Date: 20010906
Docket: 2000-2841-IT-APP
BETWEEN:
ROCHELLE MOSS,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Agent for the Applicant: Daniel Moss
Counsel for the Respondent: Jeff Pniowsky
____________________________________________________________________
Reasons for Order
(Edited from the transcript of Reasons delivered orally from the Bench
at Winnipeg, Manitoba on July 27, 2001.)
Hershfield, J.T.C.C.
[1] Just as a matter of procedure, I want to note for the record that this application to set aside an order of this Court that dismissed a prior application of the Applicant for reasons of want of prosecution (the original application), has been referred to by the Court itself as an application under section 18.21 of the Tax Court of Canada Act (the "TCCA").[1]
[2] I would note that the possible reasons for this, without an election being made by the Applicant as to what procedure would be applicable, might relate to the requirements under the General Procedure or the assumption that section 18.29 of the TCCA applied[2].
[3] The TCCA in respect of General Procedure appeals, makes no provision for making or setting aside orders given for non-appearance but the General Procedure rules ("the G.P. rules") do make such provision in section 140. Under that rule, where a party fails to appear, the Court may dismiss an appeal. On application within 30 days of the pronouncement date, the dismissal order can be set aside.
[4] Although that section refers to an appeal, not an application, I would think that that rule might govern a matter to which the Informal Procedure has no application.
[5] The pronouncement date is the date of signing the order, and the date of signing the dismissal order in this case was February 6, 2001. The current application was filed on April 5; that is, not within the 30-day limit under the G.P. rules. So, looking to the General Procedure would be of no assistance to the Applicant, she is totally out of time. It would then be in the Applicant's best interests to fit within section 18.21 as the present application is timely filed under that section.
[6] I note that there is a question here as to whether any time limitation strictly applies to an application under either subsection 18.21(2) of the TCCA or section 140 of the G.P. rules at the objection stage as opposed to the appeal stage since the limits (both in the G.P. rules and the TCCA provisions relating to the Informal Procedure) are prescribed in respect of "appeals" as opposed to taxes at issue. This question is not resolved by section 18.29 of the TCCA.
[7] To say there is no time limit would suggest that there is no authority to set aside the original dismissing order since that authority, under section 18.21 at least, to do so is also only in respect of an appeal. This question is also not resolved by section 18.29. In any event, on the facts of this case, there is no time limit issue in applying subsection 18.21(2) and that, in fact, is the way in which the matter has proceeded, albeit without any explanation by any of the parties as to how we got there other than by an acknowledgment by the parties that the Court itself had recorded the application as a subsection 18.21(2) application.
[8] Accordingly, that is the application that I am considering. It is an application to set aside an order of this Court, that dismissed an application made by the Applicant under subsection 166.2(1) for an extension of time to file an objection in respect of the Applicant's 1997 taxation year. We have proceeded on the basis that subsections 18.21(2) and (3) apply at least as a guide in the exercise of this Court's inherent jurisdiction. Subsection 18.21(2) provides for the dismissal order being set aside and subsection (3) lists the conditions that have to be met for that to happen. Under subsection (3) the setting aside of the dismissal order is permitted where two conditions or requirements are met: the first being, it would have been unreasonable in all the circumstances for the Applicant to have attended the hearing; and, the second being that the Applicant must have applied to have the order of dismissal set aside as soon as circumstances permitted.
[9] With respect to the first requirement under subsection (3), that it would have been unreasonable in all of the circumstances for the Applicant to have appeared at the hearing, the fact is that she did attend but left before the matter was called because her counsel, a lawyer, Mr. A. Stacey from Thompson Dorfman in Winnipeg, had met with the Respondent's counsel the morning of the scheduled hearing and was, apparently, apprised of evidence which tended to defeat the grounds he intended to rely on in the original section 166.2 application.
[10] The Applicant's counsel apparently advised the Applicant that the matter was lost and, if they proceeded, that there was a risk of aggravating existing threats of actions by the Respondent for abuse of process and vexatious proceedings.
