Onex Corporation v. Canada (Attorney General)

Onex Corporation v. Canada (Attorney General)
Court (s) Database
Federal Court Decisions
Date
2024-08-09
Neutral citation
2024 FC 1247
File numbers
T-2082-22, T-85-22
Decision Content
Date: 20240809
Dockets: T-85-22, T-2082-22
Citation: 2024 FC 1247
Ottawa, Ontario, August 9, 2024
PRESENT: The Honourable Mr. Justice Régimbald
BETWEEN:
ONEX CORPORATION, ONEX CARESTREAM FINANCE LP and 1727655 ONTARIO INC.
Applicants
and
THE ATTORNEY GENERAL OF CANADA
Respondent
Table of Contents
I. Overview 2
II. Background Facts 5
III. Decisions of the Minister 7
A. CRA Decision in T-85-22 7
B. CRA Decision in T-2082-22 9
IV. Issues 11
V. Standard of Review 12
VI. Analysis 18
A. The CRA failed to consider any remedial interpretation of subsections 220(2.1) and 220(3) of the ITA 18
(1) Additional CRA reasons in relation to subsection 220(2.1) of the ITA 33
(2) Additional CRA reasons in relation to subsection 220(3) of the ITA 38
(3) Other plausible remedial interpretation of subsection 220(2.1) and subsection 220(3) available to the CRA 43
B. The Minister’s exercise of discretion under subsection 220(3) 49
(1) CRA decision on the exercise of the Minister’s discretion 49
(2) Onex’s arguments on the unreasonableness of the CRA’s exercise of discretion 51
(3) The Respondent’s arguments on the reasonableness of the CRA’s decision 52
(4) The Minister failed to consider relevant elements in the exercise of their discretion 52
VII. Conclusion 58
VIII. Costs 59
JUDGMENT AND REASONS
I. Overview [1] The Applicants, Onex Corporation, Onex Carestream Finance LP and 1727655 Ontario Inc. [together “Onex”] seek judicial review of two decisions of the Minister of National Revenue [Minister] in which the Minister refused Onex’s requests under subsections 220(2.1) and 220(3) of the Income Tax Act, RSC 1985, c 1 (5th Supp) [ITA] to allow Onex to benefit from certain amendments to the ITA’s complex foreign accrual property income [FAPI] regime.
[2] Prior to 2014, Onex put in place complex structures to receive tax-free dividends from a foreign affiliate. In 2014, Parliament enacted the Economic Action Plan 2014 Act, No 2 SC 2014, c 39 [Bill C-43], that amended the FAPI regime with respect to certain business structures involving partnerships, such as the one established by Onex [the Amendments]. Subsection 21(15) of Bill C-43 set out the coming-into-force [CIF] of the new rules and provided that it would apply to taxation years after July 12, 2013, unless the taxpayer elected, under Bill C-43, to have the Amendments deemed to have come into force on January 1, 2010 [the Election].
[3] Onex, having already established a complex structure that, in their view, allowed them to achieve the purpose of the Amendments, concluded that they already benefitted from the measures adopted through the Amendments and that the Election was redundant in their case. Instead of electing to have the Amendments apply retroactively to 2010, and re-filing their 2012 and 2013 T5013 tax returns [T5013 returns], Onex simply continued with their previous practice.
[4] In June 2020, the Canada Revenue Agency [CRA] reassessed Onex’s 2012 and 2013 taxation years, resulting in an addition of $102 million and $92 million to their taxable income respectively for those years. It is not contested between the parties that, had Onex filed the Election in due course and had the Amendments applied retroactively, the CRA would not have reassessed Onex for the 2012 and 2013 taxation years.
[5] To correct the issue, Onex requested the authorization of the Minister, under subsection 220(2.1) of the ITA, to waive the requirement to file the Election, in order for Onex to benefit from the Amendments for the 2012 and 2013 taxation years. Alternatively, Onex sought permission to file new returns for those years, under subsection 220(3), where Onex would amend its earlier 2012 and 2013 returns and also file the Election required by Bill C-43.
