Date: 20030729
Citation: 2003 FC929
Toronto, Ontario, July 29, 2003
Present: THE HONOURABLE MR. JUSTICE BLAIS
BETWEEN:
Docket: T-411-02
DAL A.S. BRICKENDEN
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
- AND -
BETWEEN:
Docket: T-433-02
ARTEMIS HOLDINGS LTD.
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
- AND -
BETWEEN:
Docket: T-434-02
ARTEMIS HOLDINGS LTD.
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
REASONS FOR ORDER AND ORDER
[1] These Reasons concern the disposition of three applications for judicial review of the decisions of Narrin Gill, Acting Director for the Burnaby-Fraser Tax Services Office [the acting director] at the Canada Customs and Revenue Agency [the CCRA], dated January 28, 2002, 1) rejecting Dal A.S. Brickenden's [the Applicant individual] request to waive penalties and interest under the provisions of the Income Tax Act [the ITA] [Application 1]; 2) rejecting Artemis Holdings Ltd.'s [the Applicant corporation] request to waive penalties and interest under the provisions of the ITA [Application 2]; and 3) partially rejecting the Applicant corporation's request to waive penalties and interest under the provisions of the Excise Tax Act [the ETA] [Application 3].
[2] Given that these applications have been consolidated pursuant to rule 105 of the Federal Court Rules, 1998, I propose to discuss the facts and proceed with their analysis at the same time.
[3] In these reasons, the Applicant individual and the Applicant corporation will collectively be referred to as the Applicants.
FACTS
[4] The Applicant individual is the sole director, manager, and president of the Applicant corporation, which corporation is engaged in the marketing and advertising business. Other than periodic subcontractors, the Applicant corporation has no other employees than the Applicant individual.
[5] In the summer of 1985, the Applicant individual suffered a massive heart attack and was submitted to a quadruple by-pass surgery shortly thereafter.
[6] In the months that followed, the Applicant individual separated from his wife, resulting in the sale of the nuptial home, recognized an order for child support for the benefit of his son, and negotiated a merger of his former agency.
[7] The Applicant individual eventually remarried. His current wife underwent cancer treatment in 1996.
[8] On July 14, 2000, the Applicants applied to the Minister of National Revenue [the Minister] pursuant to subsection 220(3.1) of the ITA and section 281.1 of the ETA [the fairness requests] in respect of the 1993 to 2000 taxation years, inclusively.
[9] The basis of the Applicants' requests for fairness relief was that the assessed taxes and consequent penalties and interest were the result of personal health problems dating from 1985.
[10] At this level, the initial review made by Collections Officer Marilyn Mazar included a consideration of the Applicants' income, expenses, assets, liabilities, medical history and compliance history. In preparing a summary of the request, Ms. Mazar recommended acceptance of the Applicants' fairness requests concerning Application 1, Application 2, and Application 3.
[11] The Team Leader for Ms. Mazar, Graham Pratt, reviewed the summary prepared by Ms. Mazar. On December 1, 2000, he recommended denial of the Applicants' fairness requests.
[12] It was concluded that the Applicant individual had a poor compliance history as evidenced by his continual delinquent status on his Income Tax account, as well as on the Income Tax and Excise Tax accounts of the Applicant corporation. It was further concluded that the Applicants had not provided information that supported the contentions of financial hardship. Throughout the period from 1993 to 1996, the Applicant individual had a combined household income that averaged $74,000 per annum. The medical information provided by the Applicants did not support the contention that the Applicant individual was incapacitated for an inordinate amount of time.
[13] This recommendation was reviewed by a committee of Team Leaders made up of Chris Duke, Doris Evelle and Lisa Hall. As there was no debt for the period of 1985, 1986 and 1987, during which the Applicant individual had been affected by medical difficulties, the medical history of the Applicant individual was not applicable. Furthermore, as financial hardship was not demonstrated, the committee denied the fairness requests.
[14] By letters dated June 12, 2001, the Applicants were notified of the CCRA's decision to deny the fairness requests.
[15] A further letter was received on or about June 21, 2001, which was treated as "second level" fairness requests. Up to date financial records, the Applicant individual's description of medical difficulties as well a letter from Dr. Thomas C. Gibson dated September 19, 2000, were supplied by the Applicants, in addition to the material on file.
