BFL Canada Risk and Insurance Services Inc. v. The Minister of Finance

[Indexed as: BFL Canada Risk and Insurance Services Inc.v. Ontario (Minister of Finance)]

Ontario Reports Ontario Superior Court of Justice Belobaba J. December 12, 2018 143 O.R. (3d) 404 | 2018 ONSC 7349

Case Summary

Taxation — Sales tax — Appeals — Jurisdiction — Minister of Finance reassessing taxpayer and requiring it to pay administrative penalty for filing late retail sales tax return — Minister refusing taxpayer's request for extension of time for filing return based on extenuating circumstances — Taxpayer appealing — Superior court having jurisdiction under s. 25(1) of Retail Sales Tax Act to vacate or vary tax assessment based on minister's failure to properly apply Extenuating Circumstances Policy — Section 25(1) applying to minister's discretionary decisions and not limited to validity and correctness of assessment — Retail Sales Tax Act, R.S.C. 1985, c. 1 (5th Supp .), s. 25(1).

The Minister of Finance reassessed the taxpayer and required it to pay an administrative penalty for filing a late retail sales tax return. The taxpayer requested an extension of time to file its return and a penalty waiver based on extenuating circumstances. It ultimately filed a notice of objection to the reassessment explaining its reasons for objecting on the basis of extenuating circumstances. The minister rejected the objection. The taxpayer appealed to the Superior Court of Justice. The minister took the position that the Superior Court had no jurisdiction to review any alleged exercise of ministerial discretion and that the tax assessment appeal had to proceed in Divisional Court by way of judicial review. The taxpayer brought a motion for the determination of a question of law regarding the Superior Court's jurisdiction to hear the appeal under s. 25 of the Retail Sales Tax Act .

Held , the motion should be granted. [page405]

The Superior Court had jurisdiction under s. 25(1) of the Act to vacate or vary a tax assessment based on the minister's failure to properly apply the ministry's Extenuating Circumstances Policy. An appeal under s. 25(1) is not limited to the validity and correctness of an assessment.

[Buchanan Forest Products Ltd. v. M.N.R. , [1988] O.J. No. 1525 , 2 T.C.T. 4010 , 12 A.C.W.S. (3d) 43 , 1988 CarswellOnt 3124 (H.C.J.)]; Danso-Coffey v. Ontario (2010), 99 O.R. (3d) 401 , [2010] O.J. No. 913 , 2010 ONCA 171 , 265 O.A.C. 345 , 2010 G.T.C. 1028 , 65 B.L.R. (4th) 179 , [2010] 4 C.T.C. 83 , 186 A.C.W.S. (3d) 866; Ereiser v. Canada , [2013] F.C.J. No. 102 , 2013 FCA 20 , 444 N.R. 64 , [2013] 3 C.T.C. 49 , 2013 D.T.C. 5036 , 225 A.C.W.S. (3d) 1170; Neathly v. Canada , [2011] F.C.J. No. 1398 , 2011 FCA 275 , 426 N.R. 112 , 2011 D.T.C. 5167; Sequeira v. M.N.R. , [2012] O.J. No. 3075 , 2012 ONSC 3575 , 295 O.A.C. 41 (Div. Ct.) , consd

Other cases referred to

Canada Trustco Mortgage Co. v. Canada , [2005] 2 S.C.R. 601 , [2005] S.C.J. No. 56 , 2005 SCC 54 , 259 D.L.R. (4th) 193 , 340 N.R. 1 , J.E. 2005-1901 , [2005] 5 C.T.C. 215 , 2005 D.T.C. 5523 , 2005 D.T.C. 5547 , EYB 2005-96529 , 142 A.C.W.S. (3d) 1075; Enerzone Inc. v. M.N.R. , 2015 ONSC 7639; Placer Dome Canada Ltd. v. Ontario (Minister of Finance) , [2006] 1 S.C.R. 715 , [2006] S.C.J. No. 20 , 2006 SCC 20 , 266 D.L.R. (4th) 513 , 348 N.R. 148 , J.E. 2006-1100 , 210 O.A.C. 342 , 2006 D.T.C. 6532 , 147 A.C.W.S. (3d) 914; Web Offset Publications Ltd. v. Vickery (1999) , 43 O.R. (3d) 802 , [1999] O.J. No. 2760 , 123 O.A.C. 235 , 89 A.C.W.S. (3d) 1315 (C.A.)

