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Citation: 2004TCC588
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Date: 20040910
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Dockets: 2004-1986(GST)APP, 2004-1231(IT)APP,
2004-1988(GST)APP, 2004-1232(IT)APP
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BETWEEN:
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PATRICK CHAN,
IAN CHARLES ROBERT,
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Applicants,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR ORDER
(Edited from the transcript of Reasons for Order
delivered orally
from the Bench on August 23, 2004 at Vancouver,
British Columbia)
Hershfield
J.
[1] I have had some difficulty with
this case but regardless have concluded that the applications, if we can call
them that, and I will remark further on that comment, must fail and the
following are my reasons. The Applicants seek an extension of time to file a
Notice of Objection with respect to Notices of Assessment made pursuant to
subsection 323(1) of the Excise Tax Act for un‑remitted
GST, interest and penalties and subsection 227.1(1) of the Income Tax Act
for un-remitted source deductions, interest and penalties.
[2] It is not in dispute that
the Applicants were directors of 524428 B.C. Ltd., which had failed to make
required remittances or pay its resulting liability and that it was such
failure that gave rise to the said assessments against the applicants as
directors of that company.
[3] It is not in dispute that
Notices of Objection were filed in all cases on December 15, 2003. The
Respondent asserts that the Notices of Assessment were mailed on October 17,
2000 and the time limitations for filing such objections had expired, and that
the time limitations to make this application for an extension of time had
expired as well. The Applicants take issue with the date of mailing of the
notices and deny receiving the notices until October 31, 2003 when they were
sent to their lawyer under cover of a letter dated October 29, 2003. The
Applicants put the Minister to the burden of proof to establish the mailing.
[4] I note at this point that
if the Respondent fails to establish a mailing or a date of mailing for each
assessment as a date one year and 90 days prior to December 15, 2003, the date
of filing of the objections, then the objections filed are not out of time. No
extensions of time to file are required in such case as the objections would
have been filed within 90 days of the October 29, 2003 mailing date established
by the Applicants.
[5] This Court has
jurisdiction to hear applications for extension of time. This is found in
section 304 of the Excise Tax Act and section 166.2 of the Income Tax
Act. The question arises as to whether this Court has jurisdiction to make
the determination sought which is for a determination of a mailing date which
determines whether the objections were timely filed.
[6] That is, the matter before
me is neither an appeal of a tax liability nor, in reality, an application for
an extension of time, and as such, a question of my jurisdiction to hear the
application arises.
[7] Neither party raised a
question as to my jurisdiction to hear this matter. As well I note that cases
sited by counsel for all parties did not deal with the question of jurisdiction
including the Federal Court of Appeal's decision in Schafer.
From that one might find implied jurisdiction with this Court.
[8] Regardless, all parties
have signed pleadings filed with the Court. On that basis I believe it is
appropriate to proceed on the basis that section 173 of the Income Tax Act
and section 310 of the Excise Tax Act apply. Such sections allow the
parties to request a determination of a question relating to an assessment. In
essence I have been asked in signed pleadings to make a determination of a
question relating to an assessment.
[9] Proceeding then, I note
that the only evidence in these proceedings has been by affidavits even though
affiants were present in court and available for direct and cross-examination.
The Respondent relied on the Affidavit of two CCRA officers, and the Applicants
relied on the Affidavits of each of the Applicants and a legal assistant from
their counsel's office.
[10] The affidavit evidence of
the Respondent is as follows: Ms. Light swore that on October 17, 2000, she
produced the assessments and in respect of Roberts' assessments that she
personally took the assessments to the mailroom on that same day October 17,
2000 and sent them by registered mail, to 1606 - 3071 Glen Drive in Coquitlam,
an address taken from CCRA records dated September 2000 and August 1999. And in
respect of Chan's assessments that she personally took the assessments to the
mailroom on the same day, October 17, 2000, and sent them by register mail
to 2307 Lorraine Avenue in Coquitlam, in the case of the GST assessments but sent
them to 2037 Lorraine Avenue, Coquitlam in the case of the income tax
assessments.
[11] Since this is an oral
judgment I will repeat that. The address under the GST assessment was
"2307" but it was "2037" in respect of the income tax
assessment.
[12] Ms. Light also swore that
she maintained a diary which on January 26, 2001 noted that all mail had been
returned.
