviewed the principle enunciated by LaForest J. (above) and went on to say:

"While these rationales benefit the potential defendant, the Court also recognized that there must be fairness to the plaintiff as well. Hence, the reasonable discovery rule which prevents the injustice of a claim’s being statute-barred before the plaintiff becomes aware of its existence: Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2; Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147; M. (K.) v. M. (H.), supra. A limitations scheme must attempt to balance the interests of both sides."

[20] After a lapse of five years, the Supreme Court restated the principle in Peixeiro v. Haberman, [1997] 3 S.C.R. 549. Major J. again spoke for the Court. He said this:

"The question raised was whether the discoverability principle applied to postpone the commencement of the two-year limitation period contained in s. 206(1) of the Highway Traffic Act, R.S.O. 1990, c. H.8 ("HTA"). It stipulates that actions for "damages occasioned by a motor vehicle" must be commenced within two years of the time when the "damages were sustained". The respondents commenced their action against the appellant three years and nine months after the motor vehicle accident. In that action they claimed that Mr. Peixeiro's injuries met the requirement of the exception to the general liability immunity afforded to persons involved in a motor vehicle accident by s. 266(1) of the Insurance Act, R.S.O. 1990, c. I.8. This liability immunity is a key feature of the statutory no-fault automobile accident compensation scheme. It operates to effectively bar causes of action in tort in all but a few cases. The resolution of the issue in this appeal requires a consideration of the liability immunity and the no-fault scheme before consideration of the applicability of the discoverability principle."

[21] He went on to say later in the same judgment:

"Since this Court’s decisions in Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2, and Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147, at p. 224, discoverability is a general rule applied to avoid the injustice of precluding an action before the person is able to raise it. See Sparham-Souter v. Town & Country Developments (Essex) Ltd., [1976] 1 Q.B. 858 (C.A.), at p. 868 per Lord Denning, M.R., citing Cartledge v. E. Jopling & Sons Ltd., supra:

It appears to me to be unreasonable and unjustifiable in principle that a cause of action should he held to accrue before it is possible to discover any injury and, therefore, before it is possible to raise any action."

[22] And later he said:

"... The discoverability rule has been applied by this Court even to statutes of limitation in which plain construction of the language used would appear to exclude the operation of the rule. Kamloops, supra, dealt in part with s. 739 of the Municipal Act, R.S.B.C. 1960 c. 255, which required that notice should be given within two months "from and after the date on which [the] damage was sustained." However, this Court applied the discoverability rule even with respect to this section; see Kamloops, supra, at pp. 35-40."

I agree with the Court of Appeal that to hold that the discoverability principle does not apply to s. 206 HTA would unfairly preclude actions by plaintiffs unaware of the existence of their cause of action. In balancing the defendant's legitimate interest in respecting limitations periods and the interest of the plaintiffs, the fundamental unfairness of requiring a plaintiff to bring a cause of action before he could reasonably have discovered that he had a cause of action is a compelling consideration. The diligence rationale would not be undermined by the application of the discoverability principle as it still requires reasonable diligence by the plaintiff."

[23] He concluded with these words:

"... It was agreed that the respondents first learned of the herniated disc in June 1993. The respondents were reasonably diligent in this respect. It cannot be said that they ought to have discovered the serious nature of the damage earlier. As the action was commenced in July a year later within the limitation period, it cannot be statute-barred."

[24] Lastly, the Court revisited the rule in Novak v. Bond [1999] 1 S.C.R. 808 where McLachlin J. (as she then was), after referring to the above cases, said this:

"... It is apparent that these rationales generally reflect the interests of the potential defendant: Murphy v. Welsh, [1993] 2 S.C.R. 1069, at pp. 1079-80; per Major J. They rest on the view that a potential defendant should not have to defend a stale claim brought by a plaintiff who has chosen not to assert his or her rights diligently. Indeed, although there have traditionally been doctrines or statutory provisions that recognized the plaintiff's interests, such as the exceptions applicable to persons under a disability or victims of concealed frauds, limitations statutes have generally been oriented towards the interests of the potential defendant.