Statutes referred to

Income Tax Act , R.S.C. 1985, c. 1 (5th supp.), Part I [as am.], ss. 165 [as am.], (1), 169(1), Part XV [as am.], s. 220(3.1) Retail Sales Tax Act , R.S.O. 1990, c. R.31, ss. 2(9) [as am.], 18 [as am.], (1), 18.1 [as am.], 19 [as am.], (1) [as am.], 20 [as am.], (1) [as am.], 21 [as am.], 22 [as am.], 23 [as am.], 24 [as am.], (1), (4) [as am.], 25 [as am.], (1) [as am.], (2.1), (2.4), 26 [as am.], 27 [as am.], 32 [as am.], (1) [as am.], 33

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194 , rules 21, 21.01(1) ( a )

MOTION for a determination of a question of law.

Sinziana Hennig and Patricia Joseph ,for moving party.

J.E. DeFreitas and S. Ross ,for responding party.

[1] BELOBABA J. — This motion is for the determination of a question of law regarding this court's jurisdiction to hear the present tax assessment appeal commenced under s. 25(1) of the Retail Sales Tax Act , R.S.O. 1990, c. R.31(" RSTA ").

[2] For the reasons that follow, I conclude that it is plain and obvious that the Superior Court has jurisdiction to hear this tax assessment appeal. The case law and the plain meaning of the RSTA support the position of the moving party, BFL Canada Risk and Insurance Services Inc. ("BFL"), on this question of law. [page406]

Background

[3] In September 2015, the responding party, the Minister of Finance (the "Minister"), reassessed BFL. The Minister required BFL to pay an administrative penalty in the amount of 10 per cent of its tax owing for filing a late tax return.

[4] BFL paid the penalty and sent a letter to the Minister requesting a two-day time extension to file its return and a penalty waiver based on extenuating circumstances.

[5] Section 33 of the RSTA grants the Minister discretion to extend the deadline for filing any return under the RSTA , before or after the time for making it.

[6] The Ontario Ministry of Finance Operations Memo RST09-01R1 (the "Extenuating Circumstances Policy") provides that tax administration managers may, upon request from a taxpayer, approve an extension of time for filing a return if "extenuating circumstances" prevent a taxpayer from filing its return on time.

[7] Under the Extenuating Circumstances Policy, tax administration managers "may approve the extension of time for filing a return" under certain conditions, including the "serious illness/death of a client, immediate family member, accountant or bookkeeper". A "spouse" is considered an "immediate family member" under Appendix A of the Extenuating Circumstances Policy.

[8] BFL ultimately filed a notice of objection to the reassessment in November 2015. BFL explained its reasons for objecting on the basis of extenuating circumstances in an affidavit, namely, the serious illness of its controller's spouse. The Minister rejected the objection on December 9, 2015, and advised that further appeal lay to the Superior Court of Justice.

[9] BFL filed a notice of appeal in this court in March 2016. In November 2016, the Minister delivered a reply defending the appeal primarily on the basis that BFL was in the wrong forum and that this court has no jurisdiction to review any alleged exercise of ministerial discretion. It is the Minister's position that this tax assessment appeal must proceed in Divisional Court by way of judicial review.

Issue

[10] The issue on this motion is whether it is plain and obvious that this court has jurisdiction under s. 25(1) of the RSTA to vacate or vary the tax assessment at issue based on the Minister's failure to properly apply its Extenuating Circumstances Policy. [page407]

Discussion

[11] This issue is appropriate for determination under rule 21.01(1) (a) of the Rules of Civil Procedure. The Minister's pleading raises a question of law, and the determination of that question will dispose either of the entire action or of the Minister's principal defence. A Rule 21 determination will therefore result in a saving in costs and judicial resources.

[12] This question of law may properly be determined on a Rule 21 motion. No material facts are in dispute. To the extent that the court requires a sufficient factual basis for determining this question of law, the court may rely on the facts set out in the pleadings and refer to the documents incorporated by reference therein. Web Offset Publications Ltd. v. Vickery (1999) , 43 O.R. (3d) 802 , [1999] O.J. No. 2760 (C.A.) , at paras. 3 and 5.

The Income Tax Act cases are distinguishable

[13] The Minister urges this court to find that the process for disputing an assessment under the RTSA is similar to the process of disputing an assessment under a federal tax statute such as the Income Tax Act . The Minister relies on the Federal Court of Appeal's decision in Ereiser v. Canada for the proposition that "an appeal of a . . . tax assessment is to determine the validity and correctness of the assessment" only. The Minister further relies on Eresier to argue that a tax assessment appeal is not the right forum to address "wrongful conduct" and on Neathly v. Canada to argue that a tax court does not have the jurisdiction to review discretionary relief from late filing penalties.