[6] The CRA, acting on behalf of the Minister, rejected Onex’s requests (in these reasons, any reference to the CRA includes the Minister, as the CRA was acting on behalf of the Minister). The CRA found that the Minister did not have the authority to waive the Election under subsection 220(2.1) of the ITA. The CRA also found that the Minister did not have the authority to allow Onex to file new returns to extend the time to make the Bill C-43 Election under subsection 220(3), because Onex had already filed T5013 returns for 2012 and 2013. Finally, the CRA found that even if the Minister had the discretion to accept the filing of new T5013 returns for 2012 and 2013, along with the filing of the Election required by Bill C-43 under subsection 220(3), they would not have exercised their discretion to allow Onex to do so.
[7] For the following reasons, the CRA’s decisions are unreasonable. While the CRA did apply the principles of statutory interpretation, it failed to consider the context within which subsection 220(2.1) and subsection 220(3) of the ITA were adopted, that the subsections are remedial in nature, and that those subsections were adopted as part of a “Fairness Package” adopted by Parliament to grant the Minister extensive discretion to provide remedies for undue hardship resulting from the application of the ITA. The CRA also failed to consider section 12 of the Interpretation Act, RSC 1985, c I-21 [Interpretation Act], requiring that every enactment be deemed remedial and given fair, large and liberal interpretation to best ensure the attainment of its objectives.
[8] As for the CRA’s decision to refuse to exercise the Minister’s discretion, the CRA failed to consider and weigh the extensive consequences facing Onex in the circumstances; including Onex’s arguments that, through their structures, they always reasonably intended to benefit from the substantive result later also achieved under Bill C-43 (even without the filing of the Election), that Onex’s 2012 and 2013 tax returns had already been filed prior to the enactment of the Amendments and therefore had to be amended, that Onex’s request was not an attempt at retroactive tax planning, and that Onex has a history of tax compliance.
II. Background Facts [9] In computing their income for the purposes of the ITA for their 2012 and 2013 taxation years, Onex was subject to the ITA’s FAPI regime. In order to address these complicated rules, Onex established a structure allowing them to receive amounts distributed as tax-free dividends, and at the same time be able to deduct the interest paid to a lender to finance their investments.
[10] In 2014, Parliament enacted Bill C-43. Bill C-43 amended the FAPI regime with respect to certain business structures involving partnerships, such as the one at issue in these applications. Bill C-43 applied in respect of the taxation years of foreign affiliates of a taxpayer that end after July 12, 2013. Bill C-43 also included an option, at the election of the taxpayers, to have the Amendments come into force on January 1, 2010.
[11] To make the Election under the CIF provision of Bill C-43, a taxpayer needed to elect in writing for the application of the Amendments to all of their foreign affiliates and file the Election with the Minister, along with consequential changes to their T5013 returns if those returns had already been filed.
[12] It is not contested that had Onex filed the Election contemplated by Bill C-43, the CRA would not have reassessed them for their 2012 and 2013 taxation years, and that if the Minister had allowed Onex to file the Election, this would have resolved the tax dispute between the parties.
[13] However, Onex decided not to elect to have the Amendments apply retroactively. In their view, and after having consulted taxation advisors, making the required Election was redundant in their case, as their structures already achieved the legislative benefit that Parliament intended to extend to other taxpayers under Bill C-43. Moreover, Onex’s T5013 returns for the 2012 and 2013 taxation years had already been filed, and therefore filing the Election would also have required amending Onex’s tax returns. Finally, in Onex’s view, an Election would have placed them in the same tax position that they were already at as a result of the structures that they had established, and which in their view were consistent with the ITA and published CRA guidance.
[14] In June 2020, almost five years after the deadline to file the Election under Bill C-43, the CRA reassessed Onex for their 2012 and 2013 taxation years.
[15] While Onex continues to believe that their interpretation of the ITA is correct and that they do not need to rely on the Amendments, Onex requested, on July 9, 2020, the authorization of the Minister to waive the requirement to file the Election, under subsection 220(2.1) of the ITA. Indeed, had Onex filed the Election in due course, the CRA would not have reassessed their 2012 and 2013 taxation returns.
[16] On December 16, 2021, the CRA refused to waive the requirement to file the Election under subsection 220(2.1) of the ITA.
[17] On March 1, 2022, Onex requested that the Minister exercise their discretion under subsection 220(3) of the ITA to essentially re-file their T5013 returns for the 2012 and 2013 taxation years with consequential amendments as a result of Bill C-43, which would also have enabled Onex to file the Election along with their new amended T5013 returns.
