Citation: 2009 TCC 576
Date: 20091105
Docket: 2002-557(IT)G
BETWEEN:
ELENI SKALBANIA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR DETERMINATION OF LAW
Hershfield J.
The Issue
[1] The Appellant seeks a determination of a question
of law pursuant to paragraph 58(1)(a) of the Tax Court of Canada
Rules (General Procedure).
[2] The determination sought is that the reassessment
being appealed was not made within the normal assessment period because it was
not sent by the Minister of National Revenue (the “Minister”) within the time
required for doing so. If the determination sought is made, the appeal would be
allowed and judgment could be given accordingly. If the determination sought is
not made, the appeal would proceed in the normal course.
[3] A Statement of Agreed Facts was filed which
satisfies a requirement for the subject Rule to apply, namely that no
facts be in dispute.
Indeed both parties acknowledged that all the requirements for the
determination sought to be heard were met. I am satisfied that this is the case
as well.
[4] The question of law to be determined ultimately
rests on a finding of whether the subject Notice of Reassessment was sent by
the Minister on the day asserted by the Respondent. That day, May 28, 2001, was
the last day of the normal reassessment period as prescribed by paragraph
152(3.1)(b) of the Income Tax Act (the “Act”). It was the
last day of the three year period following the day of mailing of the original
Notice of Assessment which was May 28, 1998.
[5] The authority for the Minister to reassess within
the normal assessing period is found in subsection 152(4) of the Act.
That subsection permits the Minister to “make” the reassessment within the time
just referred to. The question as to whether the Minister “made” the subject
reassessment on May 28, 2001 will, as noted, ultimately rest on a finding of
whether the subject Notice of Reassessment was “sent” on that day as asserted
by the Respondent.
Facts
[6] The agreed facts are as follows:
- The Minister prepared the
subject Notice of Reassessment (the “Notice”) which was dated May 28, 2001.
- On the same day the Notice
was placed in an envelope addressed to the Appellant at her proper mailing
address in Vancouver.
- The envelope containing the
Notice was registered on the same day with Canada Post at Winnipeg for delivery to the Appellant at her mailing address.
- An officer of the Canada
Customs Revenue Agency identified, as an exhibit to an affidavit, the post
office certificate of registration of the envelope which registration date was
May 28, 2001.
- The envelope bore the return address of
the Minister at Winnipeg.
- The envelope was never
delivered to the Appellant and Canada Post never obtained the signature of the
Appellant or that of her representative in respect of the envelope, its
contents or its delivery.
- By June 21, 2001 Canada
Post returned the envelope and its contents to the Minister at Winnipeg as indicated by the word “Cancelled” stamped on the
certificate of registration referred to above. The return of the envelope was
pursuant to the Undeliverable Mail and Redirected Mail Regulations.
- On September 6, 2001 the
Minister mailed the Notice to the Appellant’s business. It was received by the
Appellant’s assistant and delivered to the Appellant’s solicitor.
The Law
[7] The parties accept that the settled law dealing
with the reassessment process is that a reassessment is not “made” until the
Minister has completed the reassessment process by sending a notice of
reassessment to the taxpayer. This statement of the law is found in Jozo (Joe)
Kovacevic v. The Queen, 2002 DTC 1986 at paragraph 5. It is a statement of
the law that is supported as well by the legislation. Subsection 244(15) of the
Act provides that “Where any notice of assessment or determination has
been sent by the Minister as required by the Act, the assessment
or determination is deemed to have been made on the day of mailing of
the notice of the assessment or determination.” (Emphasis added.) Section 248
of the Act defines assessment to include a reassessment which is to say
that the reassessment process includes as its final step the sending of the
reassessment. That is when the reassessment is “made” for the purposes of
determining whether a reassessment was made within the normal reassessment
period.
[8] About this there is no dispute. The question
posed of when the reassessment was “made” in this case will thus turn on
whether the Notice was “sent” on May 28, 2001 being the last day of the normal
reassessment period.
[9] In a nutshell, the argument of the Appellant is
that registered mail is a process distinct from other methods of sending mail
and is not complete where it is returned to the sender pursuant to the Canada
Post Regulations.
