Harrison v. Canada (National Revenue)

Harrison v. Canada (National Revenue)
Court (s) Database
Federal Court Decisions
Date
2020-07-21
Neutral citation
2020 FC 772
File numbers
T-868-19
Notes
Reported Decision A correction was made on December 2, 2021.
Decision Content
Date: 20200721
Docket: T-868-19
Citation: 2020 FC 772
Vancouver, British Columbia, July 21, 2020
PRESENT: The Honourable Madam Justice Strickland
BETWEEN:
ELIZABETH HARRISON
Applicant
and
THE MINISTER OF NATIONAL REVENUE
Respondent
JUDGMENT AND REASONS
[1] This is an application for judicial review of the decision of an Assistant Director, Revenue Collection, Canada Revenue Agency [CRA], on behalf of the Minister of National Revenue [Minister], dated April 26, 2019 [Decision], refusing the Applicant’s request to refund an amount which CRA collected from her, on December 19, 2014, in relation to the Applicant’s 1988 taxation year. The Applicant requested the refund on the basis that the 10-year collection limitation period [or CLP] set out in section 222 of the Income Tax Act, RSC 1985, c 1 (5th Supp) [ITA] had expired on March 4, 2014. This judicial review is brought pursuant to s. 18.1 of the Federal Courts Act, RSC 1985, c F-7.
Background
[2] The factual background to this matter takes place over an extended period of time, starting in 1988. However, the underlying facts are largely not in dispute. Those facts are set out in some detail here as this will assist and add clarity to the analysis that follows.
[3] In her 1988 income tax return the Applicant claimed losses and other deductions in connection with her participation in two transactions: the Trinity Denton Partnership [Trinity Denton] and the Sierra Trinity Limited Partnership [Sierra Trinity].
[4] On December 29, 1992 the Applicant’s 1988 taxation year was reassessed [First Reassessment].
[5] On March 23, 1993 the Applicant filed a Notice of Objection in response to the First Reassessment. Therein she objected to CRA’s disallowance of certain Trinity Denton partnership losses allocated to her in her capacity as a general partner in that entity. Specifically:
$75,108 in non-capital loss [1988 Trinity Denton NCL]; and
$25,125 capital loss [1988 Trinity Denton Capital Loss].
[collectively, the Trinity Denton Partnership Losses]
[6] On December 29, 1993 the Minister issued a Notice of Reassessment in respect of the Applicant’s 1988 taxation year [Second Reassessment].
[7] On March 18, 1994 the Applicant filed a Notice of Objection to the Second Reassessment in which she disputed the:
disallowance of $174,000 of a claimed deduction of $203,278 in Canadian exploration expenses [1988 CEE]; and
disallowance of $ 12,218 of a claimed deduction of $27,743 bank interest charges [1988 Bank Interest].
[8] The Applicant submits that the 1988 CEE and 1988 Bank Interest charges were connected to Sierra Trinity, not Trinity Denton. This is not disputed by the Respondent.
[9] On June 13, 1994, the Applicant and the Minister entered into a settlement agreement with respect to the claimed Trinity Denton Partnership Losses [Settlement Agreement]. In the Settlement Agreement the Minister agreed to provide some interest relief and the Applicant, amongst other things, agreed:
to the issuance of an assessment or reassessment to disallow the claimed partnership losses; and
to waive any right to file a notice of objection or appeal regarding the disallowance of the losses described in the agreement; to the confirmation of such an assessment or reassessment if a notice of objection had been filed; and, that she would not take any other action to contest the validity of the Settlement Agreement.
[10] On March 30, 1995 the Minister issued a letter of confirmation pertaining to notices of objections filed for the 1988 and 1989 taxation years [First Confirmation]. As a result of its review, the Minister stated that:
Losses with respect to Trinity Denton Limited Partnership which were previously disallowed were confirmed, “as per our agreement”; and
Interest charges on any taxes due for 1988 and 1989 taxation years, as a result of the reassessments relating to Trinity Denton, would be cancelled for the period prior to May 1, 1991, “as per our settlement agreement”.
