http://decisions.fct-cf.gc.ca/fc-cf/decisions/en/item/111186/index.do
Sood v. Canada (National Revenue) (July 13, 2015 – 2015 FC 857, Gascon, J.).
Précis: In February of 2014 Mr. Sood reached a settlement with CRA that would have permitted him a portion of an Ontario New Housing Rebate on a home he agreed to purchase in June of 2007 (he took possession in June of 2011). Subsequent to the date of the settlement CRA discovered that the Ontario New Housing Rebate plan did not take effect until July 1, 2010 and therefore Mr. Sood was not entitled to any Ontario Rebate. CRA refused to go ahead with the settlement and Mr. Sood sued in the Federal Court to enforce it.
The Federal Court dismissed the application for judicial review, with costs. It held that the Court had no jurisdiction to compel the Minister to abide by an illegal agreement. Moreover Mr. Sood’s application was simply an attempt to litigate a matter that was within the exclusive jurisdiction of the Tax Court.
Decision: The facts in this decision were certainly not appealing:
[1] In February 2014, the applicant Jitendra Kumar Sood accepted a proposal made by the Canada Revenue Agency offering to refund him a portion of a GST/HST new housing rebate that he claimed he had not yet received. This refund represented part of a provincial new housing rebate amount that Mr. Sood was seeking to obtain further to a contract concluded in June 2007 for the purchase of a new residence from a builder.
[2] Following Mr. Sood’s acceptance, the Agency attempted to process and implement the settlement agreement but found that it could not. After further verification, the Agency determined that Mr. Sood had already received all tax rebates he was entitled to regarding the purchase of his new residence. Mr. Sood had signed the purchase contract for his new residence in June 2007, and took possession of the residence in June 2011; the Ontario new housing rebate he was claiming did not apply to such situations. The Agency thus reneged on the settlement proposal accepted by Mr. Sood because he was not eligible to benefit from the provincial new housing rebate.
[3] Mr. Sood contends that the Minister of National Revenue cannot resile from settlement agreements reached with taxpayers. He thus filed this application for judicial review pursuant to sections 18, 18.1 and 18.4 of the Federal Courts Act, RSC 1985 c F-7 to obtain an equitable remedy of specific performance against the Minister and to enforce the settlement agreement he accepted in February 2014. Mr. Sood also seeks other types of relief including a declaratory remedy that the Minister breached the February 2014 settlement agreement, a writ of mandamus requiring the Minister to reassess Mr. Sood’s claim for the provincial new housing rebate, and various other alternative remedies seeking a reconsideration of his new housing rebate claim or damages from the Minister.
Factually, Mr. Sood never paid any HST at 13% on account of the purchase of the home, only GST at 6%:
[41] In his NHR Application, Mr. Sood claimed a provincial new housing rebate amount of $10,505.12. According to the application form and to the calculations prescribed for the rebate, this amount was based on a “provincial part of the HST” paid on the house, which Mr. Sood reported as being the addition of $22,133.85 and $627.24. These two amounts originated from the builder’s final closing statement of adjustments attached to Mr. Sood’s NHR Application; however, in that final closing statement, these two figures were respectively reported as “GST” on the sale price and “GST calculated at 6.00%” on upgrades ordered. There was no reference to any HST amount covered by either of those two tax figures.
[42] Conversely, when the HST applied, the builder’s final closing statement referred to “HST calculated at 13.00%”; it did for items such as “Electronic Registration Fee”, “Status Certificate” or “Water, Gas and Hydro Connections”, for which the builder indeed credited Mr. Sood in the statement.
[43] There is therefore no indication on the record nor evidentiary support showing that there was a total “HST paid on the house” in the amounts of $22,133.85 and $627.24 as indicated by Mr. Sood in his NHR Application. The evidence rather points to those two amounts referring strictly to the GST paid on the house. The claim for the Ontario new housing rebate amount of $10,505.12 is therefore not supported by the facts on the record, a fact that the Agency conveyed to Mr. Sood by telephone in March 2014.
The Court dismissed the appeal on four different bases. In the first place the case law was clear that in federal tax cases the Minister could not enter into a settlement except in accordance with the applicable legislation. Secondly, there was no legal basis for the Ontario rebate:
[33] The Court notes that the Government of Ontario introduced a HST as of July 1, 2010 in the province. When it came into effect on July 1, 2010, the HST rate in Ontario was 13%, 5% representing the federal part and 8% the provincial part. New homes located in Ontario were therefore taxed at the HST rate of 13% starting on July 1, 2010; prior to that, they were simply taxed at the GST rate of 6%. Sections 123 and 256.21 of the ETA refer to the “harmonization date” for Ontario, set at July 1, 2010 as this is the date on which the HST was implemented in the province.
Thirdly, as noted previously, Mr. Sood did not in fact pay any HST on the purchase of the home, only GST. Finally, Mr. Sood was attempting to litigate a matter that was within the exclusive jurisdiction of the Tax Court:
[52] Nor is there any reason to award damages under section 18.1 of the Federal Courts Act in the current situation. Mr. Sood is seeking damages equal to the amount he is claiming in his NHR Application. Once again, the invalidity of the tax reassessment made by the Minister is at the core of this requested relief and Mr. Sood cannot obtain damages unless he demonstrates this invalidity. This is something on which the Tax Court has exclusive jurisdiction and the Federal Court has no jurisdiction to award damages based on an incorrect tax reassessment until the Tax Court has overturned and revised such reassessment.
[53] Finally, subsection 18.4(2) of the Federal Courts Act gives the Court the authority to turn an application for judicial review into an action for breach of contract. However, this avenue of redress is discretionary. In Meggeson v Canada (Attorney General), 2012 FCA 175 at paras 31-38, the Court specified that, though considerations which may lead to the exercise of this discretion are not limited, it has been done when, for example, an application does not provide appropriate procedural safeguards where declaratory relief is sought or when the facts underlying the application cannot be properly determined through affidavit evidence. In essence, this discretion is exercised where proceeding by an action is “necessary to alleviate the inadequacies of the relief available on judicial review” (at para 33), and “to promote and facilitate access to justice” (at para 37).
[54] This case is not a situation which calls for the exercise of this discretion, and Mr. Sood has not referred the Court to precedents supporting his position on this front or to any basis on which the Court could be justified to exercise its discretion in that respect. Furthermore, the established jurisprudence repeatedly states that an applicant cannot seek a relief before this Court on the basis of an invalid reassessment of tax unless such reassessment has been overturned by the Tax Court. As Mr. Sood’s application is an indirect challenge of the Minister’s tax reassessment and refusal of his new housing rebate claim, the jurisdiction falls under the Tax Court (Newcombe v Canada, 2013 FC 955). There is no valid cause of action against the Minister potentially supporting a claim for damages equal to the amount of the new housing rebate denied by the Minister, and I thus decline to direct that Mr. Sood’s application be treated as an action.
As a consequence the application was dismissed with costs.