Docket: 2004-1548(IT)G
BETWEEN:
236130 BRITISH COLUMBIA LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on July 27, 2005 at Vancouver, British Columbia
Before: The Honourable Justice R.D. Bell
Appearances:
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Mr. Warren J. A. Mitchell, Q.C.
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Ms. Wendy Burnham |
____________________________________________________________________
JUDGMENT
The parties having made a reference under section 173 of the Income Tax Act as to whether the Minister of National Revenue validly reassessed tax for the Appellant's 1995 and 1996 taxation years prior to May 3, 2002.
The Court has determined that the Minister of National Revenue did not validly reassess tax for the Appellant's 1995 and 1996 taxation years prior to May 3, 2002, all in accordance with the attached Reasons for Judgment.
The Appellant is entitled to costs.
Signed at Ottawa, Canada, this 8 th day of December, 2005.
"R.D. Bell"
BETWEEN:
236130 BRITISH COLUMBIA LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
GENERAL
All section references herein are from the Income Tax Act ("Act"), unless otherwise stated.
REFERENCE
[1] This is a reference under section 173 relating to the Appellant's 1995 and 1996 taxation years. Subsection 173(1) reads as follows:
Where the Minister and a taxpayer agree in writing that a question of law, fact or mixed law and fact arising under this Act, in respect of any assessment, proposed assessment, determination or proposed determination, should be determined by the Tax Court of Canada, that question shall be determined by that Court.
[2] The question that the parties agree should be determined by the Court is stated to be:
Whether the Minister of National Revenue validly reassessed tax for the Appellant's 1995 and 1996 taxation years prior to May 3, 2002.
[3] The determination that the parties are seeking, as stated, is:
Her Majesty seeks a determination that the Minister of National Revenue did validly reassess tax for the Appellant's 1995 and 1996 taxation years prior to May 3, 2002.
The Appellant seeks a determination that the Minister of National Revenue did not validly reassess tax for the Appellant's 1995 and 1996 taxation years prior to May 3, 2002.
FACTS
[4] The Appellant is a corporation having its head office at all material times at:
800 - 200 Burrard Street
Vancouver, BC
V6C 3L6
[5] The parties filed a Partial Agreed Statement of Facts. In addition, the Respondent produced four (4) witnesses from the Canada Customs Revenue Agency ("Revenue") and both parties read in portions of the examination for discovery of Joseph Sydney Houssian, the principal shareholder of the Appellant. For its 1995 and 1996 taxation years, the Appellant filed waivers as described in subparagraph 152(4)(a)(ii) dated June 16, 1999 and May 18, 2000.
[6] On November 2, 2001, the Appellant filed Notices of Revocation of those waivers.
[7] In its returns of income for its taxation years ending October, 31, 1995 (filed April 30, 1996), October 31, 1996 (filed April 30, 2997) and October 31, 1997 (filed April 28, 1998) the Appellant reported its addresses as follows:
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Head Office |
800 - 200 Burrard Street Vancouver, BC V6C 3L6
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Mailing |
c/o Coopers & Lybrand/ESZA 1111 West Hastings Street Vancouver, BC V6E 3R2 |
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Books and Records |
800 - 200 Burrard Street Vancouver, BC V6C 3L6
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[8] In its returns for its taxation years ending October 31, 1998 (filed April 30, 1999), October 31, 1999 (filed April 28, 2000) and October 31, 2000 (filed April 30, 2001), the Appellant reported its addresses as follows:
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Head Office |
800 - 200 Burrard Street Vancouver, BC V6C 3L6*
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Mailing |
c/o Pricewaterhouse Coopers LLP/ESZA 601 West Hastings Street Vancouver, BC V6B 5A5
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Books and Records |
800 - 200 Burrard Street Vancouver, BC V6B 5A5
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* No postal code was provided on the 1998 return.
[9] On February 25, 2002, the address of the Appellant in Revenue's Business Number System was changed to:
170-13151 Vanier Place
Richmond, BC
V6J 2J2
This incorrect address was entered by Revenue.
