Digests

Mitchell v. Canada (Attorney General)

T-1761-99

2001 FCT 78, Simpson J.

14/2/01

18 pp.

Judicial review of Minister of National Revenue's refusal to reassess 1984 income tax returns based on applicants' failure to file waivers within three-year limitation period prescribed by Income Tax Act, s. 152(4)(a)(ii)--Applicants owners of land expropriated in 1981--Land also expropriated from Brenda Bellingham and Paterson Park Ltd.--In 1984 owners were paid for expropriated land--Also received sums described as "penalty interest"--All owners included penalty interest as taxable income in 1984 income tax returns, but Bellingham retained tax lawyer, Neil Nichols, to obtain refund of tax paid on penalty interest--Subsequently applicants, Paterson Park Ltd. retained Nichols for same purpose--Nichols' affidavit stating met with Revenue Canada official, at which time agreed Bellingham's lawsuit would proceed to court as test case, pending conclusion of which, other owners' files would be held in abeyance without need for further steps, documentation--On cross-examination added that although Revenue Canada agreed to dispense with waivers at meeting, also agreed that if Revenue Canada decided to require owners to file waivers, it would ask for them--On February 24, 1986 (same day as meeting) Nichols sending letter to Revenue Canada confirming matters discussed and requesting waiver forms "which would be completed and delivered to you as discussed"--On May 4, 1987 Nichols wrote to Edmonton District Taxation Office expressing concern about whether or not waivers would be required from applicants--Revenue Canada not replying in writing, but appeals officer indicated to Nichols' assistant by phone that waivers would probably be needed--One week later appeals officer told Nichols' assistant by phone waiver for Paterson Park Ltd. probably needed right away--Nichols filed waiver in prescribed form same day, but never filed applicants' waiver forms--On June 22, 1987 appeals officer again called Nichols' assistant re: Paterson Park Ltd.'s waiver and Nichols responded same day--In 1995 Federal Court of Appeal held penalty interest, as part of compensation for expropriation, non-taxable receipt (Bellingham v. Canada, [1996] 1 F.C. 613 (C.A.))--On January 16, 1996 Nichols requesting Revenue Canada to reassess applicants in accordance with decision in test case--In April 1999 applicants filing applications for refund which Minister denied--S. 152(4)(a)(ii) permitting Minister to reassess at any time if taxpayer filed waiver in prescribed form within 3 years from day of mailing of notice of assessment--Waiver form T2029, prescribed by Minister, simple one-page form requiring taxpayer to indicate name, address, social insurance or corporation number--Indicates taxation year to which waiver applies, provides space for brief description of subject-matter of reassessment--Interpretation Act, s. 32 providing where form prescribed, deviations from that form, not affecting substance or calculated to mislead, not invalidating form used--Application dismissed--(1) No agreement reached at 1986 meeting about whether waivers required--February 24, 1986, May 4, 1987 letters suggesting no agreement reached at meeting--Further, since at time of meeting first waiver did not need to be filed for over two years, focus of discussion at meeting agreement to reassess based on test case--Most probable waivers mentioned only in passing, no decisions made about whether had to be filed--(2) Since Nichols clearly knew requirement for waivers outstanding issue, responsible for determining whether actually going to be required--Advised of Revenue Canada's decision waivers required for applicants when appeals officer spoke to assistant on May 28, 1987--Received message because promptly submitted waiver for Paterson Park Ltd.--(3) Letters amounted to constructive, rather than implied waiver--Not in prescribed form and not meant to serve as waiver, but taken together contained virtually all necessary information found on prescribed form--Distinguish documents intended to serve as waiver and containing all information found in prescribed form (implied waiver)--Respondent admitted does not always insist on waiver in prescribed form (implied waivers), but not prepared to accept constructive waivers--Such approach reasonable--Revenue Canada not obliged to treat documents as waivers that were sent before waivers requested, and which were described as waivers only after deadlines for submitting waivers passed--Practice of accepting implied, but not constructive waivers, following spirit of Trynor v. Canada (Minister of National Revenue--M.N.R.) (1988), 88 DTC 1294 (T.C.C.) wherein held use of "shall" in regulation stating election "shall" be made by filing prescribed form, not mandatory, but directory given procedural nature of provision--Legislation herein referring to prescribed form not using "shall"--That together letters containing virtually all information required for waiver not requiring Revenue Canada to treat them as waiver--Revenue Canada not obliged to accept constructive waivers--Income Tax Act, S.C. 1970-71-72, c. 63, s. 152(4)(a)(ii) (as am. by S.C. 1984, c. 45, s. 59)--Interpretation Act, R.S.C., 1985, c. I-21, s. 32.