Docket: A-389-16
Citation: 2017 FCA 124
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CORAM:
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PELLETIER J.A.
WEBB J.A.
NEAR J.A.
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BETWEEN:
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STEPHEN BYGRAVE
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Appellant
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and
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HER MAJESTY THE
QUEEN
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Respondent
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REASONS FOR
JUDGMENT
PELLETIER J.A.
[1]
Mr. Bygrave appeals from an unreported decision
of the Tax Court of Canada (the Tax Court) dismissing his application for an
extension of time pursuant to section 167 of the Income Tax Act, R.S.C.
1985, c. 1 (5th Supp.) (the Act) to file his notice of appeal of the Minister
of National Revenue’s (the Minister) reassessment of his tax liability for the
2010 taxation year. In that year, Mr. Bygrave sold a condominium property that he
had acquired 3 years previously. He declared the gain from the sale in his 2010
income tax return as a capital gain. In 2014, the Minister reassessed Mr.
Bygrave’s return, treated the gain from the sale of the condominium property as
income and assessed a penalty.
[2]
Mr. Bygrave filed a notice of objection. On
January 12, 2016, the Minister confirmed the reassessment and sent her notice
of confirmation to Mr. Bygrave. This started the clock on the 90 day period for
the filing of a notice of appeal to the Tax Court provided at subsection 169(1)
of the Act.
[3]
At this point the bookkeeper who had been
assisting Mr. Bygrave referred him to a chartered accountant who apparently
told him that he had the skills to assist him in dealing with his income tax
problem. Subsequent events show that this was not the case.
[4]
The accountant communicated with Canada Revenue
Agency (CRA) officials in the hope of persuading them that the confirmation of
the reassessment was a mistake. Within a short time, the CRA advised the
accountant that the file had been closed and that Mr. Bygrave would have to
file a notice of appeal to the Tax Court if he wished to challenge the
Minister’s reassessment. The accountant was of the view that it would be unprofessional
to file a notice of appeal unless he had in hand all the documentary evidence that
he intended to put before the Court on the appeal. To that end, he asked Mr.
Bygrave to obtain that documentation, a process which took Mr. Bygrave beyond
the 90 day limitation period for filing his notice of appeal.
[5]
Some 52 days after the expiry of that limitation
period, the accountant filed Mr. Bygrave’s application for an extension of time
to file his notice of appeal pursuant to section 167(1) of the Act.
[6]
At the hearing of the application, the
accountant pursued his foray into unfamiliar territory and acted as Mr. Bygrave’s
counsel.
[7]
Subsection 167(5) sets out the conditions for
the granting of an extension of time:
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(5) No order
shall be made under this section unless
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(5) Il n’est fait
droit à la demande que si les conditions suivantes sont réunies :
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(a) the application is made within one year after the
expiration of the time limited by section 169 for appealing; and
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a) la
demande a été présentée dans l’année suivant l’expiration du délai imparti en
vertu de l’article 169 pour interjeter appel;
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(b) the taxpayer demonstrates that
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b) le
contribuable démontre ce qui suit :
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(i) within the time otherwise limited by section 169 for appealing
the taxpayer
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(i) dans le délai par ailleurs imparti pour interjeter appel, il n’a
pu ni agir ni charger quelqu’un d’agir en son nom, ou il avait véritablement
l’intention d’interjeter appel,
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(A) was unable to act or to instruct another to act in the
taxpayer’s name, or
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[En blanc / Blank]
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(B) had a bona fide intention to appeal,
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[En blanc / Blank]
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(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,
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(ii) compte tenu des raisons indiquées dans la demande et des
circonstances de l’espèce, il est juste et équitable de faire droit à la
demande,
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(iii) the application was made as soon as circumstances permitted,
and
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(iii) la demande a été présentée dès que les circonstances le
permettaient,
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(iv) there are reasonable grounds for the appeal.
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(iv) l’appel est raisonnablement fondé.
