Date: 20060929
Docket: T-1122-05
Citation: 2006 FC 1164
BETWEEN:
ROBIN AND MERRILEA YOUNG
Applicants
and
THE ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR
ORDER
GIBSON J.
I. Introduction
[1]
These
reasons follow the hearing at Kamloops, British Columbia, on September 21,
2006, of a single application for judicial review of two decisions of an
officer of the Canada Revenue Agency (the “Officer”) on behalf of the Minister
of National Revenue, denying at the second level requests for relief from
penalties and interest accumulated in respect of, in the case of Robin Young,
his 1998, 1999, 2000, 2001 and 2002 taxation years and, in the case of Merrilea
Young, in respect of her 1999, 2000 and 2001 taxation years.
[2]
Robin
and Merrilea Young are husband and wife. Their requests for relief arise out of
identical fact situations. While the general rule is one decision - one
application for judicial review, on the facts of this matter significant
efficiency and no added complexity flowed from review of the two decisions in a
single application and hearing. The Respondent took no objection.
[3]
The
named Respondent on this application for judicial review was originally the
Canada Customs and Revenue Agency, now the Canada Revenue Agency. Counsel for
the Respondent, at hearing, requested that the style of cause be amended to
reflect the Attorney General of Canada as Respondent. The Applicants, who very
effectively and efficiently represented themselves at the hearing, took no
objection to the change in the style of cause. Thus, the requested amendment
has been incorporated in these reasons.
[4]
At
the close of hearing, I advised the Applicants and counsel for the Respondent
that the application for judicial review would be dismissed and briefly
outlined my reasons. I advised that these written reasons would follow.
II. Background
[5]
In
1996, the Applicants lived in Tsawwassen, British Columbia. Both
worked full-time. They had two young children. They had two investment
properties. The Applicants were anxious to change their lifestyle in order to
be able to spend more time with their children.
[6]
In
December 1996, Robin Young purchased all of the shares of Adams Lake Towing
Ltd. of Chase,
British
Columbia.
Together with their children, the Applicants moved to Adams Lake and thus
gave up their employments in Tsawwassen.
[7]
To
achieve the purchase of the shares of Adams Lake Towing Ltd., the Applicants
incurred substantial debt obligations. They were able to do so with the help of
Robin’s father and by using for collateral a boat that Robin operated on the Fraser River. They did
not sell their investment properties.
[8]
Robin
took over responsibility for the day-to-day operations of Adams Lake Towing
Ltd. His father became the Controller of the company. Merrilea Young undertook
some bookkeeping for the company “…in the way of keeping track of the Petty
Cash expenditures and sending the information to [Robin’s father] in
Tsawwassen.”
[9]
Robin’s
parents were aging. While Robin’s father assured the Applicants that his health
condition did not impair his ability to function as Controller of the company,
in fact, he fell into arrears in the performance of his responsibilities. Robin
found that he was required to spend substantial amounts of time commuting from Adams Lake to
Tsawwassen to support his parents. In the result, he was not able to spend the
amount of time that the Applicants found to be required to operate the company.
In the years here at issue, the company was not profitable. Debt obligations
mounted. The stress on the Applicants increased.
[10]
Despite
their difficulties, the Applicants continued to file their tax returns on time.
They consulted with officials at the Canada Revenue Agency and were advised
that, if they were unable to fulfill all of their tax obligations, they should concentrate
on keeping the company current in its obligations. They accepted this advice
and, while the company remained current in its obligations, the Applicants’
personal obligations, other than the regular filing of returns, fell into
arrears. Thus, by the time they applied for “fairness relief”, accumulated
interest and penalties totalled $27,064.28.
III. The Legislative Scheme
[11]
The
“fairness program” under the Income Tax Act (the “Act”) is founded on
subsection 220(3.1) of that Act which reads as follows:
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220. (3.1) The Minister may at any time waive or
cancel all or any portion of any penalty or interest otherwise payable under
this Act by a taxpayer or partnership and, notwithstanding subsections 152(4)
to 152(5), such assessment of the interest and penalties payable by the
taxpayer or partnership shall be made as is necessary to take into account
the cancellation of the penalty or interest.
