Autonum, Solutions de financement aux consommateurs inc. v. Agence du revenu du Québec, 2024 QCCQ 1195

After speaking with counsel for the ARQ about three weeks before the scheduled trial date, the ARQ auditor concluded that Autonun should have been assessed pursuant to QSTA s. 318 (similar to ETA s. 182, regarding amounts forfeited to a taxable supplier being deemed to be inclusive of tax), rather than pursuant to QSTA s. 92 (similar to ETA s. 168(9), regarding deposits not being taxable consideration until applied as consideration) on which the assessment of Autonun had been based. One week later, the ARQ sought leave of Autonun to amend its pleading to provide that the assessment rested on s. 318 rather than s. 92, which Autonun refused.

Before rejecting the ARQ’s request to make such amendment, Bergeron JCQ first noted that TAA s. 95.2 (similar to ITA s. 152(9) and ETA s. 298(6.1)) on its face gave the ARQ an unfettered right to advance an alternative basis for its assessment. However, he noted that the request here was made before the Court of Quebec, and stated (at para. 33, TaxInterpretations translation):

In such a case, since TAA section 93.1.7 provides that a court challenge to an assessment is governed by the rules of court procedure of the C.c.p., the right of the Agency to submit new arguments, if exercised in the context of a request to modify its defence, as is the case here, is subject to the conditions governing the amendment of a procedural document, which are found in C.c.p. section 206.

Section 206 provided that there can be such an amendment “provided doing so does not delay the proceeding and is not contrary to the interests of justice” but that “the amendment of a pleading must not result in an entirely new application having no connection with the original one.”

Bergeron JCQ found that none of the quoted tests were satisfied: there would be significant delays including fresh discovery of the ARQ; the ARQ had failed to explain to Autonun why it had changed the assessment’s basis (so that Autonun would be required to “navigate blindly, in thick fog” (para. 43); and (regarding the third test) there indeed was a new application given that the auditor had affirmed “that the foundations underlying QSTA sections 92 and 318 are conceptually different and lead to different results” (para. 49).

Three weeks before trial, the ARQ auditor concluded that Autonun should have been assessed pursuant to QSTA s. 318 (similar to ETA s. 182, regarding amounts forfeited to a taxable supplier being deemed to be inclusive of tax), rather than pursuant to QSTA s. 92 (similar to ETA s. 168(9), regarding deposits not being taxable consideration until applied as consideration) on which the assessment of Autonun had been based. One week later, the ARQ sought leave of Autonun to amend its pleading to provide that the assessment rested on s. 318 rather than s. 92, which Autonun refused.

Before rejecting the ARQ’s request to make such amendment, Bergeron JCQ first noted that TAA s. 95.2 (similar to ITA s. 152(9) and ETA s. 298(6.1)) on its face gave the ARQ an unfettered right to advance an alternative basis for its assessment. However, he found that where the amendment request was made in the context of a Quebec court proceeding, it was required to satisfy the Quebec Code of Civil Procedure, including section 206 thereof. Section 206 provides that there can be such an amendment “provided doing so does not delay the proceeding and is not contrary to the interests of justice” but that “the amendment of a pleading must not result in an entirely new application having no connection with the original one.”

Bergeron JCQ found that none of the quoted tests were satisfied: there would be significant delays including fresh discovery of the ARQ; the ARQ had failed to explain to Autonun why it had changed the assessment’s basis (so that Autonun would be required to “navigate blindly, in thick fog” (para. 43, TaxInterpretations translation); and (regarding the third test) there was indeed a new application given that the auditor had affirmed “that the foundations underlying QSTA sections 92 and 318 are conceptually different and lead to different results” (para. 49).

An ARQ request to change the pleaded basis of the ARQ assessments from the QSTA equivalent of s. 168(9) to that of s. 182 was rejected in light inter alia of the auditor having affirmed “that the foundations underlying [the two sections] are conceptually different and lead to different results” (para. 49, TaxInterpretations translation).