[18] On September 9, 2022, the CRA refused Onex’s request to be granted permission to file a new return along with the Election.
III. Decisions of the Minister
A. CRA Decision in T-85-22
[19] The CRA relied on the principles of statutory interpretation to construe subsection 220(2.1) and rule that it did not grant discretion to the Minister to waive the filing of the Election. In the CRA’s view, subsection 220(2.1) allows the Minister to waive the filing of a document that is prescribed by “any provision of [the ITA].” However, because the Election in this case originates from subsection 21(15) of Bill C-43 and not the ITA, the Minister has no discretion to waive the filing of the Election. Moreover, the CRA opined that the filing requirement had to be found in the ITA and not in an “amending legislation” such as Bill C-43.
[20] The CRA also opined that if subsection 220(2.1) allowed the waiver of an election in this case, it would allow the waiver of an election that is not contemplated under subsection 220(3.2) of the ITA and section 600 of the Income Tax Regulations, CRC, c 945 [Regulations]. Subsection 220(3.2) of the ITA grants to the Minister the discretion to extend the time for making an election or to amend or revoke an election, that is prescribed under section 600 of the Regulations. However, the Election contemplated in this case, originating from Bill C-43, is not included in section 600 of the Regulations. Therefore, no extension of time is available under the ITA for the Election required under Bill C-43.
[21] Applying the implied exclusion rule of statutory interpretation, the CRA ruled that subsection 220(2.1) cannot be interpreted in a manner that would conflict with the specific intention of Parliament that allows the filing of a late election in some specific cases (those covered under section 600 of the Regulations), but not the one in which Onex is involved under Bill C-43 (relying on Ruth Sullivan, “Statutory Interpretation in a New Nutshell” (2003) 82:1 Can Bar Rev 51 at 60). Indeed, according to the CRA, the waiver of the filing of an election would negate Parliament’s intention to only allow late filings in specific cases, to which are attached a penalty contemplated under subsection 220(3.5). Allowing Onex’s waiver request would therefore contradict Parliament’s intent, because it would allow Onex to access the same remedy applying to the late filing of an election, but for a type of election that is not contemplated under subsection 220(3.2), and, moreover, without the penalty provided under subsection 220(3.5). Those conflicts are incompatible with the scheme established under section 220 of the ITA.
[22] Finally, the CRA relied on Canada v Nassau Walnut Investments Inc, [1997] 2 FC 279 at para 31, 1996 CanLII 4097 (FCA) [Nassau] for the proposition that subsection 220(2.1) and the waiver of the filing of an election could not apply in this case, because an election involves that “the taxpayer must make a decision to forego one option in favour of another on the basis of an assessment of tax risks” [emphasis added], and there was no “decision” made by Onex in this case.
B. CRA Decision in T-2082-22
[23] The CRA denied Onex’s request under subsection 220(3) to extend the time for Onex to “make” their 2012 and 2013 T5013 returns and file the Election, on the basis that Onex had already filed their T5013 returns and therefore, no extension was needed to “make” a return.
[24] Onex asserted that when the Minister exercises their discretion under subsection 220(3) to extend the time to file a T5013 return under paragraph 221(1)(d) of the ITA and section 229 of the Regulations, the Minister automatically extends the time for filing the Election under the CIF provision. The CRA agreed with that argument, because in Bonnybrook Park Industrial Development Co Ltd v Canada (National Revenue), 2018 FCA 136 [Bonnybrook], the Federal Court of Appeal [FCA] held that subsection 220(3) had a broad application, giving the Minister the authority to provide relief from the strict filing requirements throughout the ITA, and that subsection 220(3) gave the Minister the discretion to extend the time for filing a return, including a partnership information return, under the ITA. Moreover, the CRA held that to the extent that a deadline to file a return such as a T5013 return was extended, “the deadline for a form or an election that is tied to the actual filing of that return by a taxpayer’s filing due date (as defined in subsection 248(1)), would also be extended” [emphasis added] (CRA decision, Applicants’ Record, at 60).