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[8]
The Tax Court gave its
decision at the conclusion of the hearing. The Tax Court found that the
application for an extension of time had been made within one year, that within
the relevant period Mr. Bygrave had a continuing intention to appeal the
Minister’s reassessment and that there were reasonable grounds for the appeal.
The latter point was conceded by counsel for the Minister so that the basis for
that conclusion is not apparent from the record. However, the Tax Court was not
satisfied that subparagraphs 167(5)(b)(ii) and (iii) had been satisfied.
In other words, the Tax Court was not persuaded that the application was made
as soon as circumstances permitted and that it would be just and equitable to
grant the application. As a result, the Tax Court dismissed Mr. Bygrave’s
appeal.
[9]
The issues on the appeal are the Tax Court’s
conclusions with respect to subparagraphs 167(5)(b)(ii) and (iii) of the
Act, specifically whether the application for an extension of time was made as
soon as circumstances permitted and whether it would be just and equitable to
allow the application.
[10]
Given that this is an appeal from a decision of
the Tax Court after trial, the standard of review is that set out in Housen
v. Nikolaisen, 2002 SCC 31, [2002] 2 S.C.R. 235, namely correctness for
questions of law and palpable and overriding error for questions of fact and
mixed questions of fact and law unless there is an extricable question of law.
The fact that the Tax Court’s decision can be considered to be a discretionary
decision (“just and equitable”) does not affect
the standard of review since the Housen standard applies to
discretionary decisions: Hospira Healthcare Corp. v. Kennedy Institute of
Rheumatology, 2016 FCA 215 at para. 79, 402 D.L.R. (4th) 497.
[11]
In addressing the question of whether Mr.
Bygrave made his application as soon as circumstances permitted, the Tax Court
noted that both Mr. Bygrave and his accountant were aware of the 90 day limit
for filing a notice of appeal. It also noted that the reason for the delay was
the perceived need to obtain all the relevant documentation prior to filing a
notice of appeal, a process which took some time.
[12]
In coming to its decision on this aspect of the
case, the Tax Court referred to two cases in which reliance upon professional
advisers was not found to be a sufficient explanation for the delay in filing
the application for an extension of time: Carrier v. The Queen, 2005 TCC
182, [2007] 2 C.T.C. 2121, and Kolmer v. The Queen, 2003 TCC 829, [2004]
1 C.T.C. 3047. While reliance on professional advisers may be a relevant
consideration, this is not a case of taxpayer inactivity in reliance on the
mistaken belief that their professional advisers are dealing with the appeal.
This is a case in which the taxpayer embarked on a course of action in support
of his appeal which he was unable to complete within the 90 day limitation for
filing his notice of appeal.
[13]
In considering an application for an extension
of time to file an appeal pursuant to subsection 167(5), there are two relevant
time periods. The first is the 90 day period following the sending of the
Minister’s confirmation of the assessment during which a taxpayer can appeal
the Minister’s assessment to the Tax Court pursuant to section 169. For the
purposes of an extension of time, the taxpayer must demonstrate that during
this period they were “unable to act or instruct
another to act” or had “a bona fide intention to
appeal”, being the alternative requirements of subparagraph 165(5)(b)(i).
[14]
The second period begins at the end of the first
period and runs to the date of application for an extension of time, which must
be made within one year from the expiration of the first period. This second
period is the relevant period for assessing whether the application for an
extension of time was brought as soon as circumstances permitted under
subparagraph 165(5)(b)(iii).
[15]
In conducting this inquiry, the issue is the
applicant’s use of the time between the expiry of the 90 day appeal period and
the filing date of the application for an extension of time. This is not simply
a question of asking why the application was not made in the shortest number of
days after the 90 day period has expired. It requires an examination of the
applicant’s particular circumstances to determine if the applicant acted with
diligence appropriate to the circumstances.
