Suissa v. Canada (Attorney General), 2013 DTC 5158 [at at 6383], 2013 FC 897

 

 

Date: 20130823

Dockets: T-1504-12

T-1505-12

T-1506-12

T-1508-12

T-1509-12

T-1510-12

 

Citation: 2013 FC 897

Ottawa, Ontario, August 23, 2013

PRESENT:    The Honourable Mr. Justice Roy

 

T-1504-12

BETWEEN:

	YANEV SUISSA
		Applicant
	and
	ATTORNEY GENERAL OF CANADA
		Respondent

 

 

T-1505-12

BETWEEN:

	AVITAL SUISSA
		Applicant
	and
	ATTORNEY GENERAL OF CANADA
		Respondent

 

T-1506-12

BETWEEN:

	JUDITH SUISSA
		Applicant
	and
	ATTORNEY GENERAL OF CANADA
		Respondent

 

T-1508-12

BETWEEN:

	LIOR SUISSA
		Applicant
	and
	ATTORNEY GENERAL OF CANADA
		Respondent

 

T-1509-12

BETWEEN:

	DAVID SUISSA
		Applicant
	and
	ATTORNEY GENERAL OF CANADA
		Respondent

 

T-1510-12

BETWEEN:

	EREZ SUISSA
		Applicant
	and
	ATTORNEY GENERAL OF CANADA
		Respondent

 

 

           REASONS FOR JUDGMENT AND JUDGMENT

 

[1]               The applicants are members of the same family. Their applications are identical and, by order of Mr. Prothonotary Morneau, they were heard during one hearing. Judgment will therefore be identical in all six cases, file T-1504-12 being deemed to be the principal file. I will refer throughout these reasons to David Suissa as the principal applicant. David and Judith Suissa are the parents of the other applicants.

 

[2]               These are applications for judicial review, pursuant to s 18.1 of the Federal Courts Act, RSC 1985, c F-7. The applications seek to challenge the decision of the Canada Revenue Agency of July 10, 2012, denying relief from interest and penalty imposed on the applicants.

 

[3]               The applicants are non-resident of Canada and they claim that they have no assets in this country.

 

Facts

[4]               The basic facts of this case are not in dispute. Four properties located on the Island of Montréal were registered in the name of Yale Towers Inc., an entity incorporated in Canada. The applicants concede that David Suissa was responsible on behalf of the family for ensuring compliance with Canadian tax requirements.

 

[5]               Three of the four properties were sold in 2007. The fourth property was sold in 2009. All four were sold at a loss.

 

[6]               Section 116 of the Income Tax Act, RSC 1985, c 1 (5th Supp) (ITA) provides that, on the disposition of certain property by non-residents, the Minister of National Revenue may be notified before the disposition and must be notified after the disposition. The applicants do not deny that they have run afoul of the provision. They take issue though with the penalties that were imposed in each individual file.

 

[7]               The failure to notify the Minister resulted in penalties being imposed in accordance with subsection 162(7) of the ITA. The applicants, in each of these cases, were assessed three penalties of $2500 in respect of the properties disposed of in 2007 and of $2500 for the disposition of the property in 2009.

 

[8]               The applicants sought to avail themselves of the relief made available by subsection 220(3.1) of the ITA. On October 7, 2011, the remedy was denied. Upon reconsideration, the same decision was made on July 10, 2012; the decision was taken that reconsideration was not warranted. This is the decision the applicants wish to see overturned on judicial review. (The text of the provisions is appended hencewith in Schedule l).

 

Decision under review

[9]               The request made on May 3, 2011 to cancel the penalty and interest was denied on October 7, 2011. The reason given was that it did not qualify under guidelines found in Circular IC07-1, Taxpayer Relief Provisions, for cancellations of interest and penalties. A more fulsome reply came from André St-Amand, the Assistant Director of the Audit Division in Montréal, on July 10, 2012.