[16] On October 1, 2001, the Applicants submitted a letter with many attachments, including updated financial documents and projected incomes.
[17] The account was summarized by Mary Mahoney, a Collection Officer not involved with the "first level" fairness requests. Ms. Mahoney's summary recommended denial of the relief requested by the Applicants, with partial relief to the Applicant corporation for interest and penalties on a GST payment that had been misapplied by the CCRA.
[18] Managers Dennis Saretsky and Frank Benoit reviewed and approved the summary as prepared by Ms. Mahoney. In an inter office memo dated January 10, 2002, they provided a summary to the acting director for decision.
[19] On January 15, 2002, the acting director reviewed and approved the summary recommendation. She exercised her discretion not to waive or cancel penalties or interest, with the exemption of penalties and interest that accrued to the Applicant corporation with respect to its GST account between December 6, 1999 and January 28, 2002, date when the Applicants were informed of the results of the fairness requests.
[20] The latter decisions are the subject of these applications for judicial review.
ISSUE
[21] Did the Minister properly exercise his discretion in deciding not to waive or cancel penalties or interest assessed to the Applicants with respect to the 1993 to 2000 taxation years?
ANALYSIS
Standard of Review
[22] In Edwards v. Canada (Customs and Revenue Agency), (2002) FCT 618, [2002] F.C.J. No. 841, Pinard J. confirmed the standard of review applicable where the Court is asked to review a decision made pursuant to a discretionary authority:
[10] In Boudreault v. Canada (C.C.R.A.), [2002] F.C.J. No. 126 (T.D.) (QL), Justice Blais confirmed the standard of review established by Justice Rouleau in Kaiser v. Minister of National Revenue (1995), 93 F.T.R. 66, when the Courts are called upon to review the exercise of a discretionary power such as the one in question here. The following was stated at page 68:
The purpose of this legislative provision is to allow Revenue Canada, Taxation, to administer the tax system more fairly, by allowing for the application of common sense in dealing with taxpayers who, because of personal misfortune or circumstances beyond their control, are unable to meet deadlines or comply with rules under the tax system. The language used in the section bestows a wide discretion on the Minister to waive or cancel interest at any time. To assist in the exercise of that discretion, policy guidelines have been formulated and are set out in Information Circular 92-2.
The jurisprudence has established the standard to be employed by the courts when called upon to review the exercise of a discretionary power such as the one in question here. In Re Maple Lodge Farms Ltd. and Government of Canada et al., [1982] 2 S.C.R. 2">[1982] 2 S.C.R. 2; 44 N.R. 354; 137 D.L.R. (3d) 558 (S.C.C.), McIntyre, J., stated at p. 562:
"In construing statutes such as those under consideration in this appeal, which provide for far-reaching and frequently complicated administrative schemes, the judicial approach should be to endeavour within the scope of the legislation to give effect to its provisions so that the administrative agencies created may function effectively, as the legislation intended. In my view, in dealing with legislation of this nature, the courts should, wherever possible, avoid a narrow, technical construction, and endeavour to make effective the legislative intent as applied to the administrative scheme involved. It is, as well, a clearly-established rule that courts should not interfere with the exercise of a discretion by a statutory authority merely because the court might have exercised the discretion in a different manner had it been charged with that responsibility. Where the statutory discretion has been exercised in good faith and, where required, in accordance with the principles of natural justice, and where reliance has not been placed upon considerations irrelevant or extraneous to the statutory purpose, the courts should not interfere."
...
[12] At the hearing before me, both counsel for the parties submitted that the standard of review applicable to the discretionary decision in the case at bar is patent unreasonableness. I agree.
Therefore, the standard of review applicable to the decisions under review is that of patently unreasonable. This Court's function is to review the manner in which the decision was made rather than substitute its views for those of the decision maker.
Did the Minister properly exercise his discretion in deciding not to waive or cancel penalties or interest assessed to the Applicants with respect to the 1993 to 2000 taxation years?
[23] The only reason for this Court to interfere with the Minister's decisions would be if they contravened paragraphs 18.1(4)(a) to (f) of the Federal Court Act. Indeed, as stated by Teitelbaum J. in Johnston Family 1991 Trust v. Canada (Minister of National Revenue), [1999] 4 C.T.C. 75, [1999] F.C.J. No. 1157:
[para. 55] As I have stated, the Court can only grant relief under the judicial review section of the Federal Court Act if one of the grounds found in subsection 18.1(4) can be established.
