Citation: 2009 TCC 496
Date: 20091001
Docket: 2009-979(IT)APP
BETWEEN:
ALDON JOHNSON,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Woods J.
[1] This is an application brought by Aldon Johnson for an
extension of time. The matter relates to assessments issued under the Income
Tax Act for the 1999, 2000, 2001 and 2002 taxation years, for which the
total amount owing is over $50,000.
[2] The application was filed by Mr. Johnson’s solicitor.
The solicitor, who did not attend the hearing, subsequently filed with the
Registry a notice of intention to cease to act.
[3] Mr. Johnson was informed by his former solicitor that
he should attend the hearing and he did so. It appeared that he had very little
understanding of what the application was all about.
[4] It is useful to begin by setting out the procedural
history.
[5] On March 17, 2009, the solicitor filed with the Court a
letter applying to extend the time to file a notice of appeal. A notice of
appeal in Form 21(1)(a) was appended to the application.
[6] A second letter, dated April 7, 2009, was filed by the
solicitor, which modified the original application. It stated that, pursuant to
a telephone conference with an officer of the Court’s Registry, both letters
should be considered to constitute an application to extend time to file a
notice of objection.
[7] On July 2, 2009, the respondent filed with the Court a
reply to the application to extend time to serve a notice of objection.
Appended to that reply was a supporting affidavit of an officer of the Canada
Revenue Agency.
[8] According to the reply, the application is opposed. The
reason appears to be that Mr. Johnson did not make a request for an extension
of time under section 166.1 of the Act within the time period stipulated
in subsection 166.1(7).
[9] The background to this matter is set out in some
detail in the original application. The relevant parts of the letter are set
out below:
Enclosed for
filing please find a Notice of Appeal on behalf of the above noted taxpayer.
Please accept
this letter as our client’s formal application for an extension of time to
appeal the assessment of his personal income tax for the taxation years 1999,
2000, 2001 and 2002.
The taxpayer
is one of three individuals that the undersigned has represented in proceedings
before the Ontario Court of Justice pursuant to s.490 of the Criminal Code of
Canada. In those proceedings the Crown sought an application for the forfeiture
of approximately $60,000 which had been seized from the three individuals on
November 5, 2001 at the Lester B. Pearson International Airport in Toronto.
Each individual was in possession of approximately $20,000. The Crown alleged
that the funds seized were the proceeds of crime. In early October 2002, the
Crown decided not to lay charges against the three individuals which meant the
funds were not needed as evidence and were subject to being returned to the
individuals. At that time the Minister of National Revenue reassessed all three
individuals for the tax years 1999, 2000 and 2001 for an amount exceeding the
funds seized from them. The Minister of National Revenue then issued a
Requirement to Pay in respect of each taxpayer to the RCMP who were holding the
seized funds.
None of the
three individuals was ever charged with a criminal offence in respect of the
funds. However, the Crown did make an application under s.490 of the Criminal
Code seeking forfeiture of the funds. The application was dismissed on July 31,
2003 after the Crown’s evidence was struck for failing to comply with the laws
of evidence. However, in July 2004 the matter was sent back for a rehearing on
appeal to the Ontario Superior Court. The individuals appealed to the Ontario
Court of Appeal which upheld the original decision on the exclusion of evidence
but nonetheless remitted to the matter to the Ontario Court of Justice for
re-hearing. When the matter came on for hearing again in December 2006, the
Crown was ordered to fully disclose information to the individuals pursuant to
the Charter. This information we believed would reveal the level
of cooperation between the RCMP and the Minister of National Revenue. The
information was to have been disclosed by February 15, 2007. When the Crown
failed to disclose the information by that date, the Crown prosecutor handling
the matter advised the undersigned that the Crown did not intend to proceed
with the s.490 application. However, the matter has not been concluded and the
RCMP still hold the funds and take the position that the taxpayer’s portion of
the funds must be turned over to the Minister of National Revenue pursuant to
the Requirement to Pay issued to the RCMP.
