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Citation:
2003TCC512
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Date: 20030905
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Docket: 2003-645(IT)G
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BETWEEN:
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WOLF VON TEICHMAN,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent,
AND BETWEEN:
Docket: 2003-585(IT)G
GILLIAN VON TEICHMAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
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REASONS FOR ORDERS
Woods J.
[1] The Crown seeks orders to dismiss
the appeals of Wolf Von Teichman and Gillian Von Teichman for the
1993 taxation year. The ground upon which the orders are sought
is that the Notices of Appeal were not filed within 90 days from
the date of mailing of the notices of confirmation as required by
subsection 169(1) of the Income Tax Act, R.S.C. 1985 (5th
Supp.), c. 1 (the "Act"). The Appellants submit
that the Crown should be estopped from taking this position based
on a misrepresentation of fact that was relied on to their
detriment.
Facts
[2] The following facts pertain to the
appeal of Wolf Von Teichman. The facts relating to Gillian Von
Teichman's appeal are sufficiently similar for the purposes
of this issue that it is not necessary to outline them here.
[3] The Minister of National Revenue
(the "Minister") issued a Notice of Assessment dated
June 13, 1994 in respect of the 1993 taxation year of Wolf Von
Teichman. A reassessment for the same taxation year was made by a
Notice of Reassessment dated March 20, 1997.
[4] A Notice of Objection to the
reassessment was received by the Minister on June 23, 1997. In it
Mr. Von Teichman objected to the imposition of arrears interest
and the reduction of the capital gains deduction and asked for a
general explanation of the "interest and other calculations
which went into the determination of the amount now claimed
owing."
[5] In a letter to Mr. Von Teichman
dated January 13, 1999, Revenue Canada stated that it had
provided an explanation of the recalculation of the capital gains
deduction and that the assessment would be confirmed. The letter
also addressed the matter of arrears interest. The relevant
paragraph from the letter reads:
We will agree to the request to cancel arrears interest on the
1993 balance for the period of March 20, 1997 to March 20, 1998
under subsection 220(3.1). This action will be completed after
the appeal period on the Objection expires, unless you wish to
withdraw the objection now.
The Minister confirmed the reassessment by Notice of
Confirmation dated February 3, 1999.
[6] By letter dated March 17, 1999,
Mr. Von Teichman withdrew his objection for the 1993 taxation
year.
[7] The cancellation of arrears
interest was not immediately processed by the Canada Customs and
Revenue Agency (the "CCRA"). In response to this
inaction Mr. Von Teichman refiled a Notice of Objection dated May
17, 2000. In it, Mr. Von Teichman objected to the inclusion in
income of an amount of $2,139,636. This item had not been
specifically referred to in the original Notice of Objection
received on June 23, 1997.
[8] By letter dated September 27,
2002, the CCRA stated that, pursuant to subsection 165(1.1) of
the Act, it could not accept the later Notice of
Objection.
[9] By letter to Mr. Von Teichman
dated December 6, 2002, the CCRA explained the failure to deal
with the cancellation of arrears interest as follows:
After [the January 13, 1999] letter was sent out, we were
advised by the Auditor, Jim Lowes that there was further Audit
work to be done, and another reassessment to be issued for your
1993 return.
...
If further reassessments or other litigation are still pending
for the year involved, the fairness request is usually not
processed, as the final tax owing, and interest on the tax
payable, are still not known.
Once the final balance of tax and interest are determined for
your 1993 return, we suggest you request this one year interest
(plus any other periods you feel the interest should not be
charged for) be cancelled.
[10] A Notice of Appeal in respect of
several taxation years, including 1993, was filed on January 29,
2003.
Submissions of Parties
[11] The Von Teichmans submit that they made
a deal with the Minister in 1999 to cancel the arrears interest
and that they acted on this deal by withdrawing their objections.
It is suggested that the Minister subsequently broke the deal by
not cancelling the interest arrears forthwith and by indicating
in the December 6, 2002 letter that the CCRA intends to
reconsider the matter afresh.
[12] It is submitted that these
circumstances satisfy the criteria for the application of the
doctrine of estoppel. These criteria were set out by Bowman J.
(as he then was) in Goldstein v. The Queen, 96 DTC 1029
(T.C.C.) at page 1034:
The essential factors giving rise to an estoppel are I
think:
(1) A representation
or conduct amounting to a representation intended to induce a
course of conduct on the part of the person to whom the
representation is made.
(2) An act or
omission resulting from the representation, whether actual or by
conduct, by the person to whom the representation is made.
(3) Detriment to
such person as a consequence of the act or omission.
