A taxpayer fails to meet the 90-day deadline for filing an appeal to the Tax Court apparently because he was badly advised by a professional about procedural matters. Should the Court grant his application to late-file the appeal? The Federal Court of Appeal said ‘yes’ in Bygrave v R, 2017 FCA 124.
Mr Bygrave purchased a condo in 2007, sold it in 2010 and reported the gain he realized as a capital gain. The CRA reassessed him to treat the gain as an income gain and to impose gross negligence penalties (!). He objected, the CRA confirmed and Mr Bygrave hired a chartered accountant to assist him. The accountant, in a comedy of errors, helped to ensure that Mr Bygrave missed the deadline for filing the notice of appeal. First, the accountant contacted CRA to try again to convince it that the reassessment was wrong. Then the accountant told Mr Bygrave that he couldn’t file an appeal “unless he had in hand all the documentary evidence that he intended to put before the Court on the appeal”. Mr Bygrave worked to gather these materials, but in the mean time the 90-day appeal period elapsed and then some. The accountant filed the application to late-file the appeal 52 days after the end of the appeal period. The accountant also represented Mr Bygrave at the hearing of the application.
The Tax Court, in an unreported decision, dismissed the application. The Court held that the conditions in ss 167(5)(b)(ii) and (iii) of the Income Tax Act (Canada) had not been met: the application had not been brought as soon as circumstances permitted and it was not just and equitable to grant the application.
Regarding the first requirement, the FCA held that the Tax Court had applied the wrong legal test. The Tax Court had concluded that Mr Bygrave did not bring his application as soon as possible because he knew about the 90-day deadline, but he missed it anyway. He was not entitled to rely on professional advice to miss the deadline. The FCA opined that this was the wrong question. The correct question was whether Mr Bygrave, once the period after the appeal period had commenced, acted diligently to bring his application. The FCA decided—based on the “fairly sparse record” in front of it—that Mr Bygrave had acted diligently during that period to gather all of the documentary evidence he was (wrongly) told he needed to gather so that the application could be made.
Regarding the second requirement—whether it was just and equitable to grant the application—the Court wrote the following:
[22] As to whether it is just and equitable to grant the application, I am of the view that it is. There is no conduct on Mr. Bygrave’s part that would make it unjust or inequitable to award him the extension of time which he seeks. In addition, this is a case in which the Minister has imposed a penalty pursuant to subsection 163(2) of the Act which deals with false statements made knowingly or in circumstances amounting to gross negligence. A taxpayer should be given every reasonable opportunity to defend himself against the imposition of such a penalty.
