Conocophillips Canada Resources Corp. v. R. – FCt: Court Sets Aside Minister’s Decision that an Objection was Untimely

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Conocophillips Canada Resources Corp. v. The Queen[1] (November 26, 2013) is a novel case where the taxpayer sought to challenge in the Federal Court the Minister’s decision that its notice of objection for its taxation year ending November 30, 2000 was filed out of time:

[2]               The disagreement is about whether the Minister sent a Notice of Reassessment by mail to Conoco. The Minister found that the Notice of Reassessment was mailed; Conoco takes the position that the Minister failed to prove the mailing. The Minister’s factual finding has serious legal consequences. In play in the present Application are three statutory time-line provisions of the Income Tax Act, R.S.C., 1985, c.1, (5th Supp.) (Act): the limitation period for serving the Minister with a notice of objection to a notice of reassessment is “on or before the day that is 90 days after the day of sending the notice of assessment (s. 165(1)); where the Minister sends a notice of reassessment by mail, the notice is “presumed to be mailed … on the date of that notice (s. 244(14)); and with respect to receipt, the notice of reassessment “shall be deemed to have been received by the person to whom it was sent on the day it was mailed (s.248(7)(a)).

[3]                A précis of the uncontested events which ground the present Application is as follows: on April 14, 2010, members of Conoco’s tax group first learned from the Minister’s officials that a Notice of Reassessment with respect to Conoco’s taxation year ending November 30, 2000 (Assessment) was purportedly mailed by the Minister to Conoco on November 7, 2008; on May 3, 2010, the Minister’s officials supplied Conoco with a copy of the Assessment dated April 26, 2010 which bears a “date of mailing” notation of November 7, 2008; as a result, by way of letter dated June 7, 2010, Conoco served the Minister with a Notice of Objection to the Assessment (Objection); in response to the service of the Objection on the Minister, by letters dated September 15, 2010 and October 12, 2010, the Minister informed Conoco that, because the Objection was not served within 90 days of the mailing of the Assessment, and because no request for an extension of time to do so was made within the following year, being before February 5, 2010, the Objection was rejected. (Decision).

[4]               During the course of the hearing of the present Application, Counsel for Conoco confirmed that Conoco’s purpose in bringing the present Application is to have the Minister’s rejection of the Objection set aside, thus removing the bar established by the Minister for not considering the merits of Conoco’s Objection, with the result that if Conoco disagrees with the Minister’s consideration of the Objection it will have the right to appeal that consideration to the Tax Court of Canada. The primary issue for determination is whether the Minister’s decision to reject the Objection was reasonable, and in reaching this determination, the key issue is whether the Minister’s finding that the Assessment was mailed on November 7, 2008 is substantiated on the evidence.

The court accepted the applicant’s argument that it had no right of appeal to the Tax Court and, accordingly, the Federal Court had jurisdiction over the Minister’s decision to reject its notice of objection:

[7]               Counsel for the Minister argues that this Court has no jurisdiction to consider the “legal efficacy” of a notice of reassessment which is a matter to be determined by the Tax Court in an income tax appeal, and also argues that at the core of the present Application is the validity of the Assessment which falls within the exclusive jurisdiction of the Tax Court (Respondent’s Memorandum of Fact and Law, paras. 4 and 46). Counsel for the Minister makes the following statement about what Conoco should have done rather than bring the present Application:

If the applicant is correct and that its notice of objection is valid, it should have filed a notice of appeal before the Tax Court of Canada and demonstrated the validity of the same in that forum. It could have done so pursuant to s. 169(1)(b) of the Act. In the course of that proceeding, the validity of the notice of objection, including a determination of whether a notice of reassessment was sent, would be made. This application should be dismissed on the basis that this Court does not have the jurisdiction to determine the validity of the notice of objection or the notice of reassessment.