[11] In any event, the Applicant and her lawyer left before the matter was called. Respondent's counsel understood that the resultant dismissal for non-appearance was intended and the actions of the Applicant, of leaving on the advice of counsel, was tantamount to a withdrawal of the section 166.2 application.
[12] The Applicant now, with the assistance of her husband as her representative, asserts that she did not understand the matter would proceed in her absence and that an order dismissing the application would be given. Mr. Moss asserted, and she testified, that she did not understand that would happen.
[13] In effect, the Applicant asserted that she did not know that the hearing would proceed so it would not be reasonable to expect her to have attended it.
[14] Respondent's counsel raised credibility issues in respect of this testimony and assertion, and said that the Applicant and her husband knew the matter was being abandoned, the effect of which would be to have it dismissed at the scheduled hearing for want of prosecution.
[15] There was also an issue that the Applicant was bound by her lawyer's action. His leaving was tantamount to a consent to the dismissal. The Applicant was at law bound by that action of her counsel.[3]
[16] It was also noted that I asked whether the Applicant's lawyer, Mr. Stacey, could be called to clarify this issue and while the Applicant indicated no objection, the lawyer on being contacted during a recess, apparently refused to testify unless subpoenaed by the Court. He apparently still acts for the Applicant and/or her husband, at least in respect of other matters.[4]
[17] Aside from inferences that might be drawn from these developments (about which I have no direct evidence), I find it unlikely that the Applicant would have walked out of a courtroom prior to the application under section 166.2 being heard as scheduled without being aware that she was in effect abandoning her application, or without understanding that her lawyer had abandoned her application on her behalf. Even if that was not the case, as stated, she was bound by her lawyer's act. If she did not intend her lawyer to act on her behalf, she might reasonably have spoken up at the time. While this finding may itself be sufficient to dismiss the application, it is a finding of fact that, for the moment, I wish to set aside in order to determine the merits of the application in other respects.
[18] As to the second requirement to set aside the dismissal order set out in paragraph 18.1(3)(b) of the TCCA, that paragraph requires that the application be made as soon as circumstances permit. The Applicant was notified of the dismissal order in early February 2001, as the order was signed on February 6, 2001. The application to set aside was filed on April 5, 2001. That is well within the time limit under section 18.21 of the TCCA.
[19] Respondent's counsel argued that the Applicant had not satisfied her burden of proof establishing that this application was made as soon as circumstances permit. I do not think the delay here was unreasonable and in and by itself should not frustrate this Application to set aside the dismissal order. I note, however, that subsection 18.21(3) permits setting aside the order only where both paragraphs (a) and (b) are met. That is, while the paragraph (b) requirement has been met in my view, I have, as noted, doubts as to whether the paragraph (a) requirement has been met. As stated, however, I am not content to leave the matter at that without making further inquiries as to the merits of an application under section 166.2 and the merits of the objection itself.
[20] As held in Diem v. Canada,[5] when considering an application under subsection 18.21(2), one of the factors that should be taken into account is the merit of the appeal. That case did not involve an application for extension of time to file an objection so reference in that case to the merits of the appeal should, in my view, be taken, in the context of this case, to be a reference to the actual substantive tax issue being objected to. Indeed, in applying the principle in the Diem case, I think it is necessary to consider, as a factor in deciding whether or not to set aside the dismissal order, the merits of both the application for extension of time to file the objection and the merits of the objection itself. Otherwise, denying an application under either sections 18.21 or 166.2 can be seen as a technical bar to a proper determination of a substantive issue. If a taxpayer has been clearly wrongly taxed, then technical bars, while not to be ignored, might be applied more cautiously in the interests of preventing an economic injustice, which is the imposition of a tax that Parliament itself did not intend to impose.[6]
[21] The Applicant asserted an economic injustice and begs for a consideration of the merits of her position. Aside from the principle in the Diem case and the recent tendency of this Court in respect of applications for extensions of time, to apply these rules where possible in the interests of having matters heard on their merits,[7] there are further reasons in this case why I am inclined to go further. Firstly, there is the issue of the application of section 18.21. This Court's jurisdiction to hear this application may derive from section 13 of the TCCA (as opposed to section 18.21) and as such, while using subsection 18.21(3) as a guide is helpful, merit considerations must inevitably come into play. Secondly, peculiar to this case, is that Respondent counsel's position and conduct in this case have, in my view, not been respectful of the Applicant's rights in this matter. He has indeed treated the Applicant with considerable scorn. Two examples, and I will only give two although there are more, are as follows. He did not send a copy to the Applicant of his recent objection to the application, which he sent to the Court. The Applicant arrived without any forewarning of the issues arising from the Respondent's position. The second example is that after counsel for the Respondent objected to the Applicant's spouse trying to introduce evidence in argument, he was guilty himself of doing the very same thing and asserted, as factual, matters which were intended to malign the Applicant. Such maligning factual assertions were withdrawn when their accuracy was challenged by the Applicant's spouse.
