Lamarre
Proulx
T.C.J.:
This
is
an
appeal
by
the
informal
procedure
regarding
overpayments
made
in
1991
into
registered
education
savings
plans,
or
“RESPs”,
which
are
covered
by
s.
146.1
of
the
Income
Tax
Act
(“the
Act”).
Section
146.1
(2)(Æ)
of
the
Act
provides
that
the
total
amount
which
may
be
paid
into
an
RESP
each
year
is
$1,500.
Section
204.91
of
Part
X.4
of
the
Act
provides
that
a
tax
equal
to
one
percent
of
the
excess
amount
is
payable
for
each
month
in
which
the
amount
is
not
withdrawn.
The
issues
are
whether
(a)
the
appellant’s
good
faith
in
subscribing
amounts
in
excess
of
the
amount
allowed
by
the
Act
can
be
taken
into
account
to
reduce
the
tax
payable
under
Part
X.4
of
the
Act;
(b)
this
Court
may
order
the
Minister
of
National
Revenue
(“the
Minister”)
to
waive
interest
under
s.
220(3.1)
of
the
Act;
and
(c)
whether
the
Minister’s
assessment
made
pursuant
to
s.
152(7)
of
the
Act
may
be
vacated
due
to
the
fact
that
it
was
allegedly
not
made
with
reasonable
diligence.
Paragraphs
2
to
6
of
the
Reply
to
the
Notice
of
Appeal
(“the
Reply”)
read
as
follows:
[TRANSLATION]
2.
In
May
1991
the
appellant
contributed
the
following
amounts
after
administrative
expenses
to
a
registered
education
savings
plan
(“an
RESP”)
for
his
three
sons:
|
Amount
|
|
Daniel
Étienne
|
$7,141.50
|
#7383266
|
|
Marc
André
|
$7,579.80
|
#7383231
|
|
Pierre
Charles
|
$7,464.00
|
#7383258
|
|
3.
|
Following
the
preparation
of
arbitrary
declarations
TIE-OVP,
the
Min
|
|
ister
of
National
Revenue
(“the
Minister”)
assessed
the
appellant
by
no
|
|
tices
of
reassessment
dated
February
15,
1995,
on
the
excess
amounts
in
|
|
his
RESP
mentioned
above
in
paragraph
2,
with
penalties
for
the
1991
|
|
and
1992
taxation
years.
|
|
|
4.
|
Following
the
preparation
of
arbitrary
declarations
TIE-OVP,
the
Min
|
|
ister
assessed
the
appellant
by
notices
of
reassessment
dated
September
|
|
8,
1995,
on
the
excess
amounts
in
his
RESP
mentioned
above
in
para
|
|
graph
2,
with
penalties
for
the
1993
and
1994
taxation
years.
|
|
5.
|
By
notices
of
reassessment
dated
November
13,
1996
the
Minister
|
|
struck
out
only
the
penalties
mentioned
above
in
paragraphs
3
and
4
for
|
|
the
1991,
1992,
1993
and
1994
taxation
years.
|
|
|
6.
|
In
arriving
at
these
assessments
the
Minister
assumed
a
number
of
facts
|
|
including
the
following:
|
|
|
(a)
|
the
amounts
which
the
appellant
contributed
were
in
excess
of
|
|
$1,500
for
each
of
his
sons,
as
mentioned
above
in
paragraph
2;
|
|
(b)
|
the
appellant
had
still
not
withdrawn
the
excess
amount
from
|
|
his
RESPs
at
December
31,
1994;
|
|
|
(c)
|
within
90
days
of
the
end
of
the
year
the
appellant
had
not
|
|
made
his
declarations
on
the
prescribed
forms
(TIE-OVP)
for
|
|
each
of
the
1991,
1992,
1993
and
1994
taxation
years;
|
|
(d)
|
arbitrary
declarations
were
made
up
for
each
of
the
1991
to
|
|
1994
taxation
years
inclusive.
|
|
The
main
points
raised
by
the
appellant
in
his
Notice
of
Appeal
were
the
following:
[TRANSLATION]
In
1991
my
wife
and
I
were
thinking
of
going
to
Africa
as
missionaries.
