Windfall Court Victory for Taxpayer Reveals Hidden Merits of Informal Procedure

Legge v. The Queen (2014) TCC 360

A taxpayer in Halifax recently won an appeal as a result of poor pleading by counsel for the Canada Revenue Agency (CRA). The taxpayer in Legge was appealing the the CRA’s determination that certain Canada Pension Plan contributions were deemed to be zero for the two years in question, pursuant to subsection 30(5) of the Canada Pension Plan and won.

Subsection 30(5) reads:

30(5) The amount of any contribution required by this Act to be made by a person for a year in respect of their self-employed earnings for the year is deemed to be zero where:

(a) the return of those earnings required by this section to be filed with the Minister is not filed with the Minister before the day that is four years after the day on or before which the return is required by subsection (1) to be filed; and

(b) the Minister does not assess the contribution before the end of those four years.

The Crown argued that subsection 30(5) applied to the appellant in this case because the taxpayer had failed to file a return of self-employed earnings within four years of the filing due date. In fact, the taxpayer reported losses rather than earnings and subsequently made a T1 adjustment request.

The subsection 30(5) argument failed because the subsection clearly has two preconditions: a failure to file and an assessment within the four-year period. The Tax Court noted that the assessment requirement was not mentioned in the CRA’s Reply and was not mentioned by Crown counsel at the hearing. The Crown failed to satisfy the burden that the requirement in paragraph 30(5)(b) had been satisfied.

At paragraph 10 of her reasons for judgment, the Honourable Justice Judith Woods stated:

The result is in a sense a windfall to Mr. Legge because it is likely that there was no assessment of contributions for 2006 and 2007. However, the Crown is
well aware of the requirement to properly plead its case and to establish the facts supporting its position, either by evidence or by assumptions.

It is interesting to note that her ladyship mentioned at the conclusion of her reasons that had the appeal been made through the General Procedure the omissions may have been rectifiable by the CRA, but since it was made through the Informal Procedure this was not practical. Therefore, not only can the CRA take a lesson from this case, taxpayers can as well: the Informal Procedure has more strategic merits than previously thought and should be considered by those appealing their reassessments.

Greer Jacks practices law in British Columbia and updates EverGreen Explanatory Notes for Knowledge Bureau for recent jurisprudence.