2019 QCCA 2068, 2019 QCCA 2068

Agence du revenu du Québec c. Schwartz 2019 QCCA 2068 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL NO.: 500-09-027458-181 (500-80-021406-120) DATE: NOVEMBER 28, 2019 CORAM: THE HONOURABLE JACQUES DUFRESNE, J.A. MARIE-JOSÉE HOGUE, J.A. SIMON RUEL, J.A. AGENCE DU REVENU DU QUÉBEC APPELLANT – Defendant v.

ERWIN SCHWARTZ RESPONDENT – Applicant JUDGMENT [ 1 ] The appellant, the Agence du revenu du Québec (hereinafter the “ARQ”), appeals a judgment rendered on March 8, 2018 by the Court of Québec, district of Montreal (the Honourable Eliana Marengo), that partially allowed the respondent’s appeal and cancelled the penalties and part of the interest for the period from June 8, 2017 to January 25, 2018. [1] [ 2 ] The sole issue that arises in this appeal is whether the Court of Québec had jurisdiction to cancel the interest provided for in

section 28 of the Act respecting the Ministère du Revenu (hereinafter the “ AMR ”). [2] [ 3 ] The essential context is as follows. [ 4 ] After auditing the respondent’s affairs for the 2004, 2005 and 2006 taxation years, the ARQ concluded that personal expenses had been paid to the respondent by his corporation. These expenses were a taxable benefit that the respondent should have reported in his personal income, but failed to do. [ 5 ] Consequently, the ARQ assessed the respondent for the shareholder benefit in accordance with

section 111 of the Taxation Act (hereinafter the “ TA ”). [3] The ARQ also imposed penalties for gross negligence on the respondent. [4] In addition, under

section 28 AMR , the notices of assessment bore interest. [5] [ 6 ] The respondent appealed the notices of assessment to the Court of Québec.

He raised several grounds, which were dismissed by the trial judge, thereby upholding the assessments. [6] [ 7 ] The judge, however, cancelled the penalties for gross negligence, because the respondent had cooperated with the ARQ and had demonstrated his willingness to improve his corporation’s accounting practices. [7] These points are not under appeal. [ 8 ] The judge, however, cancelled part of the interest, namely, for the period from June 8, 2017 to January 25, 2018, on the ground that the second hearing day had been postponed to January 25, 2018 due to the illness of the judge and counsel for the ARQ, and that the respondent should not have to bear the interest resulting from that misfortune. [8] [ 9 ] On this particular point, the ARQ pleads that the trial judge erred in law, arguing that the Court of Québec did not have jurisdiction to cancel the interest provided for in

section 28 AMR . [ 10 ] Notwithstanding the apparent unfairness of this situation, the appeal must be allowed. [ 11 ]

Section 28 AMR states that a debt owed to the State by any person under a fiscal law bears interest. [ 12 ]

Section 94.1 AMR provides that the Minister of Revenue may waive (prospectively), in whole or in part, interest incurred with respect to a fiscal debt owed to the State, or it may cancel (retroactively), in whole or in part, the interest exigible on such a debt. According to the third paragraph of this section, “[a] decision of the Minister under this

section is not subject to opposition or appeal”. [ 13 ] This Court previously ruled that, given the wording of

section 94.1 AMR, the Court of Québec does not have jurisdiction to cancel the interest provided for in

section 28 AMR , because this prerogative belongs to the Minister of Revenue. [9] [ 14 ] In short, a taxpayer cannot appeal to the Court of Québec a decision of the Minister of Revenue made under

section 94.1 AMR

refusing to waive or cancel the interest on a fiscal debt. [ 15 ] In the case at bar, the judge thought it fair to cancel the interest because of the delays experienced in the file, [10] but, in doing so, she acted without jurisdiction, thereby inevitably requiring the intervention of this Court. [ 16 ] If the respondent wishes to have the interest cancelled, he could consider submitting an application to the Minister of Revenue.

If unsuccessful, the Minister’s decision might then potentially be subject to a judicial review application in the Superior Court, in accordance with the applicable standard and grounds for review. [11] FOR THESE REASONS, THE COURT: [ 17 ] allows the appeal, without costs; [ 18 ] Amends the conclusion “ THE WHOLE with adjusted interest and without penalties”, replacing it with “ THE WHOLE without penalties”. JACQUES DUFRESNE, J.A. MARIE-JOSÉE HOGUE, J.A. SIMON RUEL, J.A. Mtre Patrick Guay LARIVIÈRE MEUNIER For the appellant Erwin Schwartz Respondent Date of hearing: November 27, 2019