[14] I would not give effect to these submissions. The Minister relies on cases from a different jurisdiction that deal with a different and far more complex statutory scheme operating in the context of a different, statutory court system. The case law regarding the ITA is readily distinguishable. The case law does not require the appeal route under the RSTA to be as limited as the Minister contends. [page408]

[15] The main case relied on by the Minister, Ereiser ,stands for the proposition that a tax appeal is not the proper venue for a claim of misfeasance in public office or otherwise based on the wrongful conduct of a tax official. Such conduct is properly the subject of a tort action or judicial review. The present appeal is not based on wrongful conduct.

[16] While Neathly did hold that the Tax Court of Canada lacks jurisdiction to review the federal Minister's decisions not to waive interest or late filing penalties, the relevant provisions of the ITA are not similar to those of the RSTA . The appeal route in the ITA permits taxpayers to object to "an assessment under this Part", being Part I of the ITA , and thereafter appeal the assessment to the Tax Court. The ministerial decisions at issue in Neathly and other cases cited by the Minister were all made under s. 220(3.1) in Part XV, which permits the Minister to waive or cancel penalty or interest otherwise payable under the ITA , and make a new assessment "notwithstanding" the assessment provisions in Part I of the ITA . The ITA therefore expressly limits the statutory appeal route in a manner that precludes appeals from decisions not to waive late filing penalties.

[17] The RSTA does not limit tax appeals in the same way. The appeal route under the RSTA is from assessments made under various provisions, including s. 19(1). As detailed in the parties' factums, and as I will discuss further below, the penalty for delivering a late return is assessed under s. 19(1). The extension of time sought by BFL would affect the late penalty to be assessed under s. 19(1) -- an assessment that is subject to the statutory appeal route.

[18] In my view, the ITA cases cited by the Minister do not assist me in determining whether this court has jurisdiction to hear the present dispute.

Statutory interpretation of the RSTA favours BFL

[19] The question of law before the court on this motion calls for the interpretation of the appeal provision in s. 25 of the RSTA . The modern approach to statutory interpretation applies to taxation statutes like the RSTA , just as it does to other statutes. The words of an RSTA are to be read in their entire context [page409] and in their grammatical and ordinary sense, harmoniously with the scheme and object of the RSTA , and the intention of the legislature. Placer Dome Canada Ltd. v. Ontario (Minister of Finance), 2006 SCC 20, at para. 21. The provisions of taxation statutes must be interpreted in this way in order to achieve "consistency, predictability and fairness so that taxpayers may manage their affairs intelligently". Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, at para. 12.

[20] The RSTA provides a clear mechanism for resolving disputes regarding assessments, which was summarized in Buchanan Forest Products Ltd. v. M.N.R. as follows:

The Retail Sales Tax RSTA creates a scheme whereby a tax payer may be assessed for taxes alleged to be owing to the crown. Upon receipt of such an assessment the sum claimed must be paid whether or not an objection to or appeal from the assessment is outstanding.

An objection having been delivered to the Minister, the latter must respond by vacating, confirming or varying the assessment or by serving a fresh statement upon the tax payer.

A person still aggrieved after reconsideration by the Minister may appeal to the Supreme Court of Ontario [now the Superior Court of Justice]. Such an appeal is instituted by serving the Minister with a notice of appeal . . . and by filing a copy with the [court . . .]

[21] In the present case, the Minister's ability to assess a penalty flows from ss. 32 and 19 of the RSTA :

• Section 32(1) provides that every vendor who fails to deliver a return as required by the RSTA shall pay a penalty equal to 10 per cent of the tax collectable for the vendor for the period of that return.
• Section 19(1) permits the Minister to assess any penalty payable by a vendor under s. 32(1) or other provisions.

[22] As described in Buchanan Forest Products , a person who objects to an assessment under s. 19(1) may serve a notice of objection on the Minister under s. 24(1). Upon receipt of the notice of objection, s. 24(4) requires the Minister to reconsider the assessment and vacate, confirm, or vary it, or reassess. The Minister must notify the taxpayer in writing of his or her decision. [page410]

[23] When the Minister gives such a notification, s. 25(1) provides the taxpayer with a right of appeal to this court:

25(1) When the Minister has given the notification required by subsection 24(4), the person who has served a notice of objection under that section may appeal to the Superior Court of Justice to have the assessment or statement so objected to vacated or varied, but no appeal under this section shall be instituted after the expiration of ninety days from the day notice has been mailed to such person under subsection 24(4).

