Mammone v. R. – FCA: Minister relied on a new factual basis for the reassessment after the normal reassessment period had expired – Tax Court reversed, appeal allowed.

Mammone v. R. – FCA:  Minister relied on a new factual basis for the reassessment after the normal reassessment period had expired – Tax Court reversed, appeal allowed.

Mammone v. Canada (March 6, 2019 – 2019 FCA 45, Rennie, Woods (author), Laskin JJ.A.).

Précis:   The taxpayer transferred his pension funds to a new plan in 2009.  In 2013 the Minister send a notice revoking the registration of the new plan and reassessed the taxpayer accordingly.  In 2017 the Minister concluded that the first notice of revocation was defective and sent a second notice of revocation, retroactive to 2009.  The taxpayer appealed unsuccessfully to the Tax Court.  The taxpayer then appealed to the Federal Court of Appeal which allowed the appeal, with costs, holding that the 2013 reassessment was statute-barred in that the Minister could not rely upon the purported 2017 notice of revocation.

Decision:   The Court was not persuaded that the 2017 notice of revocation retroactively cured the fact that the 2013 reassessment was statute-barred on its face:

[37]  In my view, this is a clear case in which the Minister’s position impermissibly avoids the limitation period for the 2009 taxation year. The Minister’s reliance on the 2017 revocation notice was a new factual basis underlying the reassessment raised long after the limitation period had expired. Moreover, this was more than a “new basis” to support the reassessment. It was also a new fact that did not materialize until after the limitation period had expired, when the Minister issued the second notice.

[38]  The importance that limitation periods play in providing finality to disputes has been well established. In Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60, [2015] 3 S.C.R. 801, Justice Côté of the Supreme Court of Canada stated:

[57]  This Court has generally recognized that limitation periods have three purposes known as the certainty, evidentiary and diligence rationales: Novak v. Bond, [1999] 1 S.C.R. 808, at paras. 64-67, per McLachlin J.; M. (K.) v. M. (H.), [1992] 3 S.C.R. 6, at pp. 29-31, per La Forest J. Limitation periods serve “(1) to promote accuracy and certainty in the adjudication of claims; (2) to provide fairness to persons who might be required to defend against claims based on stale evidence; and (3) to prompt persons who might wish to commence claims to be diligent in pursuing them in a timely fashion”: P. M. Perell and J. W. Morden, The Law of Civil Procedure in Ontario (2nd ed. 2014), at p. 123.

[58]  Clearly, it is desirable that litigation be accurate and certain, given that the passage of time dims memories and erodes evidence, and also that the risk of error grows as an adjudicator is further removed from the cause of action. Furthermore, after a certain time, possible defendants may be unaware of the need to preserve potentially enlightening or even exonerating pieces of evidence. Finally, it is appropriate to expect plaintiffs to assert their claims diligently and to be cognizant of their circumstances and of the extent of their control over them. Modern limitations legislation is therefore based on a recognition that limitation periods, in order to be effective, need to be final. This is the other side of the coin, the practical consequence of limitation periods that can make the application of a limitations statute seem harsh: Novak, at para. 8, per Iacobucci and Major JJ., dissenting.

[39]  In my view, Mr. Mammone was entitled to rely on the expiry of the normal reassessment period to finalize his tax payable for the 2009 taxation year. In issuing the second revocation notice, and relying on it for purposes of the reassessment, the Minister was in effect seeking to do away with the limitation period.

[40]  I would accordingly allow the appeal, with costs, and order that the reassessment for the 2009 taxation year be referred back to the Minister for reconsideration and reassessment to delete the income inclusion relating to the transfer of funds between pension plans.