[11] On October 7, 2010, the Minister issued a letter of confirmation pertaining to Notices of Objections filed for the 1988, 1989 and 1990 taxation years [Second Confirmation]. With respect to the 1988 taxation year, it confirmed that:
The purchase of certain seismic data did not quality as 1988 CEE and the $174,000 in the 1988 taxation year (which had been disallowed by the Second Reassessment), was confirmed as disallowed; and
The $12,218 of the $26,496.70 1988 Bank Interest (which had been disallowed by the Second Reassessment), was confirmed as disallowed.
[12] On January 4, 2011, the Applicant filed a Notice of Appeal in the Tax Court with respect to her 1988, 1989 and 1990 taxation years. With respect the 1988 taxation year, a more detailed version of the above history of events was recited. The Notice of Appeal identified as issues, as regards to the 1988 taxation year:
Whether the listed deductions (the 1988 Trinity Denton NCL, 1988 Trinity Denton Capital Loss, 1988 Bank Interest and 1988 CEE) were deductible in computing income;
Whether the 1988 resource interest was deductible in computing income; and
Whether the disallowance of the 1988 Trinity Denton NCL, 1988 Trinity Denton Capital Loss and 1988 Bank Interest were statute barred.
[13] The Applicant disputed the disallowance of the listed 1988 deductions which she submitted were validly made. She also asserted that the Second Reassessment was improper and ought to be vacated by virtue of laches of the CRA; the 1988 resource interest should be deducted and her income reduced accordingly; and, that the disallowance of the 1988 Trinity Denton NCL, 1988 Trinity Denton Capital Loss, and 1988 Bank Interest were statute barred. She requested that the Second Reassessment be vacated or, alternatively, that it be referred back to the Minister for reconsideration and reassessment.
[14] In a Reply to the Notice of Appeal, the Minister argued that paragraphs 5 and 9 (as well as paragraphs 6(b), 6(c) and 12(c)) of the Notice of Appeal were improperly pleaded and should be struck out because the issue of the losses arising from the Applicant’s participation in Sierra Denton Limited Partnership was not properly before the Court due to the Settlement Agreement by which the Applicant agreed not to file any appeal and was, therefore, barred from appealing that issue pursuant to s 169(2.2) of the ITA. I note here in passing that, as acknowledged by the parties when appearing before me, the reference in the Reply to Sierra Denton Limited partnership is in error. The referenced paragraphs of the Notice of Appeal actually refer to the Trinity Denton partnership and the 1988 Trinity Denton NCL and 1988 Trinity Denton Capital Loss. The Settlement Agreement likewise refers to the Trinity Denton partnership.
[15] On December 19, 2014, the Minister issued a Notice of Reassessment in respect of the Applicant’s 1988 taxation year [Third Reassessment]. The Applicant states that Third Reassessment restored the deductions that had been disallowed in respect to Sierra Trinity in their entirety. It did not make any adjustments related to the Trinity Denton Partnership Losses. This is not disputed by the Respondent.
[16] The Third Reassessment indicates that the Applicant was due a refund of $929,152.13. In its explanation of changes, the reassessment states:
We have made an adjustment according to the consent judgment.
We reduced the instalment interest we charged you by $6,728.40.
We reduced the arrears interest we charged you by $838,988.83.
We have used your refund of $929,152.13 to reduce your previous balance outstanding.
[17] By letter of September 20, 2016, counsel for the Applicant advised the CRA of the Applicant’s view that the collection of the debt in relation to the 1988 taxation year was statute barred, pursuant to s 222(4) of the ITA, as the 10-year limitation period prescribed by that section had expired. The letter noted that the Applicant had been subject to two separate reassessments in respect of her 1988 taxation year. The First Reassessment (December 29, 1992) made adjustments to her participation in Trinity Denton. The Second Reassessment (December 29, 1993) made adjustments to her participation in Sierra Trinity. The Applicant filed the First Notice of Objection, in respect of the First Reassessment, on March 23, 1993. In 1994, she entered into the Settlement Agreement with respect to the First Reassessment, in which she waived her right to make any further objection or appeal in respect of the amounts contested in the First Notice of Objection. She had then filed the Second Notice of Objection, in respect of the Second Reassessment, which was ultimately confirmed by CRA. She then filed an appeal to the Tax Court in respect of the Second Reassessment.
