Laskaris v. MNR, 90 DTC 1364, [1990] 1 CTC 2464 (TCC)

Sarchuk, T.CJ.:—This is an application by the respondent for an order quashing the appellant's appeal for his 1985 taxation year on the grounds that lacks jurisdiction by virtue of its order entered July 27, 1989, dismissing the appeal and therefore is functus officio.

By way of cross motion the appellant seeks an order setting aside the dismissal dated July 27, 1989 or alternatively, an order declaring that the Court retains jurisdiction with respect to the appeal herein on the ground that the original dismissal is not intended to finally determine the appeal since it was made in contemplation of a refiling of a notice of appeal.

By consent of all parties the applications were heard together.

The sequence of events giving rise to these applications follows. The appellant was reassessed for taxation year 1985 on or about September 21, 1988. A notice of objection dated September 30, 1988 was served by the appellant and received by the respondent on October 11, 1988. No confirmation having been received within the time period prescribed by section 169 of the Income Tax Act (the Act), on June 15, 1989 the appellant forwarded a notice of appeal to the Tax Court of Canada which said notice was received on June 19, 1989. On June 28, 1989 George Nikolakakos, the appellant's accountant, had a conversation with Mr. D. Gatten of the Appeals Division, Revenue Canada, Taxation regarding this notice of appeal. Gatten erroneously stated that the notice of appeal was premature and asked Nikolakakos to arrange to have it withdrawn with the understanding that it could be refiled following confirmation. On June 30, 1989, Gatten wrote the following letter to Nikolakakos:

As discussed in our telephone conversation of June 28, 1989, this letter is to confirm that as of this date the finalization of the Notice of Objection for the above taxpayer, upon which you have based your Appeal, has not yet been completed. Therefore, we have enclosed for your convenience a letter in duplicate covering the withdrawal of the Appeal on that basis.

We would appreciate the return of the original, duly signed and dated, in the envelope provided and we will forward it to the Tax Court of Canada on your behalf.

Upon receipt of the Minister’s Notification in the form of a confirmation or reassessment finalizing the objection, you have a right to appeal the decision within 90 days from the date of the Notification.

The document enclosed by Gatten was a letter dated June 30, 1989 and addressed to the Registrar of the Tax Court of Canada. It read:

Re: Notice of Appeal for George Laskaris,

Post Marked June 15, 1989 Taxation years 1985 and 1986

The Withdrawal of the above Notice of Appeal is hereby confirmed on the basis that the Notice of Objection for the above taxation years has not to date been finalized.

This letter was signed by Nikolakakos as agent for the appellant on July 7, 1989, was forwarded to Gatten, who then sent it on to the Tax Court of Canada where it was received on July 20, 1989.

On the reverse side of this letter the following notation has been added:

Withdrawal of appeal accepted—appeal dismissed.

Initialled at Ottawa, Canada, this 27 day of July 1989.

which notation is initialled by the Chief Judge of the Tax Court of Canada.

On August 1, 1989 an official of the Tax Court of Canada wrote to Nikolakakos stating:

I acknowledge receipt of the Notice of Withdrawal in the above-noted matter.

Pursuant to subsection 171(4) of the Income Tax Act, I transmit herewith by registered mail a copy of the decision of the Court dismissing the appeal, the original of which has been duly filed of record in the Tax Court of Canada on July 27,1989.

Quite by coincidence, on July 20, 1989, the Minister of National Revenue confirmed in writing that the reassessment in respect of the taxation year 1985 had been made in accordance with the provisions of the Act. Following the confirmation the appellant, on August 8, 1989, refiled his notice of appeal with respect to the reassessment of his 1985 taxation year. This notice was received by the Tax Court of Canada on August 15, 1989. In the covering letter Nikolakakos writes:

The enclosed Appeal is being filed in the place of an Appeal which we had filed before and which was supposed to have been withdrawn instead of dismissed. . . .

As required by section 170 of the Act a copy of this notice of appeal was sent to the office of the Deputy Minister of National Revenue for Taxation. The respondent's motion followed in due course.

