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Docket: UT02103
Order UT02-03

IN THE MATTER of an appeal by Mike James against a decision of the Provincial Tax Commissioner, dated December 11, 2001.

BEFORE THE COMMISSION

on Tuesday, the 18th day of June, 2002.

Maurice Rodgerson, Vice-Chair
James Carragher, Commissioner
Kathy Kennedy, Commissioner

Order

Contents

Appearances & Witnesses

Reasons for Order

1.    Introduction

2.    Background

3.    Discussion & Findings

4.    Disposition

Order

Appearances & Witnesses

1.    For the Appellant:

Counsel:
Michelle James

Witness:
Mike James

2.      For the Respondent, Provincial Tax Commissioner:

Counsel:
Ruth M. DeMone

Witnesses:
Mary Hennessey,
Manager, Audit, Collection & Inspection Services
Department of Provincial Treasury

 3.      For the Island Regulatory and Appeals Commission

Counsel:
Thomas A. Matheson, Q.C.

Staff:
Donald G. Sutherland
Director, Technical & Regulatory Services

Faye Weeks
Recording Secretary

Reasons for Order

1.  Introduction

[1]      On August 20th, 2001, the Province of Prince Edward Island issued Notice of Assessment No. 3258 (the "assessment") to Mike James, the Appellant herein, in the amount of $1,100.00. The amount represents the difference between the sum of $1,199.50 claimed by the Province for tax on a 1998 Saturn motor vehicle purchased in Nova Scotia by Mr. James and the sum of $99.50 previously paid by Mr. James at the time the vehicle was registered in Prince Edward Island.

[2]      Mr. James subsequently filed a Notice of Objection on the assessment with the Provincial Tax Commissioner ("Tax Commissioner" or "Respondent"). On December 11th, 2001, the Tax Commissioner issued a decision upholding the assessment.  It is against this decision that the within appeal is filed with the Commission.

[3]      The appeal was heard in Charlottetown on May 7, 2002.

2.    Background

[4]      Mr. James is a resident of Prince Edward Island. On July 28th, 2001, he purchased a 1998 Saturn motor vehicle in Dartmouth, Nova Scotia in trade for a 1996 Jimmy. Prior to making this trade, Mr. James telephoned Access PEI in Summerside to determine the tax procedure for bringing a newly acquired vehicle into P.E.I.  According to Mr. James, he was advised that the tax was to be paid at the time of registration in Prince Edward Island and would be based on the net cost after trade-in.

[5]      Mr. James completed the transaction. Upon his return to Prince Edward Island, he attempted to register the Saturn at the Summerside branch of Access PEI.  According to Mr. James, he was told that tax must be paid on the total purchase price of the Saturn and not the net cost after trade-in. Mr. James objected to paying tax on this basis and, after speaking to Armand Arsenault, an employee of Access PEI, Mr. James was permitted to pay sales tax in the amount of $99.50. According to the record, this amount was calculated on the difference in price or the net price between the purchased and traded-in vehicle.

[6]      By letter dated August 3rd, 2001, Bobby Kenny, Manager of Tax Administration and Client Services for Provincial Treasury, advised Mr. James that the amount paid should have been $1,199.50, representing tax calculated on the total purchase price of $11,995.00. This was followed by a letter dated August 20, 2001 from Mary Hennessey, Manager of Audit, Collection and Inspection Services for Provincial Treasury together with the assessment at issue in this appeal.

3.    Discussion & Findings

[7]    Subsection 7(4) of the Revenue Tax Act reads as follows:

If within the province a person purchases taxable goods from a person residing in the province and trades other taxable goods as part of the consideration of the purchase price, the tax shall be computed on the difference between the fair values of the goods.

[8]     There is no issue here over the authority of the province to assess tax on the full value of the purchased vehicle. What is at issue is whether the province is estopped from collecting tax given that the representations relied upon by the Appellant were, in its view, false or inaccurate.

[9]     Based on the evidence, the Commission makes the following findings of the fact:

1.    Mr. James traded his vehicle in the Province of Nova Scotia and returned to the Province of Prince Edward Island to register it with the expectation that he would be paying tax on the net cost after trade-in;

2.    Mr. James' expectation was reasonable. His evidence is that he phoned an agent of Access PEI and was told he would pay tax on the trade difference. His evidence is credible;

3.    Even upon Mr. James being advised on July 31, 2001 that he would be obliged to pay sales tax on the full price of vehicle, he was again mislead when he was permitted to register his motor vehicle in the Province of Prince Edward Island on payment of $99.50, representing the tax due on the net cost after trade-in;

4.    Had Mr. James been advised on July 31, 2001 that his motor vehicle would not be registered unless he paid sales tax on the full amount of the purchase price, he had the option of returning the Saturn motor vehicle to Dartmouth and perhaps purchasing through the Saturn dealer in Prince Edward Island; and

5.    These misleading or false statements by the Province acted to Mr. James detriment.

[10]     The question then arises as to whether the province is estopped from claiming tax. The Appellant's initial position was that the Crown was estopped from claiming tax under the Revenue Tax Act as the Appellant clearly had relied upon representations made to him by agents or servants of the Crown operating within their apparent range of authority.  The Appellant further submitted that these representations were clearly false or inaccurate and that it was reasonable for him to have relied upon them which, in fact, he did to his detriment.