[13] Counsel for the Von Teichmans suggests
that there was a misrepresentation (i.e., the promise to cancel
interest which was to be effected forthwith if the objections
were withdrawn), a reliance on the misrepresentation (i.e., the
filing of the withdrawals) and detriment (i.e., losing all appeal
rights that would have followed if the notices of objection had
not been withdrawn). It is suggested that the taxpayers should be
put in the same position as if those appeal rights had not
expired. Thus the taxpayers should have the right to file notices
of appeal and raise new issues in them.
[14] The Crown submits that estoppel cannot
override a statutory duty and that this applies to the statutory
time period for filing a notice of appeal under subsection
169(1): Mount Sinai Hospital Center v. Quebec, [2001] 2
S.C.R. 281. Moreover, it is suggested that the appeal process
would be in havoc if estoppel were to apply in these
circumstances. It is conceded that the Minister's letter of
December 6, 2002 was poorly drafted but it is suggested that, if
taxpayers could avoid statutory time periods as a result of
poorly worded letters, the CCRA would have a serious problem.
[15] Counsel for the Von Teichmans concedes
that estoppel cannot override a clear statutory duty but suggests
that this principle is limited to statutory duties that are
fundamental to a statute. It is submitted that the time period
for filing a notice of appeal is not a fundamental provision in
the Act. Further, reference was made to a case that
applied estoppel to a statutory filing period under the Ontario
Retail Sales Tax Act: Molson Ontario Breweries v.
Ontario, [1985] O.J. No. 295. In that case, it was ordered by
way of an oral judgment that notices of appeal not filed within
the statutory time period were properly filed and that the
Ministry of Revenue was estopped from asserting the contrary. The
misrepresentation that gave rise to this relief was an incorrect
statement by an official of the Ministry to the taxpayer's
consultant that the time period for filing an appeal had
passed.
Analysis
[16] The question in this application
concerns the law of estoppel by representation. A definition of
estoppel by representation can be found in an article by Glen
Loutzenhiser, Holding Revenue Canada to its Word: Estoppel in
Tax Law: [1]
Where one person (the "representor") has made a
representation to another person ("the representee") in
words or by acts or conduct, or (being under a duty to the
representee to speak or act) by silence or inaction, with the
intention (actual or presumptive), and with the result, of
inducing the representee on the faith of such representation to
alter his position to his detriment, the representor, in any
litigation which may afterwards take place between him and the
representee, is estopped, as against the representee, from
making, or attempting to establish by evidence, any averment
substantially at variance with his former representation, if the
representee at the proper time, and in the proper manner, objects
thereto.[2]
[17] Mr. Loutzenhiser states that this
doctrine is based on a principle of justice that may be
colloquially referred to as "you cannot send someone out on
a limb, and saw that limb off."[3]
[18] In this particular case, it may have
been that the CCRA sent the Von Teichmans out on a limb, but it
cannot be said that the limb has yet been sawn off. The Von
Teichmans have not yet suffered detriment, the third requirement
for the application of estoppel. In my view there would not be a
material detriment to the Von Teichmans unless and until the CCRA
refuses to cancel the interest arrears.
[19] It has not been suggested the CCRA is
refusing to cancel the interest arrears. At most, the December 6,
2002 letter could be interpreted that the CCRA intends to
consider this matter afresh. However, the letter could also be
interpreted as merely requiring the procedural step of a letter
of request. Either way, the CCRA is not at this stage refusing to
cancel the interest arrears.
[20] Counsel for the Von Teichmans suggests
that the failure of CCRA to act promptly to cancel the interest
arrears after the letter of March 17, 1999 is one instance of a
misrepresentation and another is the December 6, 2002 letter that
implies that the matter will be considered afresh. If these are
misrepresentations, no detriment has been suffered as a
result.
[21] Although this should dispose of the
question raised on the motions, it may be useful to comment on
whether the relief sought is appropriate even if all the elements
of estoppel had been met. The relief for estoppel by
representation described above is that the party being estopped
is prevented from taking a position substantially at variance
with the representation. In this case, the appropriate relief
would be that the CCRA could not refuse to cancel the interest
arrears. The remedy sought by the Von Teichmans goes much further
than that and tries to treat the original "deal" as
void ab initio so that the Von Teichmans can institute
appeals for the 1993 taxation year afresh and raise new grounds
of appeal. I have not been referred to any authorities that would
support this type of relief and this distinguishes the Molson
Breweries case.
Conclusion
[22] Other matters were raised at the
hearing of the motions and as a result the following are
ordered:
1. The Appellants' purported
appeals with respect to the 1993 taxation year are quashed;
2. The Appellants are allowed 30 days
from the date of the Orders in which to file amended notices of
appeal for the 1994 through 1998 taxation years, inclusive;
3. The Respondent shall have 45 days
following service of each amended Notice of Appeal within which
to deliver a Reply.
Signed at Ottawa, Canada this 5th day of September, 2003.
J. M. Woods J.
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