[10] In its return for its taxation year ending October 31, 2001 (filed April 30, 2002), the Appellant reported its addresses as follows:
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Head Office |
800 - 200 Burrard Street Vancouver, BC V6C 3L6
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Mailing |
c/o Pricewaterhouse Coopers LLP/ESZA 601 West Hastings Street Vancouver, BC V6B 5A5
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Books and Records |
800 - 200 Burrard Street Vancouver, BC V6C 3L6
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[11] On or before April 8, 2002, two separate packages were mailed by Revenue to the Appellant at the above incorrect address in Richmond:
(1) Statements of Interest for the years 1995 to 1998 inclusive and
Notices of Reassessment for the years 1993 to 2000 inclusive were sent from the Ottawa Technology Centre.
(2) Similar Statements of Interest for the years 1995 to 1998 inclusive were sent from the Surrey Tax Centre.
All the Notices of Reassessment and the Statements of Interest were dated April 8, 2002.
[12] T7WC's[1], dated April 8, 2002, explaining the reassessments for 1995 and 1996 were sent to the Appellant c/o Pricewaterhouse Coopers LLP/ESZA, 601 West Hastings Street, Vancouver, BC, V6B 5A5. The T7WCs were received at that address on April 10, 2002.
[13] On April 29, 2002 the address of the Appellant in Revenue's Business Number System was changed to:
800 - 200 Burrard Street
Vancouver, BC
V6B 5A5
[14] The Respondent's first witness, Vikky Chan ("Chan") described herself as a Selection Clerk at Revenue. She testified that she takes returned mail to her desk and keys in the business number to check "the returned mail is updated or not." Although her evidence was presented in confusing fashion, she appears to have said that if the Mailing Address was the same as that on the returned mail she would have to change the address. She said if there was a valid address for Books and Records or Head Office she would change the mailing address to either one of those. That is to say, she would change the address in the computer. She said that her practice was then to put returned mail in an envelope. She did not recall changing the address of the Appellant on April 29, 2002.
[15] On cross-examination, she said that she did not recall the particular piece of mail containing the Notices of Reassessment. She said further that she did not know whether anything in the system alerted Revenue to the fact that a piece of returned mail had to be sent out by a certain date. She said that her practice was not to look at the substance, not to look at what the mail was, but simply to readdress it. She said that a corporate tax return bore three addresses, its business address, its mailing address and the address for books and records. She said that if a mailing address is incorrect she would check the business address or books and records address in the system. She then said if mail was returned she keys the business number into a program and if the address is the same address as that on the returned mail she knows that it is incorrect. She said that when she wanted to find the right address:
... I key the business number and on the screen they have head office and then they have mailing address and then they have book/record address.
She said that she chooses the latest address on the screen. She then said:
... (i) if both of them is same date, so I will take the business address.
[16] The Respondent's next witness was Valerie Kirton ("Kirton"). She said that she was the Manager of the Corporation Returns Processing Work Section at the Surrey Tax Centre. She said that her work section processes and reassesses corporation returns. She said that, as in this case, multiple reassessments are issued on the same day and are mailed in one envelope together with Statements of Interest. She stated that all communication items are sent out from the Ottawa Technology Centre in one package but that Statements of Interest can also be sent from the Tax Centre where the assessment was made, for example, the Surrey Tax Centre. She described briefly how the reassessments were made and then said that the Reassessments and Statements of Interest were dated April 8, 2002. She said that T7WC's were mailed to 601 West Hastings Street ...
... because the auditor had prepared the form with that address on it.
She said, however, that the Notices of Assessment were mailed to the Vanier Place address in Richmond.
[17] With respect to the Vanier Place address, Kirton said:
... that address was not related to this corporation at all. It was an error that one of my staff made and they updated the system in error with the address of another corporation.
Kirton testified that Statements of Interest were sent from Surrey and that there were Statements of Interest sent from Ottawawith the Notices of Reassessment. She said that her office could not issue Notices of Reassessment but could print Statements of Interest and send them to "the client". She said that the address of the Appellant was changed to Vanier Placeon February 25, 2002, and was changed to an address other than Vanier Place on April 29, 2002, having been changed to 800 - 200 Burrard Street, Vancouver. By doing computer searches her office determined that a number of corporations used that address and having conducted a search of the owner, determined that he was "Joe Houssian."