 

[10]           The reply notes that the relief is available where, through no fault of their own, taxpayers find themselves in extraordinary circumstances, or the penalty or interest is due mainly to the actions of CRA. However, the reply stresses that, in a system of self-assessment as the one applicable in Canada, the taxpayer is responsible for filing returns that are true, correct and complete. As a result, CRA considers there are no extraordinary circumstances and that neither errors nor delays on the part of CRA would justify granting the relief sought. In the words of         Mr. St-Amand, “(A) taxpayer is considered to be responsible for errors made by third parties acting on their behalf for income tax purposes”.

 

Standard of review

[11]           The parties are in agreement that the standard of review applicable in the circumstances is reasonableness. It follows that they agree that the applicants have the burden of satisfying the Court, on a balance of probabilities, that the decision rendered is not within a range of possible and acceptable outcomes. The often quoted paragraph 47 of Dunsmuir v New Brunswick, 2008 SCC, [2008] 1 S.C.R. 190, is worth repeating:

[47]   Reasonableness is a deferential standard animated by the principle that underlies the development of the two previous standards of reasonableness: certain questions that come before administrative tribunals do not lend themselves to one specific, particular result. Instead, they may give rise to a number of possible, reasonable conclusions. Tribunals have a margin of appreciation within the range of acceptable and rational solutions. A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

 

Arguments

[12]           The applicants raise three issues:

(a)          Did the CRA err by misapprehending the scope of its discretion authorized by subsection 220(3.1) of the ITA?

 

(b)         Was the decision of the CRA reasonable?

 

(c)          Did the CRA fail to respect the rules of natural justice by rendering a decision without giving the chance to the applicant to respond and provide more explanations as to the reasons for the refusal of the request for relief of penalties and interest?

 

[13]           Basically, the applicants claim that the decision-maker unduly fettered his discretion in the application of subsection 220(3.1). They note that Circular IC07-1 allows for a departure from the grounds stated by Mr. St-Amand. Indeed, they point to paragraphs 23, 24 and 25 of the Circular as allowing a measure of flexibility that, on its face, was not used by the decision-maker. Paragraphs 23 to 25 of the Circular read as follows:

[14]           From there, the contention is that the decision-maker did not act reasonably in refusing, given the circumstances of this case, to grant relief. These circumstances are summarized in the following way:

a.       the properties were registered under the name of Yale Towers Inc., a Canadian corporation;

b.      there was a misunderstanding or miscommunication with the notaries involved in the transactions and the local property manager failed to ensure compliance;

c.       the principal applicant was not informed that he had to notify the Minister, such that the lack of notification about the disposition of one property in 2009 could have been averted;

d.      capital losses were incurred for each disposition;

e.       Judith Suissa had cancer in 2007.

 

[15]           Finally, the applicants contend that there was a lack of procedural fairness in that they were not afforded an opportunity to provide further submissions prior to the decision being made. There was not much written in the applicants’ memorandum of fact and law with respect to that argument, and even less so during the hearing. Suffice it to say that the applicants were right not to dwell on that last argument.

 

[16]           The respondent counters that the issue of the cancer suffered by one of the applicants, Judith Suissa, cannot be invoked ex post facto. A judicial review is limited to the record before the decision-maker at the time. Here, the matter was never raised.

 

[17]           As for the other grounds that were raised by the applicants, the respondent contends that they merely disclose that the principal applicant relies on third parties, whether they be four different notaries or a property manager, and it is not possible for a tax-payer to rely on the action of third parties in order to escape responsibility. Relying further on the fact that the four dispositions of property resulted in capital losses in the four cases carries little weight.

[18]           In the circumstances, the decision of July 12, 2012 is reasonable concludes the respondent.

 

Analysis

[19]           The procedural fairness ground can be dealt with quickly. The applicants made submissions in May 2011 and in February 2012; indeed their representative spoke with a CRA official familiar with the case.

 

[20]           The issue is not whether procedural fairness was owed to the applicants. No doubt that such duty is owed. But it has been said that “(I)ts principal purpose is to provide a meaningful opportunity for those interested to bring evidence and arguments that are relevant to the decision to be made to the attention of the decision-maker, and correlatively, to ensure that the decision-maker fairly and impartially consider them” (D.J.M. Brown and J.M. Evans, Judicial Review of Administrative Action in Canada, loose-leaf updated July 2008 (Toronto: Canvasback, 1998) ch 7:3110). The applicants made their submissions; that does not include a right to have a continuing dialogue.

