Sykes v. R., [1998] 1 CTC 2639, 98 DTC 1164

Bowie T.C.J.:

This is a motion brought by the Respondent for an Order quashing three appeals from assessments made under the Income Tax Act (the Act). The appeals were begun by a Notice of Appeal filed in the Court on May 15, 1996. The Appellant became bankrupt on June 22, 1990, and as a result is deemed to have a taxation year beginning on January 1, 1990 and ending on June 21, 1990 (the first 1990 year), and another beginning on June 22, 1990 and ending on December 31, 1990 (the second 1990 year) [1] . It is from his assessments for income tax for these two taxation years, and for the 1989 taxation year, that the appeals are brought. The Respondent’s position is that notices of objection were not filed within the 90 days following the dates of assessment, or reassessment, as limited by the Act, and that the appeals therefore do not lie, as a timely notice of objection is a statutorily mandated condition precedent to an appeal. [2]

The motion first came on before Bowman J. at Vancouver on July 18, 1996, at which time it was adjourned to permit cross-examination on the affidavit of Stephen Tsoi, filed in support of the motion, and on the affidavit of the Appellant filed in opposition to it. Those cross-examinations were fixed for Monday, November 18, 1996, with the argument to take place on Friday November 22. The cross-examinations took place before me on the Monday as scheduled. On the Friday, Mr. Sykes appeared before me and requested that the argument be adjourned, on the ground that he had not had an adequate opportunity to prepare himself. I granted his request, and the argument was then set to proceed on April 14, 1997. It was again adjourned, at Mr. Sykes’ request, for reasons related to his health. It again came on for hearing before me on July 9, 1997. At that time, Mr. Sykes again requested an adjournment on the basis that he needed more time to prepare. I refused the requested adjournment, and Mr. Sykes then chose to leave the courtroom, rather than participate in the argument of the motion. I thereupon heard counsel for the Respondent in argument, following which I reserved judgment. At my direction, the hearing co-ordinator advised Mr. Sykes by letter that I would receive any argument that he wished to make in writing, prior to August I. [3] On August 20, he filed a document dated August 18, 1997, of some nine pages which, rather than addressing the merits, set out his proposal for a schedule whereby he would make his written submissions by March 31, 1998, with further written submissions to be filed by both parties, and culminating in a further hearing to take place on June 30, 1998. The document then goes on at great length to detail the various pieces of litigation in which the Appellant is engaged, and the reasons why he cannot, in his view, devote time to addressing the merits of this motion before next March.

The Appellant has had ample opportunity to prepare and present his argument on this motion. He has chosen, both at the hearing before me in July and in his written submission filed in August, to avoid dealing with the merits of what is a relatively simple factual dispute, namely whether or not the requisite notices of objection were filed within the time limited by the Act. I shall now deal with that dispute on the basis of the affidavits filed, and the cross-examinations which took place before me.

As I have indicated, the issue is simply whether or not, with respect to each of the three years under appeal, the Appellant served a notice of objection on the Minister of National Revenue (the Minister) within 90 days from the day of mailing of the notice of assessment. At the relevant time this was to be done by sending it by registered mail addressed to the Deputy Minister of National Revenue for Taxation at Ottawa. [4] It appears from the cross-examination of Mr. Tsoi that the practice of the Department of National Revenue (Revenue Canada) was to accept service of notices of objection by personal delivery to a Revenue Canada office, although that was not in strict compliance with the Act.

Mr. Tsoi deposed that he is an appeals officer of Revenue Canada, that he has charge of “the appropriate records”, that he has knowledge of the practices of Revenue Canada, and that he has carefully examined and searched the records relating to these appeals. He goes on to depose that:

1) as to the 1989 year, the Appellant was assessed on June 27, 1990, and he was sent a notice of assessment dated June 27, 1990. A “reconstructed copy” of this notice is made an exhibit to the affidavit. There has been no reassessment, and no notice of objection has ever been filed with the Minister.