[18] On cross-examination, Kirton said that she did not deal personally with returned mail and had no specific recollection of the reassessments in question being returned or being reissued but had only the information "that's on the system." She then stated, in answer to a specific question, that the only information on the system was that the address was changed on April 29. Then the following exchange took place:
Q ...other than the change of address, you have no specific information that these were received back and whether they were sent back out.
A No, that's correct.
[19] Appellant's counsel, on re-examination, asked Kirton about Statements of Interest which were sent from the Surrey Tax Centre and 29 pages, being the Notices of Reassessment sent from Ottawa. Kirton testified that there was a "phone number" under the address of the materials sent from Surreyto Vanier Place and:
... it's likely that the client who opened the mail by mistake phoned the number and asked where to return the mail to.
She said that there were return stamps on the mail from Surrey but none on the 29 pages sent from Ottawa and that she did not know whether it was returned with the other pages that came back from Surreyor whether it was not returned. Kirton then said the address that was entered on April 29th was 800 - 200 Burrard Street, VancouverBC, V6B 5A5.
[20] She said that this postal code was different from the one attributed originally to 800 - 200 Burrard Street. She said that the postal code was not correct. She also said that the only error made in filing the returns for 1999 and 2000 was that the wrong address was given for Books and Records, and then the following exchange took place:
Q And if they looked at the system they would have seen that there was a difference between the correct address for business records and the - - I'm sorry, correct address for the business address and the incorrect address for the Books and Records. Is that correct?
A I didn't work in that work area so I wouldn't really like to offer information on what I think they would do.
Q Fair enough, fair enough but they had all three addresses in front of them?
A Yes. Those addresses would be in the system ...
Q Are you familiar in the system with a - - or is there a system that deals with time-sensitive material? For instance, it would seem to me that if a reassessment has to be issued the 27th of July - - if a reassessment has to be issued by the 8th of August, you would have a special system that would say, "This is time sensitive. We had better react to it." Are you aware of such a system?
A Yes. We have at the initial stage in my work area where we determine if a file is priority. If it's within 30 days becoming statute barred ... we code it as a priority and treat it as such.
Q And these Reassessments did not fall within that system. Somewhere they fell between the cracks, is that correct?
A Well, there was a time delay in processing the reassessment through the system.
Q So, there is a system to deal with time-sensitive material. This was a piece of time-sensitive material but it was not dealt with in that system. Is that correct? ...
A However, there's no procedures to check them.
Q There's no procedures internally to check them, is that what you are saying?
A On return mail.
Q Thank you. Now, if they were received, they came back on April 22nd, is that correct?
A Yes. We have that date stamp ...
Q And the address was changed on April 29th, is that correct?
A Yes ...
Q The material was received - - if it was received, it was received on April 22nd.
A Yes. In Surrey Tax Centre mail room.
Q Yes, and on April 29th the address was changed?
A Yes, in the return mail area.
Q So there was a week period between the first and the second happening?
A Yes.
...
Q Other than the changing of the address on April 29th, is there any other evidence you have that these Reassessments were received or that they were sent out at a specific date?
A The only indication we have is the system printout that shows the return mail - - there was return mail as indicated by a "Y", and that it was changed on April 29th and remailed.
Q And remailed, but you don't have any specific date when it was remailed?
A Our procedures are to mail it out that day.
Q Your procedures are, and is there anyone who could say that those procedures were followed?
A Yes. They will be called, I believe.
[21] The Respondent's third witness, Joanne Kathleen Way ("Way"), was the Team Leader for the Mail and Messenger Services at the Surrey Tax Centre. She said that that involved overseeing the mail operation and mail delivery throughout the buildings. She added that she supervised up to 28 employees, depending on the time of year in all areas of the mail operation, whether incoming mail, sorting mail, opening or processing and also all outgoing mail. She stated that she had worked closely with the staff in developing work instructions and maintaining and updating them as required. This involved test checks on an ongoing basis. She said that undeliverable mail is recognized as undeliverable because it is in a Revenue envelope. She said that:
Canada Post will actually stamp a multiple-choice type of a stamp and then they will indicate the reason that they're returning it to us.
She stated that undeliverable mail is not stamped in any manner.