We
decided
to
invest
a
large
part
of
our
savings
in
an
RESP
to
ensure
that
our
three
younger
children
would
be
able
to
attend
university.
As
we
were
thinking
of
leaving
Canada
we
decided
to
invest
a
sufficient
amount
all
at
once...
We
made
this
investment
in
good
faith
expecting
that
it
would
ensure
a
better
future
for
our
children.
At
no
time
did
the
Fondation
Héritage
company
to
which
we
paid
the
money
(or
its
representative)
tell
us
of
the
tax
consequences
associated
with
our
investment,
whether
verbally
or
in
writing.
In
October
1994
we
received
a
letter
from
Daniel
Tai
of
Revenue
Canada
telling
us
that
our
RESP
contributions
exceeded
the
allowable
limit.
As
I
was
at
that
time
leaving
on
a
missionary
trip
to
Africa
I
asked
our
Fondation
Héritage
representative
to
contact
Revenue
Canada
for
us...
We
were
accordingly
sent
notices
of
assessment
dated
February
15,
1995...
Clearly
an
amount
in
excess
of
the
allowed
limit
would
not
have
been
paid
to
Fondation
Héritage
if
we
had
known
that
such
a
limit
was
imposed
by
the
Act.
•
the
amounts
paid
to
the
RESP
in
1991
in
excess
of
the
allowed
limit
were
paid
in
good
faith
and
with
no
intention
of
avoiding
the
payment
of
tax
on
the
interest
produced;
•
from
the
time
these
amounts
were
paid
and
up
until
the
receipt
of
a
letter
from
a
Revenue
Canada
representative
in
October
1994
we
were
not
told
of
the
tax
consequences
associated
with
our
investment
and
the
limits
imposed
by
the
Act,
whether
by
representatives
of
Fondation
Héritage
or
by
the
federal
Department
of
Revenue;
•
if
we
had
known
of
the
limits
imposed
by
the
Act
on
contributions
to
an
RESP
we
would
have
observed
the
limit
and
reinvested
the
excess
with
a
minimal
tax
impact;
•
a
mechanical
application
of
the
Act
to
excess
amounts
paid
into
an
RESP
seems
to
be
unreasonable
in
view
of
the
special
circumstances
mentioned
above;
alternatively,
•
the
long
delay
between
the
time
the
amounts
were
paid
into
the
RESP
and
the
issuing
of
the
notices
of
assessment
caused
significant
hardship
to
the
objector
in
respect
of
the
interest
claimed,
and
this
delay
was
not
his
fault.
The
appellant
testified
for
himself.
Robert
Levesque,
the
Minister’s
appeal
officer,
testified
at
the
request
of
counsel
for
the
respondent.
The
facts
set
out
in
the
foregoing
Reply
were
not
disputed
by
the
appellant.
However,
in
the
interests
of
accuracy
I
should
say
that
the
documents
described
as
notices
of
reassessment
in
paragraphs
3
and
4
of
the
Reply
are
notices
of
assessment,
not
notices
of
reassessment.
As
we
will
see
below,
these
were
assessments
made
by
the
Minister
independently
pursuant
to
Part
X.4
of
the
Act
and
s.
152(7)
of
the
Act.
The
notices
of
assessment
filed
jointly
as
Exhibit
I-1
do
not
state
otherwise.
In
his
testimony
the
appellant
repeated
that
he
did
not
know
there
was
any
maximum
amount
that
an
individual
could
put
into
an
RESP.
However,
in
1991
when
subscribing
to
an
RESP
the
appellant
and
his
wife
had
met
with
three
organizations
which
were
authorized
to
conclude
such
education
savings
contracts.
The
appellant
said
he
could
not
swear
with
any
certainty
that
those
organizations
had
not
told
him
there
was
a
limit
on
the
amount
that
could
be
paid
into
such
a
plan,
but
he
said
this
was
not
an
item
of
information
that
registered
in
his
mind
or
that
of
his
wife.
The
Minister’s
appeals
officer
was
not
able
to
explain
to
the
Court
in
what
circumstances
or
at
what
time
the
Minister
was
informed
of
the
excess
amounts
paid
in
by
the
appellant.
No
question
in
this
regard
was
put
to
him
by
the
appellant.
