Date:
20130423
Docket:
T-407-12
Citation: 2013
FC 411
Ottawa, Ontario,
April 23, 2013
PRESENT: The
Honourable Mr. Justice de Montigny
BETWEEN:
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JOHN RITTER
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Applicant
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and
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MINISTER OF NATIONAL REVENUE
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Respondent
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REASONS FOR
JUDGMENT AND JUDGMENT
[1]
This
is an application for judicial review by John Ritter (the Applicant) of a
decision by the Canada Revenue Agency (CRA, the Respondent), dated January 24,
2012, to issue a Requirement to Pay (RTP) to the Canada Imperial Bank of
Commerce (CIBC) in an effort to collect the Applicant’s tax debt. The Applicant
is seeking an order quashing or setting aside the RTP, an order declaring the
underlying reassessment invalid and unenforceable, and, alternatively, a writ
of prohibition prohibiting the Respondent from issuing further RTPs in relation
to the challenged reassessment.
Facts
[2]
In
1991 and 1992, the Applicant worked as a design consultant through a consulting
company called Scavella Ltd. (Scavella). The Applicant was the sole shareholder
and director of Scavella. On May 1, 1992, the Corporation was struck from the
Alberta Corporate Registry for apparently failing to file tax returns.
[3]
The
CRA claims that it advised the Applicant’s accountant by letter dated April 22,
1994, that the striking of Scavella may result in deemed dividends to the
Applicant. The CRA alleges that it further advised the Applicant by letter
dated May 9, 1995, that his 1991 and 1992 individual income tax returns would
be adjusted as a result of the striking of Scavella. Specifically, taxable
dividends would be added to the Applicant’s income.
[4]
The
Respondent claims that the Applicant was reassessed on June 8, 1995, for the
taxation years of 1991 and 1992. The 1991 reassessment resulted in a tax debt
in the amount of $10,240.67, and the 1992 reassessment resulted in a tax refund
in the amount of $404.69. The Applicant also has a tax debt in the amount of
$918.30 resulting from an assessment for the 1993 taxation year. The Applicant
alleges that he never received the 1991 notice of reassessment.
[5]
The
Respondent claims that from 1995 to 1999, statements were issued or balances
were quoted to the Applicant or his authorized representatives referencing the
tax debt which the Applicant now refutes. The amount owing was also indicated
on the Applicant’s four notices of assessment issued between 1996 and 1999.
[6]
The
Applicant admits that he was informed by a CRA officer in 1996 that he had a
tax debt of more than $10,000.
[7]
In
1998, the CRA issued two RTPs in an effort to collect the Applicant’s tax debt.
It appears that the Applicant, despite being advised of the tax debt in March
1996, waited until 2005 to find out why the CRA claimed he owed a tax debt.
Details about the Applicant’s tax debt were given to the Applicant’s
representatives in 2005 and 2006.
[8]
In
2006 and 2007, the CRA issued four RTPs in an effort to collect the Applicant’s
tax debt.
[9]
In
November 2007, the Applicant applied to the Minister of National Revenue for an
extension of time to file a notice of objection to the 1991 reassessment. The
extension of time was refused on December 14, 2007. The Applicant did not apply
to the Tax Court for an extension of time following the Minister’s refusal.
[10]
On
February 22, 2012, the CRA issued an RTP to the CIBC, which is the subject of
the present application for judicial review.
Issues
[11]
The
Applicant contends that the 2012 RTP and the 1991 reassessment are invalid
because the Minister has failed to discharge its burden of proving the
existence of the 1991 notice of reassessment and the date of its mailing. The
Applicant submits that he never received the 1991 notice of reassessment, and
that the files produced by the CRA in 2005 and 2006 contain no such notice of
reassessment or any indication that the notice of reassessment was ever issued.
[12]
According
to the Applicant, the existence and validity of the alleged reassessment will
come down to the credibility and content of the affidavit of the person
designated by the Minister. In his view, the affidavit of that person (Mrs.
Irene Van Zeumeren) does not confirm that the notice of reassessment was ever
generated or mailed and, moreover, is deficient insofar as the affiant does not
state that she had charge of the appropriate records. Finally, the Applicant
also points to the following deficiencies in Mrs. Van Zeumeren’s affidavit: a)
she has only ever worked in collection and has never worked in audit; b) there
are contradictions within her affidavit; and c) she claims that the documents
were destroyed according to the CRA’s policy but does not provide a copy of
that policy or details on the destruction of those documents.
[13]
Yet,
all of these arguments are premised on the notion that the Federal Court has
jurisdiction to determine the validity of the 1991 assessment. The Respondent
vigorously disputes this assumption, and also submits that this application is
out of time.
[14]
The
questions to be decided, therefore, are the following:
i) Does
this Court have jurisdiction to determine the validity of the 1991
reassessment?
ii) Is the
application out of time?
iii) Does
the application have merit?
Analysis
i)
Does this Court have jurisdiction to determine the validity of the 1991
reassessment?