Over the last several decades, however, many legislatures have moved to modernize their limitations statutes, most of which were formerly based on diverse collections of centuries-old English statutes: see Law Reform Commission of British Columbia, Report on Limitations, Part 2: General (1974), at pp. 9016; Alberta Law Reform Institute, Report No. 55, Limitations (1989), at pp. 15-16 and Appendix A. As part of this process, renewed attention has been given to ensuring that the limitations statutes are framed in a manner that addresses more consistently the plaintiff's interests, not just those of the defendant. This trend has also been reflected in the more balanced way that courts have sought to interpret these statutes. Arbitrary limitation dates have been discouraged in favour of a more contextual view of the parties' actual circumstances. To take just one example, it has been well-recognized that it is unfair for the limitation period to begin running until the plaintiff could reasonably have discovered that he or she had a cause of action: see Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2; Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147; M. (K.), supra; Peixeiro, supra. Even on this new approach, however, limitation periods are not postponed on the plaintiff's whim. There is a burden on the plaintiff to act reasonably.

Contemporary limitations statues thus seek to balance conventional rationales oriented towards the protection of the defendant – certainty, evidentiary, and diligence – with the need to treat plaintiffs fairly, having regard to their specific circumstances. As Major J. put it in Murphy, supra, "[a] limitations scheme must attempt to balance the interests of both sides" (p. 1080). See also Peixeiro, supra, at para. 39, per Major J.

The result of this legislative and interpretive evolution is that most limitations statutes may now be said to possess four characteristics. They are intended to: (1) define a time at which potential defendants may be free of ancient obligations, (2) prevent the bringing of claims where the evidence may have been lost to the passage of time, (3) provide an incentive for plaintiffs to bring suits in a timely fashion, and (4) account for the plaintiff's own circumstances, as assessed through a subjective/objective lens, when assessing whether a claim should be barred by the passage of time. To the extent they are reflected in the particular words and structure of the statute in question, the best interpretation of a limitations statute seeks to give effect to each of these characteristics." (emphasis added)

[25] She also said:

"... The debate in this case is over the type of circumstances in which, within that larger period of time, the commencement of the limitation period for the initiation of an action that has a reasonable prospect of success should be postponed. The answer to this question must be resolved in a manner that maintains the traditional defendant-oriented rationales of limitations statutes, while also reflecting the modern need to balance those rationales against the plaintiff's circumstances and his or her interest in bringing an action to redress a wrong." (emphasis added)

[26] None of these cases dealt specifically with the question of the time limit for launching a statutory right of appeal, but rather to commencement of a private court action in varying circumstances. However, whilst some may say that it is a stretch and that the Court is perhaps skating on thin ice, arguably the same principles arise under the Act. There is something fundamentally unjust in not allowing a citizen who has only limited knowledge of events which might or might not render him liable to pay taxes in circumstance such as those at hand, and a limited capacity to understand the most uninformative document sent to him by Revenue Canada, from having his appeal heard upon his realization that he is being held personally liable after a delay of many years by Revenue Canada. It is not a question of holding that he is or is not liable to pay, but giving him a fundamental and fair opportunity to be heard in the presentation of his appeal. He has never been listened to with respect to his arguments as to whether he is liable for the tax that is now being assessed against him, either by the Minister or by the Court.

[27] The application of the discoverability rule under the Act would be rare indeed as generally a citizen will be aware that he or she is in a position of potential liability and ongoing discussions or correspondence will have taken place with Revenue Canada. In this case, however, as I have noted, that did not take place and the Applicant was lulled into a general sense of false security, that it was not a matter of any concern to him. The situation was unique and somewhat anomalous. I am of the view that it would be rare indeed for the discoverability rule to be applied under the Act, but this is one of the rare and unique cases where the Applicant is entitled to be heard. As soon as he became aware of the decision of Revenue Canada that he pay the amounts claimed, he took immediate and diligent action. Prior to that he had no understanding that he would be personally responsible for the amounts now being claimed.