[25] However, the CRA disagreed that subsection 220(3) directly or indirectly grants discretion to the Minister to accept the late filing of the Election in this case under the CIF provision of Bill C-43 for the 2012 and 2013 fiscal years because the CIF provision of Bill C-43 is not “tied” to the return, as Bill C-43 did not require the Election to be filed with the return or an amended return (a simple notification in writing was sufficient). The request of Onex was therefore not captured under the Minister’s discretion pursuant to subsection 220(3). Moreover, in this case, the CRA opined that the Election was not a return, but rather an election, which represents a choice to be made by the taxpayer. Therefore, subsection 220(3) has no application in this case.
[26] Applying the “modern principle” of statutory interpretation, the CRA concluded that subsection 220(3) of the ITA has no application and the Minister has no discretion to extend the time to make the Election. First, based on its wording, subsection 220(3) authorizes the Minister to extend, at any time, the due date of a return that is required under the ITA. Other than the question of whether there could be a nuanced difference between “making” or “filing” a return, the text is clear. There is no reference to any election in subsection 220(3). Second, the text of the CIF provision of Bill C-43 is also clear and supports that conclusion. There appears to be no discussion of the inclusion of ministerial discretion to extend the time for filing the Election under Bill C-43, and the Election is not found within section 600 of the Regulations or elsewhere permitting late filings of elections. The text and its history suggest that the Election under Bill C-43 was deliberately excluded from the Minister’s discretion to extend the time for filing under section 600 of the Regulations. Third, the implied exclusion rule along with the rule against tautology supports the CRA’s conclusion because a general provision such as subsection 220(3) cannot override a specific provision such as subsection 220(3.2), which provides ministerial discretion to extend the time for certain elections (relying on Canada (National Revenue) v ConocoPhillips Canada Resources Corp, 2017 FCA 243 at paras 48–49 [ConocoPhillips]; Clover International Properties (L) Ltd v Canada (Attorney General), 2013 FC 676).
[27] Consequently, an interpretation giving the authority to the Minister under subsection 220(3) to indirectly extend the due date of an election beyond the scope of application of subsection 220(3.2) would not be supported by the modern rules of statutory interpretation as it would not be “harmonious” with the overall scheme of the ITA and would negate the specific and detailed limitations dictated by Parliament in respect of elections, as provided under subsection 220(3.2). Indeed, in the CRA’s opinion, concluding that subsection 220(3) gives the Minister the power to make an indirect extension of the Election filing deadline, that would not otherwise be permissible under subsection 220(3.2) which limits the types of elections that may be subject to the Minister’s discretion, would make the prescribed list of set out in section 600 of the Regulations redundant.
[28] Moreover, such an extensive interpretation of subsection 220(3) would also entail the Election being filed late without any penalty, contrary to the penalty provided under subsection 220(3.5) following the exercise of the Minister’s discretion to permit the late filing of an election under subsection 220(3.2).
IV. Issues [29] The issues in these applications are whether:
a)the Minister’s decisions finding that they had no power to waive the filing of the Election under subsection 220(2.1) of the ITA or to allow Onex to re-file their 2012 and 2013 T5013 tax returns under subsection 220(3) of the ITA in order to also permit them to file the Election, are reasonable; and
b)if the Minister did have the power to allow the re-filing of the 2012 and 2013 T5013 tax returns under subsection 220(3) of the ITA, was it reasonable for the CRA to refuse to do so.
V. Standard of Review [30] Onex submits that the standard of review for the first issue in these applications is the standard of correctness. This issue concerns the scope and interpretation of subsections 220(2.1) and 220(3) of the ITA which, in Onex’s view, satisfies the definition of a general question of law of central importance to the legal system as a whole. These subsections concern the Minister’s discretion to provide relief in cases of extensive procedural or administrative harshness in the application of the tax legislation, which underpins the fundamental principle of fairness of the tax system. For this reason, the implications of this issue are such that they require uniform and consistent answers, and should therefore be reviewed under the correctness standard (Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 at paras 59–60 [Vavilov]).
[31] I disagree.
[32] In Vavilov, the Supreme Court of Canada [SCC] held that the presumptive standard of review for all administrative decisions is the deferential standard of reasonableness (Vavilov at para 23). Courts will derogate from that presumption only when there is a clear indication of legislative intent, or when correctness review is required by the rule of law (Vavilov at paras 10, 17, 69).
[33] In this case, there is no clear indication of legislative intent to derogate from the standard of reasonableness. Parliament has neither prescribed a different standard of review, nor a statutory right of appeal, for decisions made pursuant to subsections 220(2.1) and 220(3) of the ITA. Likewise, these applications do not raise any “questions for which the rule of law requires consistency and for which a final and determinate answer is necessary” (Vavilov at para 53).
