Air Canada c. Agence du Revenu du Québec, (October 10, 2014 – 2014 QCCQ 11598, Tremblay J.).
Terry K. Lapierre of Davies Ward Phillips Vineberg LLP has been kind enough to provide the following commentary on the
Air Canada decision (I am indebted to Guy Du Pont, Ad. E., for initiating the collaboration).
THE COUR DU QUÉBEC (THE “CQ”) REMINDS QUÉBEC TAXPAYERS TO BE VIGILANT
I. OVERVIEW
1. The recent decision by the CQ in
Air Canada c. Agence du Revenu du Québec, 2014 QCCQ 11598, offers a number of important lessons to taxpayers and their counsel about pitfalls to avoid when challenging assessments – particularly when lengthy discussions over long periods of time may lull a taxpayer’s counsel to assume that the Agence du Revenu du Québec (the “ArQ”) will notify them of all developments along with the affected taxpayer.
2. Indeed, Judge Martine L. Tremblay (the “CQ Judge”) held that the ArQ has no obligation to copy a taxpayer’s counsel on a reassessment – the issuance of which starts the clock on the 90-day time-limit to appeal provided by section 93.1.13 of the
Tax Administration Act, R.S.Q. c. A-6.002 (the “TAA”), meaning that if a reassessment is expected, counsel must be proactive and monitor – either with the client or the ArQ – whether the reassessment has in fact been issued.
3. Moreover, when seeking to late-file an appeal, a taxpayer must ensure that its affidavit evidence is cogent and coherent – at the risk of having the affidavit rejected, leaving its motion bereft of any evidentiary support.
II. CONTEXT
4. On 31 July 2006, Air Canada (the “Taxpayer”) was assessed $790,254.17 by the ArQ for its 2005 taxation year. A notice of objection naming the Taxpayer’s attorneys as authorised representatives to receive all future communications was filed on 20 October 2006. The substantive tax dispute is not discussed in the reasons for judgement.
5. On 10 October 2013, nearly seven years later, the ArQ notified both the Taxpayer and counsel that a reassessment would soon issue and start the clock on the time-limit to appeal. The reassessment was then sent to the Taxpayer on 30 October 2014 (the “Reassessment”); however, the ArQ did not send a copy to the Taxpayer’s counsel.
6. Seven months later, on 14 May 2014, counsel followed up with the ArQ about the awaited Reassessment and was surprised to discover that it had been issued long before and that the 90-day appeal period had already passed.
7. Thirty-seven days later, on 20 June 2014, the Taxpayer filed a Motion in the CQ seeking an extension of time to file its appeal pursuant to section 93.1.13 paragraph 2 TAA (the “Motion”), supported by an affidavit dated 11 June 2014 – predating the Motion by 8 days – to the effect that all of the facts alleged therein were true. Though advised that its affidavit would not be admissible because it predated the motion which it supported, the Taxpayer chose to forge ahead without taking any remedial measures such as calling the affiant to testify.
III. DECISION
a. THE TEST OF SECTION 93.1.13 TAA
8. Slightly different from its federal counterpart, section 93.1.13 paragraph 3 TAA provides that a motion for an extension of time to appeal an assessment “shall be granted if the person demonstrates that it was impossible in fact for that person to act and that the application was filed as soon as circumstances permitted.” “Impossibility in fact” is a question of fact that must be proven by the party seeking to rely on it and it requires the party to demonstrate that it acted with due diligence.
9. Moreover, it is a well-known rule that, in Québec, a taxpayer must generally act within 30 days of the moment it becomes aware that an extension of time is needed, although the courts have the discretion to evaluate whether a delay is reasonable under the circumstances, subject to a one-year maximum [paragraphs 52 and 53; see, for example,
Lippé c. Agence du revenu du Québec, 2014 QCCQ 3537].
b. THE ARGUMENTS
10. On the one hand, the Taxpayer argued that it had acted with due diligence and was in a situation of “impossibility in fact”. The Taxpayer submitted that by failing to copy counsel on the Reassessment, the ArQ disregarded the power of attorney provision contained in the notice of objection and breached the rules of procedural fairness in a way that prevented it from being aware of the Reassessment until counsel received a copy on 14 May 2014 [paragraphs 26 and 27].
11. The ArQ, however, was of the view that the Taxpayer was not in a state of “impossibility to act” since it had the received the Reassessment, and that, in any event, by waiting 37 days, the Taxpayer did not file its motion “as soon as circumstances permitted”. In addition, the ArQ moved to have the Taxpayer’s affidavit struck from the record, arguing that a person cannot attest under oath to the veracity of facts contained in a document which has not yet been finalized.
c. THE CQ’S ANALYSIS
12. The CQ Judge agreed that the affidavit was not admissible. Indeed, under Québec practice, motions are often supported by affidavits that state that all facts alleged in the motion are true. If this is the form used, the affiant can hardly swear to the truth of facts in a motion that is only final eight days later.
13. As a result, the outcome of the Motion turned on whether the ArQ had an obligation to send a copy of the Reassessment to counsel – the only allegation of fact that the CQ entertained after the affidavit’s dismissal [paragraph 23; it bears note that the nature of the allegations that were disregarded is not disclosed in the decision].
14. The CQ Judge went on to find that a delay of 37 days to make the Motion was not unreasonable in light of the fact that the ArQ took seven years to render its decision on the notice of objection in the first place [paragraph 54].
15. However, the CQ ultimately held that neither the TAA, nor the rules of procedural fairness required the ArQ to send the Reassessment to anyone other than the Taxpayer itself. Considering that procedural fairness in any given situation depends on the particular facts of the case, the CQ was of the view that, in this case, there had been no breach by the ArQ. Even though there was a power of attorney provision that authorised the ArQ to communicate with counsel, it imposed no obligation to do so [paragraphs 37 and 38] and the CQ Judge was of the view that the lack of follow-up on the Reassessment was sufficient to refuse leave to extend the time to appeal [paragraphs 33 and 34].
IV. COMMENTS
16. The decision thus serves as a stern reminder to taxpayers and counsel alike that they must be proactive. Indeed, this harsh result could have been avoided by punctual follow-ups and by counsel keeping assiduously in touch with their client. It is unfortunate that the ArQ could not be relied on to copy counsel, as a matter of courtesy if no other, in particular while awaiting important events such as the imminence of an unfavorable assessment that will, of necessity, require a fresh step to be undertaken to preserve taxpayer rights. That said, there is considerable sympathy for the Taxpayer who was left hanging for seven years and for its counsel who acted on its behalf and had, it must be assumed, numerous exchanges with the ArQ. For their legitimate expectation that both would be advised of the Reassessment to be so roundly ignored is, to say the least, disappointing.
V. POSTSCRIPT
17. The Taxpayer has filed an appeal before the Quebec Court of Appeal (the “QCA”). The ArQ made a motion to quash the appeal as being frivolous or having “no reasonable chance of success”, however, the motion was, itself, dismissed by the QCA on 12 January 2015. Stay tuned…