[para. 56] I am satisfied that judicial review of the Minister's decision of August 26, 1998 or of September 8, 1998 cannot be allowed. I am satisfied that the Minister's decision not to allow the "third Fairness" application to be more than reasonable based on the evidence. I am also unable to find any error in law upon which the Minister based his decision.
[24] Paragraphs 18.1(4)(a) to (f) of the Federal Court Act provide as follows:
| (4) The Trial Division may grant relief under subsection (3) if it is satisfied that the federal board, commission or other tribunal
(a) acted without jurisdiction, acted beyond its jurisdiction or refused to exercise its jurisdiction;
(b) failed to observe a principle of natural justice, procedural fairness or other procedure that it was required by law to observe;
(c) erred in law in making a decision or an order, whether or not the error appears on the face of the record;
(d) based its decision or order on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it;
(e) acted, or failed to act, by reason of fraud or perjured evidence; or
(f) acted in any other way that was contrary to law.
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(4) Les mesures prévues au paragraphe (3) sont prises par la Section de première instance si elle est convaincue que l'office fédéral, selon le cas_:
a) a agi sans compétence, outrepassé celle-ci ou refusé de l'exercer;
b) n'a pas observé un principe de justice naturelle ou d'équité procédurale ou toute autre procédure qu'il était légalement tenu de respecter;
c) a rendu une décision ou une ordonnance entachée d'une erreur de droit, que celle-ci soit manifeste ou non au vu du dossier;
d) a rendu une décision ou une ordonnance fondée sur une conclusion de fait erronée, tirée de façon abusive ou arbitraire ou sans tenir compte des éléments don't il dispose;
e) a agi ou omis d'agir en raison d'une fraude ou de faux témoignages;
f) a agi de toute autre façon contraire à la loi.
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[25] The Respondent relies on the comments made by Sharlow J., as she then was, in Hundal v. Canada (Minister of National Revenue), [2000] 4 C.T.C. 88, [2000] F.C.J. No. 1411, to support its argument that it is not an error for a decision maker to make a determination that there is no causal connection between a trauma referred to by a taxpayer and a tax liability. Sharlow J. explains:
[para. 22] ... No specific procedure is mandated for "fairness" decisions, and the record makes it clear that the Chief of Appeals did in fact make the decision he purported to make.
[para. 23] Second, it was reasonable for the Minister to conclude that the emotional distress caused by the illness and death of Mr. Hundal's father in December of 1996 and the death of his father-in-law in January of 1997 would not justify granting Mr. and Mrs. Hundal the discretionary relief they sought. The Minister saw no causal connection between those circumstances and the 1997 tax liability. That conclusion was open to him, given the information available.
[26] I have carefully reviewed the Tribunal record provided by counsel for the Respondent on July 10, 2002. It was admitted by counsel for the Respondent that there were some discrepancies between the Tribunal record and some documents that would have been included in the record. Page 25 of this record is a document prepared by the Applicant individual in July 2000, carrying handwritten notes, of which document the bottom half has been cut off. The missing part of that document is provided in the Applicants'record. It shows the Applicant individual's 10 year average income from 1990 to 1999, as well as his wife's 5 year average income. We will come to see the consequences of this missing part.
[27] The assessment of the information provided by the Applicants prior to the June 12, 2001 decision were so far from the information provided that in that decision, there was a mention that the Applicant individual had a surplus of $3,000 per month which indicated, in the eyes of the Respondent, that the Applicant individual had the ability to repay all debts, that were at the time $86,000, within four years. It also led to the conclusion that medical considerations were not relevant for the years 1983 to 1987 as there are no debts for these taxation years. The June 12, 2001 decision contains so many errors of fact that it would have been quickly quashed. Nevertheless, the Applicant individual did not file an application for judicial review of that decision; rather, he decided to go on with the process. Later that year, he communicated updated information. One should note that the Applicant individual was unaware of Ms. Mazar's positive recommendation and of its rejection by the committee.
[28] I would also like to underline the fact that the letter sent to introduce the summary of the Applicant individual's 10 year average income and his wife's 5 year average income was also absent from the Tribunal record.
[29] When reading those documents, it is obvious that the Applicant individual's average income was not at all in line with findings made a few months later by the Respondent's representatives.
