Dockets: 2000-183-IT-APP; 2000-185-IT-APP
JOHN HAIGHT, SOPHIE HAIGHT
HER MAJESTY THE QUEEN,
Reasons for Order
 The application in respect of each Applicant is for an Order, pursuant to section 166.2 of the Income Tax Act ("Act"), extending the time for serving a Notice of Objection in respect of the 1996 and 1997 taxation years.
 The dates of Notices of Assessment and of the date by which a Notice of Objection must be filed are as follows:
1996 taxation year:
date of assessment May 29, 1997
expiration of objection period August 27, 1997
1997 taxation year:
date of assessment June 11, 1998
expiration of objection period September 9, 1998
1996 taxation year:
date of assessment June 5, 1997
expiration of objection period September 3, 1997
1997 taxation year:
date of assessment August 17, 1998
expiration of objection period November 15, 1998
 John Haight testified that he and his wife bought a bowling alley in 1967, operated it until June 11, 1993 and then sold it. He stated that when he looked at the 1996 and 1997 returns prepared by a national accounting firm, he determined that the value used for the computation of capital gain was patently wrong.
 He sent a letter dated September 24, 1997 ("Letter") to the Sudbury Taxation Centre requesting an adjustment "for the tax assessments in 1990, 1993, 1994, 1995 and 1996". That letter outlined a number of facts supporting his claim for a valuation change. It is this letter that the Applicants submit constitutes a valid application for an extension of time for the 1996 taxation year. The Applicants also seek to have an application filed by their counsel on August 18, 1999 constitute a valid application for extension of time in respect of the 1997 taxation year.
 In this regard the Applicant, John Haight, gave evidence of his physical condition. Further, a letter from Dr. Peter G. Turner, Psychiatrist, dated January 17, 2000 stated that he had been attending the Applicant, John Haight, since March 1, 1994, that he then suffered from moderately severe symptoms of depression and obsessive-compulsive symptoms and was in the midst of a family crisis with one of his daughters. That crisis related to her use of drugs and passing fraudulent cheques. The letter reads, in part:
At the time of initial presentation Mr. Haight suffered from symptoms of depression of mood, feelings of sadness, becoming increasingly preoccupied, having feelings of guilt, having difficulties in making decisions as to what to do, having disruption of his sleep pattern, having lost his usual energy, having some difficulty in memory and concentration and increased feelings of tension. He had been trying hard to fight the symptoms of depression by using various cognitive techniques, such as willpower and prayer. These have been unsuccessful in giving him any relief.
 He also wrote that additional elements contributing to Mr. Haight's psychiatric condition included a head injury and fractured skull suffered at the age of 11, a history of obsessive-compulsive tendencies and a previous history of depressive mood swings and occasional excessive use of alcohol. Finally, his letter reads:
From a psychiatric point of view, there is convincing evidence that Mr. Haight suffered significant psychiatric symptomatologies. This resulted in impairment in his thinking, his decision-making and in dealing with his personal and business affairs. His symptoms were most disabling in the period from early 1994, just prior from when he came to see me, to the end of 1996. Since that time he continues to show slow and steady improvement in residual psychiatric symptoms.
 In addition to the Letter, documents submitted to the Court included:
1. Letter from Revenue Canada signed by Ron Woelek, Director of St. Catharine's Tax Services Office to John Haight, dated November 10, 1998 with respect to the fair market value and stating that in his opinion the Department had exercised its discretion in a fair and reasonable manner.
2. Copy of handwritten letter dated March 23, 1998 signed by both Applicants reading in part:
I am appealing the market value of $90,000 established by the assessor Mark Danko of Kernahan & Graves because he was unaware of the offer ...
et cetera. This letter has a handwritten note at the bottom of page 1 to the effect that it was sent to the Director.
3. Copy of a letter of June 16, 1998 from St. Catharine's Tax Service Office to Mrs. Haight respecting 1990 and 1993 through 1996 Income Tax Returns, stating that if she did not agree with the departmental decision she could
... request another review by writing to this office's Director. We have, therefore, forwarded your letter of appeal to the Director's office for their action.
4. Letter from Ron Woelek, Director of St. Catharine's Tax Service Office to John Haight dated May 7, 1999 respecting the valuation matter originally raised by him. That letter reads in part:
Any further review of your file would require a review of the appraisal report by Kernahan and Graves in its entirety. As you noted you no longer have a copy, discussion with Mark Danko of the office of Kernahan and Graves, indicated he would provide you a copy of the report to then supply to us, as he could not provide us a copy directly.
