Date: 20000613
Docket: 1999-3149-IT-APP
BETWEEN:
GERALD WAYNE JACKMAN,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Order
Bowman, A.C.J.
[1] This is an application by counsel for the respondent that the court release her from an undertaking given to the court in the course of a preliminary motion.
[2] The somewhat unusual fact situation giving rise to the matter is as follows.
[3] Mr. Jackman was having a dispute with the Department of National Revenue concerning his 1992 and 1993 taxation years. He retained a law firm, Thorsteinssons, to represent him. On January 31, 1996 Mr. Jackman wrote a letter to the Department of National Revenue authorizing them to discuss his income tax affairs with "Kim Hansen or any member of the firm of Thorsteinssons".
[4] Notices of objection to the assessments were filed. At this point the facts become a little unclear in the face of allegations and denials on both sides. For reasons that I set out below I do not think that it is appropriate for me to make findings of credibility on this application.
[5] It seems, however, that the appellant's file was taken over by a lawyer, David Baxter, and he had negotiations with the Appeals Division of the Department of National Revenue.
[6] On April 17, 1998 Mr. Baxter wrote to Mr. Gilbert Lee of the Appeals Division of the Department of National Revenue as follows.
Re: Gerald Jackman: 1992 and 1993 Taxation Years
I have received instructions from my client to accept the settlement agreement we negotiated in our meeting of March 26, 1998.
Pursuant to that settlement agreement, I confirm that Mr. Jackman will be entitled to fully deduct the business expenses incurred in his 1992 taxation year such that the business loss of $37,084 originally reported in his T1 return will be allowed. In respect of business expenses incurred by Mr. Jackman in 1993, I attach a schedule which identifies the expenses which will be personally deductible by Mr. Jackman pursuant to our settlement agreement. By my calculations, the business expenses deductible by Mr. Jackman in his 1993 taxation year will be $26,462.26. Furthermore, for Mr. Jackman's purposes, the balance of the business expenses incurred in 1993 for $44,598.28 will be treated as shareholder advances to Windermere North-West Properties Group Inc.
Please confirm with me that the figures outlined above are consistent with your records and provide written confirmation of the adjustments you propose to make to Mr. Jackman's 1992 and 1993 taxation years by additional reassessments of those years.
[7] The letter indicated that a copy went to Mr. Jackman. Mr. Jackman testified that he never met with Mr. Baxter and did not discuss the settlement with him. He refused to confirm that he received the letter.
[8] Mr. Jackman testified that between that time and June 23, 1998 he terminated Thorsteinssons over a dispute about fees — they billed him $14,000.
[9] On June 23, 1998 Mr. Baxter sent Mr. Jackman a letter, as follows.
Re: Re-assessments of your 1992 and 1993 Taxation Years
I enclose a letter I received from Mr. Lee of Revenue Canada, Appeals Division, dated June 18, 1998. In light of our recent conversations, I have not reviewed Mr. Lee's letter in any detail. Unless I hear from you with directions to the contrary by the end of the month, I will advise Mr. Lee that you are proceeding on your own and that you will follow up with him directly. In that regard, I recommend that you confirm that the expenses incurred in 1993 on behalf of Windermere North-West Properties Group Inc. be accounted for as shareholder advances.
Please feel free to contact me if you have any questions in this regard.
[10] Mr. Jackman testified that some time after he received a telephone call from someone at the Department of National Revenue who threatened to withdraw the settlement if he did not sign the settlement letter which included a waiver of his right to object or appeal.
[11] Mr. Lee, the appeals officer, testified. He denied that he did any such thing and said that he knew of no other person who might have done so.
[12] In any event, Mr. Jackman signed a waiver of his right of objection or appeal on condition that the Department of National Revenue reassess to allow deductions of $37,084 and $26,348 for 1992 and 1993 respectively.