[30] Indeed, when the Respondent filed his application record, on December 19, 2002, included was the affidavit of Mr. Saretsky, which refers to different exhibits. Most of these documents were already part of the Tribunal record. Nevertheless, Exhibit "B" to Mr. Saretsky's affidavit are notes relating to the analysis and the recommendations that were made prior to the June 12, 2001 decision. The first person to make an analysis of the file was Ms. Mazar, a Collection Officer, who went through an assessment of all the documents filed before December 2000, including a consideration of the Applicants' income, expenses, assets, liabilities, medical history and compliance history. As stated earlier, Ms. Mazar recommended the approval of the Applicants' fairness requests.
[31] Later on, also in Exhibit "B" to Mr. Saretsky's affidavit, is the team leader's report. He reviewed the summary prepared by Ms. Mazar and recommended the denial of the Applicants' fairness requests. On this report, references are made to numbers that are totally incorrect when compared to the actual numbers. For example, there is a mention that the Applicant individual, throughout the period from 1993 to 1996, had a combined household income that averaged $74,000 per year, referring to a high of $80,000 in 1994 and a low of $64,000 in 1993. I tried to understand how one could arrive at these numbers, alas without success.
[32] What concerns me is that Exhibit "B" to Mr. Saretsky's affidavit was not included in the Tribunal record. Given the absence, in the Tribunal record, of the document provided by the Applicant individual referring to his annual income for the previous 10 years, I asked counsel for the Respondent to tell me how the committee could arrive to such findings (i.e., the numbers in the team leader's report) without the correct net income information. His response was that they probably referred to the computerized information of the Applicants to get to that conclusion. Unfortunately, such computerized information is not available.
[33] What is furthermore troubling is the fact that we don't know what was before the committee when it made its decision and we realize, after the fact, that documents that should have been there were not and that the decision might have been made based on documents that are not available to us.
[34] This situation is of significant concern to the Court.
[35] It is obvious that Ms. Mazar's positive recommendation made on or around December 1st, 2000, was reversed by a negative recommendation of the committee based on incorrect information and on missing documents.
[36] In my view, the file is irremediably tainted. In fact, even the Respondent provided evidence to the effect that there was something wrong with the file at a previous stage.
[37] The Applicant individual submitted different arguments referring to the evidence itself.
[38] As I told the Applicant individual at the hearing, I cannot substitute my opinion to that of the decision maker. The findings of the acting director, the decision maker in this file, were provided as Exhibit "J" to Mr. Saretsky's affidavit. It shows that she reviewed many elements of the Applicant individual's file, particularly his divorce, the child support, the money borrowed from members of his family that were not yet reimbursed, etc. There are some errors here and there in the findings.
[39] Another element struck my curiosity: before recommending to the decision maker the denial of the Applicants' fairness requests, Mr. Saretsky and Mr. Benoît wrote the following comment:
Mr. Brickenden has proposed to pay us all in full immediately and that "details can surely be identified promptly" and that by "working together, this matter can now be concluded fairly. A bankrupt is not likely to continue to advise people on how to make money. Tax revenues in the future are reduced". Once the penalties and interest are cancelled, he will identify the details to the Agency.
Tribunal Record, page 3, T-411-02
The quoted passages are from a letter dated June 6, 2001, sent by the Applicant individual and received June 8, 2001 by André Villeneuve, Director of the CCRA in Vancouver. In that letter, the Applicant individual essentially proposes to the CCRA a way for them to conclude the matter fairly. (Tribunal Record, pages 4-5, T-411-02) As the January 10, 2002 summary has been taken into consideration by the acting director, to me, that means that all the information available at the time has indeed been taken into consideration by the decision maker in the January 28, 2002 decision.
[40] Nevertheless, the consequence is this: because errors of fact were clearly identified above, those errors should not only be considered for the June 12, 2001 decision, but also for the January 28, 2002 decision.
[41] Regarding the medical considerations, the Applicant individual has provided evidence in a form of a letter by Dr. Thomas Gibson, which letter was examined by the first person who examined the file, Ms. Mazar. She mentions, in her note to Mr. Saretsky's:
...A letter from his Doctor substantiates his heart condition and subsequent surgery in the mid-eighties, and his current status. ...