[22] The witness was then referred to the Exhibit containing four (4) pages of Statements of Interest and Reassessments for a number of years including the 1995 and 1996 years of the Appellant. A date stamp indicated that the mail room received it, through Canada Post, on April 22, 2002. Way stated that undeliverable mail was not removed from an envelope and that an item "like this would be sent to Business Returns." She stated further that it would be sent to that branch no later than April 23rd. She said that next-day delivery standards are met and that there are mail service drop areas for outgoing mail throughout the building. She added that messengers make:
... three runs a day, go around and they pick up their outgoing mail and deliver it to the Post Office Clerk for processing.
She said that the pick up schedule is met on a daily basis and "I would hear about it if it wasn't."
[23] On cross-examination, the witness said that she had no specific knowledge of "this particular piece of mail." Way testified that if a sealed envelope gets into the mail room it goes out immediately. She then testified that she had no control over when an envelope was sealed when she was told to pick it up.
[24] The Respondent's fourth witness was Susan Marie Ellis ("Ellis"), who was Acting Team Leader at CCRA for the Business Number Services Unit. She said that, basically, they changed addresses. She described returned mail as mail that has been:
... mailed out to the client and has been returned to us by the post office stating that it could not be delivered to that address, they had moved or whatever.
[25] Ellis testified that respecting corporate return mail, everything "is remailed back to the client if an address is found." She said that they identified it as corporate mail and then checked on their system to see if the address had been updated. According to the witness, this was done as follows:
We have a screen that shows all the addresses, the current addresses, and if the current, if the address on the system is different to the address on the mail, obviously there it has been changed, but we can go into a history and see if the old address was there ... If the address has been updated then we will remail that piece of correspondence back out ... If it has not been updated then we have to do a search to see if we can find a valid address at that time.
[26] She said, firstly, they might give the taxpayer a "phone call":
... and if not, we will go in and look at the addresses. The business address if it's different is quite often a good address to go because most of the time the businesses don't move. It's just the mailing addresses that change. The books and records address is usually a more current address. If it's different then we will change it to the books and records address. If we can't find a valid address that way then we will go and we'll find a director and we will send it to a director of the company at their home address.
She went on to say that once a valid address is found:
Then we will update our system with that address, like we'll take off the old address and put on the new one, and then we will mail out the documents to the new address and we will put a stuffer saying that we've had this mail returned and we are now remailing it out to you.
[27] She also said that the address would be handwritten and it would be put in the outgoing mail docket and it would be taken from there. She said that the staff daily took the outgoing mail docket "off their desk" and that they did not keep anything "at their desk". When asked how she knew that the manual procedures were followed by everyone in her Unit, she said:
Because we have to go by the manual because of security procedures.
She also described the procedure of spot checks that was followed.
[28] She then referred to a number of documents printed out from a computer screen and was able to say that Chan corrected the Vanier Place address to Burrard Street on April 29, 2002. The code on the screen indicated that return mail had come back from the Vanier Place address and that was why Chan had corrected the address to the Burrard Streetaddress.
[29] She then testified that the procedures set out in the Business Registration Manual were the procedures followed by the Surrey Tax Centre Business Number Unit and said:
In our experience everyone follows the manual.
[30] On cross-examination, Ellis said she had no specific recollection of either receiving or sending out the Statements of Interest and Notices of Reassessment under discussion. She also stated the Business Registration Manual set no time imperatives. She stated that no log was made of when mail was returned. She said that she had no idea of whether anyone telephoned the addressee.
[31] The witness stated that when a person changes an address they have the business address, the mailing address, and the books and records addresses and that they look at all of these. The following exchange took place:
Q Okay. Now, if there are - - if you had on a screen: business address, mailing address, books and records address, would they check them all?
A Checking them in what way do you mean check them?
Q Well, check them - - one of the problems that we will get to later I believe is that what I assume they looked at they saw that the business address and books and records address were both the same addresses but they had different zip codes.
A Mm-hmm.
Q Would the person who was making the change pick that up?
A Not necessarily.
Q They could have and they could not have.
A Yeah.
Q And had they looked at it more closely they might have - - a bell might have gone off and it might not have. Is that fair?
A Possibly.
Q Okay. Now is there a system in the Department for when - and I think we will agree that some things that the CCRA sends out are time sensitive.
A Mm-hmm.