[24] The only limitations upon the right of appeal under s. 25 are set out in that section, namely,

• a person may raise by way of appeal only those issues previously raised in the person's notice of objection to the assessment (s. 25(2.1)); and
• a person may not appeal in respect of an issue for which that person has waived the right of objection or appeal in writing (s. 25(2.4)).

[25] I agree with BFL that the Minister's position that the right of appeal to this court under s. 25 does not apply to discretionary decisions is untenable. The words of the RSTA are clear that disputes regarding tax assessments are to be resolved in accordance with the procedure set out under the RSTA. That procedure culminates in a right of appeal to this court, which the statute does not confine to particular grounds or particular types of alleged errors in the assessment. The limitations on that right of appeal are spelled out in the statute, which does not immunise the Minister's discretionary decisions. I am mindful, too, that this is the very appeal procedure suggested by the Minister in the letter dated December 9, 2015.

[26] I decline the Minister's invitation to draw a distinction between different types of discretionary decisions or to hold that only discretion going to the quantum of an assessment may properly be the subject of a statutory appeal. Such distinctions are contrary to the statutory text. For example, the statutory appeal route applies to assessments under ss. 18(1), 19(1) and 20(1), each of which provides that the Minister "may" make an assessment in specified circumstances. The plain meaning of these provisions, read together, is that the taxpayer may appeal from the decision to assess any amount, and not just from how the Minister calculated the amount. The distinctions urged by the Minister would reduce the consistency, predictability and fairness of the RSTA , contrary to the admonition of the Supreme Court in Canada Trustco. [page411]

[27] I also agree that the Minister's interpretation, as argued on this motion, would relegate most disputes regarding assessments to judicial review, since assessments under the RSTA generally involve the exercise of ministerial discretion. I would not alter the statutory right of appeal in this way absent any indication of legislative intent that I should do so, either in the text or history of the RSTA .

[28] The case law relied upon by BFL indicates that this same approach has previously been adopted by both this court and the Court of Appeal.

[29] In Sequeira v. M.N.R. , the Divisional Court dismissed an application for judicial review of the Minister's refusal to grant a discretionary extension of time under s. 33 -- the same provision relied upon by BFL in this case. The court declined to grant judicial review because the applicants "had a statutory remedy available to them, that is, the right to file a Notice of Objection to the assessment with the Minister and the right to appeal from the Minister's decision", and had failed to exercise that right. The court held that granting the applicants judicial review would permit them to "bypass the statutory framework and circumvent the limitation periods provided in the [ RSTA ] for the filing of returns, audits, assessments, objections to assessments and appeals".

[30] In Danso-Coffey v. Ontario , the Court of Appeal strongly cautioned superior courts to "respect the structure set up by the legislature [in the RSTA ]and not develop a new form of incidental litigation".

[31] The issue in Danso-Coffey was whether this court could or should exercise its inherent jurisdiction to grant a taxpayer a declaration that she was not liable for retail sales tax. In contrast with the case at bar, the Minister in Danso-Coffey took the position that disputes respecting assessments under the RSTA must be resolved through the process established within the RSTA , not by applications in the courts. The Minister argued that the objection and appeal scheme contained in ss. 18 through 27 of the [page412] RSTA either ousted superior court jurisdiction entirely, or at least confined its exercise to exceptional cases.

[32] The Court of Appeal agreed, holding that disputes concerning the validity of tax assessments should be resolved within the scheme of the RSTA :

Whether or not the RSTA is a complete code in the strict sense of that term, the application here was a direct challenge to the validity of an assessment and the provisions of the RSTA govern such challenges.

Where the legislature has specified precisely what conditions must be satisfied to achieve a particular result, it is reasonable to assume that the legislature intended that taxpayers would rely on such provisions to achieve the result they prescribe. Even absent words clear enough to oust the court's jurisdiction, I would infer that the legislature intended disputes concerning the validity of an assessment of tax to be resolved within the RSTA . Thus the application judge erred in declaring that Ms. Danso-Coffey was not liable for retail sales tax.

