Neil A. Greco, Steve Stephens, Judith Mattingley, Charlie Yip, Linda Johnston-Davis, Gary Pinfold v. Minister of National Revenue, [1991] 2 CTC 2384

Mogan, T.C.J. [Orally]:—These six appeals were set down for hearing to commence at Toronto on Tuesday, June 18, 1991 by a letter from the Court dated February 14, 1991 addressed to counsel for the respondent, with a copy to counsel for the appellants. The letter indicated that it was estimated that these matters would last four days and stated that Notices of Hearing would be forwarded two months prior to the hearing.

In accordance with that letter, notices of hearing were sent out approximately 60 days before June 18 confirming that the appeals would be called for hearing on that date; and the last four days of this week were set aside to hear these appeals.

On May 31, counsel for the appellants asked for an adjournment of the cases and wrote to counsel for the respondent seeking his consent to such an adjournment. That application was all handled by mail; there was no oral hearing. Counsel for the respondent sent a letter back refusing his consent and insisting that the appeals proceed on June 18. On the strength of that correspondence, a letter was issued by the Court, after this matter had been reviewed by the Chief Judge of the Court, refusing the appellant's request for an adjournment and stating that the matters would proceed to hearing on Tuesday, June 18.

On Wednesday, June 12, counsel for the appellants caused a notice of motion to be served on the respondent, with a copy to the Court the following day, in which counsel sought an Order striking out three paragraphs in the respondent's reply for each of the six appeals and, alternatively, for an opportunity to amend each of the six notices of appeal. That motion was heard by way of a conference telephone arrangement on Friday, June 14 at approximately eleven-thirty in the morning, in which the two counsel were in their respective offices, the Registrar of the Court and the court reporter were here in Toronto, and I was in my Chambers in Ottawa. At that time, I heard submissions from both counsel and ruled that no paragraphs in the respondent's reply should be struck out; that the appellant would not have an opportunity to amend his notice of appeal at this late date; and that the appellant would have an opportunity to serve on the respondent a response to the respondent's reply, to the extent that the appellant objected to the inclusion of those paragraphs, on condition that any such response be served by five o'clock on Monday, June 17 so that counsel for the respondent would at least have overnight to consider the responses. I gave brief reasons for my ruling on Friday which are recorded and those reasons speak for themselves.

The six appeals were called for hearing yesterday morning, June 18, at nine- thirty, at which time counsel for the appellant brought a motion to have the appeals adjourned. That motion was argued at some length. I heard from counsel on both sides and made a ruling that the six cases would be adjourned for a period of not more than 24 hours and that they would proceed this morning, Wednesday, June 19, at nine-thirty. I also cautioned counsel for the appellants at that time that I would not hear further submissions from him concerning an adjournment. That is to say, I made it clear that the appeals would proceed this morning.

The cases were called for hearing this morning. At the opening of proceedings, the counsel for both sides agreed that all six appeals would proceed together and be heard on common evidence. Also, counsel for the appellants asked for and obtained permission from the Court to file certain documents With the Court pertaining to an appeal that he had lodged on either Monday, June 17, or Tuesday, June 18, in the Federal Court of Appeal, basically taking an appeal from the ruling I had made last Friday concerning his motion to strike out certain paragraphs or amend his notice of appeal.

Having agreed that the appeals would proceed together on common evidence, counsel for the appellants then stated that he did not propose to call any witnesses and, upon an inquiry from the Bench, he also stated that he did not propose to introduce any documentary evidence. He therefore closed his case without offering evidence, either by way of oral testimony or documents, in support of the position of the six appellants.

Thereupon, counsel for the respondent brought a motion to dismiss the six appeals on the basis that the appellant had not discharged the onus upon him of disproving the assumptions of fact on which the Minister of National Revenue had relied when issuing the reassessments which are under appeal. Mr. Olsson, to save time, pointed out that the six replies to the six Notices of Appeal were drafted in a parallel fashion although they contained different numbered paragraphs, depending upon the particular circumstances of the individual appeal but that, in substance, the replies had a parallel structure. He referred me to six or seven paragraphs concerning the opening of accounts with a substantial Canadian brokerage firm by a person named Maguire who is described in the pleadings; other paragraphs relating to whether documents had been lodged to show that those accounts were being operated as investment clubs; certain documents bearing the name of the brokerage firm which were apparently, according to the Minister's assumptions, not prepared by the brokerage firm but prepared by the Maguire organization; and other allegations as to the manner in which Maguire had advertised his opportunities to reduce tax and the fees charged. Counsel for the Minister then referred me to the conclusions he had drawn which, he said, were reasonable conclusions to draw from the assumed facts.

He also pointed out that if the Court did not accept those conclusions as reasonable, based on the inferences drawn from the assumed facts, that there were alternative submissions.

In response to the Minister's motion to dismiss the appeals, Mr. Zaldin takes two basic positions:

Firstly, he states that the Minister failed to act with all due dispatch when responding to the six notices of objection; and that is an argument raised on the interpretation of subsection 165(3) of the Income Tax Act, R.S.C. 1952,

c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act").

And secondly, he states that the Minister has not provided any evidence to show why it took so long to respond.

In round figures, the Minister consumed about 28 months in each of these appeals from the time the notice of objection was received until the Minister responded by way of a confirmation, I gather, and not a reassessment. There was a shorter time in one appeal but that was explained by reason of the fact that it was abbreviated at the front end in time because the taxpayer obtained an Order extending time to object. I take it though, from the pleadings, that there is no doubt the Minister had a period of 28 months from the time these objections were filed until he issued his confirmation.