[18] However, due to the passage of time and changes of counsel during that period, new counsel who prepared the Notice of Appeal was not aware of the Settlement Agreement made with respect to the First Reassessment. Because of this, new counsel included references to the First Assessment in the Notice of Appeal. In the Minister’s Reply, the Minister asserted that these were improper pleadings as the matters relating to Trinity Denton had been finally resolved by the Settlement Agreement. The Applicant did not dispute this at the Appeal.
[19] The September 20, 2016 letter goes on to state that after the effecting of the Settlement Agreement, the CRA did not contact the Applicant in relation to an amount owing in respect to the First Assessment and only did so after the Appeal of the Second Reassessment was resolved in December 2014. As no collection action was taken by March 4, 2014, CRA was barred by s 222(4) of the ITA from now attempting to do so.
[20] By letter of December 12, 2017, counsel for the Applicant wrote to confirm the voicemail message of CRA that it would not be taking collection action in relation to an amount alleged to be owing with respect to the 1988 taxation year. A letter of January 25, 2018 from counsel for the Applicant to the CRA attached the Applicant’s Detailed Arrears/Refund Interest Calculation for 1988, which indicates a credit of $91,080.10. The letter states that the Minister, on December 19, 2014, applied this credit against the 1988 debt and that the Minister improperly took collection action, contrary to the limitation period prescribed in s 222(4) of the ITA. The letter requested a refund of that amount plus interest. A similar letter was sent by counsel for the Applicant on February 19, 2018. The Minister referred the matter to the Department of Justice [DOJ] for an opinion. On April 1, 2019, counsel for the Applicant wrote to DOJ outlining the lengthy history of the matter and the Applicant’s position.
[21] By the letter of April 26, 2019, the CRA advised the Applicant that her refund request was refused. That letter comprises the Decision that is the subject of this judicial review.
Decision under review
[22] The April 26, 2019 letter is brief. It acknowledges the refund request and notes that the collections limitation period, or CLP, is restarted or extended when certain events occur, referring the Applicant to a link to CRA’s website for additional information.
[23] The letter then states:
On January 4, 2011, the taxpayer appealed to the Tax Court of Canada (TCC) in respect of its 1988 taxation year. In the “Notice of Appeal” filed, the reassessment dated December 29, 1992 (“First Reassessment”) and the reassessment dated December 29, 1993 (“Second Reassessment”) are both acknowledged. Filing an appeal with the TCC is an acknowledgement of the debt and restarted the CLP to day one. The CLP was simultaneously extended when the appeal to TCC was filed, which means that the CLP does not run during the time an appeal is with the TCC.
On December 19, 2014, the 1988 taxation year was reassessed, and the CLP restarted again 90 days after that date. The CLP started again at day one, on March 20, 2015, and the CLP would expire 10 years from this date on March 20, 2025, unless it is restarted or extended further.
The CLP for the 1988 taxation year had not expired on March 4, 2014, and the liability was not statute barred when the refund in the amount of $91,080.10 was applied to the 1998 tax liability. As a result, the requested refund will not be forthcoming.
Overview of the Applicant’s position
[24] It is perhaps helpful, before proceeding further, to provide an overview of the Applicant’s position as this provides context for the discussions that follow.
[25] The Applicant in her written submissions addresses the ITA provisions which pertain to the 10-year collection limitation period and the circumstances in which it can be extended or restarted.
[26] Specifically, that pursuant to ss 222(4)(a)(ii) and 222(4)(b) of the ITA, the limitation period for the collection of a tax debt that was payable on March 4, 2004, begins on March 4, 2004 and ends on the day that is 10 years after the day on which it began.
[27] Pursuant to s 222(8), the limitation period is extended in certain circumstances, specifically those set out in s 222(8)(a) to (d). Relevant to this matter is s 222(8)(a), which states that in computing the day on which a limitation period ends there shall be added the number of days that the Minister may not, because of s 225.1(2) to (5), take any of the actions described in s 225.1(1) in respect of the tax debt. Section 225.1(3) stipulates that where a taxpayer has appealed to the Tax Court from an assessment of an amount payable under the ITA, the Minister shall not, for the purpose of collecting the amount in controversy, take any of the collection actions described in s 225.1(1)(a) to (g). Thus, the effect of filing an appeal in the Tax Court is that the Minister is precluded from collecting the tax debt while the appeal is ongoing and the limitation period is extended by that same period.