2) as to the first 1990 year, the Appellant was assessed on November 28, 1990, and a notice of assessment dated November 28, 1990 was sent to him. A “reconstructed copy” of this notice is made an exhibit. He was reassessed for this year on November 5, 1991, and a notice of reassessment dated November 5, 1991 was sent to him. A copy of that notice is made exhibit “F” to the affidavit. Exhibit “F” appears to be a copy of the original notice, rather than a “reconstructed copy”. However, it is not deposed by Mr. Tsoi that it is a “true copy”, but simply a “copy”. There has been no further reassessment for the first 1990 taxation year.

3) as to the second 1990 taxation year, the Appellant was assessed on July 2, 1991, and a notice of assessment dated July 2, 1991 was sent to him. A “reconstructed copy” of this notice is made an exhibit to the affidavit. There has been no reassessment. A notice of objection to this assessment, dated September 17, 1991, was served on the Minister by registered mail on October 1, 1991. A copy of this notice, and a copy of the envelope in which it was mailed, are made exhibits to the affidavit.

4) The Appellant served a second notice of objection. It is dated August 22, 1995, and it purports to relate to the 1990 to 1994 taxation years, but goes on to state “I have not received from Revenue Canada any assessments or reassessments for the 1990 to 1994 taxation years”, and “This objection is being filed to protect my appeal rights in respect of the 1990 to 1994 taxation years”. A copy of this document is made an exhibit to the affidavit.

It appears from the cross-examination of Mr. Tsoi that copies of the notices of assessment were not kept by Revenue Canada, and that the expression “reconstructed copy” of a notice of assessment refers to a computer generated reproduction based upon the information stored in Revenue Canada’s computer. He testified that the practice of Revenue Canada was not to maintain paper copies of the notices of assessment in its files. He gave no information as to the workings of the computer system, nor does he depose that the “reconstructed copies” are true copies of the original notices.

Mr. Sykes, in his affidavit in opposition to the motion, deposed that he served a notice of objection dated September 4, 1990 in respect of the taxation year 1989, and he exhibits a copy of it. Under the statement of facts and reasons it has these words: “The notice of assessment does not agree with the information given by me in respect of my return for 1989”. The affidavit states that he served it “in prescribed form, manner and within the prescribed time”. However he was unable to say on cross-examination exactly when he mailed it. He also deposed that he delivered a copy of it, and a copy of a notice of objection for 1990 dated September 17, 1991, to Revenue Canada at its office at 1166 West Pender Street, Vancouver, “within 90 days from the date of mailing on the notices of assessment objected to in each case”. He also deposed that “I have never failed to serve any notice of objection within the prescribed time applicable”. His affidavit goes on to refer to the other proceedings in which he is engaged relating to his and his wife’s income tax assessments and his bankruptcy. On his cross- examination, Mr. Sykes stated that he had, somewhere in his files, copies of the notices hand delivered by him to the West Pender Street office, but that he was unable to find them. He had, apparently, not found them by July 17, 1997. Nor has he been able to produce any registered mail receipts to show when his notices of objection were mailed.

It appears from the Appellant’s income tax returns for the years in question, and from the “reconstructed” notices of assessment, that the Appellant was assessed for each of the three years in accordance with the returns filed, subject to some minor variance in the tax payable. He appeared to accept this when it was put to him in cross-examination, and counsel for the Respondent put considerable emphasis on this in argument, asking me to draw the inference that the Appellant would not likely have objected to assessments which were in accordance with his returns. The Appellant did, however, object to the assessment for the second 1990 year. The only issue in relation to that year is whether he did so in time, or one day late. It would be no less logical for him, or his trustee in bankruptcy, to object to the 1989 and the first 1990 assessments.