Q Notices of Reassessment have to be sent out by a certain date. Is there a system, of which you are aware, that deals with return mail that is time sensitive?
A No, not that I'm aware of.
Q For instance, if a Notice of Reassessment was sent out and was sent to the wrong address and it came back, there would be no bells and whistles that went off saying, "Wow, we better get this thing out by next Tuesday or we're going to be in trouble."
A No.
Q No, not al all. I think you are saying that Ms. Chan would have changed the address.
A Mm-hmm.
Q And then you're saying if she changed the address the following things are likely to have happened. You're predicting what had happened is that correct? From the system?
A The system would have changed the address.
Q No. If she followed the system you are saying if this happened then you're predicting that if the address was changed the following things would have happened.
A If she changed the address then she would have remailed it, you mean?
Q Yes.
A Yes, then she would have remailed it.
Q Okay. Is there any document or any internal material that says when the address is changed it must immediately be put in an envelope and sent?
A There's nothing in writing, no.
Q Thank you very much.
A Just that we have to do it.
[32] Counsel for the Respondent then "read in" portions of the examination for discovery of Joseph Sydney Houssian ("Houssian"). Houssian said that when he had returned from an absence of some time he picked up mail at his office on May 17, 2002 and took it home for the long weekend. He said he took it from his office but that it originally had gone to his secretary's desk. He said that when he first looked at it he simply saw interest calculations and wasn't particularly interested in looking at them and continued through his other mail. He stated that on the following Tuesday, when asked by his accountant whether he had received anything, he replied that he had only received the interest information. When he produced the papers to the accountant, he discovered that there were Reassessments enclosed with them. There was a notation on the 1995 statement saying:
Opened in error, Corporate Services Return Mail.
[33] Houssian said that he had been away several weeks before he returned on May 17th. He said that he went away around the first week of April, came back for one day around the middle of April, and then left again and came back Thursday evening, May 16th. He said that his secretary would have put the package from Revenue and other mail received during his absence on his desk. The following exchange took place:
Q OK. And do you know how Ms. Brady received the package?
A She actually didn't physically see the package. On the Thursday evening, the 16th, when she put all my mail together, put in different file folders and what have you, she had not seen the package.
Q So she hadn't recognized that it was in there? Is that what you mean when you say she hadn't see it or it actually hadn't come in it?
A She hadn't seen it, so we can only assume that it hadn't come in.
Q Okay, so therefore your assumption is that it came in on a Friday.
A Friday.
Q And then how did it get to your desk?
A The mail boy brought it in and put it in her - - in my in-tray in her office. I took it out of her in-tray out of my in-tray along with other documents throughout the day and put it on my pile.
Q Okay. So it wasn't on your desk when you initially pocked it up? It was actually in your in-box on Ms. Brady's desk, is that correct?
A It went from my in-box, to her office, to my in-box in my office, to my briefcase.
Q Okay. And you were the one who transported it from her desk to your desk and then put it in the briefcase to take it home, is that right?
A That's what we think happened, yeah... When we found the package, or when we discovered what the package was on the Tuesday, we asked the mailroom what they knew about it.
Q What did they tell you?
A The mailroom said they received a brown envelope and they stuck it in my in-basket in Irene's office...
Q And is the mailroom made aware? My understanding is the mailroom is a mailroom of Intrawest, is that correct?
A That's right.
Q Are they made aware of other addressees that might be receiving mail through that mailroom?
A Yeah, I have various personal holding companies and if - - and they have a record that it is addressed to such-and-such then they know that's me, so they would give it to me or to Irene.
Q And is there actually a listing of those in the mailroom of the various companies that receive that?
A I think there is. This particular mail boy who was a temp asked who was this and they said, "Oh, its Joe's," and so he took it to Irene's office.
An undertaking respecting the foregoing furnished the information that there were no formal mailroom procedures in 2002 and that largely, as a result of the event in dispute, procedures were established.
[34] After a number of other questions, the following took place:
Q Now, we've earlier referred to this statutory declaration that was sworn by Mr. Power. He says he put - - he says:
on May 17, 2002, three brown envelopes arrived at the mailroom. All of the envelopes were addressed to numbered companies. I asked a co-worker to whom the envelope should go. I was advised that Joe Houssian had numbered companies; that they were most likely his,
which is the evidence that you gave as well.
