Citation: 2014 TCC 122
Date: 20140425
Dockets: 2014-17(CPP)APP
2014-18(EI)APP
BETWEEN:
breathe e-z homes ltd.,
Applicant,
and
MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR ORDER
I. Issue:
[1]
In these two applications requesting the
extension of time within which to file notices of appeal there is only one
legal issue: are the failed attempts of one’s legal counsel to file a timely
and proper notice of appeal sufficient excuse to extend what is otherwise a
jurisdictionally fatal time limitation?
II. Facts:
[2]
On June 13, 2013, the Applicant, in
response to Notices of Objection previously filed, received a Canada Revenue
Agency (“CRA”) decision letter varying certain assessments (the “Decision”).
During August of that same year, the Applicant retained legal counsel to appeal
the Decision because the Applicant disagreed that it was an employer required
to pay premiums for certain service providers under the Canada Pension Plan,
RSC 1985, c C-8 and the Employment Insurance Act, SC 1996, c 23. After
receiving a notice of arrears and responsively calling the CRA in late August,
the president of the Applicant sent an email dated September 3, 2013, addressed
to lawyers at the retained law firm reminding them of the “deadline to file an
appeal”. The president identified the deadline as September 13, 2013 (it was
really the 11th of September). Legal counsel failed to file a
notice of appeal before that first 90 day period following the Decision as prescribed
under subsections 28(1) and 103(1) of both the CPP and EI Act. Instead
on October 18, 2013, legal counsel wrote to CRA requesting a discretionary
extension to file a notice of objection to the re-assessments. Identifying
that legal counsel had served a notice of objection on the CRA, but had not
filed a notice of appeal with the Tax Court, an employee of the CRA telephoned
the law firm on October 30, 2013. The employee left a message with Applicant’s
counsel’s receptionist generally identifying that an objection had previously been
filed, the Decision rendered and a notice of appeal was now required. The
receptionist placed the phone message in the file, but otherwise did not advise
other staff or lawyers of the phone call. No notice of appeal was filed before
December 10, 2013, being the expiration of the second 90 day discretionary period
following the Decision. Ultimately, in late December 2013, legal staff at the
law firm identified the error and filed the extension request and a proposed
notice of appeal with the Court on January 3, 2014.
[3]
The Applicant was unaware of the omissions
by its counsel until two or so weeks before this application hearing. The
Applicant did not review documentation filed on his behalf. During testimony the
president of the Applicant only generally recalled that he was “filing an
appeal”.
[4]
In summary, the following mistakes
were made by Applicant’s counsel:
a) failing to notice that the June 13, 2013,
confirmation letter of the Minister responded to a previously filed notice of objection;
b) missing the “as of right” deadline of
September 11, 2014, to file a Notice of Appeal (or for that matter even a
notice of objection);
c) erroneously filing a request for extension to
file an objection with the CRA received on October 24, 2013, rather than filing
an extension and notice of appeal with the Tax Court of Canada.
d) failing to heed the gratuitous phone call to
legal counsel’s office from the CRA employee on October 30, 2013;
e) missing the “discretionary extension” deadline
of December 10, 2013; and lastly,
f) failing to report to the Applicant the
various actions, filings and, regrettably, omissions along the way the
reporting of which may have led to additional warnings by the Applicant
regarding the above-noted mistakes.
[5]
Legally the appellant has a 90 day
“as of right” period following a decision within which to file a notice of appeal
and, if an appellant misses that deadline, a further period of 90 days within
which an application may be brought under the EI Act and the CPP,
both of which statutes incorporate by reference the following applicable wording
of the Income Tax Act (“Act”):
167(5) When order to be
made - No
order shall be made under this section unless
(b) the taxpayer demonstrates that
(i) within the time otherwise
limited by […..] for
appealing, 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 appeal,
(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,
(iii) the application was made as
soon as circumstances permitted, and
(iv) there are reasonable grounds
for the appeal.