I shall deal first with the 1989 year. Mr. Tsoi’s affidavit states unequivocally that he has searched the records and found no notice of objection. Mr. Sykes claims to have filed such a notice, but his evidence is not convincing. He is an experienced accountant and businessman, and yet he has no registered mail receipt, and no date-stamped copy of the copy of it which he said that he delivered by hand to the West Pender Street office. He said on cross-examination that he thought that he had received a date- stamped copy, but that he did not know where it was. He also said during that cross-examination that he had been so shocked by the impact of his bankruptcy that he had trouble with his memory at the time. The 1989 assessment was made shortly after the bankruptcy. I find that the Appellant did not file any notice of objection to the assessment for 1989. Accordingly, the appeal for that year is quashed for failure of a necessary condition precedent.

I turn now to the first 1990 year. The original notice of assessment was dated November 28, 1990. The notice of reassessment was dated November 5, 1991. Mr. Tsoi’s affidavit is equivocal as to the date on which it was mailed. The critical part is paragraph 3(d), which reads:

(d) the Minister reassessed the Appellant for the 1990 taxation year on November 5, 1991 in regards to the period of time in the year before the Bankruptcy, and sent a Notice of Reassessment, dated November 5, 1991, for the year to the Appellant at the Appellant’s address for service at that time; a copy of the said Notice of Reassessment is attached hereto and marked Exhibit “F’;

I have some difficulty with Mr. Tsoi’s use of the phrase “to the Appellant at the Appellant’s address for service at that time”, which recurs throughout his affidavit. The notice of reassessment is addressed on its face to the trustee of the Appellant’s bankrupt estate at the address of the trustee’s firm in Vancouver; rightly so, as the trustee is deemed to be his agent for all purposes of the Act. [5] It is at best careless, and at worst misleading, to describe this as Mr. Tsoi has done in his affidavit. It would be proper to say that the notice was sent to the trustee at his address. The Appellant’s evidence on cross-examination was that he had never received the notice of reassessment, because it was sent to his trustee in bankruptcy. The 1995 notice of objection purported to cover the year 1990, presumably both parts of it. On the face of it, that notice would appear to be long out of time, because it seems likely that the notice of reassessment was mailed on or soon after its November 5, 1991 date. I make no specific finding as to the date of mailing, however, as I consider the Respondent’s evidence as to that to be inadequate.

It is clear from the cross-examination of Mr. Tsoi that he was unable to state exactly when the various assessments and the reassessment were mailed. If Mr. Tsoi had deposed that Exhibit “F” is a true copy of the notice of reassessment then the combined effect of subsections 244(9) and (14) of the Act would be to deem it to have been mailed on November 5, 1991. He did not so depose, however, presumably because he was not able to. The various provisions of section 244 potentially afford the Respondent certain evidentiary advantages in litigation, but in order to take the benefit of them she must bring herself within the precise statutory language. Where the Act specifies an affidavit setting out that a document is a true copy, then the words “true copy” must appear in the affidavit for the subsection to have its deeming effect. In view of Mr. Tsoi’s failure either to depose that Exhibit “F” is a “true copy”, and not merely a “copy”, of the notice of reassessment, or to depose unequivocally that it was mailed on a specific date, I am unable to say what was the date of mailing. Consequently, I cannot say that the 1995 notice of objection was out of time.

Turning to the second 1990 taxation year, the Respondent’s position is that the Appellant did serve a notice of objection by registered mail, but that he did so only on October 1, 1991, which is 91 days after July 2, 1991, the date on the notice of assessment. The October I mailing date is established to my satisfaction by the copy of the envelope attached to the affidavit of Mr. Tsoi. That date is indeed 91 days after July 2. What is not established by the Respondent’s evidence, however, is the date of mailing of the notice of assessment. Mr. Tsoi says in his affidavit that:

the Appellant became a bankrupt on or about June 22, 1990 ... , and the Minister assessed the Appellant originally for the 1990 taxation year:

on July 2, 1991 in regards to the period of time in the year after the Bankruptcy, and sent a Notice of Assessment, dated July 2, 1991, for the year by mail to the Appellant at the Appellant’s address for service at that time; a reconstructed copy of the said Notice of Assessment is attached hereto and marked Exhibit “C”;

