Citation: 2012TCC202
Date: 20120607
Docket: 2011-3973(IT)APP
BETWEEN:
SEDWICK HILL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Paris J.
[1]
Mr. Hill is applying
under section 167 of the Income Tax Act (“ITA”) for an order extending
the time limit for filing a notice of appeal to reassessments of his 2000,
2001, 2003, 2004, 2005 and 2006 taxation years. At the hearing, Mr. Hill
also referred to a reassessment of his 1999 taxation year, but that year was
not before the Court.
2005 and 2006 Taxation Years
[2]
Mr. Hill filed tax
returns for his 2005 and 2006 taxation years on May 15, 2009, and they
were assessed by the Minister on October 5, 2010. Mr. Hill filed a
notice of objection to those assessments on November 20, 2010, but the
Minister has not responded to the objection. While the Respondent does not
oppose Mr. Hill’s application to extend the time for filing a notice of
appeal as it relates to the 2005 and 2006 taxation years, it would not be
appropriate to grant an order, in this situation because the time limit for
filing a notice of appeal has not yet expired. Mr. Hill presently has the
right under subsection 169(1) of the ITA to appeal to this Court and no extension
of time to file an appeal in respect of the 2005 and 2006 taxation years is
required. He should now file a notice of appeal along with any required filing
fee with the Court.
2000, 2001, 2003 and 2004 Taxation Years
[3]
Mr. Hill’s 2000
and 2001 taxation years were initially assessed on January 27, 2003. These
assessments were arbitrary assessments made under subsection 152(7) of the
ITA because Mr. Hill had not filed returns for those years. He
subsequently filed returns for 2000 and 2001 on March 1, 2005, and
March 7, 2005, respectively, and those years were reassessed on
October 22, 2007.
[4]
The evidence does not show
when Mr. Hill filed his 2003 and 2004 tax returns but those years were
initially assessed by the Minister on April 14, 2005 and then reassessed on
October 27, 2007.
[5]
The October 2007
reassessments for the 2000, 2001, 2003 and 2004 taxation years increased
Mr. Hill’s income in total by approximately $1 million. The
reassessments also included penalties and interest. Mr. Hill objected to
those reassessments on November 2, 2007.
[6]
Some time around
December 29, 2008, Mr. Hill retained Mr. Gianni De Micco to
represent him on the objections. Mr. De Micco made submissions to the CRA
appeals officer, Mr. Ron Tammer, between January and March 2009.
[7]
On March 4, 2009,
Mr. De Micco sent the following email to Mr. Hill:
Hi Sedwick,
I
have great news for you. Mr. Ron Tammer finally caved in and granted the bulk
of most of the changes we requested in our representation letter of February
2009, our latest one.
We
had asked for a reduction of about $ 254,984 (which includes lawyer loan,
refinancing Maple, losses real‑estate, Carl Lewis).
He
will send to our office a revised settlement offer with these new changes. We
will send you a copy in PDF file once we receive it.
He
has asked that it be signed by Friday of this week for this new offer to be
accepted.
Mr.
Ron Tammer also said that the tax years 2005 and 2006 were arbitrarily assessed
and he is willing to accept your originals on this, if you give them to him by
April 30, 2008, he will treat it in objections and annul arbitrary amounts.
It is to your advantage to file them.
I
said that I would ask for your intentions on this. Do you want us to do your
2005 and 2006 returns? If yes, send us the documentation.
Mr. Hill responded:
Thats
great to hear, Yes I want to file the 2005 and 2006. I will put that info
together soon for you. Thanks.
Sedwick
Hill
[8]
The offer as presented
by Mr. Tammer reduced the reassessments by approximately $400,000 in
total. As a condition of the settlement, the CRA required Mr. Hill to
waive his right to object to or appeal in respect of the issues dealt with in
the settlement. That waiver read as follows:
WAIVER OF RIGHT OF OBEJCTION OR APPEAL
Subsection
165(1.2)
Limitation on objections.
Notwithstanding subsections (1) and (1.1), no objection may be made by taxpayer
to an assessment made under subsection 152(4.2), 169(3) or 220(3.1) nor, for
greater certainty, in respect of an issue for which the right of objection has
been waived in writing by the taxpayer.
Subsection
169(2.2)
Waived issues. Notwithstanding
subsection (1) and (2), for greater certainty a taxpayer may not appeal to the
Tax Court of Canada to have an assessment under this Part vacated or varied in
respect of an issue for which the right of objection or appeal has been waived
in writing by the taxpayer.