Exhibit "B", Affidavit of Dennis Saretsky
[42] The committee also examined the doctor's letter but concluded differently:
The client has provided us with a letter from his doctor which in my opinion does not provide sufficient details to indicate that the client was incapacitated for any inordinate period of time. However, it is reasonable to expect that due to the complication that he has explained that his ability to return fully to work would have been limited somewhat for a period of time.
...
Exhibit "B", Affidavit of Dennis Saretsky.
[43] But on June 12, 2001, in the negative response to the Applicant individual's request, Mr. Stockhecke, writes:
Also, medical considerations are not relevant for the years 1983 to 1987 as there are no debts for these taxation years.
[44] What is surprising is that the reasons mentioned in the letter of June 12, 2001, are not in accordance with the conclusions in the recommendation dated December 1, 2000. I am convinced that had the Applicant individual known, when the decision was made on June 12, 2001, that he had not provided sufficient information about his medical situation, he would have been in a position to respond quickly. However, the reasons mentioned in the recommendation are slightly different than those mentioned in the letter. The medical history of the Applicant individual, throughout the evidence provided by the doctor and by the Applicant individual himself, shows serious medical conditions.
[45] When one looks at the decision at issue, one realizes that the acting director has given very little consideration to the said medical considerations.
[46] The Applicant individual has also mentioned that his second wife underwent cancer treatment in 1996. I carefully read the paragraph that refers to this particular element. I think that the acting director, again, totally missed the point. He found that she indeed suffered from cancer treatment but that she nevertheless filed her tax returns on time and went on with what he qualified as a reasonable income for the 1999 and 2000 taxation years. At the end, they made a mistake in concluding that she had "an income-splitting from the additional business for Amway products" which in fact was $16,000 loss, representing $8,000 loss for her. Nevertheless, this is beside the point. We are dealing with the Applicant individual's stress caused by his wife's sickness in addition to the other problems he was going through.
[47] The depth with which this element was addressed by the decision maker is another element of concern for the Court.
[48] Subsection 18.1 of the Federal Court Act reads:
| 18.1 (1) An application for judicial review may be made by the Attorney General of Canada or by anyone directly affected by the matter in respect of which relief is sought.
18.1(2) Time limitation
(2) An application for judicial review in respect of a decision or order of a federal board, commission or other tribunal shall be made within thirty days after the time the decision or order was first communicated by the federal board, commission or other tribunal to the office of the Deputy Attorney General of Canada or to the party directly affected thereby, or within such further time as a judge of the Trial Division may, either before or after the expiration of those thirty days, fix or allow.
18.1(3) Powers of Trial Division
(3) On an application for judicial review, the Trial Division may
(a) order a federal board, commission or other tribunal to do any act or thing it has unlawfully failed or refused to do or has unreasonably delayed in doing; or
(b) declare invalid or unlawful, or quash, set aside or set aside and refer back for determination in accordance with such directions as it considers to be appropriate, prohibit or restrain, a decision, order, act or proceeding of a federal board, commission or other tribunal.
18.1(4) Grounds of review
(4) The Trial Division may grant relief under subsection (3) if it is satisfied that the federal board, commission or other tribunal
(a) acted without jurisdiction, acted beyond its jurisdiction or refused to exercise its jurisdiction;
(b) failed to observe a principle of natural justice, procedural fairness or other procedure that it was required by law to observe;
(c) erred in law in making a decision or an order, whether or not the error appears on the face of the record;
(d) based its decision or order on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it;
(e) acted, or failed to act, by reason of fraud or perjured evidence; or
(f) acted in any other way that was contrary to law.
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18.1 (1) Une demande de contrôle judiciaire peut être présentée par le procureur général du Canada ou par quiconque est directement touché par l'objet de la demande.
18.1(2) Délai de présentation
(2) Les demandes de contrôle judiciaire sont à présenter dans les trente jours qui suivent la première communication, par l'office fédéral, de sa décision ou de son ordonnance au bureau du sous-procureur général du Canada ou à la partie concernée, ou dans le délai supplémentaire qu'un juge de la Section de première instance peut, avant ou après l'expiration de ces trente jours, fixer ou accorder.