The only provision of the Act which is relevant to the issue before me follows:

171(1) The Tax Court of Canada may dispose of an appeal by

(a) dismissing it, or

(b) allowing it and

(i) vacating the assessment,

(ii) varying the assessment, or

(iii) referring the assessment back to the Minister for reconsideration and reassessment.

The position of the respondent as expressed by counsel was that this Court was functus officio since the dismissal endorsed on the letter of withdrawal, a copy of which was forwarded by registered mail to the appellant and to the Minister, had the effect of disposing of the appeal pursuant to the provisions of section 171 of the Act. There is no dispute that the first appeal was validly before the Court. Accordingly the respondent's position is that once the matter is validly before the Court it is taken out of the hands of Revenue Canada by virtue of the provisions of paragraph 169(b) and the confirmation in such circumstances was a nullity. The Minister had within his power, provided he was not statute barred, to issue a reassessment which would have had the effect of vacating the existing reassessment and in that way to commence the process again. That he did not do but rather purported to issue a notice of confirmation. Since the appeal which the taxpayer launched was validly before the Court the provisions of subsection 171(1) applied and this Court had no authority to do anything other than to dismiss or allow the appeal. Counsel contended that it was clear on the material filed that nothing was done by the Court to allow the appeal and the notation stating that the matter was dismissed, initialled by the Chief Judge, coupled with the mailing of the order to the various parties concerned, constituted a proper dismissal of the appeal. While there may have been some misunderstanding between the parties as to what was intended, there is no error in the order of the Court dismissing the appeal.

Counsel for the respondent further submitted that the “slip”, a procedural concept analyzed in M.N.R. v. Gunnar Mining Limited, [1970] C.T.C. 152; 70 D.T.C. 6135 (Exch.) does not apply to the case at bar to allow this Court to amend or set aside its prior order. Counsel suggested that the decision of the Federal Court of Appeal in John Shairp v. The Queen, [1988] 2 C.T.C. 344; 88 D.T.C. 6484 could be looked to as an example of the circumstances in which the “slip” rule could be utilized. In that matter the Federal Court of Appeal held that where the formal order of the Court did not reflect what the Court intended, the Court had the authority to issue an amending order to properly reflect its decision. Such, however, was not the case here.

I turn first to the respondent's submission that this Court is functus officio and does not have the power to amend or set aside its prior order. The circumstances in which a Court may do so were considered in Gunnar Mining. In that case the Tax Appeal Board issued a judgment in 1963 which dismissed the appeal of the respondent mining company against its assessments for 1958, 1959 and 1960. The Board ruled against the taxpayer on its two principal contentions. However, the company submitted in its notice of objection, the notice of appeal to the Board, and its pleadings before the Board that, if the company were unsuccessful in its principal contentions, the income subject to tax during the taxation years under appeal should be reduced by the deduction of additional capital cost allowance and by deferred exploration expense deductions. Apparently the Minister agreed at the time of the hearing to this alternative submission, and agreed that, even if the company lost its appeal on the principal issues, the assessments should be referred back to him for reassessment. By a notice of motion, the company applied to the Board for an order amending its earlier judgment to refer the assessments back to the Minister with instructions to reassess in accordance with the agreed-to alternative submission. The Tax Appeal Board granted the motion and made an order to amend its original judgment as requested. The Minister appealed to the Exchequer Court from the Board's order and amended judgment.

The Minister’s appeal was allowed. The Tax Appeal Board had no power, jurisdiction or authority to make the order by which it purported to amend its original judgment. The general rule is that no Court can, without special authority, re-hear a matter or change its decision on a matter of substantive right after its judgment has been drawn up and entered. It is generally accepted that the general good of the community requires a final end to be put to litigation. However, there are exceptions to this general rule. As stated by the Supreme Court of Canada in Paper Machinery Ltd. v. J.O. Ross Engineering Corporation, [1934] S.C.R. 186; [1934] 2 D.L.R. 239, there is no power to amend a judgment that has been drawn up and entered except in two cases:

1. when there has been a slip in drawing it up (commonly known as the “slip” rule), or

2. where there has been error in expressing the manifest intention of the Court.