[6]
The single, but very material
difference between subsection 167(5) of the Act and subsection 28(1) and
103(1) of the CPP and EI Act is the much shorter period of 90
days under the latter statutes as opposed to the one year period described in paragraph
169(5)(a) of the Act during which period one must bring an
application to extend.
III. Submission:
a) Applicant’s
Counsel
[7]
The submissions by Applicant’s
counsel regarding the extension of time within which to file a Notice of Appeal
may be summarized as follows:
a)
the Applicant had a clear and
enduring bona fide intention to appeal witnessed by its retainer of
counsel, instructions to proceed and its further directing mandate sent by
email of September 3, 2013;
b)
the Applicant’s Notice of Appeal was
filed on January 3, 2014, being the first opportunity circumstances permitted for
the filing of the Notice of Appeal because that date represented the first
occasion after which “legal staff” at the Applicant’s counsel’s office became
aware of its deficiency of serving the CRA with the superfluous notice of objection
dated October 18, 2013;
c)
the Applicant’s notice of objection
in October also included a request for an extension of time to file (albeit that
of a notice of objection); and,
d)
the Applicant itself was of the
belief that it was simply awaiting a date for hearing evidenced by the testimony
of the president of the Applicant that he only learnt of counsel’s errors two
or so weeks before the application hearing.
[8]
Applicant’s counsel submits that
the Applicant was under a reasonable misapprehension that all had been done to
perfect its appeal rights: Seater v. Her Majesty the Queen, 1 C.T.C.
2204. Once the error was detected in late December, it was corrected with all
due dispatch: Big Bad Voodoo Daddy v. Her Majesty the Queen, 2010 TCC 12.
Lastly, no prejudice has been occasioned to the Respondent.
[9]
In summary, Applicant’s counsel
says that the Applicant’s otherwise diligent pro-active and reasonable steps, suspended
the countdown of the 90 day extension limitation from October 18, 2013 until
the Applicant had actual notice of the errors. The knowledge by the
Applicant’s lawyers per se was insufficient when not communicated to the
Applicant and therefore the filing on January 3, 2013, was within the “extended”
statutory period of 90 days.
b) Respondent’s
Counsel
[10]
Respondent’s counsel states that
the Applicant failed to take every necessary action to appeal, insufficiently
reviewed the documents to reasonably rely upon the ineffective steps taken and
did not appreciate, qua Applicant, the difference between an objection
and an appeal. In short, without justification, the Applicant resiled to a
position of insouciance which is not objectively supported by the facts: no
reporting back from counsel, lack of continued reaction by way of client emails
reminding its lawyers to act and the passage of time without the client
prompting reminders in the face of inaction.
[11]
Further, the Respondent submits
that even if reliance on professionals is afforded, the Applicant’s mistaken
belief became unreasonable once the gratuitously helpful call from CRA was made
to the office of Applicant’s counsel (Hickerty v. Her Majesty the Queen,
2007 TCC 482). By providing such warning, the interceding incorrect step was identified
and ought to have been corrected: Chu v. Her Majesty the Queen, 2009
TCC 444; Castle v. Her Majesty the Queen, 2008 D.T.C. 2821. Once counsel’s
mistaken belief was dispelled by the phone call, the alleged standstill period
within which the 90 day limitation ceased to run was rescinded, the limitation
period was reinstated and the new deadline was extended for a period of no more
than 12 days. Even if one employs that brief standstill period, the new date
for filing the extension application would have been December 22, 2013. Nonetheless,
that date was still missed.
IV. Analysis
and Decision:
[12]
The Respondent in final submissions
withdrew its previous challenge related to the Applicant’s bona fide
intention to appeal. Moreover, the Court has concluded that, aside from the
primary time limitation issue, the Applicant has otherwise satisfied the other
requirements of subsections 167(5)(ii), (iii) and (iv).
[13]
As to bona fide intention,
the Applicant was clear from the outset of its desire and resolve to appeal.