Taxation Years – 1999, 2000, 2001, 2003, and 2004
I
waive any right of objection or appeal in respect of:
• Unreported
Income
• Disallowed
Expenses
• Denied
Non‑Capital Loss
if Canada Revenue Agency reassesses as follows
|
Gross Business Income
|
|
|
|
|
|
|
|
1999
|
2000
|
2001
|
2003
|
2005
|
|
Appeals Proposed Changes
|
|
|
|
|
|
|
|
-3,700.00
|
-19,492.00
|
-59,698.63
|
-67,785.63
|
-258,841.34
|
I
have read the above subsections of the Income Tax Act and understand that I
will be precluded from filing an objection or an appeal with respect to the
above noted taxation years.
It
is agreed and understood that this agreement is binding on my heirs, executors,
trustees, administrators, and any other person who might become liable for the
taxes, interest and penalties which will ensue from this agreement.
__________________________
Signature
of taxpayer
Sedwick
Hill, SIN XXXXXX XXX
__________________________
Date
[9]
At the hearing,
Mr. Hill testified that he felt extremely pressured because of the short
time period he was given by Mr. Tammer to accept the settlement offer. He
said that he was told by Mr. Tammer that he could take it or leave it but
that if he did not accept it, he would be required to pay tax on the additional
$1 million of income that had been reassessed. Mr. Hill testified
that Mr. De Micco told him as well that if he didn’t sign the
settlement that they would lose the offer. Mr. De Micco apparently
also told Mr. Hill that they could fight over the remaining $600,000
covered by the reassessments “later”.
[10]
Mr. Hill said that
he signed the settlement offer and wrote in “signed under duress” or words to
that effect on the form and returned it to Mr. De Micco.
Mr. De Micco responded to Mr. Hill by email dated March 11,
2009, saying:
Hi
Sedwick,
We
received your fax with signed signature. Of Course, we cannot use the signature
under duress otherwise, there is no deal. We sent signature without duress.
Document was faxed to Mr. Ron Tammer today and we obtained confirmation that
fax was sent.
We
will now move on to your next issue of filing 2005 and 2006.
Also,
we will need to file 2008 to claim huge ABIL.
YSIS
needs to file corporate returns too.
Sedwick,
we would also like to bring your account up to date given that one invoice is
close to 60 days outstanding. Kindly mail to us a check of
$ 1,504.13 made payable to “Urgent Solutions Inc.”. You can date the
check for the 15th of March 2009 as discussed previously.
Best
regards.
Gianni
De Micco, B. Comm.
[11]
Mr. Hill responded
to this email
as follows:
Thanks Gianni, will do.
Sedwick
[12]
The Respondent
challenged Mr. Hill’s testimony that he had written anything on the
settlement offer to indicate that it was signed under duress. However, in light
of the email from Mr. De Micco to Mr. Hill, which appears
genuine, and which refers to Mr. Hill’s “signature under distress”, I
accept that Mr. Hill did qualify his signature of the offer as he said,
and that the additional words were somehow deleted by Mr. De Micco
before the settlement document was returned to Mr. Tammer.
[13]
Mr. Hill was
reassessed in accordance with the settlement agreement. Those reassessments
were dated April 9, 2009.
[14]
Mr. Hill’s
testimony about what took place next was vague. While he said that he has raised
the issue of the waivers been signed under duress with the CRA continuously
since the issuance of those reassessments, he was unable to provide any
particulars of his dealings with the CRA prior to June 2010 when he wrote to
the Minister. He had no copies of any correspondence with the CRA prior to the
letter to the Minister, nor did he have a record of any communication with
Mr. De Micco after April 2009.
[15]
In October 2009,
Mr. Hill did send a letter to the Registry of this Court. It was addressed
“To: CRA” and set out that he wanted “to object to the arbitrary imposed tax by
CRA auditors on [his] income.” The letter did not refer to the settlement
agreement dated March 9, 2009 or to the reassessments dated April 9,
2009, nor was there any reference to entering into a settlement under duress.
[16]
The Registry advised
Mr. Hill on November 6, 2009 that his Notice of Appeal failed to set
out the date of the reassessment, confirmation or decision to which he was
objecting. The Registry also advised Mr. Hill of the 90 day time
limit under the ITA for filing an appeal, and stated that, if he was outside
the 90 day period, he could apply for a time extension. He was provided
with the forms for preparing an application as well as appeal and was asked to
respond within 15 days. The Registry wrote him again in February 2010 and
June 2010 advising that it was still awaiting his documents, and that if
nothing was received within 15 days, no further steps would be taken by the
Registry.
