REASONS
FOR ORDER
Favreau J.
[1]
Mr. Martin Stover filed a motion to the Court
for an order pursuant to paragraph 172(2)(a) of the Tax Court of
Canada Rules (General Procedure) (the “Rules”) to set aside the “deemed”
judgment dismissing his appeal and to reinstate his appeal.
[2]
By notices of reassessment dated November 24,
2008, the Minister of National Revenue (the “Minister”) adjusted Mr. Stover’s
tax liability and disallowed commission expenses in the amounts of $72,392 and
$82,143 for the 2005 and 2006 taxation years respectively.
[3]
By notice of objection dated February 26, 2013,
Mr. Stover objected to the reassessments and the Minister confirmed the
reassessments by notice of confirmation dated March 27, 2014.
[4]
On December 9, 2014, Mr. Stover obtained an
order from the Court extending the time within which an appeal from the
reassessments made under the Income Tax Act for the 2005 and 2006
taxation years may be instituted.
[5]
Although Mr. Stover has been representing
himself in his appeal, he sought the assistance of his long-time legal counsel,
Mr. J. David Crowe.
[6]
For instance, Mr. Crowe attempted to have the
lien filed with the sheriff’s office on the applicant’s house based on the
reassessments, lifted because the reassessments were under appeal in the Tax
Court of Canada. Mr. Crowe was also consulted by Mr. Stover when he was served with
the respondent’s notice of motion and amended notice of motion to strike out
certain portions of his notice of appeal, which motion was returnable by
January 21, 2015.
[7]
Mr. Stover also brought to Mr. Crowe’s attention,
a letter dated October 28, 2015, informing of a pending status hearing before
the Tax Court of Canada.
[8]
Mr. Stover consulted his accountant and Mr.
Crowe concerning the advantages of making an application to the Fairness
Committee, now known as the Taxpayer Relief Committee, as an alternate process to
resolve his tax dispute. Mr. Stover’s conversations with his accountant and Mr.
Crowe did not make him aware that discontinuing his appeal would amount to a
full acceptance of his tax liability.
[9]
During the month of November 2015, Mr. Stover
informed Mr. Crowe that he was going to ask for relief by way of the Taxpayer
Relief provisions. Based on his understanding of Mr. Stover’s intent, Mr. Crowe
forwarded a letter dated December 1, 2015 to the registrar of the Tax Court of
Canada, informing that the appellant would not proceed with his appeal.
[10]
At the beginning of December 2015, Mr. Stover’s
accountant referred him to Mr. Wayne Warner of Warner Tax Consultants with
regards to his tax issues and Mr. Stover retained Mr. Warner in early January
2016.
[11]
On March 16, 2016, Mr. Stover received a letter
dated March 8, 2016 from the Canada Revenue Agency (the “CRA”) Collection
Division demanding payment of the disputed amount within 30 days. Mr. Stover
then became aware that the request for payment resulted from the discontinuance
of his appeal and that there was a judgment against him that rendered him
liable for the amounts claimed by way of the reassessments.
[12]
On March 29, 2016, Mr. Warner forwarded a letter
to the CRA informing it that to his knowledge, the applicant’s file was under
appeal and that CRA’s letter did not make sense considering that he was
retained in early January 2016 by Mr. Stover to represent him in the audit
and collection process relating to his tax appeal.
[13]
Mr. Stover and Mr. Crowe each signed a separate
affidavit which were filed as evidence at this hearing and they both testified
as well.
[14]
Mr. Stover stated that he has never indicated to
Mr. Crowe that he accepted the CRA’s assessments. It has always been his
intention to oppose the reassessments and that he would not have knowingly
taken any action that would amount to his acceptance of the tax reassessments.
The fact that he has retained the services of Mr. Warner in January 2016
clearly demonstrates that he wanted to proceed with his appeal.
[15]
Mr. Crowe stated that he did not realize that by
discontinuing Mr. Stover’s appeal, Mr. Stover was considered to have accepted
full liability of the reassessments. He also confirmed that Mr. Stover never
acknowledged that the reassessments were proper and correct.
[16]
Mr. Crowe confirmed his understanding that at no
time did Mr. Stover decide to accept the tax liability in issue and that Mr.
Stover was not aware of the withdrawal letter which was done in error by him.
[17]
In his testimony, Mr. Crowe affirmed that he
acted on his own initiative when he sent the discontinuance letter and that Mr.
Stover never gave him the mandate to withdraw his appeal.
[18]
However, the discontinuance letter dated
December 1, 2015 seems to contradict both Mr. Stover’s and Mr. Crowe’s
testimonies. The said letter reads as follows: “I have been instructed by my
client, Martin Stover not to proceed with his notice of appeal. He will be
applying to the Fairness Committee for hopefully resolution of his issues.”
[19]
As Mr. Stover and Mr. George Boyd Aitken of the
Department of Justice in Ottawa were copied on the discontinuance letter, it is
probable that Mr. Stover became aware of it before March 2016 when he received the
CRA’s letter.