 

[21]           I believe the issue raised around the illness of one of the applicants can also be dealt with quickly. It was not raised in due course and it is certainly difficult to argue with any success that an issue not before a decision-maker could ever make the decision not reasonable:

[31]   When, as in the present case, a consideration is not squarely presented to a decision-maker, it will be difficult to establish on judicial review that a failure to deal with it in the reasons for decision so deprives the process of “justification, transparency and intelligibility” as to render it unreasonable.

 

(Telfer v Canada (Revenue Agency), 2009 FCA 23 para 31, [2009] FCJ No 71 (QL))

(See also 334156 Alberta Ltd v Canada (Minister of National Revenue – MNR) 2006 FC 1133, [2006] FCJ No 1430 (QL))

 

[22]           But there is more. The applicants argue that they relied on third parties for compliance. The reliance on the unfortunate illness of one of the applicants not only comes to this Court as an afterthought, well after the challenged decision had been rendered, but there appears to be a measure of incompatibility between the two. Either the principal applicant relied on third parties because, as has been argued, he was an unsophisticated taxpayer, especially in view of the fact that he was a non-resident, or he was distracted during that period. At no time did the principal applicant resile from the third-party responsibility for the tax issues encountered in Canada. Clearly, in my view, he was counting on the experts he had retained and it is that reliance on those experts that is at the heart of his contention that relief ought to be granted. Surely the illness of his wife was an ordeal, but he cannot argue that it was the reason for the notice not having been given, at the same time as he is claiming that he was relying on hired expertise.

 

[23]           There is in the material made available by the applicants a letter sent on April 1, 2011, by counsel for the applicants to the International Tax Services office of the Canada Revenue Agency for the purpose of seeking an extension of time for making a tax return under ss 216(4) of the ITA. One reason raised for the extension is that Judith Suissa suffered from cancer. The applicants did not raise this matter in their attempt to have relief from the penalties imposed, in spite of the fact that the same counsel communicated twice to the Canada Revenue Agency that relief was sought for reasons described in those letters.

 

[24]           The more difficult issue, in my estimation, remains whether the decision to deny any relief was reasonable. Undoubtedly the applicants are right in arguing that the discretion to be exercised by the decision-maker is not to be fettered by Circular IC07-1 (see Nixon v Canada (Minister of National Revenue –MNR), 2008 FC 917, [2008] FCJ No 1146 (QL)). Indeed the Circular makes that point abundantly clear (see paragraph 24 of the Circular).

 

[25]           But the real question is not whether or not the discretion is fettered. It is rather what would make the exercise of discretion reasonable and, in that context, what is the use that can be made of the Circular.

 

[26]           A decision of this Court may be of assistance in considering what role can be played by the Circular. In Spence v Canada (Revenue Agency), 2010 FC 52, [2010] FCJ No. 51 (QL), my colleague Justice O’Keefe described Circular IC07-1 thus:

[24]   In general, guidelines such as the taxpayer relief provisions are not law, but can be very beneficial to both decision makers and members of the public to the extent that they provide for more organized analysis and reasons and enhance the level of consistency and accountability to the public: see D.J. M. Brown, and J.M. Evans. "Judicial Review of Administrative Action in Canada". Toronto: Canvasback, 1998 (loose-leaf updated July 2008) at p. 12:44. Some statutes in fact confer the authority to formulate legally binding rules or guidelines. Where that is not the case, guidelines can still be considered in the process and can even be determinative, provided the decision maker puts his or her mind to the specific circumstances of the case and does not treat the guidelines as binding (see Maple Lodge Farms Ltd. v. Canada, [1982] s S.C.R. 2).

 

[25]   In reality, many discretionary decision makers will be government employees who may be required to follow non-legal rules or guidelines by their employer. However, even if employees face such constraints, the law does not permit the decision maker to treat the guidelines as binding upon the individual requesting relief, in this case, the applicant taxpayer. Most guidelines remedy this conundrum and eliminate the possibility that a decision maker would have to choose between disobeying their employer and erring in law. For example, the taxpayer relief provisions contain a statement in their introducing paragraphs which reads:

 

6. These are only guidelines. They are not intended to be exhaustive, and are not meant to restrict the spirit or intent of the legislation. [my emphasis]

 

[26]   This paragraph assures the reader that the guidelines are not law. As we shall see, there are additional provisions within the guidelines that allow for flexibility. Even if the guidelines were elevated to the status of binding law, they would provide for the possibility of relief in the applicant's situation.

