Citation: 2012 TCC 328
Date: 20120914
Dockets: 2012-293(IT)G
2012-918(IT)G
2012-1357(IT)G
2012-1438(IT)G
BETWEEN:
LAWRENCE WATTS, ELIZABETH BROCCOLI, VINTON MURRAY and ALFRED J.R. ADJETY,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Edited from the transcript of
Reasons for Judgment delivered orally from the Bench on June 14, 2012 at Toronto, Ontario)
Campbell J.
[1]
Let the record show
that I am delivering oral reasons respecting motions in four matters: Lawrence
Watts, Elizabeth Broccoli, Vinton Murray and Alfred Adjety. I permitted
Mr. Watts to speak to these Motions on behalf of all four Appellants, with
their permission, as the issues are essentially the same. I did so pursuant to
the discretion provided to me in Rule 30 but only in respect to these Motions
which are before me.
[2]
The Respondent's Motion
dated April 30, 2012 was the first to come in. It was re‑filed on May 3rd
as an Amended Notice of Motion, but as far as I could tell it was only to
change the time allotted for the motions in court. Essentially, that motion was
to strike the Notices of Appeal as no reasonable grounds were disclosed
pursuant to Rule 53 and alternatively, if the Court did not strike and
requested the Appellants to amend the Notices of Appeal, then the Respondent
requested time to file Replies to these Notices of Appeal.
[3]
On June 5, 2012 I had
motions filed by each of the Appellants. Essentially, each was an application
pursuant to Rule 58(1)(a) for a determination by the Court of the Appellant's
question (and I have summarized it, which I did this morning as follows) which
is whether a delay on the part of the Minister of National Revenue (the
“Minister”) in issuing and sending a Notice of Confirmation is sufficient
grounds to vacate an assessment. The Appellants are referring to paragraph
169(1)(b) which states:
169. (1) Where a taxpayer has served notice of objection to an
assessment under section 165, the taxpayer may appeal to the Tax Court of
Canada to have the assessment vacated or varied after either
…
(b) 90 days have elapsed after service of the notice of objection
and the Minister has not notified the taxpayer that the Minister has vacated or
confirmed the assessment or reassessed. (as read)
[4]
In the present Motions,
the Appellants allege that more than 90 days have elapsed with no Notices of Confirmation
from the Minister being issued and they are therefore asking the Court to
vacate the reassessments in respect to each Appellant.
[5]
On the day prior to
this hearing, I requested that the Respondent provide a written response to the
Appellants’ motions. Although I did not specifically request that the Crown
address the pertinent issue of whether Notices of Confirmation had been issued
and sent by the Minister, that is the one piece of information that I was
looking for. I did not seek additional submissions from the Appellants in this
regard as they were alleging in their Motions that no Notices of Confirmation
had in fact been issued by the Minister.
[6]
During the hearing this
morning, the Respondent submitted Notices of Confirmation for three of the
files, Ms. Broccoli's, Mr. Murray's and Mr. Adjety's. None was provided
respecting Lawrence Watts, and he advises that it is in excess of two years
since he filed his Notice of Objection.
[7]
In the Broccoli matter,
the Notice of Appeal was filed February 22, 2012 with the Notice of Confirmation
being issued on November 30, 2011. In the Adjety motion, the Notice of Appeal
references a date of April 13, 2012 with the Notice of Confirmation being
issued February 17, 2012. Finally, in the Murray motion, the Notice of Appeal
was filed April 3, 2012 with the Notice of Confirmation being issued on
February 17, 2012.
[8]
Consequently, all Notices
of Appeal in these three matters were filed subsequent to the Minister's Notices
of Confirmation having been issued and sent, even though, as Mr. Watts pointed
out, the Notices of Confirmation were beyond the 90‑day period.
[9]
As Respondent Counsel
pointed out, section 58(1)(a) engages a two‑step process. Step (1) has
two elements: An applicant must pose an appropriate question of law or fact or
mixed law and fact to the Court. Secondly, the answer to the question must be
capable of disposing of all or part of the proceeding, must shorten it or
reduce the cost substantially. Step (2): If the Court determines that there is
a Rule 58 issue, then a hearing date can be fixed to hear and dispose of that issue.