In
fact,
no
evidence
was
submitted
by
the
appellant
about
the
Minister’s
diligence,
apart
from
his
reference
to
the
dates
of
the
assessments.
On
the
cancelling
of
the
penalties,
as
mentioned
in
paragraphs
3,
4
and
5
of
the
Reply,
the
Minister’s
officer
stated
that
this
was
done
when
the
assessments
were
reviewed
at
the
Notice
of
Objection
stage,
not
following
an
application
for
exercise
of
the
Minister’s
discretion
pursuant
to
s.
220(3.1)
of
the
Act.
Arguments
and
conclusions
The
appellant
made
three
arguments.
He
contended
that
in
view
of
his
good
faith
he
should
not
be
subject
to
the
full
rigour
of
s.
204.91
of
the
Act.
He
further
maintained
that
his
good
faith
was
a
basis
for
use
of
the
Minister’s
discretionary
authority
under
s.
220(3.1)
of
the
Act.
In
this
connection
he
referred
to
Information
Circular
92-2,
titled
“Guidelines
for
the
Cancellation
and
Waiver
of
Interest
and
Penalties”
and
the
Federal
Court
Trial
Division
judgment
in
Bilida
v.
Revenue
Canada
(1996),
97
D.T.C.
5041
(Fed.
T.D.).
The
appellant
also
contended
that
the
time
taken
by
the
Minister
to
inform
him
that
a
tax
was
payable
on
the
excess
amounts
subscribed
by
him
demonstrated
a
lack
of
diligence
by
the
Minister
and
that
he,
the
taxpayer,
should
not
have
to
bear
the
cost
of
the
tax
charged
for
all
those
years.
Counsel
for
the
respondent
argued
that:
(a)
s.
204.91
of
Part
X.4
of
the
Act
does
not
provide
for
any
reduction
of
tax
for
any
extenuating
circumstances
that
may
exist;
(b)
the
assessments
on
appeal
did
not
result
from
the
application
of
s.
220(3.1)
of
the
Act;
and
(c)
the
appellant
had
a
duty
to
comply
with
the
provisions
of
s.
204.92
of
the
Act.
Section
204.91,
the
definition
of
an
“excess
amount”
in
s.
204.9(1),
ss.
204.92
and
204.93
of
Part
X.4
and
s.
152(7)
of
the
Act
read
as
follows:
204
91
Tax
payable
by
subscribers.
—
Each
subscriber
under
a
registered
education
savings
plan
shall,
in
respect
of
each
month,
pay
a
tax
under
this
Part
equal
to
1%
of
the
subscriber’s
share
of
each
excess
amount
for
a
year
at
the
end
of
that
month
in
respect
of
a
beneficiary
or
former
beneficiary
under
the
plan,
to
the
extent
that
the
amount
of
the
share
is
not
withdrawn
from
the
plan
before
the
end
of
that
month.
204.9(1)
In
this
Part,
subject
to
subsection
(2),
"excess
amount”
“excess
amount”,
for
a
year
at
any
time
in
respect
of
a
beneficiary,
means
the
amount,
if
any,
by
which
the
total
of
all
payments
made
after
February
20,
1990
in
the
year
and
before
that
time
into
all
registered
education
savings
plans
by
or
on
behalf
of
all
subscribers
in
respect
of
the
beneficiary
exceeds
the
lesser
of
(a)
$1,500,
and
(b)
the
amount,
if
any,
by
which
$31,500
exceeds
the
total
of
all
payments
made
into
registered
education
savings
plans
by
or
on
behalf
of
all
subscribers
in
respect
of
the
beneficiary
in
all
preceding
years...
204.92
Return
and
payment
of
tax.
—
Every
person
who
is
liable
to
pay
tax
under
this
Part
in
respect
of
a
month
in
a
year
shall,
within
90
days
after
the
end
of
the
year,
(a)
file
with
the
Minister
a
return
for
the
year
under
this
Part
in
prescribed
form
and
containing
prescribed
information,
without
notice
or
demand
therefor;
(b)
estimate
in
the
return
the
amount
of
tax,
if
any,
payable
under
this
Part
by
the
person
in
respect
of
each
month
in
the
year;
and
(c)
pay
to
the
Receiver
General
the
amount
of
tax,
if
any,
payable
by
the
person
under
this
Part
in
respect
of
each
month
in
the
year.