18.1(3) Pouvoirs de la Section de première instance
(3) Sur présentation d'une demande de contrôle judiciaire, la Section de première instance peut_:
a) ordonner à l'office fédéral en cause d'accomplir tout acte qu'il a illégalement omis ou refusé d'accomplir ou don't il a retardé l'exécution de manière déraisonnable;
b) déclarer nul ou illégal, ou annuler, ou infirmer et renvoyer pour jugement conformément aux instructions qu'elle estime appropriées, ou prohiber ou encore restreindre toute décision, ordonnance, procédure ou tout autre acte de l'office fédéral.
18.1(4) Motifs
(4) Les mesures prévues au paragraphe (3) sont prises par la Section de première instance si elle est convaincue que l'office fédéral, selon le cas_:
a) a agi sans compétence, outrepassé celle-ci ou refusé de l'exercer;
b) n'a pas observé un principe de justice naturelle ou d'équité procédurale ou toute autre procédure qu'il était légalement tenu de respecter;
c) a rendu une décision ou une ordonnance entachée d'une erreur de droit, que celle-ci soit manifeste ou non au vu du dossier;
d) a rendu une décision ou une ordonnance fondée sur une conclusion de fait erronée, tirée de façon abusive ou arbitraire ou sans tenir compte des éléments don't il dispose;
e) a agi ou omis d'agir en raison d'une fraude ou de faux témoignages;
f) a agi de toute autre façon contraire à la loi.
18.1(5) Vice de forme
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[49] In my view, paragraph 18.1(4)(d) applies. I am convinced that the decisions under review were based on an erroneous finding of fact and were made in a capricious manner without regard for the material that was before it at the time of the decision.
[50] I think that justice will be better served by allowing judicial reviews of these files by a different decision maker, taking all the facts into consideration and allowing the Applicants to provide the Respondent with information relevant to the Applicant individual's medical condition so that it is adequately taken into consideration.
[51] I will also allow the Respondent to put its file in order so that all the documents relevant to the Applicants'case are before the decision maker.
ORDER
THEREFORE, IT IS HEREBY ORDERED THAT:
- These applications for judicial review, T-411-02, T-433-02, T-434-02 are granted;
- The decisions of the acting director rejecting the Applicants' request to waive penalties and interest under the provisions of the ITA and ETA are quashed and the files are returned to the Respondent for reconsideration by a different decision maker, in light of these Reasons.
"Pierre Blais"
J.F.C.
.
SCHEDULE A
RELEVANT LEGISLATION
The purpose of enacting the fairness legislation, of which subsection 220(3.1) of the ITA and subsection 281.1(1) of the ETA form part of, was to allow for a degree of flexibility and discretion in dealing with taxpayers who are unable to meet the deadlines or comply with the rules as set out in the ITA and the ETA.
Subsection 220(1) of the ITA refers to the Minister's duty. It provides as follows:
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220(1) The Minister shall administer and enforce this Act and the Commissioner of Customs and Revenue may exercise all the powers and perform the duties of the Minister under this Act.
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220(1) Le ministre assure l'application et l'exécution de la présente loi. Le commissaire des douanes et du revenu peut exercer les pouvoirs et fonctions conférés au ministre en vertu de la présente loi.
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Subsection 220(2.01) of the ITA is related to the possible delegation of powers or duties. It provides:
| 220(2.01) The Minister may authorize an officer or a class of officers to exercise powers or perform duties of the Minister under this Act.
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220(2.01) Le ministre peut autoriser un fonctionnaire ou une catégorie de fonctionnaires à exercer les pouvoirs et fonctions qui lui sont conférés en vertu de la présente loi.
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Subsection 220(3.1) of the ITA refers to the waiver of penalty or interest 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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Information Circular 92 -2 entitled Guidelines for the Cancellation and Waiver of Interest and Penalties [the Information Circular 92 -2] provides examples of circumstances beyond a taxpayer's control:
| 5. Penalties and interest may be waived or cancelled in whole or in part where they result from circumstances beyond a taxpayer'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 a return or make payments based on incorrect information;
...
(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.
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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 un paiement dans les délais exigés ou de se conformer à 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;
[...]
d) des erreurs de traitement;
e) des renseignements fournis en retard comme dans le cas où un contribuable n'a pu faire les paiements voulus d'acomptes provisionnels ou d'arriérés parce qu'il n'avait pas les renseignements nécessaires.