[11]    The Provincial Tax Commissioner has provided the Commission with three cases:

1.       Ludmer et al v. Canada [1995] 2 F.C. 3 (C.A.);
2.       Cohen v. Regina [1980] C.T.C. 318, 80 D.T.C. 6250; and,
3.       Sturdy Truck Body (1972) Ltd. v. Canada  [1995] F.C.J. No. 720

[12]      These cases are advanced by the Provincial Tax Commissioner as authority for the proposition that an estoppel can not arise against the Crown as a result of the actions of its agents and servants and may not even arise based upon a representation of the Minister of the Crown. 

[13]    During the hearing, it was admitted that an estoppel does not bind the Crown when dealing with something that is non-discretionary.  However, the Appellant submits that the payment of this tax is discretionary by reason of Subsection 12(3) of the Revenue Tax Act Regulations, which reads as follows:

The Minister may, when in his opinion a great inconvenience or hardship may result, relax the strictness of this act relative to the incidence or collection of tax thereunder.

[14]    Accordingly, the Appellant relies upon the cases cited by the Provincial Tax Commissioner and requests that the Commission allow the appeal as the Minister has discretion to disallow payment of the tax.

[15]    Subsection 12(3) of the Revenue Tax Act Regulations is undoubtedly a discretionary provision.  However, the Commission is unable to determine how the Appellant could rely on such a provision. The misrepresentations that were made to the Appellant were not made in the context of this provision but were statements that were made regarding the proper interpretation of the statute. 

[16]    It would appear to the Commission that the authority the Appellant is relying upon is that in the Sturdy Truck Body case, which reads a follows (at p.5):

 The courts in recent years have allowed some claims of estoppel to proceed against the Crown. Yet, it is quickly apparent when reading these decisions that estoppel can only lie against the Crown when an exercise of a non-statutory discretion is involved.

[17]    The discretion that is being claimed here would appear to the Commission to be a statutory discretion and thus not be within the principle outlined by Madam Justice Trembly-Lamer in Sturdy Truck Body.

[18]    In the circumstance before us, the Commission finds that the province is not estopped from assessing tax.  Despite the apparent inequity to the Appellant, the case law clearly supports the affirmation of the decision of the Tax Commissioner and the dismissal of the appeal itself. We will so order.

[19]    Having made this determination, the circumstances surrounding this case are, nonetheless, deserving of further comment.

[20]    The difficulties faced by the Appellant in this case present a picture of confusion and mishandling on the part of many of the staff who dealt with the case. According to Mr. James, he was given telephone advice that the only tax due on an out-of-province trade would be on the difference between the trade-in and purchase price of the vehicle. Had the information provider taken the time to ensure the information was accurate, this situation would have been avoided.

[21]    When Mr. James visited the Access PEI site to register his new vehicle, he was given the correct information by the front-line staff.  At this point, the earlier mistake was corrected and Mr. James could have made other arrangements. However, when he complained to a senior staff person, the confusion was compounded.  The correct information was ignored and, for whatever reason, the Access PEI manager agreed to the lower tax.  This was an action completely beyond his authority as a site manager.

[22]    Within three days, a letter was sent from the Manager of Tax Administration and Client Services which included the threat of cancellation of vehicle registration. This was an action beyond the authority of Provincial Treasury.

[23]    Given the above, it is easy to understand why Mr. James would be confused, frustrated and upset.

[24]    This case is a perfect example of the importance of providing accurate information. While it is laudable to be helpful, it is equally important to be accurate.  Improper information can detrimentally impact members of the public.  In this case, improper information will, at a minimum, cost the Appellant $1,100.00.

[25]    In the opinion of the Commission, the assessing of any penalty or interest charge against Mr. James would be inappropriate. Moreover, in our view, additional efforts must be made to ensure that both front-line and more senior members of staff receive better or enhanced training in regard to revenue tax matters.

4.  Disposition

[26]     An order affirming the assessment and dismissing the appeal will therefore be issued

Order

UPON the appeal by Mike James against a decision of the Provincial Tax Commissioner, dated December 11, 2001;

NOW THEREFORE, for the reasons given in the annexed Reasons for Order;

IT IS ORDERED THAT

1.    Notice of Assessment No. 3258 is affirmed; and

2.    the appeal is dismissed.

DATED at Charlottetown, Prince Edward Island, this 18th day of June, 2002.

BY THE COMMISSION:

Maurice Rodgerson, Vice-Chair

James Carragher, Commissioner

Kathy Kennedy, Commissioner

NOTICE

Section 12 of the Island Regulatory and Appeals Commission Act reads as follows:

12. The Commission may, in its absolute discretion, review, rescind or vary any order or decision made by it or rehear any application before deciding it.

Parties to this proceeding seeking a review of the Commission's decision or order in this matter may do so by filing with the Commission, at the earliest date, a written Request for Review, which clearly states the reasons for the review and the nature of the relief sought.

Sections 13.(1) and 13(2) of the Act provide as follows:

13.(1) An appeal lies from a decision or order of the Commission to the Appeal Division of the Supreme Court upon a question of law or jurisdiction.

(2) The appeal shall be made by filing a notice of appeal in the Supreme Court within twenty days after the decision or order appealed from and the Civil Procedure Rules respecting appeals apply with the necessary changes.