[10] The Respondent relies on the presumption of proof
of “sending by mail” that is set out in respect of registered mail in
subsection 244(5) of the Act and on a body of jurisprudence supporting
the view that the delivery of a notice to a third party such as Canada Post
completes the act of “sending” for the purposes of determining whether or not a
reassessment was made within the normal assessment period.
[11] I agree with the Respondent’s position. However,
before concluding with my reasons for coming to this conclusion it is necessary
to examine more closely the Appellant’s arguments as they have been carefully
crafted and merit consideration. Further, they are not entirely without support
as suggested in at least one authority that is relied on by the Appellant,
namely, Grunwald v. Canada, 2005 FCA 421.
Appellant’s Arguments
[12] The Appellant argues that a recurrent theme in
much of the jurisprudence dealing with the Minister’s obligation to complete
the reassessment process is that it requires as the final step sending effective
communication of the reassessment.
[13] The first case relied on is Scott v. Canada (Minister of National
Revenue - M.N.R.), 60 DTC 1273.
In that case Thurlow J. observed at page 11 that Parliament could not be presumed
to have intended that a required notice could be given by mailing if it could
not thereby be given effectively such as where the mailing was to a wrong or
fictitious address. Such an ineffective mailing could not be regarded as sent.
[14] Referring to Herbert Flanagan v. The Queen and
The Minister of National Revenue, 87 DTC 5390, it was argued that the
Federal Court of Appeal had to have had effective delivery in mind when it
found that a failed attempt at personal delivery of a notice by an employee of
the Minister meant that the notice was not sent or dispatched as required.
Sending and retention were not compatible.
[15] In Grunwald, Justice Rothstein speaking for
the Federal Court of Appeal calculated the expiry date of a limitation period
by starting it on an effective personal service date as opposed to an earlier
registered mail date where the registered mail was unclaimed. The inference was
that unclaimed, undelivered or cancelled registered mail did not constitute a
“sending” of the notice.
[16] Appellant’s counsel also referred me to portions
of Justice Rothstein’s judgment that pointed out, for example at paragraph 47,
that the Act was inconsistent as to the procedures whereby the Minister
was required to communicate to a taxpayer. Such a fundamental obligation should
be clear and needed to be addressed by Parliament. Appellant’s counsel’s
suggestion was that the inconsistencies should lead me to make a finding that
favoured a construction that gave the benefit to the taxpayer.
[17] Arguing on the other hand, that should I find that
the language of the Act was clear, Appellant’s counsel referred me to
yet another portion of Justice Rothstein’s judgment in Grunwald at
paragraph 16 that underlined that even clear language should not be given effect
where to do so gives rise to an absurd result. Seeing the purpose of the notice
provisions as requiring effective communication by the Minister to taxpayers,
the argument appears to be that I should seize on the opportunity, in respect
of registered mail, to recognize that a cancelled registration, being
ineffective communication, should not be regarded as having been sent. This
would avoid the application of a draconian construction that imposes a timely
response obligation on a taxpayer whether or not he even knows about the
reassessment.
[18] Appellant’s counsel also referred me to provisions
of the Canada Post Corporation Act which refers to the Special Services
and Fees Regulations governing the delivery of registered mail. Subsection 6(1)
of those regulations provides for registration of a letter on payment of the
applicable fee and subsection 6(8) provides that the signature of the addressee
or his representative must be obtained before registered mail is delivered.
This suggests that the passing on of the Notice to Canada Post, returnable to
the Minister, was not a completed surrender of the Notice. That being the case,
the Notice could not be regarded as dispatched in any real or final sense.
[19] While I do not find it necessary to recite Respondent’s
counsel’s arguments since my own analysis will cover many of the same points, I
will refer to three such arguments that were dealt within Appellant’s counsel’s
rebuttal.
[20] Firstly, as noted earlier in these Reasons,
Respondent relies on the presumption in subsection 244(5) of the Act
that the certificate of registration of a registered letter shall be received
as evidence of the “sending”. The rebuttal was to note that the subsection
actually provides that the certificate of registration of a registered letter
shall “in the absence of proof to the contrary” be received as evidence of the
“sending”. The rebuttal argument was that the agreed facts are proof to the
contrary.
