Lemay Co Inc. v. Attorney General of Canada, 2024 FC 995

On audit, CRA determined that the taxpayer (Lemay) had made Canada Emergency Wage Subsidy (CEWS) claims for periods 6, 7 and 13 to 15 that were excessive to the extent of $311,204 but had underclaimed for periods 8 to 12. After CRA proposed to assess only the underclaim periods, Lemay made a request that CRA exercise its discretion pursuant to s. 125.7(16) to allow increased CEWS claims for periods 8 to 12 of $1,715,341. CRA refused that request and confirmed its intention to assess the other periods. Lemay then made a further submission that CRA could accept its additional refund claims by virtue of ss. 164(1)(b) and 152(3.4). CRA responded on September 11, 2023 that it lacked such authority and that, in particular, s. 125.7(5)(a) limited the amount of the CEWS subsidy to the amount initially claimed by the taxpayer (but indicated that it wanted to consider further whether s. 125.7(16) was available). Lemay brought an application for judicial review of the September 11, 2023 decision, and the Attorney General brought this motion to strike the application on the basis that the interpretation advanced had no chance of success and was premature (as relief was available under s. 125.7(16).) In rejecting such claim that there was no chance of success, Régimbald J stated (at paras. 28, 30, TaxInterpretations translation):

[I]t is not clear, in light of sections 125.7(5), 152(3.4) and 164(1)(b), considered together and which are the subject of the application for judicial review, that the ITA does not allow the Minister to accept an amended prescribed form as requested by the plaintiff. …

In the absence of a complete and convincing argument demonstrating that sections 152(3.4), 164(1)(b) and 125.7(5) of the ITA, considered together, defeat the interpretation proposed by Lemay based on the Minister having the discretion to accept the filing of an amended prescribed form, the defendant has therefore not discharged its burden of demonstrating that it is clear and obvious that the interpretation proposed by Lemay has no reasonable chance of acceptance ….

Before dismissing the defendant’s motion to strike, Régimbald J also rejected the defendant’s argument of prematureness, noting that CRA had rejected Lemay’s request for relief under s. 125.7(16).

On audit, CRA determined that Lemay had made Canada Emergency Wage Subsidy (CEWS) claims for periods 6, 7 and 13 to 15 that were excessive to the extent of $311,204 but had underclaimed for periods 8 to 12. CRA proposed to assess the $311,204 but refused Lemay’s request that it exercise its discretion pursuant to s. 125.7(16) to allow increased CEWS claims for periods 8 to 12 of $1,715,341. Later, CRA rejected a further Lemay submission that CRA could accept its additional refund claims by virtue of ss. 164(1)(b) and 152(3.4) – on the basis inter alia that s. 125.7(5)(a) limited the amount of the CEWS subsidy to the amount initially claimed by the taxpayer. Lemay brought an application for judicial review of this decision, and the A.G. brought this motion to strike the application on the basis that the interpretation advanced had no chance of success and was premature (as relief was available under s. 125.7(16).) In rejecting the claim that there was no chance of success, Régimbald J stated (at paras. 28, 30, TaxInterpretations translation):

[I]t is not clear, in light of sections 125.7(5), 152(3.4) and 164(1)(b), considered together and which are the subject of the application for judicial review, that the ITA does not allow the Minister to accept an amended prescribed form as requested by the plaintiff. …

[T]he defendant has therefore not discharged its burden of demonstrating that it is clear and obvious that the interpretation proposed by Lemay has no reasonable chance of acceptance ….

Before dismissing the defendant’s motion to strike, Régimbald J also rejected the defendant’s argument of prematureness, noting that CRA had rejected Lemay’s request for relief under s. 125.7(16).