Tax Court of Canada Judgments

Date: 20011203

Docket: 2001-1435-CPP

BETWEEN:

INTRIA CORPORATION,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

AND

Docket: 2001-1438(CPP)

CIBC FINANCIAL PLANNING INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

AND

Docket: 2001-1444(CPP)

CIBC MORTGAGES INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

WEISMAN, D.J.T.C.C.

[1]      These three appeals under subsection 28 of the Canada Pension Plan[1] (the "Act") were heard together on common evidence.

[2]      The Appellants are all wholly-owned subsidiaries of the Canadian Imperial Bank of Commerce ("CIBC"), which is a multinational and multi-entity corporate group. In 1999, CIBC and companies related to it transferred 506 employees to Intria Corporation ("Intria"), 224 employees to CIBC Financial Planning Inc. ("CFP"), and 73 employees to CIBC Mortgages Inc. ("CMI").

[3]      Prior to the transfers, CIBC and its related entities, duly withheld, matched, and remitted to the Receiver General, the employee's and employer's contributions payable under the Act.

[4]      Following the transfers, further contributions were withheld, matched, and remitted, but only to the extent that each employee's maximum pensionable earnings, as received in 1999 from both their initial employers and the Appellants were not exceeded.

[5]      The Minister of National Revenue (the "Minister") assessed each of the Appellants by Notice of Assessment dated August 2, 2000, and August 3, 2000, for failure to remit Canada Pension premiums for the 1999 taxation year. Intria was assessed $35,918.42 (plus interest), CFP was assessed $84,002.40 (plus interest) and CMI was assessed $28,429.08 (plus interest).

[6]      These assessments were based on subsection 21.(1) of the Act which provides in part as follows:

(1)         Every employer paying remuneration to an employee employed by the employer at any time in pensionable employment shall deduct from that remuneration as or on account of the employee's contribution for the year in which the remuneration for the pensionable employment is paid to the employee such amount as is determined in accordance with prescribed rules and shall remit that amount, together with such amount as is prescribed with respect to the contribution required to be made by the employer under this Act, to the Receiver General at such time as is prescribed...

[7]      The Appellants contest the 1999 assessments because on September 27, 1996, their agent Ernst and Young sent the following letter to Revenue Canada:

Re: CPP Remittances for CIBC

On behalf of the Canadian Imperial Bank of Commerce ("CIBC"), we are requesting a letter confirming that CIBC will not be required to re-commence Canada Pension Plan ("CPP") employer contributions when employees are transferred from CIBC to a wholly-owned subsidiary of CIBC.

Effective November 1, 1996, CIBC will be transferring 4,500 employees from CIBC to a wholly-owned subsidiary 3260721 Canada Inc., currently referred to as "Symphony". CIBC will own 100 per cent of the subsidiary and there will be no change in ownership on the transfer of the employees to the subsidiary. The transfer is being effected as a part of establishing a new venture which CIBC believes should be done in a separate subsidiary for business reasons.

We understand that where an employer transfers employees to a wholly-owned subsidiary and where there is no change in the ownership of the employer, then employer CPP contributions do not have to start all over again (in the wholly-owned subsidiary) in respect of employees for whom the employer has already made the maximum annual contribution. Mr. Poirier of your CPP/UIC Rulings section in Toronto confirmed that a ruling is unnecessary, given current policy on this issue, and that a confirmation letter concerning this policy may be issued from your office...

[8]      Revenue Canada replied as follows on October 16, 1996:

Re: CPP Remittances for CIBC

In respect to your letter dated September 27, 1996, we wish to confirm that where an employer transfers employees to a wholly-owned subsidiary, and where there is no change in the ownership of the employer, then employer CPP contributions do not have to start all over again (in the wholly-owned subsidiary) in respect of employees for whom the employer has already made the maximum annual contribution.

[9]      The Appellants point out that after this exchange of correspondence there was no assessments upon them for employer's Canada Pension contributions in 1997 or 1998. They advance three arguments in support of their position that the subject assessments for 1999 should be vacated.

