Date: 20010906
Docket: 2000-2841-IT-APP
BETWEEN:
ROCHELLE MOSS,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Agent for the Applicant:
Daniel Moss
Counsel for the
Respondent:
Jeff Pniowsky
____________________________________________________________________
Reasons for Order
(Edited from the transcript of Reasons
delivered orally from the Bench
at Winnipeg, Manitoba on July 27, 2001.)
Hershfield, J.T.C.C.
[1]
Just as a matter of procedure, I want to note for the record that
this application to set aside an order of this Court that
dismissed a prior application of the Applicant for reasons of
want of prosecution (the original application), has been referred
to by the Court itself as an application under section 18.21 of
the Tax Court of Canada Act (the
"TCCA").[1]
[2] I
would note that the possible reasons for this, without an
election being made by the Applicant as to what procedure would
be applicable, might relate to the requirements under the General
Procedure or the assumption that section 18.29 of the TCCA
applied[2].
[3] The
TCCA in respect of General Procedure appeals, makes no
provision for making or setting aside orders given for
non-appearance but the General Procedure rules ("the G.P.
rules") do make such provision in section 140. Under that
rule, where a party fails to appear, the Court may dismiss an
appeal. On application within 30 days of the pronouncement
date, the dismissal order can be set aside.
[4]
Although that section refers to an appeal, not an
application, I would think that that rule might govern a matter
to which the Informal Procedure has no application.
[5]
The pronouncement date is the date of signing the order, and the
date of signing the dismissal order in this case was February 6,
2001. The current application was filed on April 5; that is, not
within the 30-day limit under the G.P. rules. So, looking to
the General Procedure would be of no assistance to the Applicant,
she is totally out of time. It would then be in the
Applicant's best interests to fit within section 18.21 as the
present application is timely filed under that section.
[6] I
note that there is a question here as to whether any time
limitation strictly applies to an application under either
subsection 18.21(2) of the TCCA or section 140 of the
G.P. rules at the objection stage as opposed to the appeal stage
since the limits (both in the G.P. rules and the TCCA
provisions relating to the Informal Procedure) are prescribed in
respect of "appeals" as opposed to taxes at issue. This
question is not resolved by section 18.29 of the TCCA.
[7]
To say there is no time limit would suggest that there is no
authority to set aside the original dismissing order since that
authority, under section 18.21 at least, to do so is also only in
respect of an appeal. This question is also not resolved
by section 18.29. In any event, on the facts of this case, there
is no time limit issue in applying subsection 18.21(2) and that,
in fact, is the way in which the matter has proceeded, albeit
without any explanation by any of the parties as to how we got
there other than by an acknowledgment by the parties that the
Court itself had recorded the application as a subsection
18.21(2) application.
[8]
Accordingly, that is the application that I am considering. It is
an application to set aside an order of this Court, that
dismissed an application made by the Applicant under subsection
166.2(1) for an extension of time to file an objection in respect
of the Applicant's 1997 taxation year. We have proceeded on
the basis that subsections 18.21(2) and (3) apply at least as a
guide in the exercise of this Court's inherent jurisdiction.
Subsection 18.21(2) provides for the dismissal order being set
aside and subsection (3) lists the conditions that have to be met
for that to happen. Under subsection (3) the setting aside of the
dismissal order is permitted where two conditions or requirements
are met: the first being, it would have been unreasonable in all
the circumstances for the Applicant to have attended the hearing;
and, the second being that the Applicant must have applied to
have the order of dismissal set aside as soon as circumstances
permitted.
[9]
With respect to the first requirement under subsection (3), that
it would have been unreasonable in all of the circumstances for
the Applicant to have appeared at the hearing, the fact is that
she did attend but left before the matter was called because her
counsel, a lawyer, Mr. A. Stacey from Thompson Dorfman in
Winnipeg, had met with the Respondent's counsel the morning
of the scheduled hearing and was, apparently, apprised of
evidence which tended to defeat the grounds he intended to rely
on in the original section 166.2 application.
[10] The
Applicant's counsel apparently advised the Applicant that the
matter was lost and, if they proceeded, that there was a risk of
aggravating existing threats of actions by the Respondent for
abuse of process and vexatious proceedings.