The other two
individuals successfully appealed their assessments for 1999, 2000, 2001 and
2002. The decisions of this Court in those cases are enclosed: R. v.
Beavis, 2008 CarswellNat 456; R. v. West, 2006
CarswellNat 3456. The latest case was heard in January 2008. It is obvious from
these decisions that in assessing income the Minister of National Revenue used
the net worth approach based on generalized statistics from Statistics Canada.
Neither of the individuals had substantial assets.
It appears
that the Minister National Revenue was advised by the RCMP of the funds that
were seized and took steps to assess income with very little factual basis so
as to be able to issue a Requirement to Pay to the RCMP. This provided a
backstop to the Crown in the event the funds were ordered to be returned to the
individuals under section 490.
Our client
will testify that he had no income for the tax years in question. He has
limited education having dropped out of school at an early age. When he
realized the notices of assessment affected him and not his father (who is also
Aldon Johnson) he contacted a representative of Canada Revenue Agency and
explained that he had not earned income in the tax years in question. He was
provided with no assistance at all. He didn’t realize that he could still appeal
these assessments until our office advised him of his rights recently. We
became involved after learning from the RCMP that they had received a
Requirement to Pay in respect of the seized funds.
The taxpayer
has incurred significant unpaid legal fees in respect of the seized funds and
must now incur further legal fees in respect of this appeal. The judgement is
for in excess of $54,000. If the judgement remains, the taxpayer will have no
choice but to declare bankruptcy.
Discussion
[10] Neither
party made reference to the applicable provision in dealing with an application
of this nature. It is subsection 166.2(5) of the Act, which provides:
166.2(5). No
application shall be granted under this section unless
(a) the application was made under subsection
166.1(1)
within one year after the expiration of the time otherwise limited by this Act
for serving a notice of objection or making a request, as the case may be; and
(b) the taxpayer demonstrates
that
(i)
within the time otherwise limited by this Act for serving such a notice or
making such a request, as the case may be, the taxpayer
(A) was unable to act or to instruct
another to act in the taxpayer's name, or
(B) had a bona fide intention
to object to the assessment or make the request,
(ii)
given the reasons set out in the application and the circumstances of the case,
it would be just and equitable to grant the application, and
(iii)
the application was made under subsection 166.1(1)
as soon as circumstances permitted.
[11] The relevant time requirement is set out in s.
166.1(5)(a). In essence, it provides that an extension of time cannot be
granted by the Court unless the taxpayer had previously applied to the Minister
for an extension within one year after the normal time for making an objection.
This requirement is strict. No exceptions are provided, even in cases of
hardship.
[12] The question, then, is whether such an application to
the Minister was made in a timely manner.
[13] Mr. Johnson’s solicitor sent a letter to the Chief of
Appeals dated January 21, 2009 which sought an extension of time to serve a
notice of objection. Based on the facts set out in the affidavit filed by the
respondent, the extension request was clearly out of time.
[14] The Court
cannot ignore the requirement in s. 166.1(5)(a). Since the applicant has
not demonstrated compliance with this provision, the application must be
dismissed.
[15] It is
always unfortunate if an appeal must be dismissed for a procedural misstep such
as a failure to object or appeal on a timely basis. It is not possible to
ignore the requirement, however: Bormann v. The Queen, 2006 FCA 83, 2006
DTC 6147.
[16] The consequences to Mr. Johnson of this conclusion
could be quite severe. The amount at issue is substantial, and it appears that
two other taxpayers in similar circumstances were successful in large measure
in their appeals to this Court.
[17] In all
the circumstances of this case, it is my hope that the Minister would review
the assessments notwithstanding that Mr. Johnson does not have an appeal to
this Court. The review would take into account the decisions of this Court in
the two other appeals that were mentioned in the application.
[18] Finally, I will include in the order a direction to the
Registry that a copy of this decision be provided to Mr. Johnson’s former
solicitor as well as to Mr. Johnson. Although the solicitor did not appear at
the hearing, he was the counsel of record at the time of the hearing.
Signed at Ottawa, Canada this 1st day of October 2009.
“J. M. Woods”
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