[28] The Supreme Court appreciated and dealt with the need to bring some finality to legal situations. Nonetheless, where there was legitimate reason for the non-appreciation of their rights to institute some legal action, the Court clearly provided that time should only start running under limitation periods in the statutes in question (albeit statutes of limitation) once the incapacity to appreciate the situation had reasonably come to an end. The question before me is whether or not an analogy can be drawn to the case at hand, when considering time limits would have been within which a taxpayer might challenge an assessment.

[29] The only case which I have found relating to income tax matters was in the Federal Court of Appeal, Carew v. Canada (Minister of National Revenue), [1992] F.C.J. 1020, D.R.S. 94-13191, Appeal No. A-1240-91, where Hugessen J. said this:

"... As a matter of principle courts today are loath to let procedural technicalities stand in the way of allowing a case to be decided on its merits. Form must not prevail over substance. ..." (emphasis added)

[30] And further he said:

"... Even if we accepted the very strict view adopted by the Tax Court with regard to the application of the time limit in Rule 44, however (and we express no opinion on that matter) the highest the test could be put would not be to ask whether everything possible had been done but rather whether what was done was reasonable in the circumstances. In our view it was." (emphasis added)

[31] In the circumstances of that case, the shoe was somewhat on the other foot in that the Minister was out of time in filing a Reply to the Notice of Appeal with the Court. The learned tax judge had declined to allow him to so file it out of time and the Federal Court of Appeal, in the circumstances of that case, allowed such filing to take place. The circumstances, of course, were somewhat different, as it involved simply a one-day delay. However, the principle was, to some extent established, although much of that decision is based upon some further statutory interpretation.

[32] The Act is, of course, a taxation statute by its very nature. It is not intended to be penal in nature, although there are penalty provisions within it. The Minister has wide powers of assessment. In most cases, they involve a taxpayer already dealing with Revenue Canada by way of a tax return of some nature. Thus invariably, there is already a relationship between the taxpayer and the Minister. In the case at hand, there was no prior relationship concerning the matter dealt with by the assessment. The assessment came out of the blue to the taxpayer without any context whatsoever. It is this situation, I think, which makes the case at hand somewhat anomalous as in normal circumstances the Minister would be providing some context to the taxpayer by correspondence or previous conversations or something. In this case, there was absolutely nothing.

[33] The Act clearly attempts to provide the taxpayer with a reasonable opportunity to challenge an assessment. It provides 90 days. The form of objection is not particularly difficult to set out and must be in writing.

[34] If the objection is not filed within the 90 days, the taxpayer still has another year in which to apply to the Minister and then turn to the Court for an extension. In general, where there is some history to the matter, the Court would find these time frames to be perfectly reasonable. It seems to me that it would only be in the rarest of cases that the principles enunciated in the Supreme Court of Canada on the subject of limitation periods not starting to run until a person was fully informed, would apply to matters arising under the Act. The question is whether this is such a case.

[35] In order to answer that question, regard must be added to the facts and the Court must look closely at what happened:

(a) On the face of the transaction, there was no equity or value which passed to the Applicant and the property was passed to him as trustee only. Thus, he could not expect to have any gain and in fact had no gain and would, quite reasonably, not expect to pay tax in his own right in relation to the transaction.

(b) The Applicant is a simple, uneducated working man who would have little, if any, understanding of section 160 of the Act which is sufficiently complicated in its wording at the best of times.

(c) In the four-line assessment sent to him, there is not a word of explanation of what the assessment had to do with him.

(d) No covering letter or explanation was sent with the assessment to explain to him how it affected him in any way at all.

(e) After he received the assessment, he spoke to a Revenue Canada official on the telephone, who told him he would look into the matter and get back to him. He never did. I accept the Applicant's evidence on this point. It seemed to me that the Applicant was honest and forthright throughout. I appreciate it is hard for the Minister to rebut this, as of course, the exact time and person cannot be pinpointed; however, I am perfectly satisfied that this occurred as the Applicant stated.

(f) The Applicant spoke to the primary taxpayer, Avery Broadbent, who said that he should not worry as it did not concern the Applicant and he, Avery, would look after it.