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220. (3.1)
Le ministre peut, à tout moment, renoncer à tout ou partie de quelque
pénalité ou intérêt payable par ailleurs par un contribuable ou une société
de personnes en application de la présente loi, ou l'annuler en tout ou en
partie. Malgré les paragraphes 152(4) à (5), le ministre établit les
cotisations voulues concernant les intérêts et pénalités payables par le
contribuable ou la société de personnes pour tenir compte de pareille annulation.
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[12]
The
discretion of the Minister under subsection 220(3.1) of the Act may be
delegated by virtue of subsection 220(2.01). It was not in dispute in this
matter that the Officer who made the decisions denying the Applicants’ requests
was appropriately designated to do so on behalf of the Minister.
[13]
The
broad discretionary authority vested in the Minister under subsection 220(3.1)
of the Act is supplemented by Information Circular IC-92-2 dated March
18, 1992, and entitled “Guidelines for the Cancellation and Waiver of Interest
and Penalties”.
[14]
Sections
5, 6 and 7 of the Guidelines read as follows:
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…
5. Penalties and interest may be waived or
cancelled in whole or in part where they result in circumstances beyond a
taxpayer’s or employer’s control. For example, one of the following
extraordinary circumstances may have prevented a taxpayer, a taxpayer’s
agent, the executor of an estate, or an employer from making a payment when
due, or otherwise complying with the Income Tax Act:
(a) natural or human-made disasters such as, flood
or fire;
(b) civil disturbances or disruptions in services
such as, a postal strike;
(c) a serious illness or accident; or
(d) serious emotional or mental distress such as,
death in the immediate family.
6. Cancelling or waiving interest or penalties may
also be appropriate if the interest or penalty arose primarily because of
actions of the Department, such as:
(a) processing delays which result in the taxpayer
not being informed, within a reasonable time, that an amount was owing;
(b) material available to the public contained
errors which led taxpayers to file returns or make payments based on
incorrect information;
(c) a taxpayer or employer received incorrect
advise such as in the case where the Department wrongly advises a taxpayer
that no instalment payments will be required for the current year;
(d) errors in processing; or
(e) delays in providing information such as the
case where the taxpayer could not make the appropriate instalment or arrears
payments because the necessary information was not available.
7. It may be appropriate, in circumstances where
there is an inability to pay amounts owing, to consider waiving or canceling
interest in all or in part to facilitate collection. For example,
(a) When collection has been suspended due to an
inability to pay.
(b) When a taxpayer is unable to conclude a
reasonable payment arrangement because the interest charges absorb a
significant portion of the payments. In such a case, consideration may be
given to waiving interest in all or in part for the period from when payments
commence until the amounts owing are paid provided the agreed payments are
made on time.
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…
5. Il
sera convenable d’annuler la totalité ou une partie des intérêts ou des
pénalités, ou de renoncer à ceux-ci, si ces intérêts ou ces pénalités
découlent de situations indépendantes de la volonté du contribuable ou de
l’employeur. Voici des exemples de situations extraordinaires qui pourraient
empêcher un contribuable, un agent d’un contribuable, l’exécuteur d’une
succession ou un employeur de faire u paiement dans les délais exigés ou de
se conformer è d’autres exigences de la Loi de l’impôt sur le revenu :
a) une
calamité naturelle ou une catastrophe provoquée par l’homme comme une
inondation ou un incendie;
b) des
troubles civils ou l’interruption de services comme une grève des postes.
c) une
maladie grave ou un accident grave;
d) des
troubles émotifs sérieux ou une souffrance morale grave comme un décès dans
la famille immédiate.
