http://decisions.fct-cf.gc.ca/fc-cf/decisions/en/item/127766/index.do
ConocoPhillips Canada Resources Corp. v. Canada (National Revenue) (January 27, 2016 – 2016 FC 98, Boswell J.).
Précis: This case is another attempt by ConocoPhillips to remedy a situation where its taxation year ending November 30, 2000 taxation year was reassessed in 2008. ConocoPhillips claimed never to have received the notice of reassessment and filed a notice of objection in 2010 which the Minister rejected as out of time. ConocoPhillips applied to the Federal Court for an order directing the Minister to consider the notice of objection. They succeeded in the Federal Court but that decision was reversed on appeal. The Federal Court of Appeal held that the appropriate course for ConocoPhillips was to appeal the reassessment to the Tax Court and that court could determine whether the notice of objection had been filed in a timely manner. These earlier decisions are blogged on this site.
This case involved another spin on the fact situation. ConocoPhillips asked the Minister to waive the filing of a notice of objection pursuant to subsection 220(2.1) of the Income Tax Act (the “ITA”). The Minister declined on the basis that she had no jurisdiction to waive the filing of a notice of objection. ConocoPhillips applied to the Federal Court for judicial review of that decision. The Federal Court held that the Minister had jurisdiction to waive the filing of a notice of objection and therefore her decision was unreasonable. As a result the matter was remitted to the Minister to consider and determine the application for a waiver. There was no order as to costs.
Decision: The provision in question was subsection 220(2.1) of the ITA:
Waiver of filing of documents
(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.
The Federal Court rejected the Minister’s argument that the filing of a notice of objection was central to the appeals processes of the ITA:
[44] In the Minister’s view, under subsection 165(3), she can only reconsider an assessment once a notice of objection is received. The Minister argues that sections 165 and 167 to 171 create a complete code, and that there must be a notice of objection before an assessment can be reconsidered. If this is the case, then on the second interpretation of the French version of subsection 220(2.1), there is a specific provision requiring the Minister to have a notice of objection before reassessing; this interpretation would lend weight to the Minister’s argument that she cannot waive the requirement for a notice of objection since that would not be a discretion in accord with the current law and regulations. This argument is largely academic, however, in view of the two-step test in R. v. Daoust, 2004 SCC 6, at paras 27 to 31, [2004] 1 SCR 217 [Daoust] to reconcile differences between the English and French versions of a statutory provision.
The Federal Court found that subsection 220(2.1) of the ITA deserved a large and liberal construction and as a result gave the Minister the power to waive the filing of notices of objection:
[55] Although the Minister’s interpretation of subsection 220(2.1) is entitled to deference because she was interpreting her home statute, her interpretation in this case was not reasonable because, in view of the foregoing comments as to the scope and breadth of the Minister’s discretionary powers under this subsection, it should be read and interpreted in a large and liberal manner rather than in a narrow and restrictive way.
[56] I agree with ConocoPhillips that the purpose of subsection 220(2.1) is to blunt the unfairness that sometimes arises by strict application of the filing and notice requirements in the ITA. The Minister’s discretionary power under subsection 220(2.1) should not be unduly limited or fettered through an unduly narrow interpretation which the Minister unreasonably adopted and applied in this case.
The Minister’s decision that she did not have jurisdiction to waive the filing of a notice of objection was accordingly unreasonable and the matter was remitted to the Minister for consideration and determination:
[65] In conclusion, I find that the Minister does have the jurisdiction under subsection 220(2.1) of the ITA to waive the requirement for a notice of objection and her determination to the contrary in this case cannot be justified and was therefore unreasonable. Accordingly, this matter should be returned to the Minister for consideration of the requested waiver. It is not the role or function of this Court to determine whether such a waiver should or should not be granted; that determination must be made by the Minister one way or the other.
There was no order as to costs.
Comment: I have somewhat abridged this long decision because I think it is extremely unlikely that it will be the last word on the subject. It will be interesting to see what the Federal Court of Appeal makes of the issue. Historically there seems to be considerable force to the Crown’s “complete code” argument and it could be argued that the Federal Court did not afford it sufficient weight relying instead on the somewhat vague language of subsection 220(2.1) of the ITA.