If we do not receive this information from you by May 31, 1999 we will consider this case closed.
5. A letter from Chief of Appeals, St. Catharine's Tax Service Office, dated November 10, 1999, to applicants' counsel, Robert Jason, acknowledging receipt of his applications for extension of time to file an objection. It stated that an extension could not be granted for 1996 because the application was not made within one year within the expiration of time otherwise permitted for filing an objection. With respect to 1997 it said:
We require further information in order to determine whether or not the extension will be granted. Specifically, it is necessary that the taxpayers demonstrate that;
a) within the period allowed for serving an objection, they were unable to act or to instruct another to act on their behalf or that they had a bona fide intention to object to the assessment;
b) given the reasons in the application and the circumstances of the case, it would be just and equitable to grant a time extension and
c) the application was made as soon as circumstances permitted.
 The letter then stated that if no further information was received within 30 days Revenue Canada would consider the matter closed and would close its files.
APPLICANTS' WRITTEN SUBMISSION:
 The Applicants' written submission read, in part, as follows:
1. Mr. John Haight suffered from a severe depression. Details regarding Mr. Haight's symptoms are fully explained by his psychiatrist, Dr. Turner, in a letter dated January 17, 2000 (Tab 10 of the Applicants' Documents submitted to the Court at the hearing of the Application on March 20, 2000). Mr. Haight's severe medical conditions precluded him from making day-to-day decisions and business decisions. In addition to Mr. Haight's medical problems, the Applicants also experienced family problems. Their youngest daughter, Emilia, was involved in drugs, thus causing enormous stress to the Applicants.
2. Consequently, due to all these problems, the Applicants were unable to deal adequately with their own tax affairs. Errors were made in the preparation of the Applicants' 1993 income tax returns which are largely related to the V-Day value of the bowling alley.
3. Mr. John Haight was in a better physical condition in 1996 and 1997 and was able to deal with his tax affairs. The Applicants filed income tax returns in 1996 and 1997 claiming a capital gains reserve in respect of the capital gain realized in 1993.
4. Shortly after filing the 1996 income tax returns, the Applicants realized that errors were made in the 1993 income tax returns and the Applicants contacted the Minister of National Revenue (hereinafter referred to as the "Minister") seeking adjustments for those errors.
5. The Minister assessed the Applicants for the 1996 and 1997 taxation years by Notices of Assessment dated and mailed to Mrs. Sophie Haight on June 5, 1997 and August 17, 1998 respectively and to Mr. John Haight on May 29, 1997 and June 11, 1998 respectively.
6. The Applicants wrote to the Minister at the Sudbury District Office requesting an adjustment for the prior taxation years to correct the reported capital gain.
7. As shown in the Applicants' documents, the Applicants wrote to the Minister on many occasions requesting adjustments to the Applicants' income tax returns for prior taxation years.
8. The Applicants sought legal advice. The solicitor for the Applicants wrote to the Minister requesting that the Minister accept the 1996 and 1997 tax returns as Notices of Objection.
9. The Minister replied to the Applicants' solicitor's letter and denied that any notice of objection was filed for the 1996 and 1997 taxation years.
10. The issue before the Court is whether the letter of September 24, 1997, sent by the Applicants to the Minister is a valid application for an extension of time to object to the assessments for the 1996 and 1997 taxation years pursuant to subsection 166.1(2) of the Act.
 Section 166.1(1) of the Income Tax Act (hereinafter, the "Act") reads in part as follows:
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) 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.
 Applicants' counsel said that if the Minister refuses to extend the time for serving the notice of objection or for making the request to file a Notice of Objection, a taxpayer may apply to this Honourable Court for an extension of time to file a Notice of Objection under section 166.2 of the Act which provides:
166.2(1) A taxpayer who has 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,
(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.
(2) An application under subsection (1) shall be made by filing in the Registry of the Tax Court of Canada, or by sending by registered mail addressed to an office of the Registry, 3 copies of the documents referred to in subsection 166.1(3) and 3 copies of the notification, if any, referred to in subsection 166.1(5).
 Applicant's counsel then said that the Respondent opposes the granting of extension of time for the filing of a Notice of Objection for two reasons.