[16]
In my view, the Tax Court did not direct its
mind to the appropriate period when it considered whether Mr. Bygrave’s appeal
had been brought as soon as circumstances permitted. In setting out the law,
the Tax Court correctly noted that if “a taxpayer is
late in filing a Notice of Appeal, the taxpayer must act with diligence to
apply for an extension of time to appeal and file a Notice of Appeal”: Bygrave
v. The Queen (12 Sept. 2016), Toronto 2016-2201 (IT) APP at 9 [Reasons]. The
Tax Court, however, concluded that Mr. Bygrave knew of the 90 day time limit
and could have filed his notice of appeal within it. This conclusion
shows that the Tax Court asked whether the circumstances permitted Mr. Bygrave
to file a notice of appeal during the 90 day period, rather than asking whether,
once that period had expired, he brought his application for an extension of
time as soon as circumstances permitted. This is an error of law that
warrants our intervention.
[17]
I am supported in my reading of the Tax Court’s
reasons by its earlier consideration of subparagraph 167(5)(b)(i). While
that inquiry is limited to the 90 day period, the Tax Court found that Mr.
Bygrave had an “ongoing intention to appeal this
reassessment throughout the 90-day time period, and until this application was
filed and he has therefore met the requirement at subparagraph 167(5)(b)(i)”:
Reasons at 10. As this passage makes clear, the Tax Court considered both periods
on this issue when it should have only considered the first. Evidently, the Tax
Court was mistaken as to the relevant time periods for both subparagraphs
167(5)(b)(i) and (iii).
[18]
Paragraph 52(c) of the Federal Courts
Act, R.S.C. 1985, c. F-7 provides that in an appeal, other than an appeal
from the Federal Court, this Court may give the decision that should have been
given, or send the matter back for determination in accordance with any
directions it considers appropriate. In my view, this is a case in which this
Court should render the decision which the Tax Court ought to have given. Having
incurred the expense of a hearing in the Tax Court and now an appeal, Mr.
Bygrave ought to be spared the necessity of a further hearing on this question
if I am able to decide it on the basis of the record developed before the Tax
Court. While the record is fairly sparse, I believe I can.
[19]
It would appear that once the CRA confirmed that
Mr. Bygrave’s file had been closed, he began gathering the documentary evidence
that his accountant told him that he needed to bring his appeal. The evidence
is that Mr. Bygrave spent the period between the expiry of the 90 day period
and the filing of his application for an extension of time gathering this
documentary evidence.
[20]
We have no information as to the basis for the
Minister’s reassessment but given that it arises from a single transaction with
respect to a condominium property that Mr. Bygrave owned for a period of three
years and that the characterization of the gain as a capital gain was rejected,
one may safely assume that the Minister concluded that the purchase and sale of
the property was an adventure in the nature of trade. In those circumstances,
Mr. Bygrave’s intention, both primary and secondary, at the material time will
be relevant. To the extent that evidence of that intention may require proof of
surrounding circumstances, some of which may require documents that Mr. Bygrave
had to obtain from Jamaica, the time to secure those documents would be a
circumstance explaining the delay in the bringing of the request for an
extension of time. While those who have some knowledge of tax matters know that
it was not necessary to have that evidence in hand prior to filing the notice
of appeal, Mr. Bygrave did not know that.
[21]
The evidence suggests that the application for
an extension of time was brought as soon as the necessary documents were in
hand. As a result, I am satisfied that the application for an extension of time
was made as soon as circumstances permitted.
[22]
As to whether it is just and equitable to grant
the application, I am of the view that it is. There is no conduct on Mr.
Bygrave’s part that would make it unjust or inequitable to award him the
extension of time which he seeks. In addition, this is a case in which the
Minister has imposed a penalty pursuant to subsection 163(2) of the Act which
deals with false statements made knowingly or in circumstances amounting to
gross negligence. A taxpayer should be given every reasonable opportunity to
defend himself against the imposition of such a penalty.
[23]
I would therefore allow Mr. Bygrave’s appeal
with costs in this Court and in the Tax Court of Canada.
"J.D. Denis Pelletier"
“I agree
Wyman W. WebbJ.A.”
“I agree
D.G. Near J.A.”
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