[13] The second affiant of the
Respondent, Mr. Desai, swore that Ms. Light's diary confirmed entries as
to the mailing date and the return of the registered mail. As well he swore in
respect of Roberts' assessments: that he sent the assessments by regular mail
on March 20, 2001, to a Princess Crescent address in Coquitlam, which was not
returned; and, that on March 29, 2001, he spoke to Roberts who confirmed he had
received the assessments; and, that on August 22, 2001, he issued a
requirement to pay to Roberts' employer for the garnishment of wages. In
respect to Chan's assessment he swore: that he sent the assessments by regular
mail on March 20, 2001 to 2037 Lorraine Avenue in Coquitlam, which was not
returned; and, that on August 22, 2001 he issued a requirement to pay to Chan's
employer for the garnishment of wages.
[14] The affidavit evidence of
the Applicants is as follows: Roberts swore that he never received the
assessments which is to implicitly deny Mr. Desai's sworn statement that he,
Roberts, acknowledged receipt in a telephone conversation on March 29, 2001. He
confirmed that his address from March 1999 to May 2002 was the Princess
Street address referred to in Mr. Desai's affidavit, but swore that he
first knew of an issue when garnishment was effected in September 2001, when he
retained counsel.
[15] Mr. Chan swore that he
never received the assessments and that his address was 2037 Lorraine Avenue
(as opposed to 2307 Lorraine Avenue in Coquitlam); and, that he first became
aware of an issue when garnishment was effected in September 2001, when he
retained counsel.
[16] A legal assistant for
counsel for the Applicants, Ms. Armstrong, swore as to correspondence
evidencing that the Applicants' counsel sent the CCRA a letter on September 10,
2003 requesting copies of the assessment and demanding an accounting. Following
a further letter and a request by the CCRA for a corporate authorization in
addition to the personal authorizations provided, the CCRA finally supplied
three of the four assessments on October 29, 2003. It appears that the
fourth assessment was made available or found prior to the filing of the four
objections on December 15, 2003.
[17] I note that the request by
the CCRA for corporate authorization is anomalous in respect of an assessment
against directors who had retired as such years earlier. I note as well that
Mr. Desai's Affidavit acknowledges that he received authorizations from the
office of Applicants' counsel on October 22, 2001, some two months after the
garnishments were issued and effected; (i.e. some two years before the
2003 correspondence referred to in Ms. Armstrong's Affidavit). Such authorizations
were not referred to by the Applicants in any of the three affidavits tendered
at the hearing. However, counsel for the Applicants filed, at the hearing,
further correspondence from the law firm dated as early as September 6, 2001.
The correspondence enclosed personal authorizations of the Applicants but
referred to the account number of 524428 B.C. Ltd. On receiving no reply, a
second letter was sent September 20, 2001, and a third on October 16,
2001, and a fourth of December 18, 2001.
[18] The latter letter
acknowledges the CCRA's request for a corporate authorization and that the
account number referred to in their correspondence to the CCRA may be the
corporate account number but – appropriately in my view – confirms that they
were responding to personal garnishments which presumably arise from personal
assessments which in turn suggests that the personal authorizations were
sufficient. No reply to this last letter from Applicants' counsel to the CCRA
was forthcoming and no explanation was provided as to why further
authorizations were required. There was no further communication on either side
until September 2003 when a similar series of correspondence commenced again as
attested to in Ms. Armstrong's Affidavit.
[19] Had the request for copies
of the assessments been complied with by the CCRA in the period September
through December 2001, as they were in the 2003 series of correspondence
referred to in Ms. Armstrong's affidavit, there seems to be no reason why the
objections would not have been filed in December 2001, as they were in December
2003. Had they been filed in December 2001 they would have been within the one
year and 90 days from even the first asserted mailing of the assessments which
was October 17, 2000. That is, a proper CCRA response, following the
garnishment, to letters of counsel, timely sent at that time, would have
permitted a timely application for an extension of time to late file the
Notices of Objection filed two years later.
[20] Such failure by the CCRA
cannot be condoned. Mr. Desai's affidavit confirms receipt of this
correspondence from Applicants' counsel yet no particulars were provided. No
explanation as to the need for extra authorizations was provided.
[21] It is a stain on the
administration and on natural justice and on the Courts that I am handcuffed by
Draconian legislation that relies on sending dates regardless of actual notice
where the CCRA has failed to respond to pleas for particulars of assessments.
Such failure by the CCRA brings disrepute to the entire system. On the other
hand, somewhat offsetting this inexcusable performance by the CCRA, it is
relevant that it took two years for counsel for the Applicants to resume their
efforts. No attempts were made to enforce the Applicants' legal rights to have
the information requested. It should have been clear that time would be of the
essence in respect of any proceedings arising in respect of garnishments under
either the Income Tax Act or the Excise Tax Act.