First, counsel for the Respondent argues that if the letter of September 24, 1997 from the Applicants to the Sudbury Taxation Centre was to be considered a Notice of Objection, it is late as it was not filed within 90 days of the Notice of Reassessment. Therefore, the Applicants must submit to the Minister an Application for extension of time. Second, the letters sent by the Applicants to the Minister cannot be considered as application for extension of time because the Applicants did not "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".
 Counsel continued in his written submissions as follows:
In respect of the Respondent's submission that no application was made by the Applicants, the Applicants submit that the letter of September 24, 1997 written by the Applicants to the Minister at the Sudbury Taxation Centre is indeed an application under subsection 166.1(2) of the Act ...
Counsel for Respondent contends that the letter of September 24, 1997 cannot be considered as an application for an extension of time because the letter does not set out the reasons why the notice of objection was not made within 90 days of the assessment.
In reply to this argument, the Applicants submit that the word "shall" contained in subsection 166.1(2) of the Act "ought to be read as "directory" instead of "mandatory". In The Queen v. Ginsberg, 96 DTC 6372, the Federal Court of Appeal considered the meaning of the word "shall" in light of subsection 152(1) of the Act. The Federal Court of Appeal stated at page 6374:
The word "shall" found in subsection 152(1), which is presumptively imperative, ought to be read as "directory" instead of "mandatory". But more importantly, recent case law indicates that the labels "mandatory" and "directory" offer no magical assistance in defining the nature of a statutory direction. The inquiry should be result oriented. If reading a statutory direction as imperative leads to serious inconveniences, then, it should be avoided. In the particular instance, subsection 152(1) should be read as directory in result.
 In R. v. Smith (1991), 4 Admin. L.R.(2d) 97 at 112, Cullen, J. of the Federal Court (Trial Division) made the following observations:
David P. Jones and Anne S. de Villars, in their text Principles of Administration Law (Toronto: Carswell, 1985) observe at page 111 that in determining whether a statutory requirement is mandatory or directory, the court should consider:
The policy of the Act, all its provisions, the reason for including the specific requirement in question, whether any statutory consequence is provided for failure to comply, and what the practical effect of non-compliance is on the complainant or any other person.
 Applicants' counsel submitted that the proper approach to the interpretation of the word "shall" is set out in Driedger, Construction of Statutes, 2nd edition, at page 14:
It is submitted that the initial fundamental question is: who is prejudiced by compliance or non-compliance? The answer is easy where the statute itself prescribes a penalty, as in penal statutes; there, the violator must pay, and shall is therefore "mandatory". The difficult cases are those where the statute does not indicate what the consequences of non-compliance are to be. Hence, the consequences of compliance and non-compliance must be considered in the light of the purpose and text of the statute and the facts of the particular case. The courts have shown a tendency not to penalize an innocent person who was not a party to the violation.
 Counsel also referred to the Interpretation Act, R.S.C. 1985, c. I-21, which provides that the word "shall" is to be construed as imperative. He then submitted that it is also directory and in support of that statement referred to R v. Buchanan, (1878), 1 C.C.C. 442, quoting Bain, J.A.:
The Interpretation Act says that "shall" shall be construed as imperative. It seems, however, that in saying this, the meaning of The Interpretation Act is not that "shall" shall always be construed as imperative in the sense that the necessary result of disobedience is the nullifaction of the proceedings. In speaking of the same provision in the Ontario Statues, Burton, J.A. said, "The Interpretation Act leaves the law pretty much as it had been previously held by judicial decision to be"; Trenton v. Dyer, 21 A.R. 379, and the decision of this case in the Supreme Court (24 S.C.R. 474) bears out this view. Speaking of the directions of a statute that certain things shall be done, Strong, C.J., said "Prima facie the presumption, as well under The Interpretation Act as without it, is that they are imperative. It is for the appellants to demonstrate that they are directory merely."
 Counsel suggested that the word "shall" should be construed in light of the purpose of the text of the statute and the facts of the case. He submitted further that section 166.1 of the Act was amended under what the Minister refers to as the "Fairness Package" which was implemented in 1991. He continued with the words of the Minister, Otto Jelinek:
The Fairness Package is an important part of my continuing commitment to make the tax system simpler, easier and fairer. The measures I am announcing today will allow for common sense in dealing with taxpayers who, because of personal misfortune or circumstances beyond their control, are unable to meet our deadlines or comply with our rules.
In addition, the Fairness Package will allow refunds for taxation years starting with 1985 and streamline the process by which individuals can make a formal objection to an assessment issued by the Department.