 

                                                                                    (Emphasis in original)

 

[27]           More recently yet, the Supreme Court of Canada provided further guidance as to the use that can be properly made by decision-makers in the context of administrative law decisions of instruments that are not binding in law.

 

[28]           In the case of Agraira v Canada (Public Safety and Emergency Preparedness), 2013 SCC 36, [2013] SCJ No 36, it was the interpretation of the words “national interest” in subsection 34(2) of the Immigration and Refugee Protection Act, SC 2001, c 27 that was an issue. Mr. Agraira was denied relief against a finding of inadmissibility under subsection 34(2) because it was deemed not to be in the national interest to do so.

 

[29]           The Inland Processing Manual: “Refusal of National Security Cases/Processing of National Interest Requests”, referred to as the Guidelines, prepared by Citizenship and Immigration Canada, was used in order to help to determine what would be relevant and reasonable in reaching a decision as to when ministerial relief would be appropriate. Here is how the Court describes the use that can be made of those Guidelines:

[60]   The Guidelines did not constitute a fixed and rigid code. Rather, they contained a set of factors, which appeared to be relevant and reasonable, for the evaluation of applications for ministerial relief. The Minister did not have to apply them formulaically, but they guided the exercise of his discretion and assisted in framing a fair administrative process for such applications. As a result, the Guidelines can be of assistance to the Court in understanding the Minister's implied interpretation of the "national interest"

 

[30]           As the Supreme Court of Canada put it, the Guidelines cannot be applied formulaically, but they guide the exercise of discretion. However, the Guidelines would not appear to exclude other considerations:

[62]   Taking all the above into account, had the Minister expressly provided a definition of the term "national interest" in support of his decision on the merits, it would have been one which related predominantly to national security and public safety, but did not exclude the other important considerations outlined in the Guidelines or any analogous considerations (see Appendix 1 (the relevant portions of the Guidelines)).

 

[31]           Circular IC07-1 would appear to provide the same kind of guidance. It tells taxpayers of important factors that will be taken into account when exercising the discretion afforded by legislation in ss 220(3.1) of the ITA. There may be others, but the decision-maker will be entitled to deference in making his determination of when the discretion is to be exercised.

 

[32]           In making its assessment of the exercise of discretion, the reviewing court will consider the record as a whole. In Construction Labour Relations v Driver Iron Inc, 2012 SCC 65, [2012] 3 S.C.R. 405, one can read:

[3] … administrative tribunals do not have to consider and comment upon every issue raised by the parties in their reasons. For reviewing courts, the issue remains whether the decision, viewed as a whole in the context of the record, is reasonable (Newfoundland and Labrador Nurses’ Union v. Newfoundland and Labrador (Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708 [para. 3].

 

[33]           In the case at bar, the record shows that the matter was reviewed carefully before the decision was made on July 10, 2012. Exhibit G to the affidavit of the decision-maker constitutes the analysis made in support of the decision. The arguments raised by the applicants are listed and reviewed. The decision-maker concludes that the applicants have been negligent or careless under a system of self-assessment and that the “taxpayer is considered to be responsible for errors made by third parties acting on their behalf for income tax matters”. I find myself incapable to conclude that, in view of the deference owed to the decision-maker, the decision is not reasonable as falling outside a range of possible and acceptable outcomes. The Circular is certainly a factor of significant importance in the decision. But in view of the record that shows that the decision-maker took into account everything that was in front of him, I fail to see how the test of reasonableness is not met.