(g) Apart from the assessment itself, no demand for payment was made by Revenue Canada within the 90 days or within the ensuing year, either of which events may well have triggered the Applicant to file his Notice of Objection or apply for an extension of time. It was as if Revenue Canada had no further interest in pursuing this matter as they took no action for those periods of time.

(h) No demand for payment was made until the Applicant triggered the situation by making a different inquiry some five years later. Again, there is no evidence before the Court why Revenue Canada made no effort whatsoever during this period of time to pursue the assessment or make any demand for payment.

(i) Nothing was ever said to the Applicant by Revenue Canada that the assessment related in any way to the property in question and that the applicant should not re-transfer the property without prior reference to Revenue Canada, so that he was on notice so to speak.

[36] In my view it is not reasonable to expect a taxpayer of limited education in these circumstances to realize that any kind of liability to pay was ever going to attach to him personally. True, the assessment stated that the money was due, but that apart, without further information, right out of the blue, the notice would not lead such person as the Applicant to believe that he had to take any specific action in that respect. He did not understand the need to do so and in fact, did not do so. In my view, in those circumstances, that was reasonable on his part, particularly when accompanied by the fact of his phone call to Revenue Canada. I do not go so far as to say that the Minister is estopped by the action of the official, whoever he or she was, but it is clear that in such a situation as presented here, when a taxpayer seeks information from Revenue Canada, is told somebody will get back to him who does not, that it is reasonable for him to be lulled into a false sense of security that they are "on hold", so to speak.

[37] To come in five years later and say pay up, plus pay all the outstanding interest and then garnishee the earnings of the Applicant so that he can barely exist whilst at the same time saying to him that the door is closed to him to have an opportunity to have his case heard, in the circumstances outlined above, borders on the iniquitous.

[38] In my view, it was not unreasonable for the Applicant to have failed to understand the implications of the assessment in such circumstances and it did not become reasonable for him to have done so until such time as he had the further conversation with Revenue Canada in late 1998 or early 1999 when he was told that he had to pay the amount of the assessment and interest. As soon as he realized that, he acted accordingly and filed his Notice of Objection in a timely fashion. That was clearly within 90 days of his being properly informed by Revenue Canada that he had a liability to pay and that they were looking to him for payment. In my judgment, in taking the lead from the reasoning of the Supreme Court of Canada in the above cases, which I find are analogous to the procedural question at hand, the 90 days did not start to run in this matter until the phone call in late 1998 or early 1999. In the result, to find the Notice of Objection was filed with the Minister within the time allowed by the Act. Accordingly, there is no need to grant the application.

[39] It also occurs to me that as the Notice of Objection has been filed within the time allowed by the Act and that the Minister having failed to reply within 90 days, the Applicant has a right to file an appeal to this Court on the merits of the assessment pursuant to paragraph 169(1)(b) of the Act.

[40] Before closing, I would be remiss if I did not comment upon the submissions of counsel for the Minister at the time of the adjourned hearing of the application. I adjourned the matter in October 1999 in order to give both counsel an opportunity to try and resolve the situation. They were apparently unable to do so for reasons which were not known to the Court. However, at the adjourned hearing, counsel for the Minister whilst taking a firm stand on the matter of the application and the assessment, indicated that there were provisions for the Minister to exercise some powers of remission in hardship cases. It was her suggestion that the Applicant should avail himself of these provisions. I appreciate that she was trying to be helpful. That, however, completely overlooks the fact that the Applicant is being denied a reasonable opportunity to present his case. His voice has not been heard to date at the Ministry. One would have expected that if the Minister was so inclined, he would have before now stepped in and exercised his discretion instead of extracting money from the Applicant by way of garnishees for something which originally was not of the making of the Applicant, from which he received no consideration or payment and which is now making it almost impossible for him to work and live. If ever there was a place for the Minister to step in, this would appear to be it and perhaps these words will encourage him to do so and bring an end to this rather sad affair.

Signed at Calgary, Alberta, this 5th day of September 2000.

"Michael H. Porter"

D.J.T.C.C.