Analysis
[20]
Pursuant to subsection 16.2(2) of the Tax
Court of Canada Act, R.S.C. 1985, C.T-2, as amended, the discontinuance of
a proceeding by a written notice from the party who instituted it, is deemed to
be dismissed as of the day on which the Court receives the written notice.
[21]
Section 172 of the Rules reads as
follows:
Setting Aside, Varying or Amending
Accidental Errors in Judgments — General
(1)
A judgment that,
(a) contains an error arising from an accidental slip or omission,
or
(b) requires amendment in any matter on which the Court did not
adjudicate
may
be amended by the Court on application or of its own motion.
(2)
A party who seeks to,
(a) have a judgment set aside or varied on the ground of fraud or of facts
arising or discovered after it was made,
(b) suspend the operation of a judgment, or
(c) obtain other relief than that originally directed,
may
make a motion for the relief claimed.
[22]
The applicant specifically referred to paragraph
172(2)(a) of the Rules and invoked the fact that he did not appreciate
that he could have applied under the taxpayer relief provisions while
continuing with his appeal.
[23]
The Federal Court of Appeal considered the
application of section 172 in at least three cases.
[24]
In Bogie v. R., [1998] 4 C.T.C. 195, the
Court did not apply section 172 of the Rules. In that case, the
taxpayer’s solicitors advised the taxpayer to discontinue his appeal from the
Minister’s notice of assessment on the basis of information received from the
taxpayer’s accountant. A notice of discontinuance was then duly filed with the Tax
Court of Canada. Subsequently, the taxpayer was advised by his accountant that
the earlier advice was given in error. The error pertained to a question of
fact, namely whether a capital cost allowance had been claimed by the taxpayer
in a previous taxation year. The Court concluded as follows at page 196:
1. Assuming,
without deciding, that the Tax Court of Canada possesses the inherent
jurisdiction to set aside a notice of discontinuance or that the requisite
jurisdiction arises under section 172 of the Tax Court of Canada Rules, we are
all of the view that his appeal cannot succeed on its merits.
. . .
3. Against this factual background, it is obvious to us that the
taxpayer cannot distance himself from the erroneous advice given by his
accountant. In the circumstances, there is no merit in the argument that the
taxpayer could not have discovered the true state of affairs through the
exercise of due diligence. In the absence of fraud, the conduct of the taxpayer
embraces the conduct of his professional advisors. . . .
[25]
In Scarola v. Minister of National Revenue,
2003 FCA 157, the Court made the following comments concerning paragraph
172(2)(a) of the Rules:
26 In practice, it is Rule 172(2)(a)
which is more likely to be invoked where the deemed dismissal has been obtained
by fraud or where facts have arisen or have been discovered after the dismissal
took effect. I hasten to add that, in the present case, there is no allegation
of fraud and, although invited by us to do so, counsel for the respondent has
been unable to point to facts discovered or that have arisen after the
dismissal which would warrant the application of Rule 172.
[26]
In Rutledge v. R., 2004 FCA 88, Justice
Létourneau restored the deemed dismissal of the respondent’s appeal and stated
that:
19. No allegation of fraud was made by the
respondent in the present case. She still lives with her husband. The
respondent alleges her own mistake with respect to her husband's tax liability
as the fact which led to the dismissal of her appeal. That was obviously not a
fact arising after the judgment. Furthermore, it was not, in my view, a fact
that could not have been discovered sooner with reasonable or due diligence: .
. .
[27]
In this instance, there is no allegation of
fraud and the applicant was represented by an experienced lawyer. Literature
concerning the terms and conditions of the Taxpayer Relief provisions can
easily be obtained, had the applicant decided to learn more about it before
taking the decision to apply for this relief.
[28]
More importantly, no new fact arose or was
discovered after the “deemed” judgment. What we have here is an error in law
resulting from a misunderstanding of the process of application for relief from
a tax liability to the Fairness Committee or a designated officer of the CRA.
[29]
Justice Doherty of the Court of Appeal for
Ontario considered in Mujagic v. Kamps, 2015 ONCA 360 (CanLII), a rule
similar to section 172 of the Rules. In paragraph 9 of his decision, he
wrote:
. . . The distinction between fact and law
is well-established. Facts come from evidence, including new testimony and
exhibits. Law comes from statute books and case law. The law is applied to the
facts to produce a result. Rule 59.06(2)(a), by its plain meaning, speaks
to "facts arising or discovered" and not to jurisprudential changes.
New facts, like all facts, are found in evidence, not in the statute books or
case law.
[30]
In my view, the finality of Court decisions and
the efficiency of the administration of justice should prevail over the
sympathetic circumstances from the applicant’s perspective.
[31]
For these reasons, the motion is dismissed with
costs.
Signed at Ottawa,
Canada, this 21st day of October 2016.
“Réal Favreau”
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