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Section 10 of the Information Circular 92 -2refers to the factors considered when determining whether or not to cancel or waive interest or penalties:
| 10. The following factors will be considered when determining whether or not the Department will cancel or waive interest or penalties:
(a) whether or not the taxpayer or employer has a history of compliance with tax obligations;
(b) whether or not the taxpayer or employer has knowingly allowed a balance to exist upon which arrears has accrued;
(c) whether or not the taxpayer or employer has exercised a reasonable amount of care and has not been negligent or careless in conducting their affairs under the self-assessment system;
(d) whether or not the taxpayer or employer has acted quickly to remedy any delay or omission.
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10. Le Ministère tiendra compte des points suivants dans l'étude de demandes d'annulation des intérêts ou des pénalités ou de renonciation à ceux-ci :
a) si le contribuable ou l'employeur a respecté, par le passé, ses obligations fiscales;
b) si le contribuable ou l'employeur a, en connaissance de cause, laissé subsister un solde en souffrance qui a engendré des intérêts sur arriérés;
c) si le contribuable ou l'employeur a fait des efforts raisonnables et s'il n'a pas fait preuve de négligence ni d'imprudence dans la conduite de ses affaires en vertu du régime d'autocotisation;
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Subsection 280(1) of the ETA refers to penalties and interest payable under that Act. It provides as follows:
| 280(1) Subject to this section and section 281, where a person fails to remit or pay an amount to the Receiver General when required under this Part, the person shall pay on the amount not remitted or paid
(a) a penalty of 6% per year, and
(b) interest at the prescribed rate,
computed for the period beginning on the first day following the day on or before which the amount was required to be remitted or paid and ending on the day the amount is remitted or paid.
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280(1) Sous réserve du présent article et de l'article 281, la personne qui ne verse pas ou ne paie pas un montant au receveur général dans le délai prévu par la présente partie est tenue de payer la pénalité et les intérêts suivants, calculés sur ce montant pour la période commençant le lendemain de l'expiration du délai et se terminant le jour du versement ou du paiement_:
a) une pénalité de 6_% par année;
b) des intérêts au taux réglementaire.
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Subsection 281.1(1) of the ETA refers to the waiver of those interest or penalties. It reads:
| 281.1(1) The Minister may waive or cancel interest payable by a person under section 280.
281.1(2) The Minister may waive or cancel penalties payable by a person under section 280.
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281.1(1) Le ministre peut annuler les intérêts payables par une personne en application de l'article 280, ou y renoncer.
281.1(2) Le ministre peut annuler la pénalité payable par une personne en application de l'article 280, ou y renoncer.
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GST Memorandum 500-3-2-1 entitled Cancellation or Waiver of Penalties and Interest sets out the general guidelines and the process followed by the Minister in considering fairness requests with respect to the ETA. It is essentially similar to Information Circular 92 -2. It provides:
| 6 Penalties and interest may be cancelled or waived where they resulted from an extraordinary circumstance beyond the person's control, which prevented the person from complying with the Act. For example, one of the following extraordinary circumstances may have prevented a person from making a payment when due, or otherwise complying with the 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.
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6 Des pénalités et des intérêts peuvent être annulés, ou on peut y renoncer, lorsqu'ils résultent de circonstances extraordinaires indépendantes de la volonté de la personne et ayant empêché celle-ci de se conformer à la Loi. Voici des exemples de circonstances extraordinaires qui pourraient empêcher une personne de faire un paiement dans les délais exigés ou de se conformer à la Loi :
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.
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| 7 The cancellation or waiver of penalties and interest may also be appropriate in some circumstances if the penalties and interest were incurred primarily because of the actions of the Department. For example:
(a) processing delays that resulted in the person not being informed within a reasonable amount of time that an amount was owing;
(b) errors in departmental publications, which led the person to file returns or make payments based on incorrect information;
(c) incorrect written information provided in an interpretation or notice given to a specific person by the Department;
(d) departmental errors in the processing of GST returns or information; or
(e) delays in providing information necessary for the person to comply with the Act.
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7 L'annulation des pénalités et des intérêts ou la renonciation à ceux-ci peuvent également être indiquées dans certains cas où ces pénalités et intérêts découlent principalement d'actions attribuables au Ministère, par exemple:
a) des retards de traitement ayant eu pour effet que la personne n'a pas été informée, dans un délai raisonnable, de l'existence d'une somme en souffrance;
b) des erreurs dans les publications ministérielles, ce qui a amené la personne à produire des déclarations ou à verser des paiements en se fondant sur des renseignements erronés;
c) des renseignements écrits inexacts fournis à une personne donnée dans une interprétation ou un avis du Ministère;
d) des erreurs ministérielles dans le traitement des déclarations de TPS ou des renseignements;
e) des retards quant à la fourniture de renseignements nécessaires pour que la personne puisse se conformer à la Loi.