I then put all three envelopes on the corner of Irene Brady's desk.
Do you know what happened to the other envelopes that were received and addressed to numbered companies?
A No, I don't know.
Q Do you know what companies they were addressed to?
A No.
An undertaking furnished information that Mr. Power was a temporary employee.
[35] Mr. Mitchell then submitted the following portions of the examination for discovery to be read into evidence:
Q ... when you were away and mail comes in, does Ms. Brady go through the mail to see if there's anything important in it?
A Yes, she goes through the mail every day. ...
Q Are you notified if there's anything important in the mail?
A Yeah, when I - - on this particular trip and when I'm in Phoenix I'm there working, and we communicate several times a day about a whole number of things including information that's come in by mail. ...
Q So, if an unpaid traffic ticket arose or if you hadn't paid your visa card or something like that you would know post haste?
A Unfortunately, yes.
Q Okay.
A No, we - - I'm in touch with Irene when I'm in Phoenix several times a day and I have email and faxes.
ANALYIS AND CONCLUSIONS
[36] Respondent's counsel agreed with Appellant's counsel's submission that the onus was on the Minister to establish that the reassessments were mailed on a timely basis to the proper address. The Federal Court of Appeal, in Aztec Industries Inc. v R., 95 D.T.C 5235, at 5237, said:
Whereas in the present case, a taxpayer alleges not only that he has not received the notice of assessment but that no notice was ever issued, the burden of proving the existence of the notice and the date of its mailing must necessarily fall on the Minister; the facts are peculiarly within his knowledge and he alone controls the means of adducing evidence of them.
[37] Subsection 152(4.1) reads as follows:
Where the Minister would, but for this subsection, be entitled to reassess, make an additional assessment or assess tax, interest or penalties by virtue only of the filing of a waiver under subparagraph 4(a)(ii) the Minister may not make such reassessment ... after the day that is six (6) months after the date on which a Notice of Revocation of the waiver in prescribed form is filed.
The waivers filed by the Appellant for the 1995 and 1996 taxation years were revoked by the Appellant's Notices of Revocation of Waiver on November 2, 2001. The statute barred date referred to in the above provision is May 2, 2002.
[38] Subsection 244(14) reads, in part, as follows:
For the purposes of this Act, where any ... notice of assessment ... is mailed, it shall be presumed to be mailed on the date of that notice ...
[39] Subsection 244(15) reads, in part, as follows:
Where any notice of assessment ... has been sent by the Minister, as required by this Act, the assessment ... is deemed to have been made on the day of mailing of the notice of the assessment ...
[40] Subsection 248(7) reads, in part:
For the purposes of this Act ... anything ... sent by first class mail or its equivalent shall be deemed to have been received by the person to whom it was sent on the day it was mailed...
[41] In Scott v. M.N.R., 60 D.T.C. 1273 (Exchequer Court of Canada), the notice of reassessment which was put in the mail on May 28, 1957, while directed to the appellant, was not directed to his actual address nor was it directed to either of the addresses stated in his 1952 income tax return. Thurlow, J., at 1281, said:
... Parliament never intended that such a notice could be given effectively by the "mailing" of it to a taxpayer at some wrong or fictitious address, and I find nothing in the statute to suggest that Parliament intended that a taxpayer should be bound by a notice of an assessment upon the posting of a notice thereof addressed to him elsewhere than at his actual address or at an address which he has in some manner authorized or adopted as address for that purpose.
... In the present case, the notice of re-assessment which was put in the mail on May 28, 1957, while directed to the Appellant, was not directed to his actual address nor was it directed to either of the addresses stated in his 1952 income tax return. ... In my opinion, such a mailing or sending was not a valid mailing or sending of a notice within the meaning of s.46(2) of the Act, and it follows that the re-assessment was not made within the four year period limited by s.46(4).
The Notices of Reassessment were dated April 8, 2002. Subsection 244(14) provides that where a notice of assessment is mailed it shall be presumed to be mailed on the date of that notice. That presumption has been clearly rebutted because it was not, on April 8, 2002, mailed to the Appellant's address and cannot, therefore, be considered to have been "mailed" for the purposes of that subsection. The result is that the assessments referred to in the said Notices were not effectively made.