204.93
Provisions
applicable
to
Part.
—
Subsections
150(2)
and
(3),
sections
152,
158
and
159,
subsections
161(1)
and
(11),
sections
162
to
167
and
Division
J
of
Part
I
are
applicable
to
this
Part,
with
such
modifications
as
the
circumstances
require.
152.
(7)
Assessment
not
dependent
on
return
or
information.
—
The
Minister
is
not
bound
by
a
return
or
information
supplied
by
or
on
behalf
of
a
taxpayer
and,
in
making
an
assessment,
may,
notwithstanding
a
return
or
information
so
supplied
or
if
no
return
has
been
filed,
assess
the
tax
payable
under
this
Part.
The
tax
payable
under
Part
X.4
of
the
Act
by
a
subscriber
to
an
RESP
on
an
excess
amount
as
defined
in
Part
X.4
is
a
separate
tax
from
the
tax
payable
under
Part
I
of
the
Act.
A
subscriber
who
makes
an
overpayment
is
required
within
90
days
of
the
end
of
the
year,
without
notice
or
warning,
to
file
a
return
containing
prescribed
information
with
the
Minister
in
prescribed
form.
He
must
estimate
the
tax
payable
under
Part
X.4
and
pay
the
amount
to
the
Receiver
General
of
Canada.
The
appellant
did
not
make
such
returns
and
the
Minister
prepared
the
returns
in
accordance
with
the
power
conferred
on
him
by
s.
152(7)
of
the
Act.
Under
s.
204.93
of
Part
X.4
of
the
Act
s.
152
of
Part
I
of
the
Act
is
a
provision
applicable
to
Part
X.4.
The
sections
of
the
Act
relating
to
the
assessments
on
appeal
provide
for
no
reductions
in
the
event
of
good
faith.
I
will
not
make
any
comment
on
whether
such
good
faith
existed
as
it
is
not
relevant
in
assessing
tax
under
Part
X.4
of
the
Act.
The
only
question
that
is
relevant
in
calculating
the
tax
is
whether
there
was
an
overpayment
at
the
end
of
each
month,
and
in
the
instant
case
that
fact
was
not
in
dispute.
The
reassessments
no
longer
contain
any
penalties.
As
to
interest,
it
is
well-settled
law
in
this
Court
that
the
Court
has
no
power
to
reduce
it
without
enabling
legislation.
Accordingly,
this
ground
of
appeal
cannot
succeed.
So
far
as
the
Minister’s
discretionary
power
is
concerned,
ss.
220(3.1)
and
(3.7)
and
165(1.2)
of
the
Act
read
as
follows:
220
(3.1)
Waiver
of
penalty
or
interest.
—
The
Minister
may
at
any
time
waive
or
cancel
all
or
any
portion
of
any
penalty
or
interest
otherwise
payable
under
this
Act
by
a
taxpayer
or
partnership
and,
notwithstanding
subsections
152(4)
to
(5),
such
assessment
of
the
interest
and
penalties
payable
by
the
taxpayer
or
partnership
shall
be
made
as
is
necessary
to
take
into
account
the
cancellation
of
the
penalty
or
interest.
(3.7)
Idem.
—
The
provisions
of
Divisions
I
and
J
of
Part
I
apply,
with
such
modifications
as
the
circumstances
require,
to
an
assessment
made
under
this
section
as
though
it
had
been
made
under
section
152.
165
(1.2)
Limitation
on
objections.
—
Notwithstanding
subsections
(1)
and
(1.1),
no
objection
may
be
made
by
a
taxpayer
to
an
assessment
made
under
subsection
152(4.2),
169(3)
or
220(3.1)
nor,
for
greater
certainty,
in
respect
of
an
issue
for
which
the
right
of
objection
has
been
waived
in
writing
by
the
taxpayer.
Under
s.
220(3.1)
of
the
Act,
the
Minister
may
waive
all
or
any
portion
of
the
penalties
or
interest
payable
and
may
make
whatever
assessments
are
necessary
to
take
such
waiver
into
account.
However,
in
view
of
s.