[28] Pursuant to s 222(5), the 10-year limitation period for the collection of a tax debt can be restarted, then ending on the day 10 years after the day on which it restarted, in the three circumstances set out in s 222(5)(a),(b) and (c):
a) the taxpayer acknowledges the tax debt in accordance with subsection (6);
b) the Minister commences an action to collect the tax debt; or
c) the Minister, under subsection 159(3) or 160(2) or paragraph 227(10)(a), assesses any person in respect of the tax debt.
[29] With respect to an acknowledgment of a debt, s 222(6) states:
(6) A taxpayer acknowledges a tax debt if the taxpayer
(a) promises, in writing, to pay the tax debt;
(b) makes a written acknowledgement of the tax debt, whether or not a promise to pay can be inferred from the acknowledgement and whether or not it contains a refusal to pay; or
(c) makes a payment, including a purported payment by way of a negotiable instrument that is dishonoured, on account of the tax debt.
[30] The Applicant’s overarching position in this case is that, pursuant to s 222(4)(a)(ii) the limitation period for debt owed by Trinity Denton for the 1988 taxation year [1988 Debt] began on March 4, 2004 and, pursuant to s 222(4)(b), ended on March 4, 2014. She submits that during that timeframe that the Minister took no steps to collect the 1988 Debt. Nor do the circumstances of this case support that the limitation period was extended or was restarted. Accordingly, pursuant to s 222(3), the Minister was precluded from commencing an action to collect the 1998 Debt after the end of the limitation period. An “action” is defined in s 222(1) and means an action to collect a debt of a taxpayer and includes anything done by the Minister under s 164(2):
(2) Instead of making a refund or repayment that might otherwise be made under this section, the Minister may, where the taxpayer is, or is about to become, liable to make any payment to Her Majesty in right of Canada or in right of a province, apply the amount of the refund or repayment to that other liability and notify the taxpayer of that action.
[31] On December 19, 2014, and despite the expiry of the limitation period, the Minister took collection action by applying a credit otherwise refundable to the Applicant against the 1988 Debt. The Applicant submits that the grounds relied upon by the Minister in the Decision refusing her request for a refund are incorrect in law.
Relevant provisions of the ITA
[32] The full text of the relevant provisions of the ITA are reproduced in Annex “A” of these reasons.
Issues
[33] The Applicant submits that the sole issue is whether the Minister made a substantive error of law by concluding that the limitation period under s 222(4) of the ITA, in respect of the 1988 Debt, had not expired prior to December 19, 2014.
[34] The Minister submits that there are three issues arising and that if the answer to any one of them is affirmative, then the application for judicial review must be dismissed. Specifically:
Did the issuance of the Third Reassessment on December 19, 2014 operate as a wholly new reassessment with an entirely new CLP in respect to the Applicant’s 1988 tax liability?
Did the Applicant’s filing of the Appeal on January 4, 2011 suspend the CLP in existence at that time for the duration of the Appeal?
Did the Applicant “acknowledge” her 1988 tax liability by filing the Appeal [to the Tax Court], thereby restarting the CLP in existence at that time?
[35] In my view, and given my conclusion on the applicable standard of review as set out below, the overarching question is whether the Minister reasonably concluded that the CLP, as prescribed by s 222(4) of the ITA, had not expired as of December 19, 2014. This question requires the determination of three issues:
Issue 1: Did the Applicant “acknowledge” her 1988 tax liability by filing her Appeal to the Tax Court, thereby restarting the CLP?
Issue 2: Did the Applicant’s filing of her Appeal to the Tax Court, on January 4, 2011, extend the existing CLP?
Issue 3: Did the issuance of the Third Reassessment on December 19, 2014 operate as a new reassessment, initiating a new CLP, in respect of the Applicant’s 1988 tax liability?
