Citation: 2006TCC576
Date: 20061124
Docket: 2006-428(GST)APP
ENTRE :
DUO COMMUNICATIONS DU CANADA LTÉE,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR ORDER
Tardif J.
[1] This is an
application for an order extending the time in which to file a notice of
objection to a notice of reassessment issued by the Minister of Revenue of Quebec
("the Minister") on March 3, 2004.
[2] In order to dispose
of the application, the Court must assess the evidence having regard to the
criteria listed in subsection 304(5) of the Excise Tax Act
("the Act"), which reads as follows:
(5) When application to be granted. No application shall be granted under
this section unless
(a) the application was made under subsection 303(1) within one year
after the expiration of the time otherwise limited by this Part for objecting
or making a request under subsection 274(6), as the case may be; and
(b) the person demonstrates that
(i)
within the time otherwise limited by this Act for objecting,
(A) the
person was unable to act or to give a mandate to act in the person’s name, or
(B) the
person 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 303(1) as soon as circumstances
permitted it to be made.
[3] The Applicant
submitted fairly substantial evidence that was clearly intended to show the
ambiguity and confusion that surrounded the notices of assessment pertaining to
the tax debt or debts.
[4] Although the
evidence of the confusion was of some interest, I do not believe that such
confusion was a relevant consideration. Indeed, the true date of the notice of
assessment was not in issue; the focus was on the amounts actually due, as
opposed to the legal grounds of the assessments.
[5] Thus, the principal
intent of the Applicant's evidence was to show that the Minister acted in a
dubious and perhaps even frivolous manner when it changed the amount of the tax
debt several times.
[6] The trustee
explained that for financial reasons, it was generally very rare for him to pay
immediate attention to proofs of claim under a notice of assessment;
he also said that a quick examination would prejudice the administration
of the bankrupt's property in that it could entail significant professional
fees.
[7] This was why the
trustee did not act on the proofs of claim received in June 2004.
In keeping with this practice, it was only in February 2005 that he took
measures to obtain explanations about the assessment. This is shown very
clearly at pages 48 and 49 of the transcript of the cross-examination of Mr.
Breton.
[TRANSLATION]
Q. O.K. So what did
you do after receiving that document in September 2003?
R. Not much. I
filed it.
Q. All right. You
did receive it, then. Can you give me the address of your office?
R. 1 Place
Ville-Marie.
Q. Was that the
office address on September 25, 2003?
R. Yes.
Q. 1 Place
Ville-Marie, Suite 2400, Montréal, H3B 3M9. Is that correct?
R. H3B 3M9.
Q. All right. It
was received on or about September
25, 2003, to your
knowledge?
R. I presume so.
Q. All right. I
would like to go to tab…
R. According to
the good offices of Canada Post.
Q. Canada Post. All right. If I go to tab 2, the proof of
claim dated January 5, 2004, I will once again refer to the table on
page 3, where a distinction is made from the other proof of claim; I am not
mistaken, it says that the "assessed claim" is $62,524.48 and that
the "estimated claim" is zero insofar as the Excise Tax Act is
concerned.
R. Yes.
Q. You did not
notice ... Well, the difference did not bother you, that it was estimated back
in September 2003. And then, in May … I mean in January 2004, the claim is
assessed?
R. As I explained
earlier and will repeat, the trustee does little work on proofs of claim until
there is reason to believe that there will be a dividend. To do otherwise would
result in needless expenses being borne by the creditors as a whole.
[8] The first condition
in subparagraph 304(5)(b)(i) reads as follows:
(i) the
person was unable to act or to give a mandate to act in the person's name; or
[9] The question
whether someone was unable to act may be open to interpretation; I do not
believe that it is possible to identify objective criteria that lead to a
completely objective answer.
[10] Several factors must
be taken into account, including the context, the taxpayer's knowledge and
experience, his level of education, his health, and any of the numerous kinds
of issues or constraints that exist.