[10]
The Appellants' general
question, which is whether the Minister's delay in issuing Notices of Confirmation
pursuant to section 169(1)(b), or the non-issuance of the Notice in the Watts
matter, can be sufficient grounds for this Court to vacate the assessments, is
a legitimate and appropriate Rule 58 question that could be posed to this Court.
The question is one of law.
[11]
The issuance or non-issuance
of a Notice of Confirmation, in considering this aspect in the two‑step
process, would be irrelevant except that it will impact the ultimate
disposition of each of the Appellant's applications. It will not be relevant to
the actual answer to the legal question posed and will not invalidate the
question that the Appellant poses initially to the Court.
[12]
However, we now have a
situation where Notices of Confirmation have been issued and sent in three
motions, and the Appellants were not prejudiced in filing their Notices of Appeal,
which were filed subsequent to those confirmations. Although the confirmations
were issued beyond the 90‑day period provided in the Act, that
will have no impact here in light of how the jurisprudence and my own common
sense dictate the path that I am now required to take.
[13]
Apparently no Notice of
Confirmation was issued on the Watts motion, but in accordance with my reasons
that follow, the end result will be the same for all Appellants and their Motions.
If the Appellants were represented by counsel, my reasons might follow a
different path, but I would be arriving again at essentially the same
destination.
[14]
A Rule 58 question,
whether legitimate or not, is simply premature at this stage of an appeal. I
think in most cases, Rule 58 is used either after the pleadings are complete, that
is the Notice of Appeal and Reply to the Notice of Appeal have been filed or at
some point along the numerous steps a general procedure meanders through prior
to a hearing date. I have only Notices of Appeal filed, no Replies, and in fact
Respondent Counsel is alleging that the Notices of Appeal that are filed do not
conform to the requirements of Rule 48 and Form 21 A.
[15]
Although this is not the
appropriate time for a Rule 58 question, I am going to address it in light of
the Appellants being self‑represented. The question posed by each Appellant
is an appropriate Rule 58 question for a court to consider. However, even
though it is premature, my answer to that question must be in the negative. Consequently,
I would refuse to vacate the reassessments as Mr. Watts would have me do.
[16]
There is abundant case
law from the Federal Court of Appeal that vacating an assessment in the Rule 58
application is an inappropriate remedy for the Minister's undue delay. I am
bound by the following case law:
Bolton v Her Majesty the Queen, 96
D.T.C. 6413 at paragraph 3:
In the case of The Queen v. Ginsberg
(Court file A-242-94) decided last week, we held that Parliament did not intend
that the Minister's failure to examine a return and assess tax 'with all due
dispatch', as required by subsection 152(1):
152. (1) The
Minister shall, with all due dispatch, examine a taxpayer's return of income
for a taxation year, assess the tax for the year, the interest and penalties,
if any, payable and determine
(a) the amount of refund, if any, to which the taxpayer may be
entitled by virtue of section 129, 131, 132 or 133 for the year, or
(b) the amount of tax, if any, deemed by subsection 119(2), 120(2),
120.1(4), 122.2(1), 127.1(1), 127.2(2), 144(9), 210.2(3) or (4) to have been
paid on account of his tax under this Part for the year. ] , did not deprive
him of the statutory power to issue an assessment. The reasoning in that case
applies with even greater force here: Parliament clearly did not intend that
the Minister's failure to reconsider an assessment with all due dispatch should
have the effect of vacating such assessment. If the Minister does not act, the
taxpayer's recourse is to appeal pursuant to s. 169:
169. Appeal -- Where a
taxpayer has served notice of objection to an assessment under section 165, he
may appeal to the Tax Court of Canada to have the assessment vacated or varied
after either
(a) the Minister
has confirmed the assessment or reassessed, or
(b) 90 days have elapsed after service of the notice of objection
and the Minister has not notified the taxpayer that he has vacated or confirmed
the assessment or reassessed;
but no appeal under
this section may be instituted after the expiration of 90 days from the day
notice has been mailed to the taxpayer under section 165 that the Minister has
confirmed the assessment or reassessed.
