2015 ONSC 1100, 2015 ONSC 1100

CITATION : Capcorp Planning

(2003) Inc. v. Canada (National Revenue) , 2015 ONSC 1100 COURT FILE NO.: 11-52108 IN THE MATTER of the Retail Sales Tax Act , R.S.O. 1990, c. R.31 as amended SUPERIOR COURT OF JUSTICE - ONTARIO RE: CAPCORP PLANNING

(2003) INC. – APPELLANT (RESPONDING PARTY) v. THE MINISTER OF NATIONAL REVENUE – RESPONDENT (MOVING PARTY) BEFORE: Mr. Justice Hugh R. McLean COUNSEL: Christopher Morris, Gregory Sanders, for the Appellant Lori E.J. Patyk, Jason DeFreitas, for the Respondent HEARD: February 10, 2015 ENDORSEMENT [ 1 ] This is a motion brought by the Minister of Revenue (Minister) to restrict the grounds that may be argued on an appeal of a Retail Sales Tax Assessment. [ 2 ] There is really not much controversy on the facts. Simply put, the Minister conducted an Audit on Capcorp Planning

(2003) Inc. (Capcorp) for the period of August 1, 2005 to March 31, 2009. After this Audit was completed, the Minister delivered a Notice of Assessment pursuant to the retail sales tax for this period. In the Assessment the Minister’s auditor took the position that Capcorp had not complied with the requirements of the Retail Sales Tax Act, R.S.O. 1990,

CHAPTER R.31 as follows: As a result of the Audit, Notice of Assessment #L1434310784 dated February 1, 2010 (“Assessment”) was issued to Capcorp in the amount of $234,773.27, plus interest in the amount of $43,852.04, for a total of $278,625.31. [ 3 ] Capcorp then filed a Notice of Objection in response to the information contained in the Assessment. The Minister subsequently reviewed the Notice of Objection and decided that no changes should be made.

After that, Capcorp instituted its Appeal to the Superior Court in accordance with s. 25(2) of the Retail Sales Tax Act . [ 4 ] As part of the Discoveries which took place, it is alleged that for the first time Capcorp was given an answer that indicated that the Minister relied on s. 20(3) of the Retail Sales Tax Act . Capcorp alleges that it was not aware of this until this time.

Section 20(3) of the Act deals with the assessment of penalties against Capcorp. [ 5 ] This particular motion before the Court deals with whether Cancorp can argue certain matters that the Minister alleges were not brought forth in the original Notice of Objection. [ 6 ] The issue is whether the Notice of Appeal binds the Appellant to the allegation that the Appeal relates to whether the premiums paid in respect to a Health and Welfare Plan (HWP) attracts retail sale taxes. This is the basis for the Minister’s argument that the Appeal should be restricted solely to this issue.

The Minister cites subsection 25(2.1) of the Retail Sales Tax Act and argues that

section restricts all appeals to solely issues raised in the Notice of Objection. [ 7 ] The Appellant, however, argues that under the Act the Court is empowered to amend the pleadings as it would under the Rules of Civil Procedure , R.R.O. 1990, Regulation 194, and thus it may allow such amendments to fairly set forth the factual basis for the Appeal itself. To be more specific, the Minister wishes the Court to not allow argument, or as it terms it, the raising of the issues of due diligence, penalty and other matters not set forth in their pleadings. The Minister is really calling for a strict

interpretation of what an “issue” is. In the final analysis they may well be right, however, the motion before the Court is how the argument of this appeal should go forward. Indeed, at this point, it seems to the Court that we are dealing with the procedural matters that will provide the record for a final determination of the issues between the parties on the Appeal. The Minister is arguing that this record should be restricted to the

matters that “are in issue” under the Notice of Objection. The Appellant, on the other hand, is of the view that other matters may be argued as they affect the factual basis for the issue itself to be decided. [ 8 ] It is very difficult for the Court to understand the complete record without a factual basis being provided for all the potential arguments that could be made. It may well be that the matter could be determined on a narrow

interpretation of the “issue” set forth in the Notice of Objection, however, in fairness to all parties a full record should be before the Court so that there is a factual basis for making the determinations that may be necessary in the interest of justice. Therefore the motion of the Minister of Revenue is dismissed. The parties may appear before me to receive further direction as to what in the interest of justice may be necessary to complete the record so that this matter may proceed. Costs are reserved to the hearing judge. McLean J. Date: March 20, 2015 CITATION : Capcorp Planning

(2003) Inc. v. Canada (National Revenue) , 2015 ONSC 1100 COURT FILE NO.: 11-52108 IN THE MATTER of the Retail Sales Tax Act , R.S.O. 1990, c. R.31 as amended ONTARIO SUPERIOR COURT OF JUSTICE RE: CAPCORP PLANNING

(2003) INC. – APPELLANT (RESPONDING PARTY) AND THE MINISTER OF NATIONAL REVENUE – RESPONDENT (MOVING PARTY) BEFORE: Mr. Justice Hugh R. McLean COUNSEL: Christopher Morris, Gregory Sanders, for the Appellant Lori E.J. Patyk, Jason DeFreitas, for the Respondent ENDORSEMENT McLean J. Released: March 20, 2015