Citation: 2009TCC444
Date: 20090911
Docket: 2009-2442(IT)APP
BETWEEN:
KAREN CHU,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent;
AND BETWEEN:
Docket: 2009-2076(GST)APP
KAREN CHU,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent;
AND BETWEEN:
Docket: 2009-2080(IT)APP
TAI SHEN CHU,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
(Edited from the transcript of Reasons delivered
orally from the Bench
on August 28, 2009 at Toronto, Ontario)
Hershfield J.
[1] The three
applications before me are made for the extension of time to file notices of
objection to certain assessments issued by the Canada Revenue Agency (“CRA”). Two
such assessments concern the applicant, Karen Chu, one issued pursuant to the
provisions of the Income Tax Act, the other pursuant to those of the Excise
Tax Act, GST portions. A third assessment concerns the applicant, Tai Shen
Chu. It was issued pursuant to the provisions of the Income Tax Act.
[2] The requirements
that must be met for this Court to grant the extensions sought are set out in
subsection 166.2(5) of the Income Tax Act and subsection 304(5) of the Excise
Tax Act.
[3] The requirements
of each such provision are the same. Amended Notices of Reply to all the
applications plead that the applications were not made within the required time
limit prescribed in paragraph (a) of each of those subsections.
[4] The time by
which applications must be made in order for this Court to deal with them must
be within one year plus 90 days from the time notices of assessment were mailed
by the CRA. The express language of the subject provisions is as follows. With
respect to the Income Tax Act, paragraph 166.2(5)(a), it reads:
(5) 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 …
[5] The time
otherwise limited is set out in paragraph 165(1)(a) of the Income Tax
Act:
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) …
and
the applicable date in this case is:
(ii) the day that is 90 days after the day of mailing of
the notice of assessment; …
[6] Under the
provisions of the Excise Tax Act, the time limitation is virtually the
same as can be seen from paragraph 304(5)(a) of the Excise Tax Act,
which refers to the one year and refers back to subsection 301(1.1) in
reference to the 90 days, giving us the one-year plus 90-day time limit running
from the time that the notices of assessment were mailed by the CRA.
[7] Counsel for the
applicants acknowledges that the subject applications were not made within the
required time. The outside dates by which the applications must have been made
and the dates they were in fact made are as follows: In respect of the
applicant Karen Chu and her application under the Income Tax Act, the
required outside date by which the application had to be made, is July 4, 2008.
The date that the application was actually made is January 9, 2009.
[8] In respect of
that applicant's GST assessment and application, the date by which she was
required to file the application is July 25, 2008, and the date she actually
filed it is January 9, 2009.
[9] In respect of
the applicant Tai Shen Chu, the required date by which he would have had to
have filed the application to fall within these provisions would be July 4,
2008, and the actual date of filing was January 9, 2009.
[10] I acknowledge at
the outset of these reasons that this case is troublesome in that the applicants’
failure to file timely objections is not a result of anything they failed to
do. Indeed, they took appropriate steps to file timely objections and believed
that they had done so.
[11] They were led to
believe by a third party engaged to represent them that the necessary steps had
been taken to appeal the subject assessments. This is a case of professional
negligence, aggravated by deceit, the result of which is that the applicants
have lost their right to pursue their objection to, or to appeal, the subject
assessments.
[12] Regrettably, I
have no jurisdiction to remedy this situation. Where a person suffers damage as
a result of the negligence and deception of a professional adviser, the remedy
lies elsewhere.
[13] In this case, the
tortfeasor appears to be Taxperts Corp. (“Taxperts”). The applicants first
retained the services of Taxperts to deal with the CRA audit that preceded the
subject assessments. In turn, Taxperts contracted or delegated the work to a
chartered accountant who I will refer to as Mr. H..
[14] The subject
assessments followed and Taxperts and Mr. H. continued to work for the
applicants, who were assured by Mr. H. that he would file the required notices
to appeal the assessments. An affidavit of Mr. H. admits that he is an
alcoholic and that he was drinking at least on an occasional basis after having
joined Alcoholics Anonymous in 2003.
[15] More relevant to
the applications before me, he admitted to increased drinking and deteriorated
health during the period he was responsible to respond to the subject
assessments. He admits that he was called repeatedly by the applicants about
opposing the assessments and that he assured them that the appeals had been
filed. This was a bold-faced deception, admitted to by Mr. H.. He admitted
repeatedly misleading the applicants as well as Taxperts on the status of the
assessments.
[16] As I have said, I
have no jurisdiction to remedy this situation. The authorities on the subject
and on like provisions have all confirmed that this Court has no jurisdiction
to extend the one-year plus 90-day deadline prescribed by Parliament,
regardless of the equities.
[17] One case of this
Court, Hickerty v. R., 2007,
relied on by the applicants did however embrace a more generous approach to the
provision by applying the doctrine of discoverability so that the starting time
in determining the expiry of a deadline would not commence on the day that is
90 days after the date of mailing of the notice of assessment, but rather when
the taxpayer, who reasonably believed a required filing had been made,
discovered the failure.