Ginsberg v Her Majesty the Queen, [1996] 3 F.C. 334 at paragraphs 15, 17,
18, 19, 20 and 22:
15 In view of the
finding of fact of the Tax Court Judge, it is not necessary to decide if the
Minister could still assess "at any time" under subsection 152(4)
except to say that if the respondent is right in his interpretation of
subsections 152(1) and (4), the astonishing result would be that the Minister
is not barred by the three-year provision of paragraph 152(4)(b) when the
taxpayer has filed a return. Bearing in mind, however, as found by the Tax
Court Judge, that the Minister was late in assessing, the only question I must
address is the nature of the sanction once there is a failure to exercise a
duty under subsection 152(1).
17 I find no escape
with the clear terms of subsection 152(3), particularly the words
"Liability for the tax under this Part is not affected by . . . the fact
that no assessment has been made". (Le fait . . . qu'aucune cotisation n'a
été faite n'a pas d'effet sur les responsabilités du contribuable à l'égard de
l'impôt prévu par la présente Partie.)
18 Subsection
152(8) in turn says "An assessment shall . . . be deemed to be valid and
binding notwithstanding any . . . defect or omission . . . in any proceeding
under this Act relating thereto." (une cotisation est réputée être valide
et exécutoire nonobstant tou[t] . . . vice de forme ou omission . . . dans
toute procédure s'y rattachant en vertu de la présente loi).
19 Section 166, in support, states that
"An assessment shall not be vacated . . . by reason only of any . . .
omission . . . on the part of any person in the observation of any directory
provision of this Act". (Une cotisation ne doit pas être annulée . . . uniquement
par suite . . . d'omission . . . de la part de qui que ce soit dans
l'observation d'une disposition simplement directrice de la présente loi).
20 This latter provision obliges me to
consider whether subsection 152(1) is directory or mandatory.
22 The distinction
between a "mandatory" or a "directory" provision is,
therefore, not very helpful. If I were to apply the rule of "inconvenient"
effects, I would say that there are, no doubt, competing interests between the
need to levy revenues for government and public expenditures, the need to have
the tax burden shared as equally as possible among the taxpayers, and the need
to protect the individual by bringing certainty to his financial affairs at the
earliest reasonable possible time. These competing interests have been settled
in favour of the government by Parliament with the adoption of subsections
152(3), (8) and section 166.
James v. Minister of National Revenue, 2001 D.T.C. 5075 at paragraphs 12,
15, 17 through 21:
12 The Income Tax Act does not stipulate
any consequence for a failure on the part of the Minister to deal with a notice
of objection with all due dispatch. On that question, the leading authority in
this Court is Bolton v. The Queen, (1996), 200 N.R. 303, 96 D.T.C. 6413, [1996] 3 C.T.C. 3 (F.C.A.). In that
case Mr. Justice Hugessen, speaking for the Court, said this (at page 304,
N.R.):
Parliament clearly did
not intend that the Minister's failure to reconsider an assessment with all due
dispatch should have the effect of vacating such assessment. If the Minister
does not act, the taxpayer's recourse is to appeal pursuant to section 169.
15
If Bolton stands, then regardless
of the reason for the ten year delay in dealing with the objections, Mr. James
cannot obtain the remedy he seeks.
17 In each of those cases it was suggested
that the remedy for the Minister's failure to deal with a notice of objection
with all due dispatch would be to vacate the reassessment. Bolton was decided
after those cases, and deals squarely with the issue of remedy. We see nothing
in any of those cases that provides a reason for departing from the principle
in Bolton.
18 J. Stollar Construction is the only case
in which reassessments were vacated. That is a decision of the Tax Court, and
it must be taken as overruled by this Court in Bolton.
19 The comments in Schultz and Appleby on
remedy were obiter dicta. It was found in both cases that the Minister had not
failed to act with due dispatch, and so the question of the appropriate remedy
did not arise. We note as well that the Court in Schultz recognized that a
taxpayer who has filed a notice of objection may resort to paragraph 169(1)(b) of
the Income Tax Act and appeal directly to the Tax Court.
