Thangarajah v. R. - TCC: Letter from taxpayers’ agent not a request for extension of time

Thangarajah v. R. - TCC:  Letter from taxpayers’ agent not a request for extension of time

Thangarajah v. The Queen (May 2, 2017 – 2017 TCC 72, Smith J.).

Précis:  The taxpayers sought an extension of the time to file Notices of Objection for the 2011 and 2012 taxation years in respect of Notices of Reassessment issued in November of 2014.  The sole question before the Court was whether a letter dated September 10, 2015 from the taxpayers’ agent could be construed as an application to extend the time to file a notice of objection.  The Minister did not accept the letter as such an application and the Court agreed that it could not be so construed.  Since no application had been made to the Minister within the statutory limitation period the extension application was dismissed.  There was no order as to costs.

Decision:  The sole question at issue was whether a letter of the taxpayers’ agent amounted to a timely request for an extension of the time to file a notice of objection in respect of the disputed Notices of Reassessment:

[8]             In the months that followed, Ms. Thangarajah received calls from the CRA Collections Office and Mr. Nicholas was appropriately informed and asked to take action. He finally did so and this is made apparent in a letter dated September 10, 2015 addressed to a certain Trudy Duggan of the CRA Collections Office, in which he sought to confirm a telephone conversation that took place shortly prior thereto. Mr. Nicholas confirmed that the Applicants’ accounting records were being reviewed by appropriate professionals, that this process was almost complete and that, presumably as advised by Ms. Duggan, he understood the need to file Notices of Objection using the forms T400A for an individual and RCS9 for a corporation and that, as soon as he heard from the accounting professionals, he would initiate what he referred to as the “appeal process”.

The Court found that the September 10, 2015 letter could not be construed as an extension application:

[19]        Even if the Court were to conclude that the letter of September 10, 2015 was sent to the CRA Collections Office within the one year period from the expiry of the 90 days from the mailing of the Notices of Reassessment, it would still have to be satisfied that the letter itself could indeed be characterized as an application to extend time. It is difficult to do so since the letter does not reference the statutory time limits and does not mention that the taxpayer is seeking any kind of extension. Moreover, as noted above, it does not state the reason why the notices of objection were not filed on time. The suggestion that the applicants were waiting for the accountants to complete their review, while providing an explanation for the delay, does not address the failure to deliver the notices of objection within the 90 days statutory limit.

[20]        In the end, the Court agrees with the Respondent and concludes that the letter of September 10, 2015 does not constitute an application to extend the time to file a notice of objection as required by paragraph 166.2(5)(a). As a result, it is not necessary to review the three‑pronged test set out in subparagraphs 166.2(5)(b)(i), (ii) or (iii) of the Act.

[21]        Although this effectively disposes of the Applications, the Court will comment on the fact that the Applicants retained and relied on the services of Mr. Nicholas, ostensibly a lawyer, to assist with the preparation and filing of the documentation necessary for the appeal of the Notices of Reassessment. Although he had ample time to prepare and file the required notices of objection, having been retained several months before the actual issuance of the Notices of Reassessments, he clearly failed to do so. No reasons were given for this failure though the inescapable conclusion is that it was due to his ineptitude and incompetence. In other words, it appears he did not know what he was doing.

[22]        However, in terms of the outcome of this case, in my view, nothing turns on the fact that Mr. Nicholas held himself out as a lawyer when in fact he was only a paralegal. That is a matter for the appropriate professional governing body. Even if the Applicants may have a cause of action for damages arising out the Mr. Nicholas’s negligence — a cause of action that would have to be pursued in another court of law, the case law from this Court has clearly established that a taxpayer who seeks to rely on a lawyer’s negligence, must also demonstrate that such lawyer acted with due diligence. That principle was explained in Di Modica v. Canada, [2001] T.C.J. No. 620 (Q.L.) at paragraph 16:

[16] It is my view that an error by counsel can be a just and equitable reason for granting an extension of time if counsel otherwise exercised the reasonable diligence required of a lawyer. I do not think that the state of the law is such that counsel's negligence or carelessness can constitute a just and equitable reason for granting the requested extension within the meaning of subparagraph 166.2(5)(b)(ii) of the Act.

[23]        While the Court has a general policy of dealing with matters on the merits, there are limits to what it can do. In the case of Chu v. The Queen, 2009 TCC 444, a taxpayer had similarly retained the services of tax advisers to prepare and file a notice of objection but they failed to do so. Having discovered the error, the taxpayer filed an application to extend the time to file the notice of objection but the application was filed more than one year after the expiry of the 90 day period from the mailing of the Notice of Assessment. Justice Hershfield concluded that his hands were effectively “tied” (para. 18) and although it was apparent that the professional advisers had been negligent, the Court was not “an insurer against such malfeasance” (para. 21). He concluded as follows:

[22]      I cannot massage the language of the subject provision; I have no jurisdiction to do so. There is no place for me to do that given the clear statutory language of the subject provisions (…).

As a result the application to extend the time to file a Notice of Objection was dismissed without costs.