165(1.2)
of
the
Act,
such
assessments
are
not
subject
to
the
appeal
process
in
this
Court.
Only
the
Federal
Court
has
jurisdiction
to
review
the
exercise
of
the
Minister’s
discretionary
authority
under
s.
220(3.1)
of
the
Act.
The
assessments
at
issue
in
the
instant
appeals
are
not
assessments
made
as
a
result
of
the
exercise
by
the
Minister
of
the
authority
conferred
on
him
by
s.
220(3.1)
of
the
Act,
as
the
appellant
made
no
such
application
under
that
subsection.
No
specific
form
is
provided
for
in
the
Act
for
making
such
an
application
to
the
Minister
under
s.
220(3.1)
of
the
Act.
Information
Circular
92-2,
referred
to
by
the
appellant,
sets
out
the
procedure
to
be
followed.
The
penalties
cancelled
by
the
reassessments
were
not
cancelled
pursuant
to
s.
220(3.1)
of
the
Act
but
in
the
review
process
made
at
the
appeals
level
following
a
Notice
of
Objection.
Accordingly,
as
regards
this
argument
concerning
review
of
the
Minister’s
discretionary
authority,
it
cannot
succeed
for
the
reasons
given
above.
As
to
the
Minister’s
diligence,
s.
152(7)
of
the
Act
does
not
specify
any
deadline
by
which
the
Minister’s
action
must
have
been
taken.
However,
the
subsection
applies
within
the
deadlines
provided
for
in
s.
152(4)
of
the
Act.
That
subsection
does
not
provide
for
any
deadline
in
the
case
of
an
initial
assessment.
In
such
cases
it
is
s.
152(1)
which
applies
and
which
requires
that
the
Minister
act
with
due
dispatch
following
receipt
of
a
tax
return.
The
Act
says
nothing
about
the
situation
in
which
there
is
no
tax
return.
In
the
instant
case
no
return
was
made
under
Part
X.4
of
the
Act.
Under
the
basic
rules
of
administrative
law,
even
though
the
Act
does
not
expressly
provide
that
the
Minister
must
make
his
assessments
with
due
dispatch,
that
surely
does
not
mean
he
does
not
have
to
exercise
his
duty
to
apply
the
Act
with
dispatch.
It
should
be
borne
in
mind
that
there
was
not
really
any
evidence
from
the
appellant
that
the
Minister
did
not
act
with
due
dispatch,
except
that
the
appellant
referred
to
the
date
of
the
assessments,
February
15,
1995,
whereas
the
overpayment
was
made
in
1991.
Even
if
there
had
been
evidence
of
a
lack
of
dispatch
it
would
not
have
had
the
effect
of
nullifying
the
Minister’s
assessments.
The
Federal
Court
of
Appeal
dealt
with
the
question
of
the
duty
of
dispatch
which
the
Act
imposes
on
the
Minister
by
s.
152(1)
of
the
Act
in
Ginsberg
v.
R.
(1996),
96
D.T.C.
6372
(Fed.
C.A.),
at
6374
and
6376:
The
sole
issue,
therefore,
pertains
to
the
legal
effect
of
a
failure
by
the
Minister
to
exercise
his
statutory
duty
to
assess
“with
all
due
dispatch”.
Bearing
in
mind,
however,
as
found
by
the
Tax
Court
judge,
that
the
Minister
was
late
in
assessing,
the
only
question
I
must
address
is
the
nature
of
the
sanction
once
there
is
a
failure
to
exercise
a
duty
under
subsection
152(1).
The
respondent’s
argument
in
essence
is
that
once
the
Minister
is
found
to
have
breached
his
statutory
duty,
he
loses
jurisdiction
to
assess
and
the
notice
of
assessment
must
be
vacated.
The
respondent
was
not
ready
to
accept,
however,
that,
if
found
valid,
the
reverse
of
his
argument
would
be
that
if
a
refund
was
owed
to
the
taxpayer,
the
Minister
would,
in
that
situation
also,
lose
jurisdiction
to
determine
the
refund.
I
find
no
escape
with
the
clear
terms
of
subsection
152(3),
particularly
the
words
“Liability
for
the
tax
under
this
Part
is
not
affected
by...
the
fact
that
no
assessment
has
been
made”.
