Netupsky v. Canada (Customs and Revenue Agency), 2003 FCT 578

Date: 20030508

Docket: T-1900-01

Neutral citation: 2003 FCT578

BETWEEN:

                                                                 BORIS NETUPSKY

                                                                                                                                                       Applicant

                                                                              - and -

                                                        HER MAJESTY THE QUEEN

                                                                                                                                                   Respondent

                                                            REASONS FOR ORDER

GIBSON J.

INTRODUCTION

[1]                 These brief reasons arise out of an application for judicial review of a decision of an officer of the Canada Customs and Revenue Agency ("CCRA") wherein the officer upheld an earlier decision of the 26^th of March 1998, denying the Applicant's "...request for a refund under the Fairness Legislation." The decision under review is dated the 27^th of September 2001.

BACKGROUND

[2]                 The history of the Applicant's income tax liability for his taxation years 1988 and 1989 is long and complex. He successfully appealed the assessment originally made against him for the first two of those three years on the ground that the Minister of National Revenue (the "Minister") had assessed his tax on the basis that he had a capital loss and not an income loss on foreign exchange transactions. In the result, on the 2^nd of October 1992, the assessments against the applicant for his 1988 and 1989 taxation years were referred back to the Minister for reconsideration and re-assessment^[1].

[3]                 A number of re-assessments followed with respect to the Applicant's 1988 and 1989 taxation years with the final re-assessments being issued on the 30^th of September 1993. The original assessments for the two years in question and each of the following re-assessments were made on the basis of Alternative Minimum Tax ("AMT") provisions of the Income Tax Act.

[4]                 The Applicant appealed the re-assessments of the 30^th of September 1993 on the basis that resort to AMT, in his particular circumstances, amounted to a discrimination on the basis of age contrary to section 15 of the Canadian Charter of Rights and Freedoms^[2]. The Tax Court of Canada dismissed the Applicant's appeal^[3]. The Applicant appealed the decision of the Tax Court of Canada to the Federal Court of Appeal. The Federal Court of Appeal dismissed the Applicant's appeal^[4]. The Applicant applied for leave to appeal from the decision of the Federal Court of Appeal to the Supreme Court of Canada. Leave was denied^[5].

[5]                 In the result, in relation to the Applicant's taxation years in question, there remained to his credit with CCRA and its predecessor a non-refundable credit applicable against taxes payable by the Applicant within the following seven years. At the expiration of those years, there remained a balance of the non-refundable credit in approximately the amount of $72,500.00.

[6]                 By letter dated the 7^th of November 1997, the Applicant applied to CCRA or its predecessor for relief relating to the balance of non-refundable tax credit. He wrote:

...I would respectfully ask that Revenue Canada consider my situation and allow, under the Fairness Package, the release of the balance of the Credit in my tax account at the end of the 1996 taxation year. Alternatively, I would respectfully request that Revenue Canada consider the possibility of applying the said balance of credit in my account as at the end of the 1996 taxation year [due to the Alternative Minimum Tax Provisions] to future taxes that I may be liable for."^[6]

                                                                                                                    [Emphasis in original]

Underlying the Applicant's application for relief under the Fairness Provisions there lay an allegation by him that, by the spring of 1990, he was and "...[has] been - since that time - de facto bankrupt." In the result he urged, the ATM provisions of the Income Tax Act simply were inapplicable to him at all relevant times.

[7]                 The Applicant was petitioned into bankruptcy by the Royal Bank of Canada in 1998 and was formally declared bankrupt by the Supreme Court of British Columbia on the 23^rd of June 1999.

[8]                 By letter dated the 5^th of January 1998, the Applicant's request for relief under the Fairness Provisions of the Income Tax Act was denied. An officer of the Department of National Revenue wrote:

I regret to inform you that I have determined that it is not appropriate in these circumstances to process your request for a refund or to extend the time limit to carry forward your Minimum Tax amounts.^[7]

The rationale underlying the foregoing conclusion, in essence, was that the concept of "de facto bankruptcy" is not recognized by the Income Tax Act and could provide no basis for relief.

[9]                 On the 15^th of January 1998, the Respondent sought a second level review of the decision of the 5^th of January 1998. By letter dated the 26^th of March 1998^[8], the second level review was denied.