[22] In this regard I note, as I
will again towards the end of these reasons, that Justice Sharlow in the
Federal Court of Appeal decision in Schafer acknowledged the unfairness
of the legislation regarding time limitations running from sent dates without
regard to receipt, but noted that regardless of such unfairness and regardless
of her expressing agreement in principle with the Tax Court decision in Schafer,
Parliament had chosen, for reasons unexplained, to subject taxpayers to time
limitations even where they had no notice of the assessments that were running
out of time.
[23] Turning then to the
question of the mailing date of the assessments, I note that while the receipt
of the assessments or knowledge of their existence are not relevant under the
terms of either Act, the Crown must establish on the evidence that on a
balance of probability the assessments were sent. If not sent, no time
limitation will have started to run as time limitations run from the date of
mailing the assessments in the case of the Income Tax Act or sending the
assessments in the case of the Excise Tax Act. In the case of the Income
Tax Act such starting time is provided for in subsection 165(1) and in the
case of the Excise Tax Act such starting time for the limitation period
is provided in subsection 301(1.1). Again this presumes that assessments are
mailed or sent.
[24] At this point it is helpful
to ask if the subject Acts prescribe a required method of sending assessments.
Under the Income Tax Act, section 227.1 assessments, and under the Excise
Tax Act, subsection 323(1) assessments, are governed by
subsection 227(10) and subsection 323(4) respectively which provide that
Divisions I and J of Part I of the Income Tax Act and sections 296 to
311 in respect of the Excise Tax Act apply with such modification as
circumstances require. Subsection 152(2) in Division I of Part I of the Income
Tax Act and section 300, Part IX of the Excise Tax Act provide that
assessments are to be sent. No manner of sending is set out.
[25] As it happens, in this case
it is asserted by the Respondent that they were mailed, first by registered
mail and then by regular mail. Counsel for both parties cited sections 244 of
the Income Tax Act and 335 of the Excise Tax Act as assisting in
terms of evidentiary rules regarding such manner of sending assessments. Such
rules contained in subsections (5), (14) and (15) of section 244 of the Income
Tax Act and subsections (1), (10) and (11) of section 335 of the Excise
Tax Act apply for the purposes of the Income Tax Act, or Part
IX of the Excise Tax Act as the case maybe and accordingly apply to
director's liability assessments.
[26] I note that in the case of
the Excise Tax Act I have been referred to an additional provision which
does not appear to be in the Income Tax Act. That additional provision
is subsection 334(1) of the Excise Tax Act which deems a receipt in the
case of mailing by first class mail. I note that none of the Respondent's
affiants make reference to mailing by first class mail. As such, technically
speaking at least, that provision does not apply. I also note that the
Respondent, ultimately, does not rely on receipt and maintains its position
that the limitation periods run from date of mailing or date sent.
[27] With respect to subsection
(5) of section 244 of the Income Tax Act and subsection (1) of
section 335 of the Excise Tax Act, I note that these subsections only
apply where the respective Acts provide for sending by mail. In such case where
a CCRA affidavit sets out that a notice was sent by registered mail and
attaches a post office certificate of registration, in the absence to the
evidence to the contrary, the affidavit shall be received as evidence of the
sending of the notice.
[28] Ignoring the question as to
whether or not the subject Acts actually provide for sending by mail, which is
only implied in the case of the Income Tax Act from the time limitation
provision which says that the time limit runs from the mailing date, I note
that post office certificates were not attached to the affidavit of Ms. Light.
[29] Section 244 then does not
assist the Crown and raises doubt in my mind as to whether the attempts of Ms.
Light to send by registered mail were completed. Respondent counsel argues that
if they were returned then they must have been sent. Ms. Light's affidavit is
insufficient on this point. If she had said or testified that she had knowledge
of their arrival at a post office to be registered and that they were
registered then sent back, then I would say such statements, unchallenged,
would suffice in lieu of a certificate, but as it is, I know nothing of where
they were returned from, or whether or not they were actually registered at a
post office. Further, her affidavit re Chan's assessments has different
addresses. On balance then I am not satisfied that the assessments were sent on
October 17, 2000.