(“Le
fait...
qu’aucune
cotisation
n’a
été
faite
n’a
pas
d’effet
sur
les
responsabilités
du
contribuable
à
l’égard
de
l’impôt
prévu
par
la
présente
Partie.”)
Subsection
152(8)
in
turn
says
“An
assessment
shall
...
be
deemed
to
be
valid
and
binding
notwithstanding
any
...
defect
or
omission
...
in
any
proceeding
under
this
Act
relating
thereto.”
(“une
cotisation
est
réputée
être
valide
et
exécutoire
malgré
...
tout
vice
de
forme
ou
toute
omission
...
dans
toute
procédure
s’y
rattachant
en
vertu
de
la
présente
loi”).
Section
166,
in
support,
states
that
“(a)n
assessment
shall
not
be
vacated
...
by
reason
only
of
any
...
omission
...
on
the
part
of
any
person
in
the
observation
of
any
directory
provision
of
this
Act”.
(“Une
cotisation
ne
peut
être
annulée...
uniquement
par
suite
...
d’omission
…
de
la
part
de
qui
que
ce
soit
dans
l’observation
d’une
disposition
simplement
directrice
de
la
présente
loi”).
This
latter
provision
obliges
me
to
consider
whether
subsection
152(1)
is
directory
or
mandatory.
The
distinction
between
a
“mandatory”
or
a
“directory”
provision
is,
therefore,
not
very
helpful.
If
I
were
to
apply
the
rule
of
“inconvenient”
effects,
I
would
say
that
there
are,
no
doubt,
competing
interests
between
the
need
to
levy
revenues
for
government
and
public
expenditures,
the
need
to
have
the
tax
burden
shared
as
equally
as
possible
among
the
taxpayers,
and
the
need
to
protect
the
individual
by
bringing
certainty
to
his
financial
affairs
at
the
earliest
reasonable
possible
time.
These
competing
interests
have
been
settled
in
favour
of
the
government
by
Parliament
with
the
adoption
of
subsections
152(3),
152(8)
and
section
166.
The
Judicial
Committee
of
the
Privy
Council
has
also
recently
diminished
the
importance
of
the
distinction
between
a
directory/
mandatory
provision
in
the
case
of
Wang
v.
Comr
of
Inland
Revenue,
a
taxation
case
originating
in
Hong
Kong.
The
Privy
Council
determined
that
when
a
question
of
an
alleged
failure
to
comply
with
a
time
provision
is
at
stake,
it
is
simpler
and
better
to
avoid
the
words
“mandatory”
and
“directory”
and
ask
two
questions:
...
he
first
is
whether
the
legislature
intended
the
person
making
the
determination
to
comply
with
the
time
provision,
whether
a
fixed
time
or
a
reasonable
time.
Secondly,
if
so,
did
the
legislature
intend
that
a
failure
to
comply
with
such
a
time
provision
would
deprive
the
decision-maker
of
jurisdiction
and
render
any
decision
which
he
purported
to
make
null
and
void?
The
Privy
Council
alluded
to
the
fact
that
mandamus
might
be
a
remedy.
Courts
in
Canada
have
been
called
upon
to
decide
whether
mandamus
should
issue
in
such
cases.?
My
understanding
of
that
decision
is
that
dispatch
by
the
Minister
in
making
an
assessment
is
not
something
which
may
make
the
assessment
void,
in
view
of
the
existence
of
s.
152(3)
and
(8)
of
the
Act,
supported
by
s.
166
of
the
Act.
The
applicable
remedy
would
be
a
writ
of
mandamus
for
the
purpose
of
obtaining
a
quick
decision
by
the
Minister.
Needless
to
say,
the
Ginsberg
case
does
not
in
any
way
concern
what
is
referred
to
as
the
usual
period
of
assessment,
the
time
for
which
is
set
by
the
Act
in
s.
152(4)
and
(3.1),
nor
the
other
deadlines
that
may
exist
in
the
Act
and
which
are
determined
by
it.
The
argument
that
the
assessments
are
invalid
by
virtue
of
their
alleged
tardiness
therefore
cannot
succeed
either.
The
appeals
are
accordingly
dismissed.
Appeal
dismissed.
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