 

[34]           The applicants rely on Société Angelo Colatosti Inc. v Canada (Attorney General), 2012 FC 124, [2012] FCJ 140 (QL), and particularly paragraph 30 which reads:

[30]   Subsection 220(3.1) of the ITA gives the Minister discretion. Although the Minister's delegate may rely on principles set out in an information circular or in guidelines, such policy statements cannot and should not limit the Minister's discretion. In this case, the Assistant Director's decision said nothing about subsection 220(3.1) of the ITA and simply stated the three circumstances provided in the Information Circular. Thus, he seems to have limited his review to the circumstances provided in the Information Circular. However, even paragraph 35 of the Information Circular states that the Minister has residual discretion to grant relief when the request is based on a third party's error in "extraordinary situations". In this case, the applicant not only relied on a third party's error; it relied on an entire set of circumstances that would explain and warrant its request for relief and the Assistant Director did not address these circumstances in his decision. Therefore, in the decision, nothing was indicated that allowed us to see whether the Assistant Director reviewed the circumstances relied on by the applicant in support of its request. If, however, this analysis was done, I find that the Assistant Director's decision did not provide sufficient reasons to understand its basis; we know absolutely nothing about why he found that the circumstances relied on were not extraordinary.

 

The difference between paragraph 30 and the case at hand is, of course, that here every argument put forward by the applicants was considered.

 

[35]           I cannot find any evidence that the decision-maker fettered his discretion. The arguments advanced on behalf of the applicants were examined and I cannot see how it can be said that the discretion was fettered where arguments are addressed. It cannot be that a refusal to exercise discretion in any given case would be confirmation that discretion was fettered. The discretion could be considered to be fettered if a decision-maker refused to consider arguments because they do not fit neatly within the four corners of the Circular. I have not been able to find evidence of such an approach in this case.

 

[36]           The applicants had the burden of convincing the Court that the imposition of the penalties was not reasonable in the circumstances of the case. That burden has not been discharged in view of the deference owed the decision-maker.

 

[37]           Once it is established that the discretion found in ss 220(3.1) of the ITA has not been exercised inappropriately, penalties are imposed by operation of law. Subsection 162(7) provides for the penalty: as a result, a penalty of $2500 is imposed for each property subject to s. 116 of the ITA, for a total of $10,000 per applicant.

 

[38]           The Court is seized with six different applications for judicial review with respect to six decisions made. In each case, the applicant seeks relief on the basis of an aggregate of factors that is claimed to amount to an unreasonable decision. As I have endeavoured to show, each applicant fails because it has not been shown that, in each case, the decision does not meet the Dunsmuir test.

 

[39]           I am sympathetic to the plight of the Suissa family in this matter. Because they each have an interest in the properties sold, they are imposed a penalty of $10,000 each (plus interest), instead of a grand total of $10,000 had there been only one owner. As I have indicated that is as a result of ss 162(7) of the ITA which provides for the penalty to be imposed and which comes to $2500 by disposition. The Taxpayer Relief Decision Report in support of the decision of July 10, 2012, suggests clearly that the Suissa family found the penalty to be excessive in the aggregate.

 

[40]           I, too, find the penalty quite severe in the circumstances. The lack of diligence of the principal applicant translates into penalties for five other members of the same family. Had there been even more members of the family with a small interest in the property, it would appear that they would have been imposed the same penalty. There does not appear to be a form of proportionality in the imposition of the penalties.

 

[41]           However, the Court is limited by the fact that the cumulative effect is, as a matter of law, not before it. Each applicant argued that the penalty was too high because of the circumstances that were presented at the time. Indeed, each application for relief was examined on that basis. In each of the six cases before the Court, taken individually, the discretion was applied reasonably. The decision-maker was reasonably of the view that the circumstances invoked by the applicant in each case were sufficient in view of the lack of diligence. The obligation is on the shoulder of a taxpayer; it cannot be transferred onto the shoulders of third parties if the ITA is to be enforced. The respondent argued that the case of Stemijon Investments Ltd et al v Canada (Attorney General), 2011 FCA 299, 2011 DTC 5169, is dispositive of the issue. Paragraph 51 was quoted:

[51]   The appellants also argued that it is unfair for the Minister to levy six separate, sizeable penalties against the six appellants when there was really only one mistake made by their one common representative. The appellants contended that the penalties should be substantially reduced for that reason. This argument, smacking of a plea for a "volume discount," has no merit. Each of the appellants is a separate legal entity and a separate taxpayer, potentially subject to penalties and interest for its own non-compliance. Each is capable of independent decision-making concerning the forms that are to be filed. Each, accepting the risk, chose instead to have a representative look after the filings. That risk materialized: their representative made a conscious decision not to file the forms, a decision made without reasonable excuse or justification, as explained above. Granting relief under subsection 220(3.1) on the basis of this argument would be an unreasonable exercise of discretion.