Standard of Review
Parties’ positions
[36] In her written submissions the Applicant asserted that correctness is the applicable standard of review, relying on Connolly v Canada (National Revenue), 2019 FCA 161 (“Connolly”):
[54] I agree with Mr. Connolly that the first aspect of the delegate’s consideration of the subsection 204.1(4) analysis, involving delineation of the applicable test enshrined in the subsection, raises a question of law and that, to date, this Court has reviewed legal interpretations made by the Minister or a ministerial delegate of provisions in the ITA for correctness, even though under the Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 framework such questions normally subject to review on a reasonableness standard: see, e.g., Redeemer Foundation at para. 24; Bozzer at para. 3; Sheldon Inwentash and Lynn Factor Charitable Foundation v. Canada, 2012 FCA 136 at paras. 19-23, 432 N.R. 338; Prescient Foundation v. Canada (National Revenue), 2013 FCA 120 at paras. 12-13, 358 D.L.R. (4th) 541; Opportunities for the Disabled Foundation v. Canada (National Revenue), 2016 FCA 94 at para. 16, 482 N.R. 297.
[37] The Respondent submitted in its written submissions that an administrative decision maker’s interpretation of their home statute is subject to deference on judicial review. Here the ITA is the Minister’s home statute and the Applicant is challenging the Minister’s interpretation and application of the ITA. The Respondent submitted that the reasonableness standard presumptively applies (Canada (Human Rights Commission) v Canada (Attorney General), 2018 SCC 31 at para 27 and 28) and that none of the exceptions to this presumption have application in this matter (British Columbia (Securities Commission) v McLean, 2013 SCC 67 at paras 25-33 (“McLean”)).
[38] Subsequent to the parties filing their written submissions, the Supreme Court of Canada issued its decision in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 (“Vavilov”). The parties were permitted to file further written submissions to address the impact of Vavilov on their positions.
[39] In those further submissions, the parties agreed that post-Vavilov, the presumptive standard of review is reasonableness.
[40] However, the Applicant contends that this presumption is rebutted in the circumstances of this matter and, therefore, the applicable standard of review continues to be correctness. Specifically, she submits that the interpretation of statutory limitation periods is a pure question of law and is of central importance to the functioning of the legal system in Canada (Markevich v Canada, 2003 SCC 9 at para 17 (“Markevich”); McLean at para 28). The Applicant submits that to allow the Minister’s delegate to interpret s 222(4) of the ITA “under the guise of ‘reasonableness’ review would be inconsistent with the rule of law and would introduce an unacceptable degree of uncertainty into the interpretation of the legal question”. Further, that the CRA, acting on behalf of the Minister, has no particular expertise in interpreting legal issues involving limitation periods and the ITA does not suggest that the Minister is to be afforded deference. In the alternative, if the Court determines that the reasonableness standard does apply, then when assessing the Decision the Court must apply that standard in the manner set out in Vavilov. This should include recognizing that the CRA is not an independent tribunal and has an interest in the outcome, the continued withholding of the refund. The CRA cannot be permitted to reverse engineer its statutory interpretation to achieve its desired outcome (Vavilov at para 121).
[41] The Respondent submits that Vavilov contemplates two situations where the presumption is rebutted: (1) where legislation speaks directly to standard or review or does so implicitly by providing for direct appeal a decision maker to a court, and (2) where required by the rule of law. However, neither of these exceptions have application in this matter. The rule of law only requires courts to have the final word with regard to general questions of law that are of central importance to the legal system as a whole (Vavilov at paras 58-59, 61). The Decision does not raise a general or abstract question relating to limitation periods generally. Rather, it raises questions of mixed fact and law that are specific to the administration of the ITA.
Analysis
[42] As to the Applicant’s reliance on Connolly, it is significant to note that following paragraph 54, relied upon by the Applicant and quoted above, the Court went on to say:
[55] That said, given significant developments in the common law of judicial review in recent years, it may well be that this approach is no longer correct as my colleague, Woods J.A., recently noted in Bonnybrook Park Industrial Development Co. Ltd. v. Canada (National Revenue), 2018 FCA 136 at paras. 22-24 and Ark Angel Foundation v. Canada (National Revenue), 2019 FCA 21 at paras. 30-31. However, for the reasons set out below, it is in my view unnecessary to decide this issue in the present case.