[10]     First, that the Minister is bound by the representations of fact contained in the October 16, 1996 letter, until notice is provided to the Appellants that he has changed his position. As a matter of evidence, the Appellants contend that the Minister is estopped from alleging or proving in these proceedings that a fact is otherwise than it has been made to appear.

[11]     Second, that this fact situation raises three equitable defences of which the Appellants can avail themselves, namely equitable estoppel, the doctrine of legitimate expectations, and the doctrine of officially induced error.

[12]     Finally the Appellants complain that the Act required the Appellants to start all over in making employer Canada Pension contributions in respect of employees for whom CIBC and its related entities had already made the maximum annual contribution for 1999. While the Act contains mechanisms for employees to obtain refunds of premium overpayments, the Appellants can find no comparable provision for employers. The employer's premiums can accordingly be paid twice.

[13]     The Appellants contend that, this additional levy upon employers is an unlegislated direct taxation within the province and is therefore ultra-vires the Federal Government.

[14]     In my view, all three arguments fail. First, estoppel only lies against the Crown on question of fact.[2] The October 16, 1996 letter from Revenue Canada, however, is a statement of law which sets out the facts upon which its legal conclusion is founded. Estoppel therefore does not arise as a matter of evidence. In addition, estoppel cannot override the law of the land.[3] The letter does not bind the Minister nor prevent him from assessing the Appellants in accordance with the Act.[4]

[15]     Second, the Tax Court of Canada is a purely statutory creation and its jurisdiction is confined to what is expressly conferred on it by Parliament and what is necessarily implied from what is expressly conferred.[5] It does not enjoy the jurisdiction of a Superior Court of record,[6] and has neither inherent[7] nor equitable[8] jurisdiction.

[16]     Finally, before raising this constitutional question the Appellants failed to serve the notices required by subsection 57.(1) of the Federal Court Act[9] which provides as follows:

57.(1)    Where the constitutional validity, applicability or operability of an Act of Parliament or of the legislature of any province, or of regulations thereunder, is in question before the Court or a federal board, commission or other tribunal, other than a service tribunal within the meaning of the National Defence Act, the Act or regulation shall not be adjudged to be invalid, inapplicable or inoperable unless notice has been served on the Attorney General of Canada and the attorney general of each province in accordance with subsection (2).

[17]     The foregoing does not mean that the exchange of correspondence between the parties was of no effect.

[18]     The administrative penalties and interest provided for in the Act impose strict liability upon the person assessed. If that person can demonstrate due diligence in attempting to comply with the legislation, the penalty will not apply.[10] In my view, the Appellants exercised due diligence in obtaining and relying upon the October 16, 1996 letter from Revenue Canada.

[19]     The appeals will accordingly be allowed and the decisions of the Minister varied to the extent that the assessments of penalties and interest to the date this decision is communicated to the Appellants, are vacated.

Signed at Toronto, Ontario, this 3rd day of December 2001.

"N. Weisman"

D.J.T.C.C.

COURT FILE NO.:                             2001-1435(CPP)

STYLE OF CAUSE:                           Intria Corporation and M.N.R.

PLACE OF HEARING:                      Toronto, Ontario

DATE OF HEARING:                        October 25, 2001

REASONS FOR JUDGMENT BY:     the Honourable Deputy Judge N. Weisman

DATE OF JUDGMENT:                     December 3, 2001

APPEARANCES:

Counsel for the Appellant:          Alan R. Kester

                                                Erin K. Carley

Counsel for the Respondent:      Scott Simser

COUNSEL OF RECORD:

For the Appellant:

Name:                 Alan R. Kester

                         Erin K. Carley

Firm:                  Canadian Imperial Bank of Commerce

                         Toronto, Ontario

For the Respondent:                  Morris Rosenberg

                                                Deputy Attorney General of Canada

                                                          Ottawa, Canada

COURT FILE NO.:                             2001-1438(CPP)

STYLE OF CAUSE:                           CIBC Financial Planning Inc. and M.N.R.