[11] In any
event, the Applicant and her lawyer left before the matter was
called. Respondent's counsel understood that the resultant
dismissal for non-appearance was intended and the actions of the
Applicant, of leaving on the advice of counsel, was tantamount to
a withdrawal of the section 166.2 application.
[12] The
Applicant now, with the assistance of her husband as her
representative, asserts that she did not understand the matter
would proceed in her absence and that an order dismissing the
application would be given. Mr. Moss asserted, and she testified,
that she did not understand that would happen.
[13] In
effect, the Applicant asserted that she did not know that the
hearing would proceed so it would not be reasonable to expect her
to have attended it.
[14]
Respondent's counsel raised credibility issues in respect of
this testimony and assertion, and said that the Applicant and her
husband knew the matter was being abandoned, the effect of which
would be to have it dismissed at the scheduled hearing for want
of prosecution.
[15] There was
also an issue that the Applicant was bound by her lawyer's
action. His leaving was tantamount to a consent to the dismissal.
The Applicant was at law bound by that action of her counsel.[3]
[16] It was
also noted that I asked whether the Applicant's lawyer,
Mr. Stacey, could be called to clarify this issue and while
the Applicant indicated no objection, the lawyer on being
contacted during a recess, apparently refused to testify unless
subpoenaed by the Court. He apparently still acts for the
Applicant and/or her husband, at least in respect of other
matters.[4]
[17] Aside
from inferences that might be drawn from these developments
(about which I have no direct evidence), I find it unlikely that
the Applicant would have walked out of a courtroom prior to the
application under section 166.2 being heard as scheduled
without being aware that she was in effect abandoning her
application, or without understanding that her lawyer had
abandoned her application on her behalf. Even if that was not the
case, as stated, she was bound by her lawyer's act. If she
did not intend her lawyer to act on her behalf, she might
reasonably have spoken up at the time. While this finding may
itself be sufficient to dismiss the application, it is a finding
of fact that, for the moment, I wish to set aside in order to
determine the merits of the application in other respects.
[18] As to the
second requirement to set aside the dismissal order set out in
paragraph 18.1(3)(b) of the TCCA, that paragraph
requires that the application be made as soon as circumstances
permit. The Applicant was notified of the dismissal order in
early February 2001, as the order was signed on February 6, 2001.
The application to set aside was filed on April 5, 2001. That is
well within the time limit under section 18.21 of the
TCCA.
[19]
Respondent's counsel argued that the Applicant had not
satisfied her burden of proof establishing that this application
was made as soon as circumstances permit. I do not think the
delay here was unreasonable and in and by itself should not
frustrate this Application to set aside the dismissal order. I
note, however, that subsection 18.21(3) permits setting aside the
order only where both paragraphs (a) and (b) are
met. That is, while the paragraph (b) requirement has been
met in my view, I have, as noted, doubts as to whether the
paragraph (a) requirement has been met. As stated,
however, I am not content to leave the matter at that without
making further inquiries as to the merits of an application under
section 166.2 and the merits of the objection itself.