[34] The rule of law requires the application of the correctness standard of review in matters such as: constitutional questions, general questions of law of central importance to the legal system as a whole, questions regarding the jurisdictional boundaries between two or more administrative bodies, and questions arising when courts and administrative bodies have concurrent first instance jurisdiction over a legal issue in a statute (Vavilov at para 17; Society of Composers, Authors and Music Publishers of Canada v Entertainment Software Association, 2022 SCC 30 at para 40).
[35] Onex’s position that the issue at hand is a general question of law of central importance to the legal system as a whole cannot be sustained. At paragraph 59 of Vavilov, the SCC describes a general question of law of central importance to the legal system as a whole as a question of “fundamental importance and broad applicability,” with “significant legal consequences for the justice system as a whole or for other institutions of government.” Questions that simply address a general issue of “wider public concern,” or that touch on an important issue when framed in a general or abstract sense, are not general questions of law of central importance to the legal system as a whole, and are not subject to the correctness standard of review. In light of the SCC’s teachings, I am not persuaded that the issue pertaining to the interpretation of subsections 220(2.1) and 220(3) of the ITA is a general question of law of central importance to the legal system as a whole. It is rather a narrower question of law applicable in matters of taxation that, while important, does not have implications that “impact the administration of justice as a whole” (Vavilov at para 59; Mason v Canada (Citizenship and Immigration), 2023 SCC 21 at para 47 [Mason]).
[36] In light of the foregoing, the standard of review applicable to the interpretation of the Minister’s discretion under subsections 220(2.1) and 220(3) of the ITA, and to the merits of the CRA’s decisions, is that of reasonableness (Vavilov at paras 10, 25; Mason at paras 7, 39–44).
[37] Following this standard, Mason, relying on Vavilov, teaches that the reviewing court must first look to the reasons of the administrative decision maker in order to assess the justification for the decision. Moreover, the SCC reiterates the need to “develop and strengthen a culture of justification” (Mason at paras 8, 58–60, 63; Vavilov at paras 14, 81, 84, 86).
[38] In Mason, the SCC explains how a reviewing court must conduct a judicial review of a decision. A decision may be unreasonable if the reviewing court identifies a fundamental flaw, either because of a lack of internal logic in the reasoning or because of a lack of justification given the factual and legal constraints affecting the decision (Mason at para 64).
[39] The SCC identifies a series of factual and legal constraints that the decision maker must examine and justify, depending on the applicable context, in order for the decision to be sufficiently justified within the meaning of Vavilov. The burden of justification varies, but the decision maker must be “aware” of the essential elements, “sensitive to the issue before [them]” and “meaningfully grapple with key issues or central arguments raised by the parties” (Mason at paras 74, 97; Vavilov at para 128). The decision maker must consider the main arguments and evidence of the parties and give reasons as to why particular arguments were accepted or dismissed, and the evidence that was accepted or rejected in the decision-making process (Mason at paras 73–74; Vavilov at paras 126–128). Moreover, an exercise of discretion may be unreasonable when the decision maker “considered irrelevant factors, failed to consider relevant factors, or reached an unreasonable conclusion” (Yatar v TD Insurance Meloche Monnex, 2024 SCC 8 at para 41).
[40] In particular, the decision maker must ensure that they consider the principles of statutory interpretation, the applicable statutory, common law or international law rules, the evidence and main arguments of the parties, the practices and previous decisions of the administrative tribunal, and the potential and possibly severe consequences of the decision on the party concerned or on a broad class of persons, as well as the overall issues. Failure to give proper consideration to any of these factors, or to provide adequate reasons for the decision, may constitute a serious deficiency that causes a reviewing court to “lose confidence in the outcome reached” by the decision maker (Mason at paras 66, 69; Vavilov at paras 106, 122).
[41] When the decision maker sets out their reasons, it is not enough for the decision to be justifiable; it must be justified by reasons that establish the transparency and intelligibility of the decision-making process (Mason at paras 59–60; Vavilov at paras 81, 84, 86). The Court must determine whether, by examining the reasoning followed and the result obtained, the decision is based on an internally coherent and rational chain of analysis that can be justified in light of the legal and factual constraints to which the decision maker is subjected (Mason at paras 8, 58–61; Vavilov at paras 12, 15, 24, 85–86). The decision will be unreasonable if it lacks internal logic or if the reviewing court is unable to follow the decision maker’s reasoning without “encountering any fatal flaws in its overarching logic” (Mason at para 65, citing Vavilov at para 102).