[13] The Department assessed accordingly on October 19, 1998. Mr. Jackman filed notices of objection to the new assessments on January 11, 1999 his position being that he did not understand that he was waiving his right to appeal and that he had been coerced into signing the waiver by an official of the Department of National Revenue.
[14] On June 18, 1999 (five months after the objections were filed) Mr. Asher of the Appeals Division wrote to Mr. Jackman as follows:
I am writing in response to the Notices of Objection which you filed on January 11, 1999 for your 1992 & 1993 taxation years. On July 18, 1998 you signed an agreement pursuant to subsection 165(1.2) of the Income Tax Act to waive your right of objection and appeal if we reassessed the 1992 & 1993 taxation years to allow you additional deductions. By reassessments issued on October 19, 1998 we reassessed those years in accordance with the agreement. Therefore the Notices of Objection which you have now filed are not valid and we are returning them to you.
[15] Mr. Jackman then brought an application in this court for an extension of time to file notices of objection.
[16] When the matter came on before me I expressed the view that
(a) the application was unnecessary because Mr. Jackman had filed objections for 1992 and 1993 on a timely basis; and
(b) it was improper for the Canada Customs and Revenue Agency (the "CCRA") to return the notices of objection to Mr. Jackman.
[17] Counsel for the Minister very fairly undertook that a notification of confirmation of the assessments would be issued, at which time Mr. Jackman could file appeals to this court and the matter of his right to object and appeal could be dealt with in this court.
[18] The order that I issued was as follows:
The applicant having filed a Notice of Objection to assessments made under the Income Tax Act for the 1992 and 1993 taxation years within the prescribed time;
And counsel for the respondent having undertaken that a Notice of Confirmation will be issued in response to the Notice of Objection;
The application is dismissed.
[19] I did so on the basis that the appellant had clearly filed timely notices of objection and furthermore that counsel for the respondent had unequivocally undertaken that a notice of confirmation would be issued.
[20] On April 17, 2000 counsel for the respondent wrote to the Registrar of this court as follows.
I am writing this letter because I have encountered a problem in trying to fulfil an undertaking ordered by His Honour Judge Bowman.
On January 11, 1999 Gerald Jackman ("Jackman") filed a document purporting to be a Notice of Objection with the Minister of National Revenue (the "Minister") with respect to a Reassessment issued on October 19, 1998 for the 1992 and 1993 taxation years. The Canada Customs and Revenue Agency ("CCRA") returned Jackman's "Notice of Objection" on June 18, 1999 with a letter stating that the objection was invalid because Jackman had signed as settlement agreement on July 18, 1998, pursuant to subsections 165(1.2) and 169(2.2) of the Income Tax Act (the "Act") in which he waived his right to further object or appeal to the reassessments issued. In response to the CCRA letter of June 18, 1999, Jackman applied to the Tax Court on June 24, 1999 for an extension of time to file an objection. He was apparently under the impression that he had filed his objection in the wrong place. CCRA opposed the application on the basis that it would not be just and equitable in the circumstances to make an order extending the time.
The matter was heard on March 10, 2000 before His Honour Judge Bowman. His Honour did not think that a hearing concerning an application for an extension of time was the proper forum in which to entertain Jackman's non est factum arguments. He was of the view that CCRA ought to have issued Jackman a Notice of Confirmation. Once Jackman had filed a Notice of appeal in response to the Notice of Confirmation, CCRA could then have made a motion to have the appeal quashed on the basis that the objection was not valid by virtue of subsection 165(1.2) of the Act. At the time, I agreed with His Honour's reasoning. Neither he nor I was of the opinion that issuing a Notice of Confirmation would be to acknowledge the validity of Jackman's objection. His Honour dismissed the application on the condition that I undertake to have CCRA issue a Notice of Confirmation. I should have clarified at the time that I could not undertake to have a Notice of Confirmation issued to Jackman, but only to make such a request to CCRA; however, I did not do so because I did not expect there to be any difficulty.