[15]
Pursuant
to s 18.1 of the Federal Courts Act, RSC 1985, c F-7, the Federal Court
clearly has jurisdiction over the legality of collection measures by CRA
officials: see Fuchs v Canada, [1997] 2 CTC 246, 129 FTR 168 (FC).
Since the Applicant is apparently challenging an RTP, and since the application
was filed within 30 days of the issuance of that RTP, this Court should prima
facie be in a position to entertain it.
[16]
Yet,
the essence of this application is not a challenge of the RTP itself, but a
challenge of the validity of the underlying reassessment. Although the issuance
of a notice of reassessment is indeed an act of a federal board, commission or
other tribunal pursuant to s 18.1 of the Federal Courts Act, Division J
of Part I of the Income Tax Act, RSC 1985, c 1, establishes a complete
appeal procedure for all issues related to reassessments. Subsection 12(1) of
the Tax Court of Canada Act, RSC 1985, c T-2, provides that the Tax
Court has original exclusive jurisdiction on matters arising under the Income
Tax Act.
[17]
Section
18.5 of the Federal Courts Act precludes an appeal to the Federal Court
where a federal statute grants specific jurisdiction to, inter alia, the
Tax Court. That section reads as follows:
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18.5 Despite
sections 18 and 18.1, if an Act of Parliament expressly provides for an
appeal to the Federal Court, the Federal Court of Appeal, the Supreme Court
of Canada, the Court Martial Appeal Court, the Tax Court of Canada, the
Governor in Council or the Treasury Board from a decision or an order of a
federal board, commission or other tribunal made by or in the course of proceedings
before that board, commission or tribunal, that decision or order is not, to
the extent that it may be so appealed, subject to review or to be restrained,
prohibited, removed, set aside or otherwise dealt with, except in accordance
with that Act.
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18.5 Par dérogation aux articles 18 et 18.1, lorsqu’une loi fédérale
prévoit expressément qu’il peut être interjeté appel, devant la Cour
fédérale, la Cour d’appel fédérale, la Cour suprême du Canada, la Cour
d’appel de la cour martiale, la Cour canadienne de l’impôt, le gouverneur en
conseil ou le Conseil du Trésor, d’une décision ou d’une ordonnance d’un
office fédéral, rendue à tout stade des procédures, cette décision ou cette
ordonnance ne peut, dans la mesure où elle est susceptible d’un tel appel,
faire l’objet de contrôle, de restriction, de prohibition, d’évocation,
d’annulation ni d’aucune autre intervention, sauf en conformité avec cette
loi.
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[18]
Counsel
for the Applicant tried to distinguish between the substantive and the
procedural validity of an assessment, arguing that the Tax Court has exclusive
jurisdiction only over the former and not over the latter. Such a distinction
is, however, unwarranted, and counsel for the Applicant cited no authority in
support of that proposition. Indeed, the Court of Appeal came to the opposite
conclusion in Walker v Canada, 2005 FCA 393, [2006] 1 CTC 130 [Walker]. In that case, the applicant was
challenging an RTP on the basis that he had never received the notice of
reassessment. The Court of Appeal confirmed that s 18.5 of the Federal
Courts Act effectively removes from the jurisdiction of the Federal Court
all matters related to reassessments:
15. An application for judicial review may be made
to the Federal Court to challenge the legality of collection measures taken by
the Minister to collect taxes allegedly due. However, the Federal Court’s
jurisdiction does not extend to an application involving an attack on the
underlying reassessment on which collection measures are based. In the present
case, the appellant says that the Minister cannot justify collection measures
by relying on a reassessment allegedly made in May 1998 without proving that
notice of it was mailed to him. This is sufficient to engage section 18.5.
[19]
At
the hearing, counsel for the Applicant tried to distinguish the case at bar
from Walker and argued that this is not a case where the applicant
argues that he never received the reassessment because it was not mailed to the
correct address, but more dramatically that there is no evidence that a reassessment
was ever made. In my view, this is a distinction without a difference. In both
cases, the validity of the notice of reassessment must be determined, and it is
irrelevant whether such a notice is invalid because it cannot be traced or
because there is no evidence that it was mailed to the correct address. By
virtue of s 12(1) of the Tax Court of Canada Act, the Tax Court has
exclusive jurisdiction irrespective of the arguments being mustered against the
notice of reassessment.
[20]
Counsel
for the Applicant made much of the decision rendered by Prothonotary Aalto in Carter
v Canada, 2009 FC 846, 2009 DTC 5152. In that case, the Minister had sent a
notice of reassessment to the wrong address in July 2007. The taxpayer learned
of the notice and attempted to file a notice of objection more than 90 days
after the notice was issued. The Minister refused to accept the notice of
objection as it was out of time, and the taxpayer applied to this Court for
judicial review of the Minister’s decision. The Minister applied to strike the
application on the basis that the Tax Court had exclusive jurisdiction to
determine the matter. Prothonotary Aalto refused the Minister’s application to
dismiss.
[21]
First,
it bears noting that Prothonotary Aalto’s order was set aside by Justice
O’Keefe in Carter v Canada, [2009] FCJ 1308, although no reasons were
provided. It should also be noted that Prothonotary Aalto’s order was made in
the context of a motion to strike brought by the Minister.
