|
Citation: 2003TCC844
|
|
Date: 20031119
|
|
Docket: 2003-1682(IT)APP
|
|
BETWEEN:
|
|
JEFFREY SWARTZ,
|
|
Appellant,
|
|
and
|
|
|
|
HER MAJESTY THE QUEEN,
|
|
Respondent.
|
REASONS FOR JUDGMENT
Sheridan,
J.
[1] This application is for an extension of time to file an appeal under
the Tax Court of Canada Rules, General Procedure from a Notice of
Reassessment of the Applicant's 1995 taxation year.
[2] The reassessment disallowed the deductions claimed by that Applicant
for certain business expenses and capital losses for that taxation year of
approximately $100,000 and $75,000 respectively.
ISSUE
[3] The issue is whether the Applicant has met the requirements of
subsection 167(5) of the Income Tax Act permitting the
granting of an order to extend the time within which he may institute an appeal
for the 1995 taxation year.
[4] There is no issue as to paragraph 167(5)(a) or subparagraph
167(5)(b)(iv) in that the Respondent concedes that the Applicant made
this application within the time permitted and that there are reasonable
grounds for the appeal. The Respondent disputes, however, that the Applicant
has satisfied any of the remaining criteria set out in subparagraphs 167(5)(b)(i)(A)
or (B); (b)(ii) and (b)(iii) of the Act.
STATUTORY PROVISIONS
[5] Subsection 167(5) of the Act sets out the requirements for
the granting of an application for an extension of time to file an appeal.
(5) No order shall be made under this section unless
(a) the application is made within one year after the
expiration of the time limited by section 169 for appealing; and
(b) the taxpayer demonstrates that
(i) within the time otherwise limited by
section 169 for appealing the taxpayer
(A) was unable to act or to instruct
another to act in the taxpayer's name, or
(B) had a bona fide intention to
appeal,
(ii) given the reasons set
out in the application and the circumstances of the case, it would be just and
equitable to grant the application,
(iii) the application was
made as soon as circumstances permitted, and
(iv) there are reasonable
grounds for the appeal.
FACTS
[6] The relevant dates regarding the reassessment for the 1995 taxation
year are:
|
October 2, 2000
|
Notice of
Reassessment received
|
|
January 22,
2001
|
Notice of
Objection filed
|
|
December 27,
2001
|
Notice of
Confirmation received
|
|
April 20, 2002
|
Applicant’s
“letter of appeal” to CCRA
|
|
April 26, 2002
|
CCRA's response
to Applicant
|
|
July 1, 2002
|
Notice of
Appeal & filing fee mailed to TCC Registry
|
|
March 23, 2003
|
Notice of
Appeal & filing fee received by TCC Registry
|
|
March 25, 2003
|
TCC Registry
call to Applicant re need to file application for extension of time to file
appeal and to advise deadline is March 27, 2003
|
|
March 27, 2003
|
Application for
extension of time filed
|
[7] The Applicant is a dentist. He was the only witness called by either
party to this application. At some point in the mid-1990’s, the Applicant
attempted to sell his practice. For reasons not made entirely clear at the
hearing, the sale fell through thus precipitating a decade of fiscal disaster
for the Applicant. He ultimately lost his practice and his home. Bankruptcy
threatened. He was without resources for legal and accounting advice. In the
middle of all this, he and his wife discovered they were to have a child.
[8] The Applicant made reference to a 10-year history of dealings with
the CCRA; in particular, the Collections Department. According to the
Applicant, the botched sale severely impaired his ability to assemble the
necessary documentation to support the claims he was making to the CCRA.
ANALYSIS
[9] It is against this general factual background that each of the
criteria in dispute are considered:
I. s.167(5)
(b) the taxpayer demonstrates that
(i) within the time otherwise limited by section 169
for appealing the taxpayer
(A) was unable to act or to instruct another to act in
the taxpayer's name, or
(B) had a bona fide intention to appeal,
[10] There is sufficient evidence on a balance of
probabilities to demonstrate that during the 90-day period following the Notice
of Confirmation of December 27, 2001, the Applicant was “unable to
act or to instruct another to act in his name”. Describing in some detail the
impact on his life of the failed sale of his practice, the Applicant testified
as to “stolen” and “misplaced” payroll and expense records pertaining to the
year in question. He said his lack of access to the offices of his former
practice made it difficult for him to assemble the necessary documentation to
dispute the 1995 reassessment. Meanwhile, his financial and personal
difficulties continued to swirl around him. He testified that he was not
thinking as clearly as he otherwise might have been during the period between
December 2001 and July 2002, describing his state of mind as “foggy” and recalled
feeling “lost in time”.
[11] I am satisfied that the combined effect of the
numerous fiscal, professional and personal pressures on the Applicant during
this time effectively rendered him “unable to act or to instruct another” to
appeal within the 90-day period following the Notice of Confirmation as set out
in subparagraph 167(5)(i)(A). As the legislation requires that the
Applicant satisfy only (A) or (B) of subparagraph 167(b)(i), it
is not necessary for the Court to consider subparagraph (B).
II. s. 167(5)(b)
(ii) given the reasons set out in the application and
the circumstances of the case, it would be just and equitable to grant the
application, ...
[12] In Meer v. Canada, [2001] T.C.J.