[20]
As held in Diem v. Canada,[5] when considering an application under subsection
18.21(2), one of the factors that should be taken into account is
the merit of the appeal. That case did not involve an application
for extension of time to file an objection so reference in that
case to the merits of the appeal should, in my view, be
taken, in the context of this case, to be a reference to the
actual substantive tax issue being objected to. Indeed, in
applying the principle in the Diem case, I think it is
necessary to consider, as a factor in deciding whether or not to
set aside the dismissal order, the merits of both the application
for extension of time to file the objection and the merits of the
objection itself. Otherwise, denying an application under either
sections 18.21 or 166.2 can be seen as a technical bar to a
proper determination of a substantive issue. If a taxpayer has
been clearly wrongly taxed, then technical bars, while not to be
ignored, might be applied more cautiously in the interests of
preventing an economic injustice, which is the imposition of a
tax that Parliament itself did not intend to impose.[6]
[21]
The Applicant asserted an economic injustice and begs for a
consideration of the merits of her position. Aside from the
principle in the Diem case and the recent tendency of this
Court in respect of applications for extensions of time, to apply
these rules where possible in the interests of having matters
heard on their merits,[7] there are further reasons in this case why I am
inclined to go further. Firstly, there is the issue of the
application of section 18.21. This Court's jurisdiction to
hear this application may derive from section 13 of the
TCCA (as opposed to section 18.21) and as such, while
using subsection 18.21(3) as a guide is helpful, merit
considerations must inevitably come into play. Secondly, peculiar
to this case, is that Respondent counsel's position and
conduct in this case have, in my view, not been respectful of the
Applicant's rights in this matter. He has indeed treated the
Applicant with considerable scorn. Two examples, and I will only
give two although there are more, are as follows. He did not send
a copy to the Applicant of his recent objection to the
application, which he sent to the Court. The Applicant arrived
without any forewarning of the issues arising from the
Respondent's position. The second example is that after
counsel for the Respondent objected to the Applicant's spouse
trying to introduce evidence in argument, he was guilty himself
of doing the very same thing and asserted, as factual, matters
which were intended to malign the Applicant. Such maligning
factual assertions were withdrawn when their accuracy was
challenged by the Applicant's spouse.
[22]
This is conduct unbecoming of a barrister, an officer of the
Court purporting to provide factual information during the course
of a hearing. Further, Respondent's counsel introduced a
number of exhibits, which while tending to, or intended to, cast
doubt on the credibility of the Applicant's testimony, were
aimed as much at branding the Applicant as a scoundrel who would
go to any length not to pay taxes. This character assassination
was unnecessary, if not inappropriate.[8]
[23]
There is little to be gained by counsel being so wrapped up in
his belief as to the type of person the Applicant is that he
loses his professionalism in dealing with the person and with
this Court. Respondent's counsel approached this matter
soured by a history of which he was a part. In these
circumstances, there is some concern that the dismissal order
resulted from similar overzealous tactics employed prior to the
original hearing. As such, the judicial process must be sensitive
to the idea that justice must be seen to be done as well as
having it done by applying the law on its terms. That is, in this
case, I am inclined to look further at the merits of the original
application and the objection itself.
[24]
The parties acknowledged during the hearing that if the
Application to set aside the dismissal order was to be granted,
that I should proceed to hear the application under section 166.2
of the Income Tax Act. This is, in fact, frequently the
practice of this Court where the parties are ready to proceed and
both parties acknowledged in this case that they were. Proceeding
in this way was agreed to be particularly sensible given that in
considering the Application, I was intending to review the merits
of the section 166.2 application in any event.
[25] As to the merits of the
section 166.2 application, consider subsection 166.2(5)
which provides as follows:
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 the
circumstances permitted.
These are the conditions that must be met for an extension of
time to be granted. The time requirements in paragraph (a)
are not in issue.[9]
[26]
The matters then to be considered in respect of the section 166.2
application are the matters set out in paragraph (5)(b),
which sets out three requirements, the first being that either
the Applicant was unable to act or instruct another to act during
the period allowed for filing the objection, or had during
that period a bona fide intention to object. The second
requirement is that it be just and equitable to grant the
extension. The third requirement is that the application to the
Minister for an extension under subsection 166.1(1) was made as
soon as the circumstances permitted.
[27]
I will deal with the last requirement first. It requires a review
of the chronology of events.
[28]
The taxation year in question, as stated, was 1997. The filing
deadline was April 30, 1998. The objection deadline was one
year from then, i.e. April 30, 1999.[10] The application for an extension of
the deadline under section 166.1 needed to be filed within one
further year, or April 30, 2000. The application for extension
under section 166.1 was filed effectively in March 2000. The
Minister denied the request.[11]
[29]
The Respondent's counsel argued that the Applicant has not
demonstrated that circumstances did not permit an earlier
application to be filed under section 166.1. That is, the
delay of 10-12 months in filing the application meant that the
requirements of subparagraph 166.2(5)(b)(iii) had not been
met.
[30]
In this regard, I note that the explanation of the Applicant in
respect of the delay is that she believed that she was bankrupt
as of January 1998 and, therefore, did not need to object.