[22]
More
importantly, it appears from a careful reading of the Prothonotary’s order that
he was concerned with the apparent absence of a remedy for the taxpayer if the
Federal Court did not assume jurisdiction, since the applicant had not filed
(or could not file) an objection within the prescribed period. It is far from
clear, however, that a taxpayer is without recourse before the Tax Court
because he or she did not file a notice of objection within 90 days of the
alleged mailing of the notice of reassessment (or failed to request an
extension of time within one year), if it is claimed that the notice of
reassessment was never received. The time for filing an objection starts to run
on the day of the mailing of the notice of reassessment. It if can be
demonstrated that the notice was sent to the wrong address, or for that matter
was never sent or never made, the Tax Court would have jurisdiction to grant an
extension of time (Aztec Industries Inc v Canada (1995), 179 NR 383, [1995] 1
CTC 327 (FCA)).
[23]
In
any event, it would seem improper that a taxpayer would gain access to relief
from this Court simply by waiting for the prescribed period for objections and
appeals to expire. In Lazar v Canada (Attorney General) (1999), 168 FTR
11, 87 ACWS (3d) 1241, Justice Evans wrote, at para 18:
It would surely be anomalous if, by the simple
expedient of failing to appeal in time, an applicant were able to avoid having
to use a statutory right of appeal before invoking the Court’s supervisory
jurisdiction.
[24]
It
is also telling that the Applicant could only apply to this Court because he
failed to appeal to the Tax Court within 90 days of the Minister’s refusal to
grant him an extension of time when he filed an objection to the 1991
reassessment in 2007.
[25]
For
all of the above reasons, I am therefore of the view that the Federal Court,
despite having jurisdiction over the legality of RTPs, does not have
jurisdiction on issues related to the underlying reassessment, whether or not
the validity of the reassessment is raised. In a case such as the case at bar,
the challenge of the RTP is merely collateral to a challenge of the underlying
reassessment.
ii) Is the
application out of time?
[26]
Even
assuming that this Court has jurisdiction over the validity of the 1991
reassessment, I agree with the Respondent that the application was commenced
after the limitation period expired.
[27]
The
Applicant, by his own admission, learned of his tax debt in March 1996, nine
months after the 1991 reassessment was issued on June 8, 1995. Had he then made
inquiries, which could be reasonably expected, he would have learned of the
1991 reassessment and presumably he would have received a copy of the notice of
reassessment. Assuming that the notice of reassessment was indeed never mailed
by the CRA in 1995, the Applicant could have challenged the reassessment 90
days after the reassessment was actually mailed, and he could have sought an
extension of time one year after the expiration of that period, as a result of
ss 165(1),
166.1(1) and 166.1(7) of the Income
Tax Act. The Applicant, however, chose not to inquire about his tax debt
and waited until November 2007 to apply for an extension of time to file a
notice of objection, claiming that he did not receive notice of the 1991
reassessment. When the Minister denied the Applicant’s request in December 2007,
he did not seek redress from the Tax Court. Instead, he waited another four
years to commence these proceedings.
[28]
This
application is subject to section 32 of the Crown Liability and Proceedings
Act, RSC 1985, c C-50, according to which he had six years after his cause
of action arose to commence the application. A cause of action is “a set of
facts that provides the basis for an action in court”: Doig v Canada, 2011 FC 371, at paras 30-31, 387 FTR 156. In the present case, the Applicant’s
cause of action arose when he knew or ought to have known of the Minister’s
assertion that he owed a tax debt and began collection actions against him to
recover that debt – that is in March 1996. Accordingly, the Applicant should
have commenced proceedings on or before March 2002.
[29]
Aside
from the fact that the Applicant was told by a collection officer in March 1996
that he owed over $10,000, there is considerable evidence that the Applicant
knew, or ought to have known, of his cause of action prior to the expiry of the
six-year limitation period (i.e. February 2006). Statements were issued or
balances were quoted to the Applicant or his representative between June 1995
and December 1999, referencing the tax debt which the Applicant now refutes.
During the period of May 1996 to December 1999, the Respondent issued four
Notices of Assessment to the Applicant which referenced the tax debt. From
September 2004 to February 2006, there was email and letter correspondence as
well as telephone conversations between the Applicant or his representative and
the Respondent whereby he was made aware that there were attempts to collect
the tax debt and his tax situation was discussed. The Applicant cannot credibly
pretend, therefore, that he only became aware of his tax debt and of the 1991
reassessment less than six years before filing his application for judicial
review.
[30]
As
a result, there is no need to look into the merit of the Applicant’s claim that
the 1991 reassessment does not exist. If there are no remaining hard copies of
the relevant documents, it is so only because the Applicant failed to take
action in March 1996 or shortly thereafter. Had he done so, witnesses and
documents would be available, and he would have been able to properly challenge
the validity of the 1991 reassessment.
[31]
Consequently,
this application for judicial review is dismissed, with costs.
JUDGMENT
THIS
COURT’S JUDGMENT is that this application for judicial review is
dismissed, with costs.
"Yves de
Montigny"
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