[22] This is conduct unbecoming of a barrister, an officer of the Court purporting to provide factual information during the course of a hearing. Further, Respondent's counsel introduced a number of exhibits, which while tending to, or intended to, cast doubt on the credibility of the Applicant's testimony, were aimed as much at branding the Applicant as a scoundrel who would go to any length not to pay taxes. This character assassination was unnecessary, if not inappropriate.[8]
[23] There is little to be gained by counsel being so wrapped up in his belief as to the type of person the Applicant is that he loses his professionalism in dealing with the person and with this Court. Respondent's counsel approached this matter soured by a history of which he was a part. In these circumstances, there is some concern that the dismissal order resulted from similar overzealous tactics employed prior to the original hearing. As such, the judicial process must be sensitive to the idea that justice must be seen to be done as well as having it done by applying the law on its terms. That is, in this case, I am inclined to look further at the merits of the original application and the objection itself.
[24] The parties acknowledged during the hearing that if the Application to set aside the dismissal order was to be granted, that I should proceed to hear the application under section 166.2 of the Income Tax Act. This is, in fact, frequently the practice of this Court where the parties are ready to proceed and both parties acknowledged in this case that they were. Proceeding in this way was agreed to be particularly sensible given that in considering the Application, I was intending to review the merits of the section 166.2 application in any event.
[25] As to the merits of the section 166.2 application, consider subsection 166.2(5) which provides as follows:
No application shall be granted under this section unless
(a) the application was made under subsection 166.1(1) within one year after the expiration of the time otherwise limited by this Act for serving a notice of objection or making a request, as the case may be; and
(b) the taxpayer demonstrates that
(i) within the time otherwise limited by this Act for serving such a notice or making such a request, as the case may be, the taxpayer
(A) was unable to act or to instruct another to act in the taxpayer's name, or
(B) had a bona fide intention to object to the assessment or make the request,
(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, and
(iii) the application was made under subsection 166.1(1) as soon as the circumstances permitted.
These are the conditions that must be met for an extension of time to be granted. The time requirements in paragraph (a) are not in issue.[9]
[26] The matters then to be considered in respect of the section 166.2 application are the matters set out in paragraph (5)(b), which sets out three requirements, the first being that either the Applicant was unable to act or instruct another to act during the period allowed for filing the objection, or had during that period a bona fide intention to object. The second requirement is that it be just and equitable to grant the extension. The third requirement is that the application to the Minister for an extension under subsection 166.1(1) was made as soon as the circumstances permitted.
[27] I will deal with the last requirement first. It requires a review of the chronology of events.
[28] The taxation year in question, as stated, was 1997. The filing deadline was April 30, 1998. The objection deadline was one year from then, i.e. April 30, 1999.[10] The application for an extension of the deadline under section 166.1 needed to be filed within one further year, or April 30, 2000. The application for extension under section 166.1 was filed effectively in March 2000. The Minister denied the request.[11]
[29] The Respondent's counsel argued that the Applicant has not demonstrated that circumstances did not permit an earlier application to be filed under section 166.1. That is, the delay of 10-12 months in filing the application meant that the requirements of subparagraph 166.2(5)(b)(iii) had not been met.