[21] Secondly, the
Respondent relied on subsection 244(15) of the Act which, as noted
above, provides that where a
notice of an assessment or reassessment has been sent by the Minister as
required by the Act, the assessment or reassessment is deemed to have
been made on the day of mailing of the notice. The Appellant notes that
her position is based on the argument that the subject Notice was not sent.
That is the determination requested; namely, whether the subject Notice was
sent on the day it was registered at the post office and left there for
delivery. I agree, whether subsection 244(15) applies begs the question before
me.
[22] Thirdly, the Respondent relied on VIH Logging
Ltd. v. Canada, 2004 DTC 2090; 2003 TCC 732 as authority for the
proposition that “sent” means “dispatch” as suggested by the Federal Court of
Appeal in Flanagan. In VIH Logging Ltd., Justice Woods found that
delivery by the Minister to a courier was sufficient dispatch of the Notice in
that it was a giving up of possession of the notice. That the Minister had some
power to recall the notice was not relevant. Giving up possession to a third
party was sufficient. Justice Woods observed that the notion that giving up
possession needed to be coupled with giving up control to recall, was not
suggested by the authorities. The Appellant noted in rebuttal that these
observations were obiter dicta and not persuasive.
Analysis
[23] The starting point in the analysis is to revisit
the purpose of requiring the Minister to send notices of the type that is the
subject of this determination.
[24] That purpose was well described in Kovacevic.
At paragraph 5 Justice Bonner stated as follows:
It is long settled law that an assessment is not made until the
Minister of National Revenue (the “Minister”) has completed the assessing
process by sending notice of the assessment to the taxpayer. …
[25] Inherent in this statement is, in my view, the
notion that the “sending” of notices by the Minister has precious little to do
with communicating anything to the taxpayer. It is about identifying when the
Minister completed the reassessment process. It is the completion date that
measures whether the Minister has taken too long to reassess a taxpayer. The
Minister cannot examine, enquire, propose and mull over its reassessing
position forever. That process must end by a certain outside date and the
manner of satisfying this requirement is to put it in writing and release it,
by that date, from the confines and tinkering of the Agency. The correctness of
this construction of the requirement of “sending” notices is abundantly clear to
me.
[26] Nothing in the Appellant’s arguments, as carefully
crafted as they were, suggests that a different conclusion is warranted on the
facts of this case involving a notice sent by registered mail. Indeed, to
suggest otherwise would mean that a taxpayer could foil the Minister’s ability
to reassess within the normal reassessment period by avoiding receipt of
registered mail.
[27] The Appellant’s position might be best dealt with
by referring separately to each aspect of the argument made.
[28] The Appellant cannot rely on the decision in Scott
as authority for the proposition that a notice needs to be communicated to a
taxpayer to be an effective sending. More recent cases have made that
abundantly clear. For example, in Schafer v. Canada, 2000 DTC 6542, the
Federal Court of Appeal confirmed that proof of failure of the postal system
resulting in non-receipt does not change the start date of a prescribed
limitation period.
[29] The Appellant cannot rely on the decision in Flanagan
as authority for the proposition that a notice needs to be communicated to
a taxpayer to be an effective sending. The failure in that case to “send” a
notice resulted from the fact that the Minister never caused the notice to
leave the possession of the Canada Revenue Agency (“CRA”) personnel. It was not
a question of whether the taxpayer received the notice. It was a finding that a
notice that stays in the possession of the CRA cannot be regarded as having
been sent. The case re-enforces the view that the Minister will only be
regarded as having completed the reassessment process if the notice is turned
over to a third party as part of a genuine delivery process. It matters not
that the process may fail for any reason. That the Minister may regain
possession of the notice, either by operation of law (such as mail returned by
Canada Post, registered or not) or by contract such as with a third party
courier, is of no import. The process is presumed to be transparent. Regaining
possession cannot vitiate the initial sending.