I am satisfied on the authority of Paper Machinery and Gunnar Mining that the “slip” rule is a device that may be utilized by the Tax Court of Canada, and proceed to the question of whether it would have been appropriate in the circumstances of this case to utilize the rule. In Gunnar Mining Limited Jackett, P. analyzed its application in a number of cases and then said at page 173 (D.T.C. 6147):

The "slip" rule was authoritatively construed in Oxley v. Link, (1914) 2 K.B. 734, per Vaughan Williams, L.J. at pp. 737, et seq., where he said:

. . . the same objection, which arises in respect of the words "clerical mistakes in judgments or orders" in my opinion arises in respect of the words "errors arising therein from any accidental slip or omission.” What is "therein"? That is in the judgment. It is exactly the same thing. “Clerical mistakes in judgments" only covers the same area, neither greater nor smaller, as you get from the words "errors arising therein from any accidental slip or omission"—that is in judgments or orders. Under those circumstances, I come to the conclusion that this slip rule does not apply in the present case. The real fact of the matter is that what is asked for here by the judgment creditors, if I may call them such, is this, not that there may be a correction in the judgment or order, but that they may substitute for the judgment or order which has been made something which is a wholly different judgment. I heard Mr. Sankey say this morning that all that was wished to be done here was to add an omitted clause; but it is not so. The proposal is to substitute one form of judgment or order for another. He has no desire, as I understand it, to make any correction at all.

Jackett, P. then went on to say at page 174 (D.T.C. 6148):

I am satisfied, from my examination of the authorities, that the “slip” rule, even if it were applicable, would not have authorized the Board to do what it did here, namely, substitute for the judgment originally delivered a completely different judgment that it had no intention of delivering when it rendered its original judgment.

Consideration must also be given to the second exception to the rule expressed by the Supreme Court of Canada in Paper Machinery, that is whether there has been error in expressing the manifest intention of the Tax Court in dismissing Laskaris' appeal.

In his analysis of this exception in Gunnar Mining President Jackett referred to Thynne v. Thynne, [1955] 3 All E.R. 129; [1955] P. 272. In that case it was held that the Court could correct a divorce decree after it became absolute to make it recite the marriage ceremony which created the state of marriage that was dissolved by the decree instead of a subsequent ceremony that was the only one of which the Court had been informed before the divorce decree was pronounced. To which President Jackett said at page 171 (D.T.C. 6146):

This would seem to go somewhat further than the bounds established in the Paper Machinery case, supra, but does not go any further than making changes necessary to make the judgment reflect what the Court really intended to do . . . these cases can have no application here where it is clear that the Board did not have in mind, when it delivered its original judgment, the quite different judgment substituted by the later order.

[Emphasis added.]

These words apply in the case at bar.

In my opinion, the taxpayer's case does not fall within either of the two "exceptions" outlined in the Paper Machinery case and analyzed so thoroughly in Gunnar Mining. Therefore this Court could not set aside or amend the original order. In these circumstances I conclude that the appellant cannot avail himself of the "slip" rule or the “manifest intention” exception to have this Court set aside or amend the order in the original appeal.

Although the foregoing conclusion is sufficient to determine the issue before me the appellant's submissions warrant the following observations. The primary position advanced is that the withdrawal of the notice of appeal was merely an interlocutory procedural step which was not intended to dispose of the appeal.

Reference to /.S. Robert Lafleur Estate v. The Queen, [1974] C.T.C. 1; 74 D.T.C. 6033 (F.C.T.D.) and John R. Wiebe v. M.N.R., [1989] 1 C.T.C. 411; 89 D.T.C. 5179 (F.C.A.) satisfies me that that the Tax Court of Canada may entertain “interlocutory proceedings” notwithstanding the absence of any specific statutory authority or Court rules.