PLACE OF HEARING:                      Toronto, Ontario

DATE OF HEARING:                        October 25, 2001

REASONS FOR JUDGMENT BY:     the Honourable Deputy Judge N. Weisman

DATE OF JUDGMENT:                     December 3, 2001

APPEARANCES:

Counsel for the Appellant:          Alan R. Kester

                                                Erin K. Carley

Counsel for the Respondent:      Scott Simser

COUNSEL OF RECORD:

For the Appellant:

Name:                 Alan R. Kester

                         Erin K. Carley

Firm:                  Canadian Imperial Bank of Commerce

                         Toronto, Ontario

For the Respondent:                  Morris Rosenberg

                                                Deputy Attorney General of Canada

                                                          Ottawa, Canada

COURT FILE NO.:                             2001-1444(CPP)

STYLE OF CAUSE:                           CIBC Mortgages Inc. and M.N.R.

PLACE OF HEARING:                      Toronto, Ontario

DATE OF HEARING:                        October 25, 2001

REASONS FOR JUDGMENT BY:     the Honourable Deputy Judge N. Weisman

DATE OF JUDGMENT:                     December 3, 200l

APPEARANCES:

Counsel for the Appellant:          Alan R. Kester

                                                Erin K. Carley

Counsel for the Respondent:      Scott Simser

COUNSEL OF RECORD:

For the Appellant:

Name:                 Alan R. Kester

                         Erin K. Carley

Firm:                  Canadian Imperial Bank of Commerce

                         Toronto, Ontario

For the Respondent:                  Morris Rosenberg

                                                Deputy Attorney General of Canada

                                                          Ottawa, Canada

2001-1435(CPP)

BETWEEN:

INTRIA CORPORATION,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeal heard on common evidence with the appeals of Intria Corporation (2001-1433(EI)), CIBC Financial Planning Inc. (2001-1436(EI) and 2001-1438(CPP)) and CIBC Mortgages Inc. (2001-1442(EI) and 2001-1444(CPP)), on October 25, 2001 at Toronto, Ontario, by

the Honourable Deputy Judge N. Weisman

Appearances

Counsel for the Appellant:                             Alan R. Kester

                                                                   Erin K. Carley

Counsel for the Respondent:                         Scott Simser

JUDGMENT

The appeal is allowed and the decision of the Minister is varied to the extent that the assessment of penalties and interest to the date this decision is communicated to the Appellant, is vacated in accordance with the attached Reasons for Judgment.

Signed at Toronto, Ontario, this 3rd day of December 2001.

"N. Weisman"

D.J.T.C.C.

2001-1438(CPP)

BETWEEN:

CIBC FINANCIAL PLANNING INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeal heard on common evidence with the appeals of Intria Corporation (2001-1433(EI) and 2001-1435(CPP)), CIBC Financial Planning Inc. (2001-1436(EI)) and CIBC Mortgages Inc. (2001-1442(EI) and 2001-1444(CPP)), on October 25, 2001 at Toronto, Ontario, by

the Honourable Deputy Judge N. Weisman

Appearances

Counsel for the Appellant:                             Alan R. Kester

                                                                   Erin K. Carley

Counsel for the Respondent:                         Scott Simser

JUDGMENT

The appeal is allowed and the decision of the Minister is varied to the extent that the assessment of penalties and interest to the date this decision is communicated to the Appellant, is vacated in accordance with the attached Reasons for Judgment.

Signed at Toronto, Ontario, this 3rd day of December 2001.

"N. Weisman"

D.J.T.C.C.

2001-1444(CPP)

BETWEEN:

CIBC MORTGAGES INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeal heard on common evidence with the appeals of Intria Corporation (2001-1433(EI) and 2001-1435(CPP)), CIBC Financial Planning Inc. (2001-1436(EI) and 2001-1438(CPP)) and CIBC Mortgages Inc. (2001-1442(EI)), on October 25, 2001 at Toronto, Ontario, by

the Honourable Deputy Judge N. Weisman

Appearances

Counsel for the Appellant:                             Alan R. Kester

                                                                   Erin K. Carley

Counsel for the Respondent:                         Scott Simser

JUDGMENT

The appeal is allowed and the decision of the Minister is varied to the extent that the assessment of penalties and interest to the date this decision is communicated to the Appellant, is vacated in accordance with the attached Reasons for Judgment.

Signed at Toronto, Ontario, this 3rd day of December 2001.

"N. Weisman"

D.J.T.C.C.