Air Canada v. ARQ, 2016 QCCA 710

In response to an objection filed in 2006 by the taxpayer (“Air Canada”), with a lawyer having consistently been the contact person with ARQ, ARQ informed Air Canada (with a copy to the lawyer) on October 10, 2013 that it would be reassessing Air Canada at a somewhat lower level than previously. That reassessment was sent on October 30, 3013 to the (usual) Air Canada head office address in Montreal, but without any copy being sent to the lawyer. The Montreal office sent the notice of reassessment to the Air Canada Winnipeg office, which dealt with tax matters, but which did not deal with the notice. It was not until May 14, 2014 that the lawyer communicated with the ARQ, and was informed of the October 30 reassessment, after which Air Canada launched an appeal pursuant to s. 93.1.13 of the Tax Administration Act (Quebec), which provided for an extension of the 90-day appeal period from a decision under s. 93.1.6. S. 93.1.13 provided that “the application shall be granted if the person demonstrates that it was impossible in fact for that person to act and that the application was filed as soon as circumstances permitted.”

The Court stated (at paras. 16, 17, TI translation):

Given the nature of the dispute…(the contesting of a notice of objection)and the process under the terms of which the respondent arrived at its decision in response to the objection of the taxpayer pursuant to a notice of objection…, the process implies exchanges with the taxpayer or, as the case may be, its designated representative, given the importance of the decision for the taxpayer and the procedure chosen by the respondent, who itself recognized the right of the taxpayer to be represented, one can conclude that equitable procedures require the respondent to communicate its decision not only to the taxpayer, but also to its representative for dispute purposes, or , at the least, to warn the latter of the decision rendered. This , among other things, conforms the legitimate expectations of one who has elected to be represented by another, and furthermore to be represented by counsel. …

Thus, when section 93.1.6 of the T.A.A. provides that, in the case of an objection to an assessment, “the Minister shall (…) reconsider the assessment and (…) make a reassessment, and send the Minister's decision to the person by mail,” one should instead read “to the person and to its designated representative, if any”… .

Notwithstanding that ARQ thus had made a procedural error, the Court nonetheless declined to grant an extension of the 90-day appeal period under the more stringent Quebec equivalent of s. 166.2, which required that the taxpayer demonstrate that “it was impossible in fact” for the it to appeal promptly. Air Canada, in the absence of any evidence as to why nothing had happened after the reassessment was forwarded to Winnipeg, had not established due diligence.

The lawyer acting for Air Canada in a tax dispute with ARQ was copied on a letter to Air Canada indicating that ARQ would be reassessing in a smaller amount than the original reassessment under dispute. This occurred several weeks later, but without the lawyer being copied. The Montreal head office of Air Canada forwarded the reassessment to its Winnipeg office (which dealt with tax matters), where something went awry, so that no action was taken. The lawyer did not find out about this until the 90-day objection period had expired.

The Court found that, in light of considerations of procedural fairness, the Quebec equivalent of ITA s. 165(3) should be read as if it contained the additional bolded words noted below (para. 17):

[T]he Minister shall … reconsider the assessment and … make a reassessment, and send the Minister's decision to the person by mail and to its designated representative, if any.

Notwithstanding that ARQ thus had made a procedural error, the Court nonetheless declined to grant an extension of the 90-day appeal period under s. 93.1.13 of the Tax Administration Act (Quebec), which provided that “the application shall be granted if the person demonstrates that it was impossible in fact for that person to act and that the application was filed as soon as circumstances permitted.” The Court stated (at para. 22):

[T]here is no impossibility of acting if it is lacking in diligence or it could remedy the effect of such a lack (of its lawyer, for example), but it chose or neglected to do so. One can thus state that diligence is a condition sine qua non for there to be impossibility to act.

The Court made extensive findings that such diligence was not established, including responding to a submission (at para. 32) that “having conferred a mandate on a lawyer to represent it attested sufficiently to its diligence,” by stating (at para. 33):

[T]his does not relieve its obligation to forward the documents received by it relating to the mandate of representation which it conferred on him or, at least, to diligently alert him when it received such documents.