[42] I now turn to a consideration of the above quoted subsection 244(15). There is much evidence as to Revenue's mailing procedures. That evidence suggests that the Notices of Reassessment, mailed a second time to the Appellant, were so mailed on April 29, 2002 or April 30, 2002. The evidence amounts to speculation as to the actual mailing, no one of the four witnesses being able to testify that she indeed attended to handling those documents. Ellis said that she was not aware of any system dealing with returned mail that is time sensitive[2]. She said that there was no document or any internal written material stating that when an address is changed, returned documents must immediately be put in an envelope and sent.
[43] The evidence is that the Statements of Interest and Reassessments for a number of years, including the 1995 and 1996 taxation years, bore a date stamp indicating that Revenue's mail room received them, through Canada Post, on April 22, 2002. One week after that, on April 29, 2002, the Appellant's address in Revenue's Business Number System was changed to:
800 - 200 Burrard Street
Vancouver, BC
V6B 5A5.
[44] Respondent's counsel sought to make some point of the failure of the Appellant to call Houssian as a witness. Counsel also referred to the fact that the envelope enclosing the documents on second mailing, had not been produced by Houssian. However, the Respondent had every opportunity to, and did, examine Houssian during the examination for discovery. The portions of that examination which were read into evidence made no reference to such envelope. The Respondent could have called Houssian as a witness had she, in pre-trial preparation, seen fit so to do. The evidence of Houssian from the portions of his examination for discovery read into the record, in my opinion, produced, on a balance of probabilities, the conclusion that the remailed Notices of Reassessment were not received by the Appellant until May 17, 2002.
[45] In Schafer v. The Queen [1998] G.S.T.C. 60, this Court considered an application by the Appellant for an order extending the time within which a notice of objection to an assessment under the Excise Tax Act ("ETA") could be filed. This Court, at 60-5 said:
In a large organization, such as a government department, a law or accounting firm or a corporation, where many pieces of mail are sent out every day it is virtually impossible to find a witness who can swear that he or she put an envelope addressed to a particular person in the post office. The best that can be done is to set out in detail the procedures followed, such as addressing the envelopes, putting mail in them, taking them to the mail room and delivering the mail to the post office.
After describing evidence of Revenue procedures respecting the preparation and mailing of assessment notices, the Court stated further:
I am satisfied, on a balance of probabilities that the notice of assessment was probably placed in the Canada Post mail bag on September 2, 1993. I say this without any specific evidence. However, if the procedures were followed it seems more probable that it was sent than that it was not.
The Court found that the notice of assessment was not received by the Appellant. It then said that subsection 334(1) of the ETA, referring to Goods and Services Tax, deems the notice to have been received on the day it was sent and said:
The deeming of receipt in s.334(1) is not conclusive and the presumption created by that subsection has been rebutted.
That subsection, not unlike subsection 248(7) read:
For the purposes of this Part and subject to subsection (2), anything sent by first class mail or its equivalent shall be deemed to have been received by the person to whom it was sent on the day it was mailed.
This Court then concluded, on a balance of probabilities, that the Appellant, having discovered that a notice of assessment had been issued some three years before the date of an examination for discovery respecting five other notices of assessment, had not received it. It determined that the Appellant did not need an order extending the time within which to file a notice of objection because she had filed a valid objection to the assessment within the time limits described by the Act.
[46] The Federal Court of Appeal, in its Reasons for Judgment in the appeal of that case, 2000 D.T.C. 6542 referred to subsection 301(1.1) of the ETA which, at 6546, reads:
Any person who has been assessed and who objects to the assessment may, within 90 days after the day notice of the assessment is sent to the person, file with the Minister a notice of objection in the prescribed form and manner setting out reasons for the objection and all relevant facts.
That Court said:
Therefore, the only requirement is that the Minister demonstrate that the notice was sent. There is no requirement that the notice be received in order to start the limitation period running. The language of subsection 301(1.1) is clear and unambiguous and must be applied regardless of its object and purpose ... The Tax Court considers this subsection to create a rebuttable presumption as to the date that the notice was received. ... The question therefore becomes whether the conclusion that subsection 334(1) contains a rebuttable deeming provision that would frustrate the scheme of the ETA. In my respectful view, subsection 334(1) does not create a rebuttable presumption ... I agree that it would be extremely difficult to administer a scheme in which a notice is sent by ordinary first class mail that would require the Minister to contact every person who has been sent a notice of assessment to ensure that they have, in fact, received it ...