Mr. Zaldin, counsel for the appellants, takes the position that that is too long for an unexplained delay and, therefore, the assessments should be struck down as invalid.

Even before I heard counsel for the respondent, I put to Mr. Zaldin a suggestion that a taxpayer had an escape hatch, one might say, from the Minister's delay, under section 169 of the Income Tax Act, by having an absolute right to launch an appeal if he thought the Minister was taking too long to consider his objection; and the parallel provision that, if anything, a taxpayer would want to indulge the Minister some time, in the hope that the Minister's response under section 165 would not be speedy or arbitrary or capricious or indeed, worst of all, simply a rubber stamp of what the field assessor had done.

As I understand the concept of the objection procedure, it is an internal appeal. It is an opportunity for a taxpayer to have his assessment reviewed within the Income Tax Department, hopefully by a second sober look to see if the original auditor was correct. I should think the Minister would have to be indulged some time to exercise his discretion in determining whether he should confirm the assessment or grant some relief.

Mr. Zaldin relied upon the decision of this Court in /. Stollar Construction Ltd. v. M.N.R., [1989] 1 C.T.C. 2171; 89 D.T.C. 134, in which Judge Bonner determined that an assessment issued by the Minister six years after an income tax return was filed was not issued with all due dispatch, and he allowed the appeal.

In my view, the decision in Stollar Construction has no application whatsoever to this proceeding. I would have reached that conclusion on my own because of the different consequences flowing from the Minister's duty under section 152 to assess with all due dispatch, and the consequences flowing from the Minister's obligation under subsection 165(3) to review an objection with all due dispatch.

However, I do not have to rely on my own instinct because I can follow an unreported decision of the Associate Chief Judge of this Court in Apfelbaum v. M.N.R., [1991] 1 C.T.C. 2599; 91 D.T.C. 800. In that case, Judge Christie reviews the legislation at length, including sections 165 and 169 and makes the following statement on page 2601 (D.T.C. 802).

I conclude that the remedy and the only remedy that a taxpayer has if the respondent fails to discharge his duty under paragraph 165(3)(a) is to appeal under paragraph 169(b). Failure of the respondent to act under paragraph 165(3)(a) does not make a reassessment that has been objected to liable to be vacated by this Court regardless of the lapse of time since the service of the notice of objection. The application to vacate the reassessment is refused.

I have also been referred to an old decision of the Tax Appeal Board in 1961 in which Mr. Boisvert referred to an earlier decision of the Exchequer Court in Jolicoeur v. M.N.R., [1960] C.T.C. 346; 60 D.T.C. 1254 which referred to the words "with all due dispatch" in what is now section 165(3). In the Jolicoeur case, Mr. Justice Fournier stated at page 358 (D.T.C. 1261):

In my opinion the words “with all due dispatch” have the same meaning as "with all due diligence” or “within a reasonable time”. They appear in Sections 46(1), 58(3) and 105(2) of the Income Tax Act and other fiscal statutes. In a legal sense, they are interpreted as giving a discretion and freedom, justified by circumstances and reasons, to the person whose duty is to act.

I find those decisions consistent with what my instinct would be as to giving the Minister some discretion to consider an objection and have some latitude in the time he takes to consider it.

As to the second argument of whether the length of time taken was reasonable in the circumstances, Mr. Zaldin argued forcefully that there is no evidence before the Court as to that. I think there is evidence before the Court in the form of the pleadings. I do not know whether the statements made in the Notice of Appeal or the Minister's reply in any one of these cases is true but I do recognize allegations which are serious and which indicate a high degree of complexity in the transactions which the Minister has attempted to review, audit and reassess. The allegations in the Minister's reply are extensive, to say the least, and the conclusions he has drawn are serious. He says that these taxpayers did not really know about accounts before they were opened in the name of a brokerage firm; had no connection with the brokerage firm. He makes a number of conclusions and alternatives; he suggests that the whole thing was a sham. I would hope that the Minister would not make those kinds of allegations lightly. Assuming he is a responsible administrator of a statute, that he should not conduct an audit of a transaction that seems as complex as this without thoroughly reviewing files in the offices of all parties involved and according to the pleadings which, of course, are not proven yet. There were a number of parties involved and there was some complexity in the transactions and really significant amounts of money involved in terms of buying and selling securities and running over $10 million in amount in accounts that are identified in the pleadings.

If the field auditor did his work in order to make the initial reassessment and if the objection process is to be given a fair chance to operate, I think that 28 months is not an unreasonable length of time for the particular division in the Income Tax Department which considers objections to take and review this whole situation to see whether the assessments are well founded.

Therefore, I find that the appellants position is not well taken either in saying that the Minister did not act with all due dispatch or that there were no facts before the Court or no evidence or reasons given why it had taken 28 months to review the objections. I think the pleadings themselves indicate the reasons why it took a long time to give a fair review of what the assessor had done. I also find, on the basis of Judge Christie's decision, that even if the Minister took a few months longer than he should have, there was a remedy to the taxpayer and that remedy was to expedite the determination of the taxpayer's complaint by coming to the Court.

Therefore, I find that the appellants here today do not have an effective answer to the respondent's motion to dismiss these appeals and, on the basis that the appellants have not discharged the burden of proving the assessments were wrong, I will issue a judgment—not an Order—dismissing the appeals.

Appeals dismissed.