In the first instance, the Applicant’s accountant filed the notice of
objection, the partial rejection of which by the Minister in the Decision
necessitated that the next step was to be that of an appeal (the very one ill
managed by the Applicant’s retained lawyers). Within the first “as of right”
90 day period following the Decision, the Applicant retained a law firm, signed
a business consent form which nominated counsel as agent, contacted CRA within
that same period and confirmed in writing its instructions to counsel of “our
deadline to file for the appeal”.
[14]
On this issue of filing the appeal
as soon as circumstances permitted, satisfaction may be taken from the fact
that the Applicant never actually became aware of the fact that an appeal had
not been filed before the deadline until very recently. Moreover, counsel did
file the appeal as soon as a review of the file revealed that only an objection
had been served and an appeal had not been filed. That date was January 3,
2014. The issue of the phone call of October 30, 2013, by necessity, will be
analyzed subsequently in connection with its impact on dispelling the
reasonable basis for the mistaken belief that an appeal had been initiated.
[15]
Aside from the time limitation
there would appear to be prima facie grounds for the appeal and, at the
very least, the Respondent has not suggested otherwise.
[16]
Lastly, and again subject to the timing
issue and its impact on jurisdiction, the Court concludes that it would
otherwise be just and equitable to grant the Order for extension. Swaying
justice and equity to the Applicant are the facts referenced in the
determination of a bona fide intention and the following:
a) the Applicant recognized its lack of expertise in this
area, retained accountants and then tax lawyers to attend to the appeal process;
b) the Applicant, when acting without professionals,
submitted documents, answered calls and solicited the assistance of CRA when
served with notices of assessments, statements of arrears and other information;
c) the Applicant pursued its remedies diligently and
without committing a single error or omission on its own, as opposed to
vicariously through tax counsel; and,
d) the Applicant was assured by counsel all was in hand and,
when it was not, otherwise simply received no reports from counsel on
procedural steps taken related to the appeal.
[17]
However, unless this Court holds
that the Applicant constructively and effectively commenced an appeal within the
requisite 180 days after the Decision, then this Court lacks jurisdiction to
make an order pursuant to subsections 28(1) and 103(1) of the CPP and EI
Act, respectively.
[18]
Generally, the authorities may be divided
into several categories: deadlines completely missed by even a few days for no
reason; incomplete or incorrect interceding acts by a taxpayer to appeal or
object; and, mishandled objections or appeals prosecuted by professional
advisors.
[19]
Those cases dealing with missing
the deadline by a matter of days, in the absence of any interceding but vain
attempt to perfect an appeal, are the subject of definitive and settled law.
In the absence of any indication of a positive action, however futile, no
application may be imputed, implied or constructed. This is true even where the
notice of reassessment was not received because of postal disruption (Carlson
v. R, 2002 FCA 145) and to such an extent that extending only one day
beyond the statutory period will not afford discretion to extend the statutory
limited period (Edgelow v. R, 2011 TCC 255) because the Court lacks
jurisdiction to do so given the mandatory language in subsection 167(5): Carlson,
supra. Where it is a professional advisor who also fails to undertake
any action to indicate in some meaningful form an intention to object or appeal
within the statutorily limited period for doing so, the Applicant will also
fail: Chu v. R, 2009 TCC 444 at paragraph 19 and 20.
[20]
In contrast, where a taxpayer has
undertaken reasonable actions, albeit incorrectly, to file an objection or
appeal in some form with some logical entity, the Court has been prepared to
find that such steps act as a standstill which freezes the countdown of time
during that period within which a taxpayer was under a reasonable misapprehension
that an appeal has been perfected (Hickerty, supra at paragraph 12).