[30] In this regard, I note that the explanation of the Applicant in respect of the delay is that she believed that she was bankrupt as of January 1998 and, therefore, did not need to object. However, the bankruptcy was annulled by the Court of Queen's Bench of Manitoba in June 1999. What circumstances prohibited her from filing the section 166.1 application at that time? There was at least an eight-month delay from the bankruptcy annulment date to the date the application was filed.
[31] It is clear from the evidence that the Applicant was preoccupied with financial survival during this period. For example, there were appeals respecting the bankruptcy annulment that were ongoing throughout the extension period. There were jeopardy order appeals during this period and a requirement to pay and set-off order in January 2000.[12]
[32] This Court has acknowledged that financial stress and prioritization of matters are reasonable causes for delay in these types of applications.[13] That being the case, I find that the delay in filing the section 166.1 application should not be fatal in this case.
[33] It is noted that the jurisprudence on reasonable causes for delay referred to above, to my knowledge at least, is limited to cases where the words being considered are "as soon as circumstances permit", which are not the words used in clause 166.2(5)(b)(i)(A). That is, turning to the first requirement in paragraph 166.2(5)(b), that requirement, that the taxpayer be unable to act or instruct another to act, is very different statutory language. There is no evidence that this Applicant could not have acted within the time set out in subparagraph 166.2(5)(b)(i). This is not fatal unless the Applicant also fails to demonstrate that she had a bona fide intention to objection during the time allowed for filing the objection.
[34] Accordingly, the next question is whether there was a bona fide intent to object during the original objection period. Effectively this period ran from June 29, 1998, which is the assessment date, the earliest date from which an objection would be filable, to April 30, 1999. During this time, the Applicant thought she was bankrupt. Even if she disagreed with the tax assessment (which was her evidence), she was disinterested in it. Such disinterest is not consistent with a bona fide intent to object during that period. Even a contingent intent pending the outcome of the bankruptcy annulment proceedings is not a bona fide intent to object and the Applicant's preoccupation with such matters is not a defence to failing to meet the requirements of subparagraph 166.2(5)(b)(i).
[35] Having failed to meet the requirements of subparagraph 166.2(5)(b)(i), an application under section 166.2 would fail. However, I will not stop here.
[36] I have yet to consider the just and equitable test in subparagraph 166.2(5)(b)(ii) and the merits of the underlying objection issue. Respondent's counsel brought considerable evidence that the assessment at issue and the need for time to extend all stem from the Applicant's own misguided acts. An earlier jeopardy order resulted in asset seizures, a bankruptcy declaration, an annulment of that declaration, a fraudulent conveyance suit, a set-off order and protracted litigation in respect of all of these matters.
[37] The jeopardy order caused certain life insurance assets (policies) to be seized and the Applicant thereby lost the ability to control such assets. Such lack of control caused tax consequences to flow that the Applicant intended, when the policies were bought, but wanted to change.
[38] The seizure frustrated her desire to change those tax consequences that she originally bought into and that resulted in the T5 income in 1997, the inclusion of which the Applicant wanted to object to for the reasons that she did not receive the funds and that the jeopardy order prevented her from altering the tax position of those policies as she was desirous of doing. The T5 income in 1997 was reported in April 1998 by the Trustees in bankruptcy. The assessment sought to be objected to confirmed this filing. The bankruptcy was annulled by the Court of Queen's Bench of Manitoba in June 1999. Appeals in regard to that ruling of the Queen's Bench have failed. That means that the Applicant was never bankrupt and the question is whether it is just and equitable that the Applicant be left with the filing of a Trustee in an annulled bankruptcy. Perhaps it is not, but it is the jeopardy order that really gives rise to the tax issue. It is that order that resulted in the non-receipt of funds and the inability of the Applicant to alter her tax fate. That order was given under provisions of the Income Tax Act that suggest the Applicant's assets might have disappeared if the order was not granted.[14]
[39] The jeopardy order withstood appeals. Seizures under this order froze the Applicant's tax planning opportunities and froze the Applicant's access to any income generated by seized assets. A debtor in this situation is taxable on the income generated by his/her assets whether in his/her control or not. The position of the Applicant, given the annulment of the bankruptcy, is like any other debtor whose seized assets cannot be reorganized because they are out of their control and possession. The income from those assets under any trusteeship to protect creditors will continue to be taxable to the debtor until the underlying assets have been turned over beneficially to the creditors. That is, the underlying objection here seems to be without merit. In any event, I concur with Respondent counsel's suggestion that equities here would not favour granting the application under section 166.2.