[10]            By letter dated the 25^th of June 2001, the Applicant again sought review of his request for relief. It was not the normal practice of CCRA or its predecessor to consider a request for relief for a third time. However, due to a technical defect in the handling of the second request for relief, a third review was undertaken. That review again resulted in a rejection and it is that rejection that is here under judicial review.

THE ISSUES

[11]            The issues on this application for judicial review are, I am satisfied, the following: first, the appropriate standard of review, and I will deal briefly with this issue though it was not raised before me; second, against the appropriate standard of review, whether CCRA or its predecessor made any reviewable error in arriving at the decision under review; and third, given an acknowledgment on behalf of the Respondent that the decision under review was made by an officer who did not have appropriate delegated authority, should the decision be set aside notwithstanding that there may have been no reviewable error in arriving at the substance of the decision itself?

ANALYSIS

(a)         Standard of Review

[12]            In Barron v. Minister of National Revenue^[9], Justice Pratte, for the Court, wrote at paragraphs [5]:

Before saying why we think that these findings are wrong, it may be useful to recall that s. 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.

In Cheng v. Canada^[10], I applied the foregoing to a judicial review of a fairness review, a discretionary decision. I am satisfied that it reflects the appropriate standard of review of the decision now before me.

(b)         Reviewable Error

[13]            There was no evidence before me to indicate that the Applicant had, during his earlier dealings with tax officials in relation to his income tax affairs for the years 1988 and 1989, raised the issue of de facto bankruptcy. Nor did he raise that issue in previous litigation arising out of his tax assessments and re-assessments for those years. Further, I am satisfied that officers of CCRA and its predecessor who reviewed the Applicant's request for relief under the Fairness Provisions were correct in concluding that the concept of "de facto bankruptcy" plays no part in the scheme of the Income Tax Act and simply provides no basis whatsoever for relief to the Applicant, whether discretionary or otherwise. In the circumstances, I conclude that CCRA and its predecessor made no reviewable error of substance in rejecting the Applicant's application for discretionary relief.

(c)         Improper Exercise of Authority

[14]            In materials filed on behalf of the Respondent, and in submissions before me, the Respondent acknowledged that the officer who made and communicated the decision under review did not have the appropriate delegated authority to make and communicate that decision.

[15]            In Mobil Oil Canada Ltd. v. Canada-Newfoundland Offshore Petroleum Board^[11], Justice Iacobucci, for the Court, wrote at page 228:

In light of these comments, and in the ordinary case, Mobil Oil would be entitled to a remedy responsive to the breach of fairness or natural justice which I have described. However, in light of my disposition on the cross-appeal, the remedies sought by Mobil Oil in the appeal per se are impractical. While it may seem appropriate to quash the Chairman's decision on the basis that it was the product of an improper subdelegation, it would be nonsensical to do so and to compel the Board to consider now Mobil Oil's 1990 application, since the result of the cross-appeal is that the Board would be bound in law to reject that application by the decision of this Court.

                                                                                                                            [Emphasis added]

[16]            While Justice Iacobucci went on to counsel that, in the face of reviewable error such as improper subdelegation, which I am satisfied was the case on the basis of the acknowledgment on behalf of the Respondent before me, withholding of relief is exceptional in character and should not be applied broadly, I am satisfied that it is an appropriate result on the facts before me. I am satisfied that, if the decision under review were set aside and referred back, the same decision would necessarily follow by reason of the reality that the concept of de facto bankruptcy is simply not recognized within the scope of the Income Tax Act in a way that would permit any relief of the nature sought by the Applicant.

[17]            In the result, this application for judicial review will be dismissed. The Respondent does not seek costs. There will be no order as to costs.

(Sgd.) "Frederick E. Gibson"

Judge

Vancouver, B.C.

May 8, 2003

                          FEDERAL COURT OF CANADA

                                       TRIAL DIVISION

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                   T-1900-01

STYLE OF CAUSE: BORIS NETUPSKY v. HER MAJESTY THE QUEEN

PLACE OF HEARING:                                   Vancouver, B.C.

DATE OF HEARING:                                     May 7, 2003

REASONS FOR ORDER:                              GIBSON J.

DATED:                      May 8, 2003

APPEARANCES:

Mr. Boris Netupsky                                              ON HIS OWN BEHALF

Ms. Patricia A. Babcock                                                  FOR RESPONDENT

SOLICITORS OF RECORD:

Morris A. Rosenberg                                            FOR RESPONDENT

Deputy Attorney General of Canada

Ottawa, ON