The amendments will eliminate the formalities associated with the filing of an objection. Currently, taxpayers are required to file a notice of objection using a prescribed form, in duplicate, and by registered mail with the Deputy Minister of Revenue Canada, Taxation. This must be done within 90 days from the date a notice of assessment was sent to the taxpayer.
The amendments will allow all taxpayers to initiate the appeal process simply by setting out the facts and reasons for the objection in a letter to the Chief of Appeals in their local district office or taxation centre. Taxpayers will continue to have the option of using a form provided by the Department.
 He stated that in light of the foregoing, the purpose of section 166.1 is to make "the tax system simpler, easier, and fairer" and that, therefore, the applicants should not be penalized because of family problems and physical conditions that are beyond their control.
RESPONDENT'S WRITTEN SUBMISSION:
 Respondent's counsel submitted that the Letter cannot be considered as an application for an extension of time because it does not set out the reasons why the notice of objection was not made within 90 days of the assessment. Counsel advanced the same argument with respect to the August 16, 1999 application regarding the 1997 assessments.
 Counsel stated that, with respect to the 1996 taxation year, the application was not made within one year after the expiration of the time otherwise allowed by the Act for serving a Notice of Objection as required by paragraph 166.1(7)(a) of the Act. He submitted that nowhere in the letter did Mr. Haight even request an extension of time. He referred to subsection 166.1(2) which states:
... an Application shall set out the reasons why the Notice of Objection or the request was not served or made ...
 He said that no reasons were provided by the applicant in his letter.
 Counsel then said that section 11 of the Interpretation Act reads:
The expression "shall" is to be construed as imperative and the expression "may" as permissive.
 He referred to Reference re Language Rights Under the Manitoba Act:
It is therefore incumbent upon this Court to conclude that Parliament, when it used the word "shall" ... intended that those sections be construed as mandatory or imperative, in the sense that they must be obeyed, unless such an interpretation of the word "shall" would be utterly inconsistent with the context in which it has been used and would render the sections irrational or meaningless.
 He then submitted that interpreting subsection 166.1(2) as anything but imperative would render subsection 166.1 irrational in its entirety. He said that the Minister cannot grant the application without reasons as to why the objection was not served on time. He then quoted section 166.1(7) which reads:
(7) 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.
 He stated, in the closing portion of his written submission that the Letter does not even request an extension of time let alone provide the Minister with reasons why one ought to be granted.
ANALYSIS AND CONCLUSION:
 The Letter which was submitted to Revenue Canada within the time limit required for an application for extension of time, clearly referred to the 1996 assessment. While not stating that it was an application, the language used in it is easy of the interpretation that the Applicants wanted their affairs reviewed for that year. Also, the letter of March 23, 1998 sent to the Director and signed by both Appicants, including the words:
I am appealing the market value of ...
was sent within the time limit required for an application for extension. The Applicants were encouraged to assume that the matter was indeed open, the letter of June 16, 1988 to Mrs. Haight from Revenue Canada stating that she could "request another interview". That letter did not include any advice to the Applicants that they could file an application for extension of time to file a Notice of Objection.
 The May 7, 1999 letter to John Haight from the Director of St Catharine's Tax Service Office by referring to any "further review of your file" would also have led the Applicants to believe that the matter was still open.
 I accept the submissions of the Applicants' counsel that the word "shall" in the facts of this case should be interpreted as directory, not as mandatory. Section 166.1 obviously is designed to afford relief to a taxpayer who disagrees with an assessment. Although it sets out specific requirements it should not, in these circumstances, be interpreted to foreclose the possibility of an earnest taxpayer, unsophisticated in tax matters, being able to proceed with an appeal. That is simply unjust. Both the letter dated September 24, 1997 and the letter of March 23, 1998 were sent to Revenue Canada within one year after the expiry date for filing a Notice of Objection for the 1996 taxation year. Either, or both, should be regarded as an application to extend the time for serving a Notice of Objection.
 As it appears that the subject matter sought to be altered for the 1997 year, namely the reserve for capital gain, is the same as for 1996, and as an application for 1997 was, albeit without containing all requirements, made on a timely basis, I conclude that the Applicants are entitled to an Order for extension of time to file a Notice of Objection for both taxation years.
 The applicants are entitled to costs in this application.
Signed at Ottawa, Canada this 25th day of September 2000.