[42] On the other hand, the reviewing court must not create its own yardstick and then use it to measure what the decision maker did (Mason at para 62; Vavilov at para 83). Nevertheless, reasonableness review is not a “rubber-stamping” process, it is a robust form of review (Mason at paras 8, 63; Vavilov at paras 12–13).
[43] Accordingly, on judicial review under the standard of reasonableness, the reviewing court must assess the reasons for the decision “holistically and contextually” in light of the history and context of the proceedings, the evidence adduced, and the main arguments of the parties (Mason at para 61; Vavilov at paras 91, 94, 97). The Court’s role is not to reweigh the evidence presented to the decision maker, to question their exercise of discretion, or to make its own interpretation of the law. It is up to the decision maker to fulfil these roles. As long as the decision maker’s interpretation of the law is reasonable and the reasons for their decision are justifiable, coherent and intelligible, the court must show deference (Vavilov at paras 75, 83, 85–86, 115–124).
[44] Regardless of the approach taken by the decision maker, the task of the reviewing court is to ensure that the statutory provision is interpreted in accordance with the “modern principle” of statutory interpretation, which focuses on the overall context of the statute, following the ordinary and grammatical meaning of the words chosen by Parliament, and harmonizing with the spirit of the statute, its purpose, the context, and Parliament’s intention (Mason at paras 67, 69–70, 83; Vavilov at paras 110, 115–124; Canada Post Corporation v Canadian Union of Postal Workers, 2019 SCC 67 at para 42; Alexion Pharmaceuticals Inc v Canada (Attorney General), 2021 FCA 157 at paras 20, 36 [Alexion]; Le-Vel Brands, LLC v Canada (Attorney General), 2023 FCA 66 at para 16; Rizzo & Rizzo Shoes Ltd (Re), [1998] 1 SCR 27 at para 21, 1998 CanLII 837 (SCC); Bell ExpressVu Limited Partnership v Rex, 2002 SCC 42 at para 26 [Bell Expressvu]; Elmer A Driedger, Construction of Statutes, 2nd ed (Toronto: Butterworths, 1983) at 87). An interpretation that involves a “results-oriented analysis” and is done in an expeditious manner is unreasonable (Alexion at para 37, citing Vavilov at paras 120–121; Entertainment Software Association v Society of Composers, Authors and Music Publishers of Canada, 2020 FCA 100 at para 42).
[45] In this case, it is up to the CRA, and not the Federal Court, to interpret the scope of the exercise of the discretion conferred on the Minister under subsections 220(2.1) and 220(3) of the ITA (Safe Food Matters Inc v Canada (Attorney General), 2022 FCA 19 at para 37). The CRA is not required to follow the manner with which courts conduct statutory interpretation – the standard of perfection does not apply. Nor is the CRA required to give reasons on every argument, legislative provision, or detail raised by the parties (Mason at paras 61, 69–70; Vavilov at paras 119–120). Also, the length of the reasons themselves is not a decisive indicator of the reasonableness of the decision (Vavilov at paras 92, 292–293; Catalyst Paper Corp v North Cowichan (District), 2012 SCC 2 at paras 16–19; Groupe Maison Candiac Inc v Canada (Attorney General), 2023 FC 1720 at para 63).
[46] On the other hand, the more serious the impact of the decision on the rights and interests of a party, the more the reasons must reflect these issues, be sufficient for the parties, and “the decision maker must explain why its decision best reflects the legislature’s intention” (Mason at para 76; Vavilov at paras 133–134; Alexion at para 21). Consequently, a decision may be unreasonable simply because the decision maker does not consider or address, in their reasons, the particularly harsh consequences for the affected individuals (Mason at paras 69, 76; Vavilov at paras 134–135).