[43] Subsequent to Connolly, the Supreme Court of Canada in Vavilov held that the standard of reasonableness presumptively applies whenever a court reviews an administrative decision (Vavilov at paras 16, 23, 25). That presumption may be rebutted in two circumstances. The first is where the legislature has prescribed the standard of review or has provided a statutory appeal mechanism thereby signalling the legislature’s intent that appellate standards should apply (Vavilov at paras 17, 33). The second circumstance is where the rule of law requires the application of the correctness standard. This will be the case for certain categories of questions, namely, constitutional questions, general questions of law of central importance to the legal system as a whole and questions related to the jurisdictional boundaries between two or more administrative bodies (Vavilov at paras 17, 53).
[44] The Applicant does not suggest that the first circumstance has any application in this matter. She takes the position that the Minister’s Decision falls into the category of a general question of law of central importance to the legal system as a whole and, as such, rebuts the presumption that the reasonableness standard applies.
[45] In my view, this position is not supported by Vavilov or the factual circumstances of this matter. In Vavilov, the Supreme Court stated that the presumptive standard of reasonableness applies to the administrative decision maker’s interpretation of its enabling statute, as well as applying more broadly to other aspects of its decision (para 25). And, as to general questions of law of central importance to the legal system as a whole, the Supreme Court referenced its decision in Dunsmuir, 2008 SCC 9 at para 60, which held that general questions of law which are “both of central importance to the legal system as a whole and outside the adjudicator’s specialized area of expertise”. However, while the Court remained of the view that the rule of law requires courts to have the final word with regard to general questions of law that are “of central importance to the legal system as a whole”, it found that it is no longer necessary to evaluate the decision maker’s specialized expertise in order to determine whether the correctness standard must be applied in cases involving such questions (Vavilov at paras 58). That is, expertise is no longer relevant to the determination of the standard of review as it was in the previously required contextual analysis. The role of expertise in decision-making is now a consideration in conducting the presumptive reasonableness review (Vavilov at para 31).
[46] The Supreme Court then noted that the key underlying rationale for this category of question is the reality that certain general questions of law “require uniform and consistent answers” as a result of “their impact on the administration of justice as a whole” (Dunsmuir, para. 60). In these cases, correctness review is necessary to resolve general questions of law that are of “fundamental importance and broad applicability”, with significant legal consequences for the justice system as a whole or for other institutions of government (Vavilov at para 59). The Court cited its prior decisions in this regard and then stated:
[59] … For example, the question in University of Calgary could not be resolved by applying the reasonableness standard, because the decision would have had legal implications for a wide variety of other statutes and because the uniform protection of solicitor-client privilege — at issue in that case — is necessary for the proper functioning of the justice system: University of Calgary, at paras. 19-26. As this shows, the resolution of general questions of law “of central importance to the legal system as a whole” has implications beyond the decision at hand, hence the need for “uniform and consistent answers”.
[47] Further:
[61] We would stress that the mere fact that a dispute is “of wider public concern” is not sufficient for a question to fall into this category — nor is the fact that the question, when framed in a general or abstract sense, touches on an important issue: see, e.g., Communications, Energy and Paperworkers Union of Canada, Local 30 v. Irving Pulp & Paper, Ltd., 2013 SCC 34, [2013] 2 S.C.R. 458, at para. 66; McLean, at para. 28; Barreau du Québec v. Quebec (Attorney General), 2017 SCC 56, [2017] 2 S.C.R. 488, at para. 18. The case law reveals many examples of questions this Court has concluded are not general questions of law of central importance to the legal system as a whole. These include whether a certain tribunal can grant a particular type of compensation (Mowat, at para. 25); when estoppel may be applied as an arbitral remedy (Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, 2011 SCC 59, [2011] 3 S.C.R. 616, at paras. 37-38); the interpretation of a statutory provision prescribing timelines for an investigation (Alberta Teachers, at para. 32); the scope of a management rights clause in a collective agreement (Irving Pulp & Paper, at paras. 7, 15-16 and 66, per Rothstein and Moldaver JJ., dissenting but not on this point); whether a limitation period had been triggered under securities legislation (McLean, at paras. 28-31); whether a party to a confidential contract could bring a complaint under a particular regulatory regime (Canadian National Railway, at para. 60); and the scope of an exception allowing non-advocates to represent a minister in certain proceedings (Barreau du Québec, at paras. 17-18). As these comments and examples indicate, this does not mean that simply because expertise no longer plays a role in the selection of the standard of review, questions of central importance are now transformed into a broad catch-all category for correctness review.