It may well be that the appellant's representative and Gatten intended that the appeal filed by the appellant be discontinued without prejudicing his right to refile following confirmation. However on the authority of Charles R McCambridge v. The Queen, [1979] C.T.C. 473 ; 79 D.T.C. 5412 (F.C.A.) the Tax Court of Canada may not deal with an appeal by way of "discontinuance" since it is not an option allowed by the statute. In McCambridge the taxpayer filed an appeal with the Tax Review Board and later withdrew the appeal by letter. Some time later the taxpayer sought to have the appeal heard. The Board refused the taxpayer's request to reopen the appeal and the taxpayer applied to the Federal Court of Appeal to review and set aside the decision. The taxpayer's appeal was allowed. The Court decided that the jurisdiction of the Tax Review Board was to hear and dispose of appeals in the manner stipulated by the relevant statutory provisions. In this case, the only action taken by the Board in response to the letter of withdrawal from the applicant's solicitor was a letter of May 17, 1978, saying that the "matter is now concluded so far as the Board is concerned" which was signed, not by a member of the Board, but by Michael L. Artelle, Senior Court Registrar.

Heald, J. commented on page 475 (D.T.C. 5414) that:

. . . an appeal can be disposed of only by a member of the Board, and not by administrative action pursuant to some policy of the Board by an employee of the Board. The statute requires a member of the Board, by affirmative action, such as an order of judgment to dispose of the appeal.

For the purposes of the case at bar, the response of Heald, J. to the respondent's position is most interesting. The respondent submitted that the effect of the appellant's letter was to annul or discontinue the notice of appeal so that from that point in time there was no valid notice of appeal.

Heald, J. responded as follows on page 475 (D.T.C. 5414):

I do not read the statutory provisions referred to supra as permitting such a result. If Parliament had intended to provide that one means of disposing of an appeal could be by way of filing a notice of discontinuance, it would have been an easy matter to so provide in the statute. There are only two ways in which the present legislation provides for disposing of appeals to the Board. One way is in the manner discussed above, by virtue of sections 7 and 9 of the Tax Review Board Act. The other is provided in subsection 171(1)(a) of the Income Tax Act (supra) which provides for dismissal. However, in both cases, the legislation provides for action by the Board itself.

Since there is no mechanism by virtue of which this Court could accept or otherwise permit the “discontinuance” or “withdrawal” of the appeal what occurred (whether inadvertently is irrelevant) was that the letter of June 30, 1989 was treated as tantamount to a consent to dismissal and the appeal was disposed of on that basis by the Chief Judge of the Tax Court. He could not have, on the basis of the very limited information available to him, intended to do anything else.

In the alternative counsel submits that the letter of withdrawal combined with the endorsement of the Chief Judge in this particular case did not render the Tax Court of Canada functus officio in the subsequently filed appeal with respect to the same taxation year. It was argued that this order was made in contemplation of the refiling of a notice of appeal following Ministerial confirmation and was in essence the discontinuance of an action which per se does not preclude a subsequent appeal with respect to the same subject matter on the principle of res judicata. There has been, counsel argued, no discontinuance or dismissal of the appeal on the merits. In support counsel cited Femini v. McGuire et al. (1984), 42 C.P.C. 189; 64 N.S.R. (2d) 421, a decision of the Nova Scotia Supreme Court (Appeal Division).

I have concluded that is precluded by subsection 171(1) of the Act and the absence of rules of the Court to afford any relief to this taxpayer. Regardless of the merits of his argument (Fermini v. McGuire et al.) he may not argue them in this Court. There are no such devices as withdrawal or discontinuance at this Court. In the case at bar accepting for the sake of argument that the Tax Court dealt with what the appellant characterizes as “an interlocutory procedural step" it did so by disposing of the appeal in one of the ways permitted by subsection 171(1) of the Act. A final decision having been made, on the authority of Lafleur, an appeal from that decision must go to the Federal Court of Canada.

It follows, therefore, that the respondent's motion must be allowed and an order quashing the appellant's purported appeal for his 1985 taxation year is hereby granted.

Appeal quashed.