(Respondent’s Memorandum of Fact and Law, para. 51)

[8]               Counsel for the Applicant argues that no right of appeal exists to the Tax Court with respect to the unique circumstances of the present case. I agree with this argument. First, s. 169(1)(b) of the Act does not apply to the present circumstances because the conditions precedents do not exist. The provision allows a taxpayer to appeal an assessment to the Tax Court to vary or vacate an assessment after either the Minister has confirmed the assessment or reassessed, or 90 days have elapsed after service of the notice of objection and the Minister has not notified the taxpayer that the Minister has vacated or confirmed the assessment or reassessed.

[9]               With regard to Counsel for the Minister’s point that this Court has no jurisdiction to consider the “legal efficacy” of a notice of reassessment, in deciding the present Application no attempt will be made to determine whether the Assessment has the capacity of producing the legal result desired by the Minister. As set out above, the purpose of the present Application is not to challenge the validity of the Assessment but to remove the Decision that is an obstacle placed in Conoco’s path towards a proper consideration by the Minister of its Objection. I find that the present Application is within the jurisdiction of this Court and Conoco has no other access to justice besides the filing of the present Application.

The court then went on to conclude that the Minister’s decision in finding the taxpayer’s notice of objection was out of time was unreasonable:

[22]           In the Decision, Mr. Kassan makes only two statements to support his finding that the Assessment was mailed. In his letter of September 15, 2010 he states that “the latest reassessment date is November 7, 2008” and “we are able to trace through our internal mail system that the Notice of Reassessment was sent out on November 30, 2000 [sic: November 7, 2008]. And in his letter of October 12, 2010 he states that “as indicated before, our records show that the Notice of Reassessment dated November 7, 2008 was sent to your client on that day”.

[23]           In the Decision, Mr. Kassan does not state the precise evidence that supports the finding of fact that the Assessment was mailed. Indeed, in his affidavit Mr. Kassan does not state the content of the “verbal briefing” he received from Ms. Tse, nor does he comment on Ms. McGregor’s Analysis or the Internal Records mentioned in paragraph 11(e) of his affidavit.

[24]           The transcript of Mr. Kassan’s cross-examination on his affidavit discloses the process of decision-making undertaken by Mr. Kassan (Cross-Examination, Applicant’s Record, Vol. 1 of 2, pp. 75-100). Mr. Kassan confirmed that Ms. McGregor reports to Ms. Tse, and Ms. Tse reports to Mr. Kassan. Mr. Kassan confirmed that, upon receipt of Ms. Moan’s letter, Ms. Tse asked Ms. McGregor to prepare an analysis of it, and Ms. McGregor produced two documents: a draft of a letter of response; and her Analysis with reference to the Internal Documents that is referred to in the cross-examination as “the analysis” (Examination, p. 82). It appears that it was Ms. McGregor who generated the misunderstanding that Ms. Moan’s letter of June 7, 2010 was a request for an extension of time to file the Objection, which, on its face, it was not.

[26]           I find that the main conclusion that arises from the cross-examination is that, in reaching the Decision under review, Mr. Kassan was not sufficiently engaged with the evidence so as to form an independent opinion on the evidence, and, therefore, he placed full reliance on Ms. Tse’s opinions on the evidence in rendering the Decision. Of critical importance in the present review is that there is no evidence on the record of how Ms. Tse reached her opinions, what they were, and, indeed, what she said to Mr. Kassan. Thus, I find that there is no transparent and intelligible justification for Mr. Kassan’s finding that the Assessment was mailed.

[27]           As a result, I find the Decision is unreasonable.

The court’s judgment read as follows:



For the reasons provided, I set aside the Decision under review.

I award costs of the Application to the Applicant.

Presumably the decision implicitly directs the Minister to accept the notice of objection filed and act on it accordingly.

Comment:  This decision may be quite useful to taxpayers if it is sustained on appeal.  The obvious difficulty is that there is a long line of cases in the Tax Court and its predecessor tribunals deciding whether notices of objection (and, hence, notices of appeal or extension applications) were filed on a timely basis. On the other hand this decision could be interpreted as protecting the taxpayer’s substantive right to have the Minister consider its notice of objection on the merits – a jurisdiction the Tax Court does not seem to possess.  It will be interesting to see what the Federal Court of Appeal (or Supreme Court of Canada) makes of this new approach.

[1] 2013 FC 1192.