Barron v. Minister of National Revenue, 97 DTC 5121, [1997] 2 CTC 198 (FCA)

The judgment of the court was delivered by Pratte J.A.(orally):

This is an appeal from an order of the Trial Division setting aside a decision of the Minister of National Revenue denying the respondents’ request under subsection 152(4.2) of the Income Tax Act [1] to re-open statute barred taxation years to enable them to claim business losses that they had allegedly incurred in those years.

The judge of first instance based his judgment on two main findings, namely, that the Minister’s decision was made unfairly and, second, was erroneous in law since it was contrary to the Minister’s announced policy that, in exercising his discretion under subsection 152(4.2), he would “issue a refund or reduce the amount owed if [he was] satisfied that such a refund or reduction would have been made if the return or request had been filed or made on time.”

The judge’s finding of unfairness was based on his opinion

(1) that the Minister failed to inform the respondents of the factors that he would take into account in evaluating their requests;

(2) that the respondents were not given an opportunity to make representations in support of their requests, and

(3) that the respondents were denied the opportunity “to participate in the proceedings and [...] to confront the case against them.”

The judge concluded that the Minister’s decision was contrary to his announced policy and, for that reason, bad in law because he was of the view that the respondents would have been entitled to deduct their business losses if their requests had been made before the expiry of the three-year period following the date of the assessments.

Before saying why we think that these findings are wrong, it may be useful to recall that subsection 152(4.2) of the Income Tax Act confers a discretion on the Minister and that, when an application for judicial review is directed against a decision made in the exercise of a discretion, the reviewing court is not called upon to exercise the discretion conferred on the person who made the decision. The court may intervene and set aside the discretionary decision under review only if that decision was made in bad faith, if its author clearly ignored some relevant facts or took into consideration irrelevant facts or if the decision is contrary to law.

The judge’s findings that the Minister failed to inform the respondents of the factors that he would take into consideration in exercising his discretion and that he also failed to give them an opportunity to make representations in support of their requests are both clearly contrary to the evidence. The record shows that the respondents were invited by an officer of the Department of National Revenue to take advantage of subsection 152(4.2) and were sent an Information Circular explaining that provision and indicating how the Minister would exercise his discretion. The record also shows that the respondents were given a full opportunity to make representations in support of their requests; true, they were not given the opportunity to make oral representations, but the law is clear that, save in exceptional cases, fairness does not require an oral hearing.

As to the judge’s opinion that the respondents were denied the “right to participate in the proceedings and [...] to confront the case against them,” it results from a complete misunderstanding of the nature of the proceedings (if they can be called proceedings) before the Minister. Those proceedings are not adversarial and if the respondents were not given the opportunity to confront the case against them, it is because there was no such case.

Finally, the judge did not disclose the reasons that led him to conclude that, had it not been for the expiry of the three-year period, the respondents would have been entitled to deduct their business losses; nor did he indicate why the Minister erred in reaching a different conclusion. In any event, the judge’s opinion on the question was of little importance since it was the Minister, not the judge, who was vested with the discretion conferred by subsection 152(4.2) and who had to form an opinion on the point. The Minister’s decision could not be said to be wrong for the sole reason that the judge, on the basis of the fragmentary information before him, would have exercised the discretion in a different manner.

The appeal will be allowed, the decision of the Trial Division set aside, and the respondents’ application for judicial review dismissed.

Appeal allowed.