[11] Can the trustee's
explanation — namely that in order to prevent significant costs from being
charged against the assets to be distributed eventually among the different
creditors, there is a certain amount of time between the date that a proof of
claim is filed and the date that its merits are assessed — serve to justify or
explain the failure to comply with the time limit set out in the Act?
[12] In other words,
based on the explanations that he gave, can the trustee claim that he was
unable to act or mandate someone to act on his behalf?
[13] Section 135 of the Bankruptcy
Act stipulates as follows:
Admission
and Disallowance of Proofs of Claim and Proofs of
Security
Trustee shall
examine proof
135. (1) The trustee shall
examine every proof of claim or proof of security and the grounds therefor and
may require further evidence in support of the claim or security.
Determination of provable claims
(1.1) The
trustee shall determine whether any contingent claim or unliquidated claim is a
provable claim, and, if a provable claim, the trustee shall value it, and the
claim is thereafter, subject to this section, deemed a proved claim to the
amount of its valuation.
Disallowance by trustee
(2) The trustee may disallow, in whole or in part,
(a) any claim,
(b) any right to a priority under the applicable order of
priority set out in this Act; or
(c) any security.
Notice of determination or disallowance
(3) Where the trustee makes a determination under subsection (1.1)
or, pursuant to subsection (2), disallows, in whole or in part, any claim, any
right to a priority or any security, the trustee shall forthwith provide, in
the prescribed manner, to the person whose claim was subject to a determination
under subsection (1.1) or whose claim, right to a priority or security was
disallowed under subsection (2), a notice in the prescribed form setting out
the reasons for the determination or disallowance.
Determination
or disallowance final and conclusive
(4) A
determination under subsection (1.1) or a disallowance referred to in
subsection (2) is final and conclusive unless, within a thirty day period after
the service of the notice referred to in subsection (3) or such further time as
the court may on application made within that period allow, the person to whom
the notice was provided appeals from the trustee’s decision to the court in
accordance with the General Rules.
Expunge or reduce a proof
(5) The court
may expunge or reduce a proof of claim or a proof of security on the
application of a creditor or of the debtor if the trustee declines to interfere
in the matter.
[14] A trustee cannot
disregard the time limits contained in the Act on the pretext that an
examination of a claim could result in significant costs being charged against
the assets that would ultimately be divided among the various creditors of
varying priority.
[15] In a sense, the
trustee assumed that the amounts claimed in the notice of reassessment were
arbitrary if not groundless. In addition, it is very clear that he drew
inferences from the fact that the amount of the assessment had been changed
several times. According to the trustee, this was a somewhat haphazard
approach, and it justified his inaction.
[16] There is no dispute
as to whether there was notice of the reassessment. This was simply not a
case in which the trustee was unaware of an assessment that was discarded or
lost in the commotion of the period preceding the transfer of the seizin of the
bankrupt's property to the trustee.
[17] In the case at bar,
the trustee essentially acted out of habit or reflex when he declined to
examine the quality of the tax debt because he was unable to draw any
conclusions about the costs and benefits. While this conduct might be generally
reasonable, it is certainly not sufficient to conclude that the trustee was
unable to act or mandate someone to act in his name as soon as the
circumstances permitted.
[18] An in-depth
examination of the merits of the reassessment or an exhaustive analysis of the
amounts paid versus the amounts payable would not have been necessary in order
to constitute action.
[19] Basically, in order
to have taken action, the trustee would have had to produce a summarily
substantiated notice of his intent to question the merits of the assessment.
[20] Essentially, this
would have required that he show a modicum of respect for the time limit
established by the Act.
[21] In the case at bar,
the Applicant has not met the conditions precedent to the issuance of an order
extending the time in which to file a notice of objection.
[22] For these reasons,
the application is dismissed.
Signed at Ottawa, Canada, this
24th day of November 2006.
"Alain Tardif"
Translation certified true
on this 28th day of February 2008.
Brian McCordick, Translator
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