Written on behalf of Feigenbaum Consulting
One of the most important reasons to work with an experienced lawyer for matters related to tax law for both individuals and businesses is to ensure that critical deadlines are not missed and that you are not adversely impacted by a statute of limitations, which is a deadline under which an action in law must fall under. While deadlines should be taken seriously, and there can be significant consequences for missing them, a recent decision from the Tax Court of Canada, Aerovition Digital Inc. v. The Queen, shows that not every missed deadline will be treated with equal weight, and that there are situations where (in this case) a defence in tax litigation can still occur even if a deadline is missed.
Business appeals denial of Canada Emergency Wage Subsidy
The issues leading to the trial began when the appellant applied to receive the Canada Emergency Wage Subsidy (CEWS) in March 2020 when the COVID-19 pandemic began. The appellant is a business, and the CEWS was designed to provide businesses with assistance in paying employees if they lost a certain percentage of their revenue. The respondent was the Canada Revenue Agency (CRA), which denied the application on the grounds that the appellant did not fit the meaning of a “qualifying entity” because they did not employ and pay eligible remuneration to an eligible employee.
Government misses the deadline to file response to appeal
The appellant appealed this decision and sent notice to the CRA. A mistake at the CRA led to the wrong deadline being provided to the employee tasked with responding to the appeal. The deadline came and went on November 15, 2021. The reply was filed two days later on November 18 and was sent to the appellant one day later. It was not until November 22 that the CRA sought the appellant’s consent to the late filing. The appellant refused to consent to the late filing. In response to this, the CRA notified the court it would be submitting a motion to apply for an extension. The appellant wanted to strike out the reply altogether.
The appellant’s argument was simple, stating that the reply should be struck because the CRA asked for permission to file a late reply after the deadline had already been missed, and secondly because the reply was not served on the appellant within three days of filing. The appellant also said that allowing the filing of the reply would be prejudicial to them.
Government says missing deadline was not significant enough to bar it
The CRA told the court that their reply should not be struck unless it is “so clearly futile that the positions advanced therein have no chance of success.”
The context provided by the CRA was that they always intended to defend their assessment of the appellant’s application. The missed deadline was minimal in the CRA’s opinion and was only missed due to a clerical error. The CRA said it acted in good faith throughout the process and did not intend to miss the deadline. They told the court that the interests of justice would be best served by allowing the reply to be filed.
The appellant focused on the timing of events, telling the court the application to file a late reply must be made before the time expires for its filing. The appellant referred to the Tax Court of Canada Act, which states,
“18.16(1) The Minister of National Revenue shall file a reply to a notice of appeal within sixty days after the day on which the Registry of the Court transmits to that Minister the notice of appeal unless the appellant consents, before or after the expiration of the sixty day period, to the filing of that reply after the sixty day period or the Court allows the Minister, on application made before or after the expiration of the sixty day period, to file the reply after that period. (Emphasis added by the court)”
While the appellant had suggested it was the victim of prejudice as a result of the missed filing date, it offered no evidence to support that allegation. In addressing this, the court wrote that prejudice cannot be presumed before a hearing date has been fixed or from a “mere two-day delay” in the filing of the reply. In fact, the court found that the appellant was familiar enough with what the CRA’s appeal would be because they filed a point-by-point rebuttal to it less than two weeks after the reply was filed.
Court finds Minister’s explanation for delay reasonable
Ultimately, the court found that the Minister’s explanation for the delay was reasonable in the circumstances, adding that the duration of the delay was insignificant in the context of the litigation. The court emphasised that the lack of a confirmed hearing date was the most significant contribution to this finding.
The court recognized the general importance of abiding by deadlines, and that they are in place to help facilitate the expeditious resolution of appeals. However, for the reasons described above, there can be exceptions for deadlines that are missed.
Work with the experienced tax lawyers at Feigenbaum Law if you are involved in tax litigation
At Feigenbaum Law, our team has an extensive background in both American and Canadian tax law. We recognize that it is critical for our clients to meet deadlines established by law or by courts and ensure that our clients are not negatively impacted by oversight leading to missed deadlines. Contact us to find out how we can help you if you are involved in tax litigation or if you want to reduce your overall tax burden, shield your business from liabilities and avoid pitfalls that result from improper tax planning.
We provide a comprehensive range of tax services and look forward to helping you. Contact us about making your transition across the border as smooth as possible. We offer services to clients in the US, Canada and around the world. Contact us online, or call us at (905) 695-1269 or toll-free at (877) 275-4792 to learn more about how we can help.