Date: 20061026
Docket: A-622-05
Citation: 2006 FCA 352
CORAM: NOËL
J.A.
EVANS
J.A.
MALONE
J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
236130 BRITISH COLUMBIA LTD
Respondent
REASONS FOR JUDGMENT
NOËL J.A.
[1]
This is an appeal from the Order of Bell J. of
the Tax Court of Canada (2005 TCC 770), who held, further to a reference made
under section 173 of the Income Tax Act (the “Act”), that the
reassessments issued with respect to the respondent’s 1995 and 1996 taxation
year were issued after the applicable limitation period had expired.
The facts
[2]
The following brief summary outlines the salient
facts which led to the reference. After filing waivers pursuant to subparagraph
152(4) (a) (ii) of the Act for the 1995 and 1996 taxation years, the respondent
filed Notices of Revocation on November 2, 2001. As a result, the limitation period
to reassess those two years elapsed six months thereafter, on May 2, 2002.
[3]
Notices of reassessment bearing the date April
8, 2002 were first mailed to the appellant presumably on that date. However,
they were mailed to an erroneous address in Richmond, B.C. as a result of a mistake by an official of the Canada Revenue
Agency (“CRA”) who entered into the computer system another corporations
mailing address for that of the respondent.
[4]
The Notices of Reassessment were returned to the
CRA and stamped received on April 22, 2002. The appellant produced evidence establishing
that, based on the procedure in place, the reassessments would have been mailed
out again by April 29 or 30, 2002.
[5]
However, when they were mailed out again, the
reassessments were sent to the “Books and Records” address indicated on the
respondent’s income tax return in which, the postal code had been improperly inscribed
by the respondent. The evidence revealed that, without checking the
respondent’s returns, a clerk had entered into the computer system the
erroneous Books and Records’ address as the respondent’s mailing address.
[6]
The
reassessments were received by the respondent by May 17, 2002 at the latest.
There is no evidence as to the exact date.
[7]
In the
appeal which ensued, the respondent alleged, amongst other things, that the
reassessments were invalid since they had been issued out of time.
[8]
The
parties subsequently agreed to refer to the Tax Court of Canada the question
whether the reassessments had been made on time (i.e., before May 3, 2002). On
December 8, 2005, Bell J. ruled that the reassessments were statute barred.
[9]
This is
the decision under appeal.
Statutory
provisions
[10]
It is useful at this stage to set out the two statutory
presumptions which operate in favour of the Minister when an assessment is sent
by mail. Subsection 244(14) reads, in part, as follows :
For the purposes
of this Act, where any … notice of assessment … is mailed, it shall be
presumed to be mailed on the date of that notice …
|
Pour
l’application de la présente loi, la date de mise à la poste […] d’un avis de
cotisation […] est présumée être la date apparaissant sur cet avis […]
|
[11]
Subsection 244(15) reads, in part, as
follows :
|
Where any notice
of assessment … has been sent by the Minister, as required by this Act, the
assessment … is deemed to have been made on the day of mailing of the notice
of the assessment …
|
Lorsqu’un avis
de cotisation […] a été envoyé par le ministre comme le prévoit la présente
loi, la cotisation est réputée avoir été établie […] à la date de mise à la
poste de l’avis de cotisation […]
|
Decision of the Tax Court Judge
[12]
The Tax Court Judge first
noted that the onus of demonstrating that the reassessments were mailed on time
rested with the Minister. However, he acknowledged that in an organization such
as the CRA, it is impossible to produce direct evidence of the date of mailing
of a particular document and that the appropriate method of proof is that set
out in Schafer v. The Queen, [1998] GSTC 60 (TCC) (Schafer,) as applied by this Court in
Kovacevic v. The Queen, [2003] GSTC 112 (FCA) (Kovacevic).
[13]
In Schafer,
Bowman J. (as he then was) enunciated the test as follows:
[23] In a
large organization, such as a government department, a law or accounting firm
or a corporation, where many pieces of mail are sent out every day it is
virtually impossible to find a witness who can swear that he or she put an
envelope addressed to a particular person in the post office. The best that can
be done is to set out in detail the procedures followed, such as addressing the
envelopes, putting mail in them, taking them to the mail room and delivering
the mail to the post office.
[14]
In Kovacevic,
this Court gave this statement the following qualified approval:
[16] I accept that when
legislation requires that documents be sent by a large organization such as a
government department by ordinary mail, but does not require registered or
certified mail or evidence of a more formal means of sending, the observation
[of the Tax Court] in Schafer is reasonable. Generally it would be
sufficient to set out in an affidavit from the last individual in authority who
dealt with the document before it entered the normal mailing procedures of the
office, what those procedures were.
[15]
The Tax Court Judge appeared
to accept the Crown’s evidence that, in the normal course, the procedure in
place with respect to returned mail should have led to the Notices being mailed
out on time. However, he found, that he could not rely on this evidence in this
instance since the evidence shows that the reassessments were again sent to a
wrong address.