[33] Lastly, in Enerzone Inc. v. M.N.R. , this court dismissed the Minister's motion to strike a taxpayer's appeal on the same grounds advanced in the present case -- that this court lacked jurisdiction to review an exercise of the Minister's discretion on an appeal under s. 25 of the RSTA . Justice Morissette concluded that nothing in the RSTA prevents this court from reviewing an exercise of the Minister's discretion, and that the legislature intended all disputes under the RSTA to be determined under the appeal process provided in the RSTA [at paras. 28-32]:

The scheme created by the RSTA expressly creates and contemplates an exercise of discretion by the Minister in the assessment of unpaid RST against either a purchaser or a vendor.

There is nothing in the RSTA that prevents the Superior Court of Justice, on an appeal under s. 27 of the RSTA , from engaging in a review of the merits of the issues raised by the appellant, or from granting the relief requested by the appellant. In fact, the RSTA expressly permits the court to vacate or vary the assessment.

I see no limiting language as to what issues the court may entertain, or under what circumstances the court may vacate or vary an assessment.

The fact that the legislature expressly designated the Superior Court of Justice, which is a court of inherent jurisdiction, to adjudicate appeals under the RSTA , is a signal of the intention of the legislature to create a regime in which all disputes arising under the RSTA can be determined in one place and at one time through the appeal process outlined in the RSTA . [page413]

For these reasons, this court has the power to hear the appellants appeal on all issues it has raised in its Notice of Appeal.

[34] The Minister's position that the right of appeal to this court under s. 25 does not apply to discretionary decisions conflicts with s. 2(9) and is unsupported by anything in the text, jurisprudence or legislative history of the RSTA .

[35] The words of the RSTA are precise and unequivocal: their clear meaning is that disputes regarding tax assessments are to be resolved in accordance with the procedure set out under the RSTA . That procedure culminates in a statutory right of appeal to this court -- a right of appeal that is not confined to particular grounds or particular types of alleged errors in the assessment. The limitations on that right of appeal are spelled out in the RSTA , which does not immunise the Minister's discretionary decisions.

Disposition

[36] In my view, it is it is plain and obvious that this court has jurisdiction under s. 25(1) of the RSTA to vacate or vary the tax assessment at issue based on the Minister's failure to properly apply its Extenuating Circumstances Policy.

[37] Accordingly, the question of law is answered in favour of BFL.

Costs

[38] Both parties have made costs submissions. BFL requests $21,000 on a partial indemnity scale, while the Minister requests $30,000. A costs award of $21,000 is therefore fair and reasonable.

[39] Costs are fixed at $21,000, payable forthwith by the Minister to BFL.

Motion granted.

Notes

1 R.R.O. 1990, Reg. 194 .

2 Web Offset Publications Ltd. v. Vickery (1999) , 43 O.R. (3d) 802 , [1999] O.J. No. 2760 (C.A.) , at paras. 3 and 5. Note 3: R.S.C. 1985, c. 1 (5th supp .), s. 165 ("ITA").

4 [2013] F.C.J. No. 102 , 2013 FCA 20 ("Ereiser"), at para. 31 .

5 Ibid., at para. 33.

6 [2011] F.C.J. No. 1398 , 2011 FCA 275 ("Neathly"), at paras. 2-3 .

7 Ereiser , supra, at paras. 18-20, 31, 35-38 .

8 ITA, s. 165(1).

9 Ibid., s. 169(1).

10 See, e.g., Neathly , supra, at paras. 3-4 .

11 Placer Dome Canada Ltd. v. Ontario (Minister of Finance) , [2006] 1 S.C.R. 715 , [2006] S.C.J. No. 20 , 2006 SCC 20 , at para. 21 .

12 Canada Trustco Mortgage Co. v. Canada , [2005] 2 S.C.R. 601 , [2005] S.C.J. No. 56 , 2005 SCC 54 ("Canada Trust Co."), at para. 12 .

13 [1988] O.J. No. 1525 , 1988 CarswellOnt 3124 , 12 A.C.W.S. (3d) 43 (H.C.J.) ("Buchanan Forest Products"), at paras. 5-7 .

14 [2012] O.J. No. 3075 , 2012 ONSC 3575 (Div. Ct.) .

15 Ibid., at para. 17.

16 Ibid., at para. 18.

17 (2010), 99 O.R. (3d) 401 , [2010] O.J. No. 913 , 2010 ONCA 171 ("Danso Cofffey"), at para. 33 .

18 Ibid., at paras. 4, 29-30.

19 Ibid., at paras. 34-35.

20 2015 ONSC 7639 .

End of Document