[30] I also note that
subsections 244(14), (15) of the Income Tax Act which apply for the
purposes of that Act and subsections (10), (11) of section 335 of the Excise
Tax Act which apply for the purposes of Part IX of that Act, require
a finding that an assessment has been mailed. I make no such finding in
respect of the registered mail so that these subsections, in fact, do not apply
at all to the mailings referred to in Ms. Light's affidavit.
[31] That takes me to the mailing
dates sworn in Mr. Desai's affidavit. I see no reason not to accept his sworn
statements as to these mailing dates. That both Applicants did not receive them
does not seem, on balance of probability, likely. Mr. Roberts never expressly
challenged in his affidavit Mr. Desai's statement in his affidavit that he,
Roberts, had acknowledged receipt of the assessments. Roberts never took the
stand at the hearing; Mr. Desai was not cross-examined on the statement. None
of the assessments sent by Desai were returned. They were sent to correct
addresses.
[32] While I have talked more
about Mr. Roberts than Mr. Chan I would note that if Roberts knew of the
assessments, it is unlikely Chan was ignorant of them. Fellow former directors
of a financially fallen company might share such information. On receiving the
garnishments, both retained the same counsel again indicating the probability
that information might have been shared.
[33] Still the Applicants rely
on Associate Chief Justice Bowman's Tax Court decision in Schafer
to support the view that, for the purposes of time limits, the date notices
are sent should not be determinative if the assertedly sent material was not
received. In Schafer it seems Associate Chief Justice Bowman believed
the applicant, through no fault of her own, such as not informing the Minister
of changing of addresses, did not receive the assessments and was not notified
of them. He was satisfied that she had not been notified of the assessments
until an Examination for Discovery on another matter. Mrs. Schafer was
subjected to vigorous cross-examination and testified as to problems in
receiving mail. It was on this basis that Associate Chief Justice Bowman found
that he could, on balance of probability, conclude the assessments were not
sent.
[34] In the case at bar I have
no oral testimony to come to the credibility conclusions that Associate Chief
Justice Bowman came to. I have no cross-examination at all, let alone vigorous
cross-examination of the affiants. I have no challenge of Mr. Desai's sworn
statement that he sent the assessments and that he had a telephone conversation
with Roberts confirming their receipt. Beyond mailing procedures I have Mr.
Desai's statement in his affidavit, unchallenged except by the notion of not
being received, that they were sent.
[35] In short, even applying
Associate Chief Justice Bowman's reasoning in Schafer, I am not faced
with the same fact situation and would not come to the same conclusion on the
facts as he came to in regard to Mrs. Schafer.
[36] Further, Mrs. Schafer did
act when informed. Here, lawyers were retained and inquiries were made upon
their being informed for the first time. But still in spite of the clear and
reprehensible default of the CCRA there is a two-year gap in pursuing inquiries.
[37] I also note that the
Applicants' counsel referred to Judge Hamlyn's decision in Adler.
In Adler Judge Hamlyn found the sworn affidavit testimony of the
applicant to be uncontroversial; that is not the case here. Mr. Desai's sworn
statement controverts the statements of Mr. Roberts.
[38] Of course the main reason
why I might not follow decisions like Adler and the Tax Court decision
in Schafer is the Federal Court of Appeal decision in Schafer
where Justice Sharlow commended the approach taken by the Tax Court in Schafer
and Adler and suggested it did not do violence to the scheme of the Act
but went on to concur with the majority judgment (which overturned the Tax
Court decision) and to say that:
"Parliament has chosen to adopt a rule that
makes no allowance for the possibility, however remote, that the taxpayer may
miss the deadline for objecting or appealing because of a failure of the postal
system. I do not understand why Parliament has chosen to deprive taxpayers of
the chance to challenge an assessment of which they are unaware, but that is a
choice that Parliament is entitled to make."
[39] Given my remarks as to the
conduct of the CCRA, it is with considerable regret that I have to ultimately
concur with Justice Sharlow. This is what Parliament has done, notwithstanding
how unfair it may seem to the Applicants.
[40] It is for those reasons
then, having found that the notices sent by Mr. Desai were sent by mail,
that I find that the Applicants are out of time. The applications are therefore
denied for those reasons.
[41] Subject to the lawyers for
the Applicants explaining the two-year lag in their responses and questions as
to the merits of the appeal, I might have suggested redress possibly under the Financial
Administration Act. Counsel for the Applicants might consider that or other
possible courses of action. As I said, it is inexcusable that the CCRA did not
respond to correspondence at a time that would have permitted these Applicants
to make timely applications for extensions of time.
Signed at Ottawa, Canada, this 10th day of
September 2004.
Hershfield
J.
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