6. L’annulation
des intérêts ou des pénalités ou la renonciation à ceux-ci peuvent également
être justifiées si ces intérêts ou pénalités découlent principalement
d’actions attribuables au Ministère comme dans les cas suivants :
a) des
retards de traitement, ce qui a eu pour effet que le contribuable n’a pas été
informé, dans un délai raisonnable, de l’existence d’une somme en souffrance;
b) des
erreurs dans la documentation mise à la disposition du public, ce qui a amené
des contribuables à soumettre des déclarations ou à faire des paiements en se
fondant sur des renseignements erronés;
c) une
réponse erronée qu’un contribuable ou un employeur a reçue concernant une
demande de renseignements comme dans le cas où le Ministère a informé par
erreur un contribuable qu’aucun acompte provisionnel n’est nécessaire pour
l’année en cours;
d) des
erreurs de traitement;
e) des
renseignements fournis en retard comme dans le cas où un contribuable n’a pus
faire les paiements voulus d’acomptes provisionnels ou d’arriérés parce qu’il
n’avait pas les renseignements nécessaires.
7. Il
peut être convenable dans des situations où il y a incapacité de verser le
montant exigible d’examiner la possibilité de renoncer ou d’annuler la
totalité ou une partie des intérêts afin d’en faciliter le recouvrement, par
exemple dans les cas suivants :
a) lorsque
les mesures de recouvrement ont été suspendues à cause de l’incapacité de
payer;
b) lorsqu’un
contribuable ne peut conclure une entente de paiement qui serait raisonnable
parce que les frais d’intérêts comptent pour une partie considérable des
versements; dans un tel cas, il faudrait penser à renoncer à la totalité ou à
une partie des intérêts pour la période où les versements débutent jusqu’à ce
que le montant exigible soit payé pourvu que les versements convenus soient
effectués à temps.
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[15]
In
short, the Guidelines provide for waiver or cancellation of penalties and
interest where the penalties and interest have accumulated, in whole or in
part, as a result of “…circumstances beyond the taxpayer’s …control”, where
penalties and interest have accumulated “…primarily because of actions of the
Department, …” which is to say the Canada revenue Agency or where waiver or cancellation
will “facilitate collection”.
[16]
On
the facts of this matter, the Applicants urge that their accumulated penalties
and interest should have been waived because the accumulation resulted from
circumstances beyond their control, namely, the serious illnesses of Robin’s
parents, in particular his father, and because of the serious emotional and
mental distress that they were experiencing by reason of the illnesses of
Robin’s parents and eventually the death of Robin’s father, as well as by
reason of their efforts to manage the debt load they were experiencing.
Further, the Applicants urge that they received “incorrect advice” from the
Canada Revenue Agency when they were advised to give priority to the
obligations of their company rather than to their personal obligations. I do
not interpret this latter submission as having been strongly pursued.
Certainly, the advice provided and followed worked to protect the Applicants’
principal source of income on a day-to-day basis and for the longer term.
[17]
The issue
of waiver to “facilitate collection” does not here arise.
IV. The Issues
[18]
In
the Applicants’ memorandum of fact and law, only a single issue was identified
and that in the following terms:
As
far as the Applicants are concerned, the only point in issue in these
proceedings is whether or not Canada Customs and Revenue Agency should have
exercised their discretion in favour of the Applicants under the fairness
provisions found in information circular IC-92-2 to cancel penalties and
interest.
[19]
In
the Respondent’s memorandum of fact and law, in addition to raising the issue
of standard of review, counsel described the issue before the Court in the
following terms:
Did
the Minister discharge his duty to act fairly in exercising his discretion
under subsection 220(3.1) of the Act to deny the Applicants’ Second Fairness
Request?
V.
Analysis
A.