VI. Analysis A. The CRA failed to consider any remedial interpretation of subsections 220(2.1) and 220(3) of the ITA [47] The important provisions in these applications are subsections 220(2.1), 220(3), 220(3.2) and 220(3.5) of the ITA, which provide:
Waiver of filing of documents
Renonciation
(2.1) Where any provision of this Act or a regulation requires a person to file a prescribed form, receipt or other document, or to provide prescribed information, the Minister may waive the requirement, but the person shall provide the document or information at the Minister’s request.
(2.1) Le ministre peut renoncer à exiger qu’une personne produise un formulaire prescrit, un reçu ou autre document ou fournisse des renseignements prescrits, aux termes d’une disposition de la présente loi ou de son règlement d’application. La personne est néanmoins tenue de fournir le document ou les renseignements à la demande du ministre.
…
[…]
Extensions for returns
Prorogations de délais pour les déclarations
(3) The Minister may at any time extend the time for making a return under this Act.
(3) Le ministre peut en tout temps proroger le délai fixé pour faire une déclaration en vertu de la présente loi.
…
[…]
Late, amended or revoked elections
Choix modifié, annulé ou produit en retard
(3.2) The Minister may extend the time for making an election or grant permission to amend or revoke an election if
(3.2) Le ministre peut, en ce qui concerne un choix prévu par une disposition visée par règlement, proroger le délai pour faire le choix ou permettre la modification ou l’annulation du choix si les conditions suivantes sont réunies :
(a) the election was otherwise required to be made by a taxpayer or by a partnership, under a prescribed provision, on or before a day in a taxation year of the taxpayer (or in the case of a partnership, a fiscal period of the partnership); and
a) le choix devait être fait par ailleurs par un contribuable ou une société de personnes au plus tard un jour donné d’une de ses années d’imposition ou d’un de ses exercices, selon le cas;
(b) the taxpayer or the partnership applies, on or before the day that is ten calendar years after the end of the taxation year or the fiscal period, to the Minister for that extension or permission.
b) le contribuable ou la société de personnes demande au ministre, au plus tard le jour qui suit de dix années civiles la fin de l’année d’imposition ou de l’exercice, de proroger le choix ou d’en permettre la modification ou la révocation.
…
[…]
Penalty for late filed, amended or revoked elections
Pénalité relative au choix modifié, annulé ou produit en retard
(3.5) Where, on application by a taxpayer or a partnership, the Minister extends the time for making an election or grants permission to amend or revoke an election (other than an extension or permission under subsection (3.201)), the taxpayer or the partnership, as the case may be, is liable to a penalty equal to the lesser of
(3.5) Lorsque le ministre proroge le délai pour faire un choix ou permet qu’un choix soit modifié ou annulé (sauf s’il s’agit de la prorogation ou de la permission visée au paragraphe (3.201), le contribuable ou la société de personnes, selon le cas, est passible d’une pénalité égale à la moins élevée des sommes suivantes :
(a) $8,000, and
a) 8 000 $;
(b) the product obtained when $100 is multiplied by the number of complete months from the day on or before which the election was required to be made to the day the application was made in a form satisfactory to the Minister.
b) le produit de la multiplication de 100 $ par le nombre de mois entiers compris dans la période commençant à la date où, au plus tard, le choix devait être fait et se terminant le jour où la demande de prorogation, de modification ou d’annulation est faite sous une forme que le ministre juge acceptable.
[48] In its decisions, the CRA purported to apply the principles of statutory interpretation. In both decisions, the CRA opined that a harmonious interpretation of subsection 220(2.1) and subsection 220(3), considered in the context of the scheme set out under section 220 of the ITA as a whole, indicated that the Minister did not have discretion to waive the filing of the Election under subsection 220(2.1), nor to accept a new return under subsection 220(3) of the ITA. The CRA held that the implied exclusion rule applied, and the existence of ministerial discretion in this case would conflict with subsection 220(3.2) of the ITA and section 600 of the Regulations, which set out a closed list of circumstances when a late election is acceptable, and prescribe a penalty in those cases under subsection 220(3.5).
[49] The CRA’s reasons in both decisions essentially reflect that analysis. The reasons in this section therefore apply to both files. In my view, while the CRA’s decisions indeed reflect one plausible interpretation, the CRA failed to consider the remedial nature of the scheme set out under section 220 of the ITA. Careful attention to the remedial nature of the scheme allows for an alternative plausible interpretation. For the reasons that follow, the CRA must reconsider its decisions and take into account the remedial nature of subsections 220(2.1) and 220(3) of the ITA, following which the CRA may then evaluate whether its initial decisions stand.