There is no corresponding subsection detailing how the Minister or the taxpayer is to establish that the taxpayer received the notice of assessment. The absence of a provision in the ETA detailing the method of proof of receipt or non-receipt of a notice of assessment is, in my respectful view, cogent evidence that the deeming provision is conclusive. [emphasis added]
[47] In Kovacevic v. R. [2003] G.S.T.C. 112-1, at 112-5, the Federal Court of Appeal said:
I accept that when legislation requires that documents be sent by a large organization such as a government department by ordinary mail, but does not require registered or certified mail or evidence of a more formal means of sending, the observation [of the Tax Court] in Schafer is reasonable. Generally it would be sufficient to set out in an affidavit from the last individual in authority who dealt with the document before it entered the normal mailing procedures of the office, what those procedures were.
[48] When the Notices of Assessment were mailed a second time to the Appellant, the address to which they were sent was the mistaken address furnished by the Appellant to Revenue. That was the Books and Records address which was identical to the Head Office address except that the postal code of the Books and Records address was incorrect. The evidence of Revenue officers was that all three addresses were displayed on a screen and that, obviously, the incorrect address was selected. Even though the Appellant furnished that address to the Respondent, the decision to select the Books and Records address with the wrong postal code exhibited another lack of care on behalf of Revenue. An incorrect address, entered on the system by Revenue, having been used on the original mailing, more time and care should have been taken to ensure the correct address was used on the second mailing. Two identical municipal addresses with different postal codes should have caught Revenue's attention and should have resulted in selection of the correct address.
[49] With respect, in the circumstances of this case, I am not directed by the above quoted comments of this Court in Schafer or of the Federal Court of Appeal in Kovacevic.
[50] The Federal Court of Appeal, in Schafer, referred to the language of subsection 301(1.1) of the ETA as being "clear and unambiguous." In this case, where the Notices of Assessment were mailed to a wrong address the first time and mailed to an address which Revenue could have verified as being correct the second time, I, in spite of procedural evidence from Revenue officials as to the probability of the Notices of Assessment having been remailed on April 29 or April 30, 2002, cannot decide, even on a balance of probabilities, that such was the case. Not surprisingly, there was no evidence respecting the journey of those Notices of Reassessment, dated April 8, 2002, between returning to Revenue on April 22, 2002, and arriving at the Appellant's office on, as I have concluded, May 17, 2002. The wording of subsection 244(15) is that a notice of assessment sent by the Minister, as required by the Act:
... is deemed to have been made on the day of mailing of the notice of assessment ... [emphasis added]
Adopting the Federal Court of Appeal's words above, the meaning of "the day of mailing" is "clear and unambiguous."
[51] While the Respondent has produced evidence of mailing procedures, no evidence of the date of mailing the Notices of Reassessment was produced. The Respondent has not proved that the Notes of Reassessment were mailed to the Appellant before May 3, 2002. Accordingly, the Respondent has failed to meet the onus of persuading this Court that it should determine that the Minister of National Revenue validly reassessed tax for the Appellant's 1995 and 1996 taxation years prior to May 3, 2002.
[52] The Appellant will be entitled to costs.
Signed at Ottawa, Canada, this 8th day of December, 2005.
"R.D. Bell"
Bell, J.
COURT FILE NO.: 2004-1548(IT)G
STYLE OF CAUSE: 236130 British Columbia Ltd.
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: July 27, 2005
REASONS FOR JUDGEMENT BY: The Honourable Justice R.D. Bell
DATE OF JUDGMENT: December 8, 2005
APPEARANCES:
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For the Appellant: |
Mr. Warren. J. A. Mitchell, Q.C.
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Counsel for the Respondent: |
Ms. Deborah Horowitz and Ms. Wendy Burnham |
COUNSEL OF RECORD:
Name: Warren J. A. Mitchell, Q.C.
Firm: Thorsteinssons LLP
Vancouver, British Columbia
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Ontario