[40] Accordingly, on a review of the application of section 166.2, on its own terms, it seems improbable that, if the dismissal order were set aside and the application under section 166.2 were heard, an extension would be permitted on the terms of that section on the facts of this case.
[41] Further, it seems that even if the dismissal order were set aside and the application for the extension under section 166.2 were allowed, then it would be highly improbable that an objection would be successful or that any appeal to a confirmed assessment would be successful.
[42] That takes me back to where I started in terms of my findings in respect of the Application.
[43] On a balance of probability, I find that the Applicant knew, when she did not appear at the last hearing, that she had foregone her application as per her lawyer's advice.
[44] Accordingly, the Applicant does not meet the requirements that section 18.21 would impose to have the dismissal order set aside. Aside from the application of that section, I see no cogent or compelling reasons not to consider the dismissal order as a final and binding order of this Court. In coming to that
conclusion, I have determined that an application under section 166.2 and/or an objection and appeal in respect of this matter are likely doomed in any event and that has been a factor in this decision.
[45] Lastly, while I do not want to rub salt in the wounds of the Applicant, I would note, for the record, that there were inconsistencies and contradictions in the testimony of the Applicant and her husband which were brought out on cross-examination of the Applicant at least, and that led me to have some reservations as to credibility.
[46] Not only did the Applicant change her story as to when she knew of tax problems associated with the seized insurance policies but her husband testified that they knew of the problems before the 1997 returns were filed. This question of when the tax issue became known or of concern has been massaged in every direction in the hope of finding one direction that afforded a chance to succeed in this application or an application for extension of time to file an objection. That does not speak well for granting a remedy that can only be justified as just and equitable.
[47] Still, I have not relied on these inconsistencies or on the findings of other judges in other matters regarding the credibility of the Applicant in coming to my decision. I have gone beyond these issues. As stated, this dismissal is based on consideration of the requirements set out in subsection 18.21(2) of the TCCA and on a review of the merits of the application under section 166.2 and an ultimate consideration of the merits of the objection and potential appeal. On this basis, the Application fails.
Signed at Winnipeg, Canada, this 6th day of September 2001.
"J.E. Hershfield"
J.T.C.C.
COURT FILE NO.: 2000-2841(IT)APP
STYLE OF CAUSE: Rochelle Moss and
Her Majesty the Queen
PLACE OF HEARING: Winnipeg, Manitoba
DATE OF HEARING: July 27, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge J.E. Hershfield
DATE OF JUDGMENT: September 6, 2001
APPEARANCES:
Agent for the Applicant: Daniel Moss
Counsel for the Respondent: Jeff Pniowsky
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-1349(IT)I
BETWEEN:
EVELYN ELLEN WILSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 11, 2001 at Toronto, Ontario, by
the Honourable Judge T.E. Margeson
Appearances
Counsel for the Appellant: John David Buote
Counsel for the Respondent: Meghan Castle
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1996 taxation year is allowed and referred back to the Minister of National Revenue for reconsideration and reassessment in order for the Minister to reconsider any proper receipts in support of any allowable medical expenses in support of this claim when they are presented.
In all other respects, the appeal is dismissed and the Minister's assessment is confirmed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 10th day of September 2001.
|
"T.E. Margeson" |
J.T.C.C.
[1] The original application was for an extension of time to file an objection to an assessment.