[17]
It does not appear that
anything further was received by the Registry from Mr. Hill until the
present application was filed on December 16, 2011.
[18]
However, Mr. Hill
testified that in February 2010 he had a friend mail in a Notice of Appeal to
the Tax Court that he had prepared. He also provided an affidavit sworn by
Sandra Tulshi, stating that she mailed some documents to the Tax Court on
behalf of Mr. Hill. Ms. Tulshi was not called as a witness at the
hearing nor did Mr Hill have a copy of what was allegedly sent to the
Court.
[19]
Mr. Hill also said
he called the Tax Court, possibly in June 2010, and was advised that the
Registry had not received anything from him. In the present application,
Mr. Hill wrote that he did not follow up on the matter because he was
negotiating with various parts of CRA in hopes of a resolution without the
courts.
[20]
Mr. Hill wrote to
the Minister of National Revenue in June 10, 2010 raising the duress issue
and seeking the Minister’s intervention. The Minister responded on
August 16, 2010 and stated that Mr. Hill had waived his right to
appeal the reassessments and that the matter would not be revisited.
[21]
In August 2010, Mr.
Hill filed amended tax returns with CRA for his 2001, 2003 and 2004 taxation
years requesting adjustments to items unrelated to the issues dealt with in the
March 2009 settlement agreement. According to an affidavit sworn by an officer
of the CRA, the amended returns were considered to be an application under
subsection 152(4.2) of the ITA because the normal reassessment period for
those returns had expired. Subsection 152(4.2) gives the Minister the
power to reassess a taxation year for which the ordinary reassessment period
has expired, where the taxpayer requests an adjustment. Objection and appeal
rights for such reassessments are abrogated by subsections 165(1.2) and
169(2.2) of the ITA. Subsection 152(4.2) reads as follows:
(4.2) Reassessment
with taxpayer's consent -- Notwithstanding subsections (4), (4.1) and (5),
for the purpose of determining, at any time after the end of the normal
reassessment period of a taxpayer who is an individual (other than a trust) or
a testamentary trust in respect of a taxation year, the amount of any refund to
which the taxpayer is entitled at that time for the year, or a reduction of an
amount payable under this Part by the taxpayer for the year, the Minister may,
if the taxpayer makes an application for that determination on or before the
day that is ten calendar years after the end of that taxation year,
(a) reassess tax,
interest or penalties payable under this Part by the taxpayer in respect of
that year; and
(b) redetermine the amount, if any, deemed by subsection 120(2) or
(2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 127.1(1), 127.41(3) or 210.2(3) or
(4) to be paid on account of the taxpayer's tax payable under this Part for the
year or deemed by subsection 122.61(1) to be an overpayment on account of the
taxpayer's liability under this Part for the year.
[22]
The Minister allowed
certain of the adjustments requested by Mr. Hill and issued notices of
reassessment for those years pursuant to subsection 152(4.2) on
October 5, 2010.
[23]
On November 30,
2010, Mr. Hill requested further adjustments to the 2001, 2003 and 2004
taxation years relating to the items that were covered by the settlement
agreement. The Minister treated the request as a request for an administrative
review of the October 5, 2010 decision to reassess those years and refused
the adjustments on August 8, 2011.
[24]
Mr. Hill again
wrote to the CRA on September 14, 2011, apparently repeating his request
of November 30, 2010, and the CRA, by letter dated October 27, 2011
refused the request.
[25]
Mr. Hill filed the
present application with the Court on December 16, 2011.
Issue
[26]
The issue to be decided
in this application is whether the March 9, 2009 waiver signed by
Mr. Hill precludes him from appealing the issues set out in the waiver.
Mr. Hill maintains that he signed the waiver under duress and that he
should be able to challenge all of the amounts reassessed for those years.
Analysis
[27]
The law is clear that a
party may repudiate an otherwise valid contract on the basis that the party’s
consent to the contract was obtained by duress. According to G.H.L. Fridman in The
Law of Contract in Canada (5th ed.) 2006 at page 308:
The
essential idea behind the plea of duress is that improper, wrongful pressure
has been brought to bear by one person upon another so as to make the latter
unwillingly do something against his interest.
[28]
I must decide in this
case is whether the CRA appeals officer exerted improper or undue pressure on
Mr. Hill to sign the waiver. This is a question of fact.
[29]
According to the
evidence, Mr. Hill was told about the settlement offer in an email from
Mr. De Micco on Wednesday, March 4, 2009. In that email,
Mr. De Micco wrote that the CRA appeals officer “asked that [the settlement
offer] be signed by Friday of this week for this new offer to be accepted.”