[16]
In particular he
said:
[48] When the Notices of
Assessment were mailed a second time to the Appellant, the address to which
they were sent was the mistaken address furnished by the Appellant to Revenue.
That was the Books and Records address which was identical to the Head Office
address except that the postal code of the Books and Records address was
incorrect. The evidence of Revenue officers was that all three addresses were displayed
on a screen and that, obviously, the incorrect address was selected. Even
though the Appellant furnished that address to the Respondent, the decision to
select the Books and Records address with the wrong postal code exhibited
another lack of care on behalf of Revenue. An incorrect address, entered on the
system by Revenue, having been used on the original mailing, more time and care
should have been taken to ensure the correct address was used on the second
mailing. Two identical municipal addresses with different postal codes should
have caught Revenue's attention and should have resulted in selection of the
correct address.
[17]
In the end, the Tax
Court Judge held that the Minister had failed to establish on a balance of
probabilities that the Notices of reassessment had been remailed prior to May
3, 2002.
Alleged errors
[18]
The appellant submits
that the Tax Court Judge erred in concluding that the Minister had not
satisfied its onus of proving, on a balance of probabilities, that the
reassessments had been mailed out on April 29 or 30, 2002. According to the
appellant, after acknowledging that the procedure in place would have resulted
in the reassessments being made on time, the Tax Court Judge was bound to apply
the rule stated in Schafer, and hold that the Minister had discharged
the onus.
[19]
Moreover, it was not
open to the Tax Court Judge to hold that the test for establishing the date of
mailing had not been met given that the incorrect postal code used by the
Minister to mail the Notices on the second occasion had been supplied by the
respondent.
Decision
[20]
In my view, it is not
necessary in this case to determine whether, despite acknowledging that the
procedure in place would have resulted in the reassessments being mailed on
time, the Tax Court Judge could hold that the Minister had not discharged his onus.
The fact that the reassessments were sent to the wrong address leads to the
conclusion that they were not issued at all.
[21]
In this respect, I
disagree with the appellant’s contention that the error which led to the
reassessments being sent to the wrong address is attributable to the respondent
and that therefore, it cannot be “laid at the feet of the Minister” (A.G. of
Canada v. Bowen, 91 D.T.C. 5594 (FCA) at 5596). As the prescribed
tax return form requires, three addresses were given in the respondent’s tax
return; a mailing address, an address indicating where the Books and Records are kept, and the head office address. Both the head office and the
mailing address were correctly inscribed. However, the reassessments were sent
to the Books and Records address, which as noted, did not reflect the proper
postal code.
[22]
In the end, the
reassessments were mailed to the wrong address on both occasions. As was stated
in L.B. Scott v. M.N.R.
[1960] C.T.C. 402 (Ex. Ct.) (Scott)
at p. 417:
“… it is in my opinion also to be inferred
that Parliament never intended that such a notice could be given effectively by
the “mailing” of it to the taxpayer at some wrong or fictitious address, and I
find nothing in the statute to suggest that a taxpayer should be bound by an
assessment or fixed with notice of assessment upon the posting of a notice
thereof addressed to him elsewhere than at his actual address or at an address
which he has in some manner authorized or adopted as his address for that
purpose.”
[23]
The appellant argued
that all three addresses indicated by the respondent in its tax return are “in
some manner authorized or adopted” by it for mailing purposes. This of course
ignores the prescribed form which specifically requires a taxpayer to provide
an address for mailing purposes. In this case, this address happens to be
different from the head office address and the Books and Records address.
Obviously the mailing address is the only one authorized and adopted for
mailing purposes.
[24]
I agree with the
respondent that absent an indication to the contrary, the mailing address is
the one to which mail is to be sent including the reassessments here in issue.
Had the reassessments been mailed to that address rather than the address
indicated for Books and Records, they would have been made on time. The error
is entirely attributable to the officers of the Minister who when the first
Notices were returned failed to verify the respondent’s mailing address by
examining the tax returns.
[25]
I would dismiss the
appeal with costs.
“Marc Noël”
J.A.
“I
agree.
John
M. Evans, J.A.”
“I
agree.
B.
Malone, J.A.”
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-622-05
STYLE OF CAUSE: Her
Majesty The Queen v.
236130 British Columbia Ltd.
PLACE OF
HEARING: Vancouver, British Columbia
DATE OF
HEARING: October
25, 2006
REASONS FOR
JUDGMENT OF THE COURT: Noël, J.A.
Evans,
J.A.
Malone,
J.A.
REASONS FOR
JUDGMENT: Noël, J.A.
DATED: October
26, 2006
APPEARANCES:
Wendy Burnham
Deborah
Horowitz FOR
THE APPELLANT
Warren J.A.
Mitchell, Q.C. FOR THE
RESPONDENT
SOLICITORS
OF RECORD:
|
John H. Sims,
Q.C.
Deputy
Attorney General of Canada
|
FOR THE APPELLANT
|
|
Thorsteinssons
LLP
Vancouver, British Columbia
|
FOR THE RESPONDENT
|
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