Loiselle v. Agence du revenu du Québec, 2019 QCCQ 4647

The taxpayer was experiencing difficulties in locating documents to substantiate the amount of her capital gain form the disposition of shares of a company. On January 29, 2014, which was over three months before the expiry of the normal reassessment period for the year of disposition, the taxpayer met with an ARQ auditor (Mr. Drapeau) and signed, at his suggestion, a waiver, which was worded to extend to all sources of income rather than only the share sale. In February, the taxpayer learned from her accountant that she did not have to sign the waiver and, on the accountant’s advice, filed a revocation of the waiver. On September 15, 2914 (i.e., beyond the normal reassessment period), CRA reassessed the year to increase the capital gain over the amount reported.

The taxpayer’s appeal raised the validity of her waiver. Lévesque, J.C.Q. considered this issue to turn in part on whether the taxpayer’s consent was “free and enlightened” as required by Article 1399 of the Quebec Civil Code. She also referred to Article 1400, which provided: “Error vitiates the consent of the parties or of one of them where the error relates to the nature of the contract, to the object of the prestation or to any essential element that determined the consent.”

Before finding that the waiver was valid, Lévesque, J.C.Q. stated (at paras. 54-56, TaxInterpretations translation):

Nothing in the evidence demonstrated that Mrs. Loiselle signed the waiver through error or as a result of misrepresentation on the part of Mr. Drapeau.

Very much to the contrary, Mr. Drapeau had explained clearly and simply to Mrs. Loiselle that her signature to the waiver enabled her to assemble the documents necessary for substantiating her computation of the capital gain and avoiding a rushed assessment, which would not be in her interests.

In fact, Mrs. Loiselle received from Mr. Drapeau all the particulars necessary in order that she could give a free and enlightened consent by signing the waiver.

After noting that pursuant to the equivalent of ITA s. 152(4.1), six months had to run for the revocation to have effect, and the ARQ reassessed within this six month period, she stated (at para. 73) that “the revocation only served to confirm her acceptance of the waiver.”

The taxpayer, after being asked by the ARQ to substantiate her capital gain computation for a share sale, met with the ARQ auditor (Mr. Drapeau) over three months before the expiry of the normal reassessment period and signed, at his suggestion, and on the spot and without the benefit of professional advice, a waiver, which was worded to extend to all sources of income rather than only the share sale. Shortly thereafter, she told her accountant what she had done and, on his advice, she sent a revocation of the waiver to the ARQ. Under the Quebec equivalent of ITA s. 152(4.1), six months had to run for the revocation to have effect, and the ARQ reassessed within this six month period to increase the capital gain from what she had reported.

After finding that the taxpayer could not resile from her waiver given that her signature to the waiver was “free and enlightened,” Lévesque, J.C.Q. stated (at paras. 73-74, TaxInterpretations translation):

[T]he revocation only served to confirm her acceptance of the waiver.

In order to raise her having signed the revocation in error, Mrs. Loiselle should instead have contested the validity of the signature affixed to such document … .