[62] In short, general questions of law of central importance to the legal system as a whole require a single determinate answer. In cases involving such questions, the rule of law requires courts to provide a greater degree of legal certainty than reasonableness review allows.
[48] I note that in McLean, referenced above in paragraph 61 of Vavilov by the Supreme Court as an example of questions that are not general questions of law central to the importance to the legal system as a whole, the Supreme Court considered whether, for the purposes of s 161(6)(d) of the British Columbia Securities Act, “the events” that triggered the six-year limitation period found in s 159 were triggered by the underlying conduct that gave rise to a settlement agreement or by the settlement agreement itself. The majority found that although limitation periods, conceptually, are “generally of central importance to fair administration of justice”, it did not follow that the Security Commissioner’s interpretation of the limitation period must be reviewed for its correctness. Rather, that the meaning of “the events” in s 159 was “a nuts-and-bolts question of statutory interpretation confined to a particular context” (McLean at para 28).
[49] In my view, this is a similar circumstance. The Decision in this matter does not turn purely on the Minister’s interpretation of s 222(4) of the ITA, but on the Minister’s application of that, and related provisions, to the facts of the Applicant’s case. That is, it is an issue of mixed fact and law. I am also not persuaded that any interpretation of that provision by the Minister in the Decision gives rise to a general question of law central to the importance to the legal system as a whole. The Minister’s interpretation is confined to the Applicant’s particular circumstances, being whether the Settlement Agreement caused the limitation period to be extended or restarted and, if it did not, whether the limitation period had expired prior to, and could not be revived by, the Third Reassessment. It will primarily have an effect on the specific circumstances of the Applicant and it does not amount to a general question of law of central importance to the legal system as a whole which requires a single determinate answer. Accordingly, the presumption of reasonableness as the applicable standard of review of the Decision has not been rebutted.
[50] Finally, I note that the Supreme Court in Vavilov also addressed how a reasonableness review is to be conducted by a reviewing court (at paras 73-145).
[51] Within that discussion, the Supreme Court addressed the principles of statutory interpretation as an element of a reasonableness analysis and held that matters of statutory interpretation are not treated uniquely and, as with other questions of law, may be evaluated on a reasonableness standard (para 115).
[52] More generally, it held that a reviewing court must determine whether the decision as a whole is reasonable and, to make that determination, the reviewing court “asks whether the decision bears the hallmarks of reasonableness – justification, transparency and intelligibility – and whether it is justified in relation to the relevant factual and legal constraints that bear on the decision” (Vavilov at paras 15, 99). When a decision is based on an internally coherent and rational chain of analysis and is justified in relation to the facts and the law that constrain the decision maker it is reasonable and is to be afforded deference by a reviewing court (Vavilov at para 85).
Issue 1: Did the Applicant “acknowledge” her 1988 tax liability by filing her Appeal to the Tax Court, thereby restarting the CLP?
Applicant’s position
[53] This first issue concerns whether the Applicant made a “written acknowledgment” of the 1988 Debt, as that term is described in s 222(6)(b) of the ITA, by filing her Appeal to the Tax Court, thereby restarting the CLP pursuant to s 222(5)(a). The Applicant submits that the Appeal did not constitute a written acknowledgment of the 1988 Debt by the Applicant and therefore it did not restart the limitation period.
[54] She submits that because what constitutes a written acknowledgment is not defined in the ITA, it is therefore is properly interpreted by reading the words of the statutory provision “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” (Re Rizzo & Rizzo Shoes Ltd, [1998] 1 SCR 27 at para 21), including considering the ordinary meaning of those words. Such an interpretation does not support that the Appeal is a written acknowledgment of the 1988 Debt.
[55] In that regard, the Applicant notes, amongst other points, that s 222(8)(a) provides that the limitation period is extended while an appeal is outstanding. It would be redundant and incoherent to conclude that s 222(5)(a) is also intended to simultaneously restart the limitation period. Had Parliament intended to restart the limitation period on the filing of any Notice of Appeal to the Tax Court, it would have said so. The Applicant submits that this interpretation is also consistent with the legislative purpose of s 222 and the policy underlying limitation periods in general (Alberta Law Reform Institute, Report No. 55, Limitation’s (Edmonton: The Commissions, 1989) at 92). That is, where a taxpayer does not admit or verify their liability, they have not renounced their need to be protected by the limitation period and there is no justification for renewing the limitation period. Conversely, based on estoppel, if a debtor has promised to pay a debt, then the creditor should be entitled to rely on this new promise and a limitation period should not be renewed in view of that promise.