No. 321, Mr. Justice Hershfield set out the considerations in making a
determination as to whether the requirements of this subsection have been met:
[20] ... Counsel for the Respondent argued that
the requirement that the granting of an extension be just and equitable in the
circumstances was a separate test that must be met as a condition to granting
the application. Such condition does appear in subsection 167(5) as a
separate test. But the condition is derived from the reasons for and
circumstances of the request. The reasons and circumstances here do not give
rise to any asserted injustice. There has been no assertion here of foul play,
dishonesty or prejudice. I can find no cases, nor has the Respondent's counsel
offered any cases, that would support the contention or give an illustration of
a situation where all the other conditions for the granting of the application
are met and it is still found not just and equitable to grant the application.
The reassessment is not adversely affected by granting the application except
that the reassessment can then be dealt with on its merits. In these
circumstances it strikes me as inequitable not to apply the principle set down
in Seater v. R., [1997] 1 C.T.C. 2204. ...
[13] I find that the same reasoning applies to the
facts of the present case and that the Applicant has satisfied the requirements
of subparagraph 167(5)(b)(ii).
III. s. 167(5)(b)
(iii) the application was made as soon as
circumstances permitted, and ...
[14] Subparagraph 167(5)(b)(iii) has as its
focus the time period in which the application for an extension of the time to
appeal was filed. The key phrase is “as soon as circumstances permitted”.
[15] In the present case, the Applicant testified
that he first realized that he had to make an application for an extension of
time in which to appeal the 1995 reassessment on March 25, 2002, a scant two
days before the final deadline. The catalyst for his sudden awareness was a
telephone call from the Registry of the Tax Court of Canada advising that it
had just received his purported Notice of Appeal but that he would need an
Order under s. 167 before it could be filed.
[16] The Applicant testified that he had mailed
this material nearly nine months earlier on July 1, 2002. On cross-examination,
the Applicant explained that he was not troubled by the lack of response from
the Tax Court of Canada Registry between July 1, 2002 and March 25, 2003
because he had had no previous experience with the Court. Further, during this
period, he continued to be completely preoccupied with fighting for his financial
survival especially with re-establishing himself in practice. Finally, he said
that during this period, the Collections Officers at CCRA had stopped
“hounding” him for payment – a fact that was consistent with what [he believed]
to be CCRA's practice once a taxpayer had filed an appeal. As to why he hadn’t
noticed or wondered why he had not received a cancelled cheque for the $400
filing fee, he explained that, because of his still limited financial means, he
had opted for a less costly chequing account with reduced services. Under the
terms of the account, the bank provided him with a monthly statement but none
of the cancelled cheques itemized in it. During this period, there had been
“$400” amounts shown in these statements from time to time but the Applicant
could not tell what each represented from the statement alone. And so, in this
relative period of calm, the Applicant felt no compulsion to check the status
of his appeal with the Court.
[17] In Meer (supra), the learned
judge made this observation regarding the standards to which an Applicant may
reasonably held:
The phrase "as soon as circumstances permit"
does not preclude prioritizing what one can reasonably do in a particular time
frame. The question as set down in Pennington v. M.N.R. comes down to
what can be reasonably expected in the circumstances. One does not need to rely
on a flood or imprisonment or hospitalization to argue that circumstances did
not permit filing the application. This is an area of broad discretion. Keeping
one's life work, one's business enterprises or one's financial stake from
crumbling is a circumstance that might reasonably be attended to and relieved
before circumstances can fairly be said to permit the filing of an application
for an extension of time to file an appeal.
[18] In view of all of the above, I feel compelled
to accept that it was not until March 25, 2003 that the Applicant knew he
had to apply for an order to extend the time to file his appeal. The evidence
was uncontroverted that only then did he learn that the time in which to make
his application was about to expire.
[19] Immediately upon making this discovery, the
Applicant called an accountant recommended to him by a friend, Mr. Joel
Lipchitz. The Applicant instructed Mr. Lipchitz to make the application
and this was done two days later-just in time to make the deadline of March 27,
2003. Accordingly, I find that the Applicant has demonstrated that the
application was made “as soon as circumstances permitted”. Thus the final
condition is satisfied.
CONCLUSION
[20] The case law supports the principle that,
except in extreme circumstances, it is better to have an appeal heard on its
merits than to see it fail on a procedural matter. In Seater v. Canada., [1996] T.C.J. No. 1363, McArthur, J. stated :
Generally, it is preferable to have a
taxpayer's issues decided on their merits than having them dismissed, for
having missed time limits in the Act. The courts must attempt to make a fair
and just decision inview of all of the facts.
[22] There is a substantial amount of money
involved in this case. The evidence is clear that the Applicant was
experiencing, perhaps in part for reasons of his own making, great turmoil
through out the period in question. While, as counsel for the Respondent
argued, a man with the Applicant’s experience in business and dealing with CCRA
might have done better in handling his difficulties, I accept his evidence that
“[he did] what he could under the circumstances”. Although he failed to get his
appeal in on time, he meanwhile struggled to survive financially, to avoid
bankruptcy and to re-establish his practice. As soon as he was aware of the
filing deadline he acted immediately. The Respondent has never disputed there
are reasonable grounds for the Applicant’s appeal.
[23] For all of these reasons, the application is
granted and the Applicant shall have a period of not more than 30 days from the
date of this order to file his Notice of Assessment and the appropriate filing
fee.
Signed at Ottawa,
Canada, this 19th day of November 2003.
Sheridan,
J.
Email this Content