[30] This point is brought home most clearly in VIH
Logging Ltd.. While Justice Woods’ comments, as noted above, may well be obiter
dicta, they are compelling. She found that even though the Minister had
some power to recall a courier so as to frustrate delivery of a notice, the
notice must still be regarded as having been sent. While there may well be
limits on this approach, absent evidence of bad faith or other similar reason
for finding that the Minister retained effective possession and control of the
notice, it is an approach that, in my view, reflects the law as intended to be
applied by Parliament.
[31] In Grunwald, Justice Rothstein made it
absolutely clear at paragraph 13 that he should not taken as making any finding
on the effectiveness of sending a notice (by registered mail in that case)
which was subsequently returned as unclaimed. He chose to avoid that question
by looking only to a subsequent sending of the notice. In that case, looking at
the later date extended the time available to file an objection. However, even
that generous approach failed to result in a favourable outcome for the
Appellant. This obviated the need to consider the issue of the earlier sending
of the notice by registered mail – the taxpayer was out of time even
disregarding the earlier sending, so it was disregarded. The inference that
Appellant’s counsel wants me to draw from the case cannot be made.
[32] As well, I cannot embrace the Appellant’s
counsel’s suggestion that inconsistencies in the language in the Act regarding
giving notice, as pointed out in Grunwald, should lead me to a less
draconian construction of the subject provisions so as to avoid the absurdity
of requiring a taxpayer to act on a wholly ineffective communication of a CRA
reassessment.
[33] Keeping in mind that the purpose of the sending
requirement has not been found to be communication to the taxpayer, one must
ask how else is the noted absurdity avoided. The answer to that is, arguably at
least, found in the time limits imposed on a taxpayer to respond to the notice.
That time limit (90 days from mailing an assessment, reassessment or
confirmation) can be extended by a full year on application to the Minister and
then to this Court if the Minister does not grant the extension. See sections
166.1, 166.2 and 167 of the Act. The basis for allowing extensions
includes consideration of just and equitable grounds. Arguably, such extensions
would resolve most cases of initial non-communication. Indeed, it would
presumably resolve all cases of initial non-communication where the CRA has
knowledge of a delivery failure and has, such as in the present case, diligently
pursued, as a follow-up, a more effective method of communication. Indeed, that
follow-up, in the case at bar, assured the Appellant her day in Court.
[34] While this model adopted by Parliament to address
ineffective communications may still seem draconian and potentially harsh and
unjust, it is the model adopted by Parliament to contain the duration of
disputes over revenue collections.
[35] At this point, I note as well, that there should
be no question that even though the method of sending notices is not prescribed
under the Act, registered mail is an acceptable method of “sending” by
mail. Indeed, one can imagine that it might be seen as preferable from an
evidentiary point of view and as being more reliable from a delivery point of
view. Regardless, subsection 244(5) clearly provides that registered mail will
satisfy the sending requirement.
[36] It is true, however, that the certificate of
registration referred to in that subsection will only be evidence of sending in
the absence of proof to the contrary. While that qualification might well be
taken to mean that evidence of failure to deliver the registered letter
dictates a finding that there has been no sending, I do not take that to be the
case. What is rebuttable here is not the delivery to the taxpayer, but rather
is the delivery and registration of the notice to Canada Post. Evidence that
the envelope was empty or contained something other than the notice would, for
example, defeat the evidence of sending the notice.
[37] Lastly, I note that the provisions of the Canada
Post Corporation Act and the Special Services and Fees Regulations
governing the handling of registered mail do not impress me as having any
impact on the question before me. The terms of reference of a third party
holder of a notice who is given possession of it by the Minister for the
genuine purpose of delivery are irrelevant to the question as to when the
notice has been dispatched. The dispatch alone or surrender of the notice is
the act that renders the reassessment as having been made.
[38] On that basis, and for all the reasons noted
above, I conclude that the subject reassessment was made on May 28, 2001 and was
thereby made within the normal assessing period.
[39] No submissions were made in respect of
costs.
[40] Accordingly, the appeal of the reassessment shall
be prosecuted in the normal course and costs shall be in the cause.
Signed at Ottawa,
Canada this 5th day of November 2009.
"J.E. Hershfield"
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