[2] The Reasons for Judgment delivered from the bench did not direct themselves to the issues of whether section 18.29 of the TCCA applied and the consequences of that section failing to apply. In brief, that section deals with "applications" and provides that certain listed sections of the TCCA dealing with "appeals" be read as dealing with applications as well. Section 18.21 is not one of the listed sections in section 18.29. The inference is that section 18.21 cannot be read to apply to applications. That would mean that the order dismissing the original application could not be made under section 18.21. In fact it did not purport to have been made under that section. It was made simply for "want of prosecution". It would be absurd, in my view, to think that Judge Rip in making the dismissal order for want of prosecution had no inherent jurisdiction to do so. If he did not, non-appearances could protract disputes indefinitely. This would frustrate the "due exercise" of this Court's jurisdiction and, that being the case, section 13 of the TCCA bestows on this Court the powers of a superior court of record. That is, if there is any uncertainty as to Judge Rip's inherent authority to dismiss the original application for want of prosecution, which I do not think there is, section 13 would clearly bestow such authority. Had counsel for the Respondent not simply accepted this Court's directive to hear this application to set aside the original order under section 18.21, he might have argued that if the original order was not given pursuant to section 18.21, this Court had no jurisdiction to set aside such order since section 18.24 gives only the Federal Court such power (even in respect of "applications" since section 18.29 lists section 18.24 as one that applies to "applications"). On the other hand, if the original order is given under this Court's jurisdiction as a superior court pursuant to section 13, it seems to me that this Court would not exceed its jurisdiction under that same section to review an order so given. After all, the Income Tax Act, in section 166.2 together with subsection 12(4) of the TCCA, gives this Court exclusive jurisdiction to hear the underlying application. This implies the powers set out in section 18.29. In any event, no jurisdictional challenge was raised, the matter was heard, a decision given and an order signed dismissing the application. At the end of the day, as these Reasons set forth, the remedy sought by the Applicant, which was to have this Court consider, on its merits, her application under section 166.2 of the Income Tax Act, was essentially given effect to.
[3] Sourani v. The Queen, [2001] F.C.J. No. 904.
[4] This was not denied by the Applicant although the application at bar filed April 5, 2001 states that counsel was dismissed. There was no evidence presented that counsel had been dismissed when he left the Court, with his client, prior to the scheduled hearing of the original application.
[5] [1999] T.C.J. No. 359.
[6] I note that subsection 166.2(5), unlike subsection 167(5), makes no reference to a requirement that there be reasonable grounds to appeal (object). That is, a corresponding provision in section 166.2 to the one in subsection 167(5) would require the Court to consider, in a section 166.2 application, whether or not there are reasonable grounds to object. No such requirement in fact exists in section 166.2. This might suggest that even potentially unfounded objections might be afforded a late filing opportunity if the requirements of subsection 166.2(5) are met, and those requirements, as I said, do not themselves expressly include a merit requirement. However, I would pursue a merit review in this case because the application is being considered under section 18.21 of the TCCA, which itself has been found in the Diem case (which I endorse) to require a merit review. More to the point, I am not inclined to rely only on a finding in this case, where this Court's jurisdiction to set aside the dismissal order may derive solely from its inherent jurisdiction, that the requirement in paragraph 18.21(3)(a) was not met without considering the underlying substantive issues.
[7] Seater v. R., [1997] 1 C.T.C. 2204.
[8] This is not to suggest that the exhibits, if relevant, would not have supported the Respondent counsel's claims. Indeed, other Judges' comments in published cases involving the Appellant referred to by counsel for the Respondent at the hearing, might themselves have supported the assertions of Respondent's counsel. Still, counsel's focus on those historical issues distracted considerably from the issues of the day before me.
[9] I also note that the time requirement in paragraph 166.2(1)(b) has not been put in issue.
[10] The objection itself was attempted to be filed on the last day of February 2000.
[11] Even using the February 2000 filing date as the application date to the Minister, it is still 10 months into the extension year, the extension year being from the beginning of May 1999 to the end of April 2000. In fact, the application was filed in March 2000 as a section 166.2 application instead of a 166.1 application, but the Respondent agreed that it regarded such filing as a request to the Minister for an extension under section 166.1.
[12] There was a jeopardy order obtained by the CCRA in respect of another tax matter which was in the Courts by this time.
[13] Thistle v. M.N.R., 83 DTC 586 (T.C.C.) cited with approval in Meer v. The Queen, file no. 2000-4338(IT)APP, dated May 17, 2001, unreported. See also Pennington v. M.N.R., 87 DTC 5107 (F.C.A.).
[14] Section 225.2 of the Income Tax Act.