[50] In determining the Minister’s discretion under subsections 220(2.1) and 220(3), the modern rule of statutory interpretation applies. As noted by the FCA in ConocoPhillips :
[36] The general approach to statutory interpretation is well established and was articulated at paragraphs 39 and 40 of the decision of the Federal Court:
[39] In addressing the question of whether the Minister’s interpretation of her authority under subsection 220(2.1) of the ITA is reasonable, I begin by noting that it is trite law that statutes should be read according to Driedger’s modern rule of statutory interpretation, namely that:
…the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
as cited in Ruth Sullivan, Statutory Interpretation, 2ed edition (Toronto: Irwin Law, 2007) at 41 [Sullivan]. Also see Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 SCR 27, 154 DLR (4th) 193 at para 21.
[40] The ITA, like any other federal statute, must also be read in view of section 12 of the Interpretation Act, R.S.C., 1985, c. I-21, such that subsection 220(2.1) must be “given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.” In addition, the Supreme Court has specifically stated in Stubart Investments Ltd. v Canada, 1984 CanLII 20 (SCC), [1984] 1 SCR 536, [1984] CTC 294 at paras 57-61, that, in tax cases, the modern rule of statutory interpretation should be followed rather than the traditional strict approach to statutory interpretation (see also: David G Duff et al., Canadian Income Tax Law, 5th ed (Lexis Nexis: Markham, 2015) [Duff] at 107, 116-117).
(ConocoPhillips at para 36)
[51] In Bonnybrook at paragraph 34, the FCA elaborated on this rule and held:
[34] The proper approach to statutory interpretation was described in Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601 at paragraph 10:
[10] It has been long established as a matter of statutory interpretation that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: see 65302 British Columbia Ltd. v. Canada, 1999 CanLII 639 (SCC), [1999] 3 S.C.R. 804, at para. 50. The interpretation of a statutory provision must be made according to a textual, contextual and purposive analysis to find a meaning that is harmonious with the Act as a whole. When the words of a provision are precise and unequivocal, the ordinary meaning of the words play a dominant role in the interpretive process. On the other hand, where the words can support more than one reasonable meaning, the ordinary meaning of the words plays a lesser role. The relative effects of ordinary meaning, context and purpose on the interpretive process may vary, but in all cases the court must seek to read the provisions of an Act as a harmonious whole.
(Bonnybrook at para 34)
[52] The principles of statutory interpretation, along with section 12 of the Interpretation Act require, when possible, the preference for a remedial interpretation that best ensures the attainment of the statutory provision’s object (see also Bell ExpressVu at para 26, quoting Elmer A Driedger, Construction of Statutes, 2nd ed (Toronto: Butterworths, 1983) at 87; Vavilov at paras 117–118; Mason at paras 69, 83). Section 12 of the Interpretation Act provides:
Enactments deemed remedial
Principe et interprétation
12 Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.
12 Tout texte est censé apporter une solution de droit et s’interprète de la manière la plus équitable et la plus large qui soit compatible avec la réalisation de son objet.
[53] As held by the SCC in Vavilov at paragraph 121, the CRA must interpret subsections 220(2.1) and (3) of the ITA
in a manner consistent with the text, context and purpose, applying its particular insight into the statutory scheme at issue. It cannot adopt an interpretation it knows to be inferior — albeit plausible — merely because the interpretation in question appears to be available and is expedient. The decision maker’s responsibility is to discern meaning and legislative intent, not to ‘reverse-engineer’ a desired outcome.
(Vavilov at para 121)
[54] Moreover, at paragraph 76 of Mason, the SCC held that a decision maker, in their interpretation of a statute or in the exercise of discretion, has to consider the potential “harsh consequences” for an entity. In “grapp[ling] with the particularly severe or harsh consequences for the affected [entity],” the decision maker has to “explain why [their] decision best reflects the legislature’s intention” (Mason at para 76, relying on Vavilov at paras 133–134).
[55] In its decisions, the CRA does not discuss nor put any weight on section 12 of the Interpretation Act, nor examine the remedial nature of section 220 of the ITA.
[56] The scheme of section 220 was adopted and presented by Parliament as a “Fairness Package,” to make “the tax system simpler, easier and fairer” by allowing “common sense