Standard of Review
[20]
I am
satisfied that the appropriate standard of review of the decisions here before
the Court is reasonableness simpliciter. In Dort Estate v. Canada (Minister of National
Revenue), my colleague Justice
Sean Harrington wrote at paragraph 8 of his reasons:
In
accordance with the decisions of the Supreme Court in Dr. Q. v. College of
Physicians and Surgeons of British Columbia,…and Law Society of New
Brunswick v. Ryan, …the judicial review of decisions of administrative
tribunals must be approached functionally and pragmatically. Depending on the
circumstances, the applicable standard of review is correctness,
unreasonableness or patent unreasonableness. In Lanno v. Canada (Customs and Revenue Agency),…the Federal Court of Appeal overruled
the trial judge who had applied the standard of patent unreasonableness, and
held that the appropriate standard was reasonableness. The decision under
review in that case was a decision of a tax official not to exercise his
discretion under section 152(4.2) of the Act so as to permit the reassessment
of Mr. Lanno’s returns beyond the normal reassessment period, which
reassessment would have resulted in a refund. That section, like the section in
question in this case, section 220(3.1), was part of the Fairness Package which
was introduced in 1991. Mrs. Dort submitted that a discretionary decision with
respect to the waiver of interest is likewise subject to a reasonableness
standard of review. That submission is correct. The Federal Court of Appeal has
just recently specifically extended Lanno,…to section 220(3.1) of the Income
Tax Act (Comeau c. Agence des douanes et du Revenue du Canada….
[citations omitted]
[21]
The
reasonableness or reasonableness simpliciter standard provides that a
court should not interfere with the decision unless it is clearly wrong in the
sense of being based on a wrong principle or a misapprehension of the facts. An
unreasonable decision is one that, in the main, is not supported by any reasons
that can stand up to a somewhat probing examination. However, a reasonable
decision is not necessarily a correct decision, and there can be more than one
reasonable decision arising out of the application of a discretionary provision
of law to a particular fact situation.
B. Application of the Standard of Review to
the Decisions under Review
[22]
As
indicated earlier in these reasons, the two decisions here under review arise
out of a single factual background. The Applicants were faced with very
substantial financial pressures arising out of a heavy debt load, voluntarily
assumed, and personal obligations arising from the aging of Robin’s parents,
associated illnesses and the eventual death of Robin’s father. I accept without
question that the conjunction of these pressures could well result in serious
emotional and mental distress for the Applicants. That being said, I find the
following extract from paragraph 60 of the reasons of my colleague Justice
James Russell in Neilans v. Canada (Attorney General) to be directly on
point:
Ms.
Neilans finds the situation she is faced with to be a harsh one. She feels she
has paid enough. But the regime under which she labours is equally applicable
to all Canadian taxpayers. Her hardships are the result of decision[s] that she
has freely made. She created the problem by not filing tax returns and not
paying tax….
As with Ms. Neilans, the situation that the
Applicants faced was a harsh one. But once again as in the case of Ms. Neilans,
the Applicants’ hardship was the result of decisions freely made to change
their lifestyle by acquiring a business, to support Robin’s parents in their
time of need, to direct what limited resources were available to them to the
payment of debts other than their personal income tax obligations, and to
preserve, as long as they could, their investment properties against
liquidation or refinancing until it became no longer feasible to do so.
[23]
One
can certainly sympathize with the Applicants in their decision to change their
lifestyle. One can further admire the Applicants with their determination to
support Robin’s parents in their time of need, even at the expense of being
able to devote the time and attention to the affairs of their business when it
cried out for their time and attention. The choice of directing resources to
certain debts in priority to their tax debt obligations was a voluntary one.
One can speculate that other creditors might not have waived penalty and
interest obligations if the Applicants had made other choices.
[24]
In
effect, the Applicants chose to “borrow from Peter to pay Paul” where Peter was
the Minister of National Revenue. They chose to do so under a regime equally
applicable to all Canadian taxpayers.
[25]
In
all of the circumstances here before the Court, I am satisfied that, against a
standard of review of reasonableness simpliciter, the decisions under
review must stand. Put another way, the decisions under review are supported by
reasons that can stand up to a somewhat probing examination. They are not
decisions that are clearly wrong in the sense of being based on a wrong
principle or on a misapprehension of the facts.
VI. Conclusion
[26]
Based
on the foregoing brief analysis, this application for judicial review will be
dismissed. Notwithstanding the request on behalf of the Respondent for costs
against the Applicants, I exercise my discretion in that regard to decline to
provide any order as to costs.
“Frederick E.
Gibson”
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