[18] However, with
respect, the language of the subject provisions is absolutely, unambiguously
clear. It does not suggest that receipt of the notice of assessment is
relevant. Accordingly, the authorities have found, for example, that proof of
failure of the postal service resulting in a non-receipt does not change the
start date of the prescribed limitation period. This was confirmed by the
Federal Court of Appeal in 2000, in Schafer v. Canada. Essentially, such decisions frustrate the application
of the doctrine of discoverability. I believe my hands are tied.
[19] In Hickerty,
the judge did take, as noted, a different approach, effectively applying the
doctrine of discoverability. In that case, the applicant was under the mistaken
but reasonable belief that she had validly instituted an appeal in accordance
with the requirements of the Tax Court of Canada Act and its Rules.
The judge started the time limitation period set out in paragraph 167(5)(a)
relating to extensions of time to file appeals in the Income Tax Act, to
the date that the applicant reasonably became aware that the intended appeal
was not validly made. In that case, the appeal had not been validly commenced
because it was sent to the CRA instead of the Court.
[20] With respect, I
believe a different rationale might be found in that case to warrant its
result. In that case, the question was whether a filing had been made. Addressing
an error of that nature which involves the Tax Court of Canada Act
and its Rules might not bar a finding that a filing in fact had been
made in that case and that an extension was not needed.
[21] In any event,
this case is very different. Here, we have a taxpayer who has chosen to deal
with a firm offering professional services. That firm failed to perform its
professional obligations. It was negligent in my view and this Court is not an
insurer against such malfeasance.
[22] I cannot massage
the language of the subject provision; I have no jurisdiction to do so. There
is no place for me to do that given the clear statutory language of the subject
provisions and I cannot apply the doctrine of discoverability.
[23] Indeed, although
admittedly only obiter dicta (as acknowledged by Justice Woods of this
Court in her 2005 decision in Nagle v. R.),
the Federal Court of Appeal in Carlson v. R.
in 2002 rejected the application of that doctrine in the context of the subject
provision.
[24] The Hickerty
decision distinguished Carlson on the basis of the time taken to bring
the application. In Carlson, the delay was years, some six years. That
rationale to distinguish Carlson, in and by itself, is not persuasive in
my view.
[25] Applicants’
counsel makes the same argument in respect of other authorities relied on by
the respondent, namely that they deal with applicants whose applications
reflected substantial delays compared to the few months delay in the
applications at bar.
[26] Again, with
respect, I find such distinctions do not warrant adopting an approach to the
subject provision that embraces a doctrine that suggests that a little late
should be treated differently than very late.
[27] There is a bright
line, a bright timeline here that Parliament says must be observed. Acting
diligently to rectify a problem upon learning of it, does not change that
bright line. Being in the dark, at no fault of your own, that a clock is
ticking, does not change that bright line.
[28] My biggest
misgiving in this case in having no choice but to deny the applications, is
that I am suggesting that the applicants have a fertile case for damages
against Taxperts. It is a misgiving because that means potentially I have
invited further litigation in a different forum with more issues and more
costs. For example: What are their damages?
[29] Ironically, this
Court has exclusive jurisdiction to determine that question definitively in the
first instance. Nonetheless, that is where the matter stands. Regardless that
I take little satisfaction in passing the problem on to another forum, all I
can do is hope that the applicants here will receive adequate compensation for
their reliance on the professional services of Taxperts.
[30] I note before
closing that while the Amended Reply to these applications deals only with the
time-limit requirement of the subject provisions, counsel for the respondent
raised the question of whether the applicants acted with sufficient diligence
to warrant a finding that they acted as soon as circumstances permitted, which
is another requirement to be met under the subject provisions for this Court to
grant the extension.
[31] I repeat, in this
context, without hesitation, that I find that the Chus were diligent in their
efforts to object to these matters as soon as reasonably possible or as soon as
might reasonably have been expected in the circumstances.
[32] I also note that
I have considered the case of this Court in 2007 of Cheam Tours Ltd. (c.o.b.
Airport Link Shuttle) v. Canada (M.N.R.), which was also
referred to and relied on by applicants’ counsel. That case looks to this
Court's power to cure a technical defect.
[33] In my view, the
case before me goes beyond curing a technical defect. This is not a case for
bending a provision to prevent depriving a taxpayer of their day in Court by
exposing them to unintended obstacles or traps.
[34] In this case, we
have an overt failure to comply with the legislation. There are no hidden
traps, and the failure to comply is not as a result of a technical defect.
[35] In this case,
where a presumably competent practitioner failed to comply with a clear
statutory requirement, it is not for me to rectify the situation by ignoring
the express language of the Act, even though it may well be equitable
for me to do so, particularly given that the respondent should not be seeking
to collect more taxes than the law requires if that is the case. But I have no
equitable jurisdiction to give effect to a remedy that would allow that
determination to be made.
[36] Accordingly, it is incumbent on me to deny the applications.
Signed at Ottawa, Canada, this 11th day of September, 2009.
"J.E. Hershfield"
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