[21]
Documents not meeting the precise procedural
requirements and/or otherwise sent to the wrong party, provided same are sent
within the requisite time frame to some party relevant and involved in the
proceedings, constitute actions requiring the Court to analyze the saving
provisions of its rules to determine whether an application or appeal may have
been constructively received by virtue of the inchoate step: Cheam Tours
Ltd. v. MNR, 2008 TCC 18 at Paragraphs 14, 15 and 18. The Court may be prepared
to construe the actions of the taxpayer as being reasonably sufficient to
virtually constitute an application to extend the time to bring the appeal. Inexplicably
misplaced or wrongly addressed documents are to be assigned the highest benefit
of doubt in order to have an applicant’s appeal heard on it merits: Miniotas
v. Her Majesty the Queen, 2011 TCC 43 at paragraphs 28 and 48. A letter
filed by the taxpayer with the CRA instead of the court, where the taxpayer is
confused, if filed within the requisite time, may be deemed to be a notice of appeal
filed with the Tax Court by virtue of the discretion embedded in the 27(3) of
the EI Tax Court Rules: Pham v. MNR, 2009 TCC 235 at paragraph
10.
[22]
However, where there is some
questionable conduct, uncertain intention or equivocal facts allocable to the
taxpayer, the Court will refrain from exercising such finite discretion which
must be rooted in the clearly apparent intention, good faith and reasonable diligence
of the taxpayer. For example, the presence of evasive or uncooperative
behavior, sophisticated knowledge or experience, general insouciance and lack
of dispatch upon learning of any deficiency will destroy the foundations of a reasonable
misapprehension of a perfected appeal: Gidda v. R, 2013 TCC 190 at
paragraphs 13 through 16.
[23]
Similarly, inattentiveness and wilful
blindness to one’s affairs for an unreasonable period will have the same
effect, irrespective of incomplete or incorrect filings: Castle v. R,
2008 DTC 2821 at paragraph 37.
[24]
Mishandled appeals by professional
advisors are empirically the most challenging category for courts to entertain and,
no doubt, the most frustrating for clients to endure. Taxpayer clients,
identifying they are in the midst of complicated, procedurally top-heavy and
time-sensitive litigation, seek out professional advisors. Taxpayers frequently
retain accountants, financial advisors or friends in informal matters or CPP
and EI appeals to be their agents; in the present case the Applicant retained a
known and self proclaimed firm of tax law specialists, regrettably with no
appreciably enhanced service, and perhaps even less than that which self-representation
may have rendered. Certain authorities assist taxpayers provided the taxpayer
acts in good faith, possesses little knowledge of the relevant area or topic
and such delegation of rights to the professional advisor was ostensibly
reasonable and supportable in the circumstances: Seater v. Her Majesty the
Queen, [1997] 1 CTC 2204 at paragraph 10. Similarly, erroneous or
misguided confirmation by a professional advisor of acting correctly followed
by immediate remedial steps to correct a deficiency, once revealed, will
convince the Court of a reasonable degree of diligence in the exercise of
rights: Gorenko v. Her Majesty the Queen, 2002 DTC 2025 at paragraphs 19
and 20. Moreover, where a taxpayer has delegated the responsibility of dealing
with reassessments to the professional advisor and there are no circumstances
which could have allowed the taxpayer to know more than it did because of a
re-direction of CRA correspondence and dealings from the taxpayer the
professional advisor, then it is unfair for the taxpayer not to have the appeal
determined on its merits: Big Bad Voodoo Daddy v. Her Majesty the Queen,
2010 TCC 12 at paragraph 10 which cites with approval at paragraph 11, Gorenko,
supra.
[25]
The following factual
particularities based upon the authorities referenced above, will afford the present
Applicant its day in Court in order to present the merits of its appeals:
a) the taxpayer at every step in the process, when acting
without faulty direction and assistance, did what it reasonably could to object
to and appeal the re-assessments: directing its accountants, retaining tax lawyers,
executing the appropriate consents, confirming all advices received directly
from the CRA and taking all such foregoing steps within the 90 day “as of
right” appeal period following the Decision:
b) in retaining professional advisors, as opposed to having
its director or officer conduct the appeal, the Applicant picked an advertised,
self-proclaimed firm of tax lawyers;
c) at no time was the taxpayer obstructionist with the CRA,
lax in instructing counsel nor anything other than forthright before this
Court;
d) when requested by counsel, the Applicant responded
forthwith;
e) when under the reasonably held misapprehension all was
proceeding according to right and rite, it awaited a reasonably short amount of
time for its court date; and,
f) by comparison to some taxpayers before this Court, the
Applicant was diligent and mindful of the deadlines and time frames of which it
was made aware.