As with the notice of reassessment for the first 1990 taxation year, Mr. Tsoi does not depose as to the date of mailing. It is clear from his cross- examination that he could not do so, as he does not know with any certainty whether the notice was mailed on the date that appears on its face, or on some later date. Nor does the Respondent have the benefit of the presumption created by subsection 244(14) of the Act. Exhibit “C” to the affidavit is a “reconstructed copy”, according to Mr. Tsoi. He said in cross- examination that the information on it came out of the Revenue Canada computer, but he does not purport to describe the workings of the system, and there is no reason to believe that he has the knowledge or the competence to do so. Nor does he depose that the “reconstructed copy” is a true copy, so as to bring it within subsection 244(9) of the Act. In these circumstances, I am not prepared to find that the notice of assessment for the second 1990 year was mailed on July 2, 1990. It may have been mailed on July 3 or some later date, in which case the notice of objection would have been served within the 90 days limited by the Act.

There is another reason why the Respondent’s motion must fail with respect to both the first and the second 1990 taxation years. Paragraph 128(2)(a) of the Act deems the Appellant’s trustee in bankruptcy to be his agent for all purposes of the Act, after the date of bankruptcy, which was June 22, 1990. As such, he would be entitled to serve a notice of objection to any assessment or reassessment made after that date, which of course includes all of the assessments here in issue. Mr. Tsoi’s affidavit makes specific reference to the two notices of objection which Mr. Sykes served, and to the facts which the Respondent says make them ineffective. It also states unequivocally that no notice of objection was served in relation to the 1989 taxation year. What it fails to say is that no notices of objection other than those dated September 17, 1991, and August 22, 1995 were served in respect of the first and second 1990 taxation years. Were there no bankruptcy involved that might not seem a serious omission, but in circumstances where the trustee is a person, arguably the only person, entitled to serve a notice of objection, it is incumbent upon the Respondent to adduce positive evidence that he has not done so.

The Respondent by this motion seeks to terminate these appeals without a hearing on the merits. Where non-compliance with the requirement to serve a notice of objection is clearly proved it may be desirable to save the parties and the public the expense of a trial, but the Respondent has the onus of establishing that non-compliance, at least on a balance of probabilities, by proper evidence. [6] I do not believe it can be said that this onus has been met where there is no evidence to negative the possibility that the trustee may have served a notice of objection. A simple statement in the affidavit of Mr. Tsoi to the effect that no notice other than those of September 17, 1991 and August 22, 1995 had been served by anyone, would suffice. Absent such a sworn statement, I am not prepared to terminate the Appellant’s right, or perhaps I should say his trustee’s right, to a hearing on the merits. An Order of that kind should be made only upon satisfactory evidence, and where the Respondent seeks to take the benefit of the special evidentiary rules found in section 244, her agents and counsel must be scrupulous in complying with the requirements of that section.

The appeal from the assessment for the 1989 taxation year is quashed.

The Notice of Appeal totally fails to meet the requirement of subsection 18.15(1) of the Tax Court of Canada Act that the Appellant set out therein, in general terms, the reasons for the appeal and the relevant facts. Had the Respondent moved against it on that ground, I should have been inclined to strike out the Notice of Appeal, with leave to amend it. In other circumstances, I would make such an Order of my own volition, simply to ensure that the hearing have some properly defined subject matter. However, I have little confidence that the Appellant would improve the quality of his pleading in response to such an Order, and it would likely only result in further delay to a matter which has already seen too much of that. The Respondent shall have 30 days from the date of this Order to deliver a Reply in respect of the appeals for the two 1990 taxation years. In view of the time which has elapsed since the Notice of Appeal was filed, those appeals should proceed to an expedited hearing.

Motion allowed in part.