CCRA Head Office Appeals has taken the position that because of subjection 165(1.2), Jackman did not have the right to file a Notice of Objection. Therefore, his purported objection was invalid. In their view, to issue a Notice of Confirmation in the circumstances would be to acknowledge the objection as valid and to imply that the Minister reconsidered the reassessments at issue under subsection 165(3). Consequently, CCRA declines to issue a Notice of Confirmation. However, CCRA points out that notwithstanding that the Minister did not consider the objection valid, Jackman clearly did. This being the case, Jackman can now appeal to the Tax Court under paragraph 169(1)(b) of the Act on the basis that 90 days have elapsed since service of the "Notice of Objection" and the Minister has not confirmed the assessment or reassessed. Once Jackman's appeal is filed, the Minister will be in a position to make a motion to have the appeal quashed on the basis that the objection was not valid under subsection 165(1.2). The Court can at that time hear argument on the validity of the waiver and the objection.
I would appreciate it if you would bring this matter to Judge Bowman's attention and inform me as to whether His Honour will release me from the undertaking to have a Notice of Confirmation issued, given that Jackman can file a Notice of Appeal without such Notice being issued. If this is not acceptable to His Honour, I would appreciate any direction he can give me as to how I should proceed from here.
Thank you for your kind assistance in this matter.
[21] Ms. Coombs' observation is quite right. Since the Minister has failed to respond to the notices of objection Mr. Jackman has a right to file appeals to this court at which time Mr. Jackman's non est factum argument can be considered, as well as the effect of his signing the letter purporting to waive his rights of appeal.
[22] Therefore I release Ms. Coombs from the undertaking that she gave to the court.
[23] Ms. Coombs' conduct throughout this matter has been correct, proper and professional.
[24] The conduct of the officials of the CCRA has on the other hand been arrogant and improper. It is moreover based upon the erroneous premise that by returning a document that has been filed the filing is somehow magically undone. For the CCRA to return a notice of objection filed by a taxpayer is an act that is without legal authority and is tantamount to an attempt to reverse history.
[25] I begin with the letter of June 18, 1999 in which Mr. Jackman's notices of objection were returned to him.
[26] This constitutes an endeavour to deprive Mr. Jackman of any right to have this court determine the validity of the waiver that he signed.
[27] When the CCRA refused to honour Ms. Coombs' undertaking given to the court it again attempted to usurp the role of this court. The undertaking that Ms. Coombs gave was one that she, as the representative of the Attorney General of Canada, had the right and the authority to give. Under paragraph 5(d) of the Department of Justice Act, the Attorney General of Canada has "the regulation and conduct of all litigation for or against the Crown or any department, in respect of any subject within the authority or jurisdiction of Canada." Counsel representing the Attorney General of Canada does not need the authority of the officials of the tax department or the CCRA to settle litigious matters that are within the ambit of paragraph 5(d). They can bind the Government of Canada in such proceedings.
[28] The behaviour of the officials of the CCRA in seeking to usurp the role of this court and in refusing to honour a binding undertaking given by a representative of the Attorney General of Canada is reprehensible.
[29] In Ms. Coombs' letter she says that the CCRA Head Office Appeals is of the view that
to issue a Notice of Confirmation in the circumstances would be to acknowledge the objection as valid and to imply that the Minister reconsidered the reassessments at issue under subsection 165(3). Consequently, CCRA declines to issue a Notice of Confirmation.
[30] The excuse given by the CCRA is absurd. There is no reason why the notification of confirmation could not be based upon the purported settlement and waiver signed by Mr. Jackman.
[31] I should emphasize that I make no finding on Mr. Jackman's assertion that he is not bound by the settlement agreement and waiver that he signed. Such a determination would involve findings of credibility that it would be inappropriate to make on this application. My only point here is that he has a right to have the matter determined by the court and not through an act of high-handed and officious bureaucracy.
Signed at Ottawa, Canada, this 13th day of June 2000.
"D.G.H. Bowman"
A.C.J.