[26]
There is little else that the
taxpayer could have reasonably done given the relatively short time frame between
instruction and the date when this application was heard when coupled with the
all too normal practice of uncommunicative counsel.
[27]
The same is not true of
Applicant’s counsel. The list of multiple omissions is stark given the short
period of the retainer, even though counsel did manage to file an interceding
notice of objection and request for extension, admittedly in the wrong format
and wrong forum. Although not entirely clear, this error seemed to arise from
a mistake of fact concerning whether a previous notice of objection had been
filed. Moreover, the omissions do not derogate from the fact that the
identifiable missteps were taken during the period of 180 days next following
the Decision. Moreover, the telephone call of October 30, 2013 by the CRA, was
simply that: a phone message which through inadvertence of clerical staff itself
was not disclosed to anyone who may have understood its import. Until December
30, 2013, the Applicant and (less convincingly) counsel were of the reasonable but
mistaken view that what needed to be done had been done. Counsel, upon
discovering otherwise, did act with considerable speed to file the proper
application to extend and notice of appeal with the proper entity, this Court.
[28]
The facts of this application
create an unusual situation. An incorrect assumption and inexplicable delay by
a professional advisor led to a mistake of fact: the filing of the redundant,
second notice of objection with a request to extend. The misfiled revelation
of that error --the phone message-- prevented discovery of the previous error.
The non-disclosure and non-reporting throughout of actions taken by counsel (the
missed 90 day “as of right” deadline and the filing of the incorrect notice of
objection) prevented the possible, but inverted obligation of the Applicant to
identify the missteps of counsel. These causally interdependent errors of
judgment, none of which were committed by the taxpayer, all procedurally robbed
the otherwise pro-active, cooperative and reasonably mistaken Applicant of its opportunity
to perfect its appeal rights and access the curative provisions for remedying
same had it been aware of the initial missteps and tardiness.
[29]
Therefore, given the inchoate
appeal approximated by the superfluous objection and the necessary request for
an extension dated October 18, 2013 this Court will deem the request for
extension and the notice of objection (filed with the CRA) to have been
received by the Court on October 24, 2013 as a notice of appeal, now amended by
the grounds of appeal contained within the proposed notice of appeal received
with this application. It does so because the missteps were steps nonetheless.
These actions, admittedly incomplete, give the Court jurisdiction to deploy its
authority and discretion under sections 5.2 and 27 of both the CPP and
EI Act Rules of Procedure of this Court to correct the errors in such
a unique situation.
[30]
Costs ought to be awarded, but the
Court is mindful that this application relates to CPP and EI Act matters
where there is no authority to order costs relative to the result of an appeal.
Also, the Applicant seems to have been a victim of befuddled counsel and bad
circumstance. However, given the number of missteps and omissions committed, costs
thrown away should be ordered against Applicant’s counsel personally for a
fixed amount. The Court may do so by virtue of the inherent jurisdiction as a
superior court of record to regulate its own processes; such a cost order
reflects procedural delay rather than a results oriented award at disposition
of the matter. The Court will allow some time for submissions by counsel after
which time it will render a decision and fix such costs in favour of the
Respondent to be paid by Applicant’s counsel personally. Also, the Respondent
shall have 60 days after the issuance of the cost order to file a Reply. As
mentioned above, this is a factually unique application. For the sake of
taxpayers who retain and pay good money for tax counsel to prosecute appeals,
hopefully it remains so.
Signed at Vancouver, British Columbia, this 25th
day of April, 2014.
“R. S. Bocock”
Email this Content