Mr. Hill said that he was told that if he didn’t accept the offer, the
file would be closed with no adjustment and that he would owe tax on
$1 million of income that had been reassessed.
[30]
In my view, the actions
of the CRA appeals officer as described by Mr. Hill do not amount to improper
or illegitimate pressure. It appears to me that the terms of the settlement
offer would not have been a complete surprise to Mr. Hill. According to Mr. De Micco’s
March 4, 2009 email to Mr. Hill, the proposed settlement largely
reflected what Mr. De Micco had proposed on behalf of Mr. Hill.
The relevant portion of Mr. De Micco’s email read as follows:
I
have great news for your. Mr. Ron Tammer [the CRA auditor] finally caved
in and granted the bulk of most of the changes we requested in our
representation letter of February 2009, our latest one.
(my emphasis)
[31]
In this light, as
referred to in Mr. De Micco’s emails, the short deadline for responding
to the offer does not appear unreasonable. Furthermore, the deadline was
apparently somewhat flexible, since Mr. Hill did not sign and return the
waiver to Mr. De Micco until the Wednesday of the following week,
which was March 11, 2009. I also note that Mr. Hill did not attempt
to have the deadline extended.
[32]
In all of these
circumstances I am not persuaded that the waiver was obtained as the result of
any improper or illegitimate pressure exerted by the CRA auditor on
Mr. Hill. The imposition of a short deadline for accepting a settlement
offer and a “take it or leave it” approach does not amount to the kind of
pressure of threat that would enable Mr. Hill to treat the agreement as
void.
[33]
This result is
consistent with the jurisprudence in cases where taxpayers have alleged that
waivers they gave to CRA were given under duress.
[34]
In Smerchanski v.
Minister of National Revenue, [1977] 2 S.C.R. 23, the Supreme Court of
Canada held that a waiver agreement obtained from a taxpayer under a threat of
prosecution for tax evasion was enforceable, since the tax department had good
grounds for proceeding with a prosecution, and this was conceded by the
taxpayer. Therefore, the threat of prosecution in that case was held to have
been not improper or illegitimate.
[35]
In Anthony v. The
Queen, 2007 TCC 606, this Court held that pressure on a taxpayer
to sign a waiver by an auditor who wanted to “close the file” was not
sufficient evidence of duress.
[36]
Furthermore, the
statement by the appeals officer that Mr. Hill would have to pay all of
the amounts reassessed if he did not accept the settlement does not appear to
me to be a “threat”. It was simply a statement of legal consequences that would
have flowed from the reassessments if there was no settlement. It should also
be noted that if the offer was not accepted, Mr. Hill would have still had
his right to appeal the reassessments to the Tax Court.
[37]
Even if I had concluded
that the waiver here had been obtained by means of duress, I agree with the
Respondent’s counsel that Mr. Hill, by his conduct subsequent to the
signing of the waiver, ratified the agreement. Since a contract effected by
duress is voidable, rather than void from the start, there
will still be an enforceable agreement if the agreement is ratified after the
alleged duress has ended.
[38]
Here, Mr. Hill was
not able to show that he took any immediate steps to advise
Mr. De Micco or the CRA auditor that he was not in agreement with the
settlement after Mr. De Micco sent in the signed agreement. In fact,
Mr. Hill, in his response to Mr. De Micco’s email advising that the
agreement had been sent to the CRA “without duress” did not even mention the
issue of duress nor did he indicate any disagreement with what
Mr. De Micco had done.
[39]
In this case there was
no evidence of any direction by Mr. Hill to Mr. De Micco to
withdraw the acceptance. I also note that the notice of appeal Mr. Hill
sent to the Tax Court in October 2009 did not refer to the waiver or duress issue
at all. Therefore, Mr. Hill has not shown that he took steps as soon as
possible after the alleged duress ended to have the settlement agreement and
waiver voided.
[40]
For these reasons, I
find that it is not open to Mr. Hill to now treat the agreement and waiver
as void. Since he is precluded by subsection 169(2.2) of the ITA from
appealing the resulting reassessments of his 2000, 2001, 2003 and 2004 taxation
years, this application to extend time to appeal from those reassessments must
be dismissed.
[41]
For the reasons I have
already given, the application in respect of the 2005 and 2006 taxation years
will also be dismissed, and Mr. Hill may file a notice of appeal to this
Court from the reassessments for those years, along with the required filing
fee.
Signed at Ottawa, Canada, this 7th day of June 2012.
“B. Paris”
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