 

The difference between Stemijon and the case at bar is that the other five taxpayers are not all capable of making their own decisions, each accepting the risk. I would not call the attempt made by the Suissa family a plea for “volume discount” because of that difference between the two sets of circumstances.

 

[42]           As I have tried to explain in these reasons, the decision-maker made six different decisions which, in view of the full record before the Court and that was in support of the decisions (not ex post facto), were reasonable in each individual case, and that considered all of the circumstances, including of course ensuring that the law is enforced, thus not fettering the discretion that exists at law. In other words, I am satisfied that, as a matter of law, the decision-maker considered the matter without fettering the discretion in each individual case and that, in each case, the decision was reasonable. The issue is not so much individual cases as the accumulation of the six decisions on one family.

 

[43]           There are six individual decisions before the Court, each of which is reasonable on its own terms. The penalties in each decision are provided by law: no relief is afforded. The accumulation of penalties in one single family is not a matter that is before this Court. It is rather the six individual decisions that are before the Court.

 

[44]           I find myself in general agreement with the tenor of the comments made by Justice Jorré of the Tax Court of Canada, in Lipson v Canada, 2012 TCC 20 at paras 35 to 42, [2012] TCJ No 13. Although these paragraphs are in the nature of observations they make the point that “(S)uch penalties seem unduly higher in the circumstances know to me and it is hard to imagine how such high penalties enhance compliance with the Act” (para 37).

 

[45]           But there remains the fact that penalties are imposed on each of the six members of one single family who evidently did not have a say in the matter. And all of this because they have an interest in the properties sold, at a loss. Despite the conclusion reached as a matter of law in each of the six applications for judicial review taken individually, I would urge the respondent to consider providing some relief, through remission or otherwise, given the particular circumstances of this case. It would seem excessive to impose penalties, which although reasonable on an individualized basis, end up penalising unduly, in my view, a family by operation of law. There exist mechanisms in our law to allow for a more perspicacious enforcement of penalties. The circumstances of this case may command themselves to the use of those tools.

 

JUDGMENT

THIS COURT’S JUDGMENT is that the six applications for judicial review in the cases T-1504-12, T-1505-12, T-1506-12, T-1508-12, T-1509-12 and T-1510-12 are dismissed. There will be no order for costs.

 

 

“Yvan Roy”

Schedule 1

 

 

Federal Courts Act, RSC 1985 c F-7

 

 

 

Income Tax Act, RSC 1985, c 1 (5th Supp.)

 

FEDERAL COURT

 

SOLICITORS OF RECORD

 

 

DOCKETS:                                       T-1504-12, T-1505-12, T-1506-12,

                                                            T-1508-12, T-1509-12, T-1510-12

 

 

STYLE OF CAUSE:                        Yanev Suissa

                                                            v. Attorney General of Canada

                                                            Avital Suissa

                                                            v. Attorney General of Canada

                                                            Judith Suissa

                                                            v. Attorney General of Canada

                                                            Lior Suissa

                                                            v. Attorney General of Canada

                                                            David Suissa

                                                            v. Attorney General of Canada

                                                            Erez Suissa

                                                            v. Attorney General of Canada

 

 

PLACE OF HEARING:                  Montréal, Quebec

 

DATE OF HEARING:                    June 11, 2013

 

REASONS FOR JUDGMENT:      ROY J.

AND JUDGMENT

 

DATED:                                            August 23, 2013

 

 

 

APPEARANCES:

 

Michael Leibov	FOR ALL APPLICANTS
Louis Sébastien	FOR THE RESPONDENT

 

 

 

 

 

 

SOLICITORS OF RECORD:

 

BCF LLP Montréal, Quebec	FOR ALL APPLICANTS
William F. Pentney Deputy Attorney General of Canada	FOR THE RESPONDENT