[56] Further, by its very nature an appeal is a dispute as to the existence of a tax debt, not a confirmation of its existence. By filing the Appeal the Applicant merely acknowledged that the First and Second Reassessments had been issued for her 1988 taxation year. She did not acknowledge the existence of the alleged 1988 Debt itself or her liability for that debt. Rather, she expressly denied the existence of any liability for the 1988 taxation year. As the Appeal did not “confirm and concede” (Buik Estate v Canasia Power Corp, 2014 ONSC 2959 at paras 35 (“Buik”)) the correctness of the First Reassessment or the Second Reassessment or the existence of the 1988 Debt, it was not a written acknowledgment of the tax debt and did not restart the limitation period.
Respondent’s position
[57] The Respondent submits that the Minister’s interpretation of what constitutes a “written acknowledgment” in the context of the ITA was reasonable and is to be afforded deference. While the Respondent concedes that language similar to that found in s 222(5) of the ITA appears in the Limitation Act, RSBC 1979 c 236, it asserts that the authorities relied upon by the Applicant are nevertheless distinguishable due to the statutory context and purpose of the ITA, its purpose being to raise revenues to operate the public sector.
[58] Further, s 152(8) of the ITA states that an assessment shall, subject to being varied or vacated on an objection or appeal under Part I and subject to a reassessment, be deemed to be valid and binding notwithstanding any error, defect or omission in the assessment or in any proceeding under the ITA relating thereto. Section 152(3) states that liability for the tax under Part I is not affected by an incorrect or incomplete assessment or by the fact that no assessment has been made.
[59] Accordingly, the Respondent submits that there is no need for a taxpayer to make an admission of liability because the ITA already deems that liability to exist and ousts any common law precondition of an admission of liability in order to constitute an acknowledgment. The filing of an appeal of a valid and binding tax debt is an acknowledgment of that debt. The ordinary meaning of the word “acknowledge” can bear this interpretation and is reasonable.
Analysis
[60] The Decision states that the Notice of Appeal acknowledged both the First Reassessment and the Second Reassessment. Further, that “Filing an appeal with the TCC is an acknowledgement of debt and restarted the CLP to day one”. This appears to express a view generally held by CRA that the filing of any appeal is an acknowledgment of the subject debt and, therefore, restarts the limitation collection period.
[61] I note in passing here that the Respondent’s above reasoning referencing s 152(3) and (8) of the ITA is not found in the Decision refusing the requested refund. The Decision makes no explicit reference to any provisions of the ITA in support of its conclusion. The certified tribunal record, like the Decision, does not include any notes or analysis. It includes only excerpts from the CRA National Collections Manual and a screen print of a portion of CRA’s external website concerning limitation periods, which both indicate, without explanation, that the filing of a notice of objection or an appeal to the Tax Court is an acknowledgment of the debt. The external website extract states that these actions will restart the collections limitation period as they “are considered acknowledgments of debt”. The electronic link to which the Applicant was referred in the Decision is, presumably, a link to the CRA website. That said, the interpretation of s 222(5)(a) and 222(6) was not directly at issue when the Applicant made her submissions to the CRA seeking a refund. However, the CRA appears to rely on a stated interpretation of the ITA in the Decision without offering any justification for its conclusion.
[62] Accordingly, the first question to be addressed is whether CRA reasonably concluded that the act of filing an appeal is, in and of itself, an acknowledgment which will suffice to restart a limitation period in every case.
[63] The Supreme Court of Canada has held 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 (Vavilov at para 117; Rizzo at para 21; in the context of the ITA also see Trustco Mortgage v Canada, 2005 SCC 54, at para. 10). Further, that assessing the reasonableness of a statutory interpretation requires the reviewing court to ask “[…] whether the tools of statutory interpretation – including the text, context and purpose of the provision – can reasonably support the [Minister’s] conclusion” (Williams Lake Indian Band v. Canada (Aboriginal Affairs and Northern Development),