20 It was argued on behalf of Mr. James
that the Bolton interpretation of paragraph 165(3)(b) imposes a statutory duty
on the Minister but gives no effective weapon to taxpayers by which they can compel
the Minister to comply. It is true that under Bolton, a taxpayer cannot claim
the right to have a reassessment vacated because it is under objection for an
unduly long period of time. However, it does not follow that the taxpayer has
no effective remedy. The taxpayer may appeal to the Tax Court under paragraph
169(1)(b), or commence proceedings in the Federal Court to compel the Minister
to consider the objection and deal with it. There is jurisprudence relating to
such applications in the context of other income tax provisions imposing an
obligation on the Minister to act with all due dispatch: Burnet v. Canada, 98 D.T.C. 6205, [1999] 3
C.T.C. 60, [1998] F.C.J. No. 364
(QL) (F.C.A.); Merlis Investments Ltd. v. Canada, [2000] F.C.J. No. 1746
(QL)(F.C.T.D.).
21 We conclude that there is no basis for
departing from the decision of this Court in Bolton, and that the Trial Judge
was correct to dismiss the motion to set aside or vary the notices of
reassessments.
Vert-Dure Plus (1991) Inc. v Her Majesty
the Queen, 2007 TCC 379 at
paragraph 25:
[25] Even if Mr. Desrosiers claims the
opposite, Vert-Dure's argument is similar to the one he raised when he
presented the pre-trial motion to have his own assessment vacated before Angers
J. However, this argument was dismissed by the judge in an order rendered
December 23, 2003. In Desrosiers v. The Queen, 2003 TCC 859 (CanLII), 2003 TCC 859, Angers J.
stated at paragraphs 14 and 15:
14
Since Stollar, there have been other decisions dealing with the same
issue, including Ginsberg v. Canada, 1996 CanLII 4062 (FCA), [1996] 3 F.C. 334, in
which the Federal Court of Appeal found that a breach of the duty to assess tax
with "all due dispatch" does not mean that the assessment will be
vacated. The same reasoning applies in this case, even though the provisions of
the Act are at issue here. In this case, the Minister had already made an assessment;
it is only the Minister's consideration of the objection that must be made with
all due dispatch.
15
Another distinction in this case is that the Appellant has the right to appeal
to this Court if 180 days have elapsed after the filing of the Notice of
Objection and the Minister has not notified the person that the Minister has
vacated or confirmed the assessment or has reassessed. Thus, the Appellant is
permitted to advance his case and be heard on the merits without waiting until
the Minister has considered the Appellant's Notice of Objection. Finally,
application of the provisions set out in section 299 of the Act will preclude
the assessment under appeal in this case from being vacated.
[17]
These cases make it
clear that a taxpayer in such circumstances cannot claim a right to have an
assessment vacated. The best remedy that the Appellants can obtain under a Rule
58 question respecting 169(1) is allowing them to proceed to a hearing without
the Notices of Confirmation having been issued, in the case of the Watts matter, or where Notices of Confirmation were in fact issued in the other remaining
matters but beyond the 90‑day period.
[18]
In summary, what all of
this boils down to is the following: I am going to allow the four Appellants to
proceed to hearing under the General Procedure Rules, whether it is pursuant to
my analysis of the Rule 58 question or pursuant to the alternative grounds
sought by the Respondent in that motion. The end result will be the same.
[19]
Since I agree with the Respondent's
submissions respecting the inadequacies of the Notices of Appeal, all of them
will require amendments. They address only the issues posed before me today,
and I have answered those. Beyond that, they do not contain the material facts
which the Appellants rely upon or a statement of the issues. They are not
framed within the pertinent rules, and particularly Form 21A, and consequently,
the Respondent will be unable to respond to these appeals unless they are
amended to conform with those provisions.
[20]
In fairness to the Appellants,
I am denying the Respondent's Motion to strike the present Notices of Appeal,
but pursuant to the Respondent's alternative ground, I am directing that the
four Appellants file and serve Amended Notices of Appeal on or before July 27,
2012, setting forth a statement of the issues and the material facts upon which
they are relying in their appeals of the reassessments.
[21]
The Respondent shall
file and serve Replies to the Notices of Appeal on or before September 7, 2012.
In fairness to both parties, I have given you each approximately six weeks to
do the filing.
[22]
I consider success
divided here so I am not making any award respecting costs. Finally, I believe
these four matters and the Sharma matter, which I disposed of separately, are
part of a larger group of appeals which I am case‑managing, and if so,
they shall form part of any subsequent management procedures applying to the
general group.
[23]
That concludes my
reasons in respect to the motions which I heard earlier today.
Signed
at Toronto, Ontario this 14th day of September 2012.
“Diane Campbell”
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