However, the bankruptcy was annulled by the Court of Queen's
Bench of Manitoba in June 1999. What circumstances
prohibited her from filing the section 166.1 application at that
time? There was at least an eight-month delay from the bankruptcy
annulment date to the date the application was filed.
[31]
It is clear from the evidence that the Applicant was preoccupied
with financial survival during this period. For example, there
were appeals respecting the bankruptcy annulment that were
ongoing throughout the extension period. There were jeopardy
order appeals during this period and a requirement to pay and
set-off order in January 2000.[12]
[32]
This Court has acknowledged that financial stress and
prioritization of matters are reasonable causes for delay in
these types of applications.[13] That being the case, I find that the delay in
filing the section 166.1 application should not be fatal in this
case.
[33]
It is noted that the jurisprudence on reasonable causes for delay
referred to above, to my knowledge at least, is limited to cases
where the words being considered are "as soon as
circumstances permit", which are not the words used in
clause 166.2(5)(b)(i)(A). That is, turning to the
first requirement in paragraph 166.2(5)(b), that
requirement, that the taxpayer be unable to act or instruct
another to act, is very different statutory language. There is no
evidence that this Applicant could not have acted within the time
set out in subparagraph 166.2(5)(b)(i). This is not
fatal unless the Applicant also fails to demonstrate that she had
a bona fide intention to objection during the time allowed
for filing the objection.
[34]
Accordingly, the next question is whether there was a bona
fide intent to object during the original objection period.
Effectively this period ran from June 29, 1998, which is the
assessment date, the earliest date from which an objection would
be filable, to April 30, 1999. During this time, the Applicant
thought she was bankrupt. Even if she disagreed with the tax
assessment (which was her evidence), she was disinterested in it.
Such disinterest is not consistent with a bona fide intent
to object during that period. Even a contingent intent pending
the outcome of the bankruptcy annulment proceedings is not a
bona fide intent to object and the Applicant's
preoccupation with such matters is not a defence to failing to
meet the requirements of subparagraph 166.2(5)(b)(i).
[35]
Having failed to meet the requirements of subparagraph
166.2(5)(b)(i), an application under section 166.2 would
fail. However, I will not stop here.
[36]
I have yet to consider the just and equitable test in
subparagraph 166.2(5)(b)(ii) and the merits of the
underlying objection issue. Respondent's counsel brought
considerable evidence that the assessment at issue and the need
for time to extend all stem from the Applicant's own
misguided acts. An earlier jeopardy order resulted in asset
seizures, a bankruptcy declaration, an annulment of that
declaration, a fraudulent conveyance suit, a set-off order and
protracted litigation in respect of all of these matters.
[37]
The jeopardy order caused certain life insurance assets
(policies) to be seized and the Applicant thereby lost the
ability to control such assets. Such lack of control caused tax
consequences to flow that the Applicant intended, when the
policies were bought, but wanted to change.
[38]
The seizure frustrated her desire to change those tax
consequences that she originally bought into and that resulted in
the T5 income in 1997, the inclusion of which the Applicant
wanted to object to for the reasons that she did not receive the
funds and that the jeopardy order prevented her from altering the
tax position of those policies as she was desirous of doing. The
T5 income in 1997 was reported in April 1998 by the Trustees in
bankruptcy. The assessment sought to be objected to confirmed
this filing. The bankruptcy was annulled by the Court of
Queen's Bench of Manitoba in June 1999. Appeals in regard to
that ruling of the Queen's Bench have failed. That means that
the Applicant was never bankrupt and the question is whether it
is just and equitable that the Applicant be left with the filing
of a Trustee in an annulled bankruptcy. Perhaps it is not, but it
is the jeopardy order that really gives rise to the tax issue. It
is that order that resulted in the non-receipt of funds and the
inability of the Applicant to alter her tax fate. That order was
given under provisions of the Income Tax Act that suggest
the Applicant's assets might have disappeared if the order
was not granted.[14]
[39]
The jeopardy order withstood appeals. Seizures under this order
froze the Applicant's tax planning opportunities and froze
the Applicant's access to any income generated by seized
assets. A debtor in this situation is taxable on the income
generated by his/her assets whether in his/her control or not.
The position of the Applicant, given the annulment of the
bankruptcy, is like any other debtor whose seized assets cannot
be reorganized because they are out of their control and
possession. The income from those assets under any trusteeship to
protect creditors will continue to be taxable to the debtor until
the underlying assets have been turned over beneficially to the
creditors. That is, the underlying objection here seems to be
without merit. In any event, I concur with Respondent
counsel's suggestion that equities here would not favour
granting the application under section 166.2.
[40]
Accordingly, on a review of the application of section 166.2, on
its own terms, it seems improbable that, if the dismissal order
were set aside and the application under section 166.2 were
heard, an extension would be permitted on the terms of that
section on the facts of this case.
[41]
Further, it seems that even if the dismissal order were set aside
and the application for the extension under section 166.2 were
allowed, then it would be highly improbable that an objection
would be successful or that any appeal to a confirmed assessment
would be successful.
[42]
That takes me back to where I started in terms of my findings in
respect of the Application.
[43]
On a balance of probability, I find that the Applicant knew, when
she did not appear at the last hearing, that she had foregone her
application as per her lawyer's advice.
[44]
Accordingly, the Applicant does not meet the requirements that
section 18.21 would impose to have the dismissal order set
aside. Aside from the application of that section, I see no
cogent or compelling reasons not to consider the dismissal order
as a final and binding order of this Court. In coming to that
conclusion, I have determined that an application under
section 166.2 and/or an objection and appeal in respect of this
matter are likely doomed in any event and that has been a factor
in this decision.
[45]
Lastly, while I do not want to rub salt in the wounds of the
Applicant, I would note, for the record, that there were
inconsistencies and contradictions in the testimony of the
Applicant and her husband which were brought out on
cross-examination of the Applicant at least, and that led
me to have some reservations as to credibility.
[46]
Not only did the Applicant change her story as to when she knew
of tax problems associated with the seized insurance policies but
her husband testified that they knew of the problems before the
1997 returns were filed. This question of when the tax issue
became known or of concern has been massaged in every direction
in the hope of finding one direction that afforded a chance to
succeed in this application or an application for extension of
time to file an objection. That does not speak well for granting
a remedy that can only be justified as just and equitable.
[47]
Still, I have not relied on these inconsistencies or on the
findings of other judges in other matters regarding the
credibility of the Applicant in coming to my decision. I have
gone beyond these issues. As stated, this dismissal is based on
consideration of the requirements set out in
subsection 18.21(2) of the TCCA and on a review of
the merits of the application under section 166.2 and an ultimate
consideration of the merits of the objection and potential
appeal. On this basis, the Application fails.
Signed at Winnipeg, Canada, this 6th day of September
2001.
"J.E. Hershfield"
J.T.C.C.
COURT FILE
NO.:
2000-2841(IT)APP
STYLE OF
CAUSE:
Rochelle Moss and
Her Majesty the Queen
PLACE OF
HEARING:
Winnipeg, Manitoba
DATE OF
HEARING:
July 27, 2001
REASONS FOR JUDGMENT BY: The
Honourable Judge J.E. Hershfield
DATE OF
JUDGMENT:
September 6, 2001
APPEARANCES:
Agent for the
Applicant:
Daniel Moss
Counsel for the
Respondent:
Jeff Pniowsky
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-1349(IT)I
BETWEEN:
EVELYN ELLEN WILSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 11, 2001 at Toronto,
Ontario, by
the Honourable Judge T.E. Margeson
Appearances
Counsel for the
Appellant:
John David Buote
Counsel for the
Respondent:
Meghan Castle
JUDGMENT
The
appeal from the assessment made under the Income Tax Act
for the 1996 taxation year is allowed and referred back to the
Minister of National Revenue for reconsideration and reassessment
in order for the Minister to reconsider any proper receipts in
support of any allowable medical expenses in support of this
claim when they are presented.
In all other respects, the appeal is dismissed and the
Minister's assessment is confirmed, in accordance with the
attached Reasons for Judgment.
Signed at Ottawa, Canada, this 10th day of September 2001.
J.T.C.C.
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