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| 8. It may be appropriate for the Department, in circumstances where there is an inability on the part of the person to pay amounts owing, to consider cancelling or waiving penalties and interest in whole or in part to facilitate collection. For example:
(a) when collection has been suspended due to an inability to pay;
(b) when a person is unable to conclude a reasonable payment arrangement because the penalty and interest charges represent a significant portion of the payments. In such cases, consideration may be given to waiving penalties and interest in whole or in part for the period beginning on the first payment due date under the payment arrangement until the amounts owing are paid, provided the agreed payments are made on time.
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8. Dans les situations où il y a incapacité de la part de la personne de verser les montants dus, il peut être indiqué pour le Ministère d'examiner la possibilité d'annuler la totalité ou une partie des pénalités et des intérêts, ou d'y renoncer, afin d'en faciliter le recouvrement, par exemple dans l'un des cas suivants :
a) lorsque les mesures de recouvrement ont été suspendues à cause de l'incapacité de payer;
b) lorsqu'une personne ne peut conclure une entente de paiement qui serait raisonnable parce que les pénalités et les frais d'intérêts représentent une partie considérable des versements; dans un tel cas, il y a lieu de penser à renoncer à la totalité ou à une partie des pénalités et des intérêts pour la période allant de la date d'échéance du premier paiement en vertu de l'entente de paiement jusqu'au moment où les montants dus sont payés, pourvu que les versements convenus soient effectués à temps.
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| 9. Where an extraordinary circumstance beyond the person's control has prevented the person from complying with the Act, the following factors will be considered by the Department to determine whether or not penalties and interest will be cancelled or waived:
(a) Does the person have a satisfactory history of voluntary compliance (i.e., have previous GST returns been filed and payments made on time)?
(b) Has the person knowingly allowed an outstanding balance to exist upon which the penalties and interest have accrued?
(c) Has the person acted quickly to remedy the omission or the delay in compliance, which originally resulted in penalties and interest being charged?
(d) Is there evidence that the person exercised reasonable care and diligence (e.g., planned for anticipated disruptions) and was not negligent or careless in the conduct of its affairs? The onus is on the registrant to keep abreast of any new developments in the administration of the GST so as to ensure continuing compliance.
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9. Lorsque des circonstances extraordinaires indépendantes de la volonté d'une personne ont empêché celle-ci de se conformer à la Loi, les facteurs suivants seront pris en considération par le Ministère pour déterminer s'il doit annuler les pénalités et les intérêts ou y renoncer :
a) La personne a-t-elle des antécédents satisfaisants d'observation volontaire (c.-à-d. les déclarations de TPS précédentes ont-elles été produites et les paiements ont-ils été versés à temps)?
b) La personne a-t-elle, en connaissance de cause, laissé subsister un solde en souffrance sur lequel se sont accumulés les pénalités et les intérêts?
c) La personne a-t-elle agi avec diligence pour remédier à tout retard ou à toute omission en matière d'observation qui a donné lieu à l'imposition initiale des pénalités et des intérêts?
d) Y a-t-il des preuves selon lesquelles la personne a fait preuve de prudence et de diligence (p. ex. a pris des précautions en vue de troubles prévus) et n'a pas fait preuve de négligence ni d'imprudence dans la conduite de ses affaires? Il revient à l'inscrit de se tenir au courant de tout changement apporté à l'administration de la TPS de manière à assurer qu'il continue à observer la Loi.
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FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-411-02, T-433-02, T-434-02
STYLE OF CAUSE:
BETWEEN:
Docket: T-411-02
DAL A.S. BRICKENDEN
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
- AND -
BETWEEN:
Docket: T-433-02
ARTEMIS HOLDINGS LTD.
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
- AND -
BETWEEN:
Docket: T-434-02
ARTEMIS HOLDINGS LTD.
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: May 21, 2003
REASONS FOR REASONS AND ORDER : Mr. Justice Pierre Blais
DATED: July 29, 2003
APPEARANCES:
Mr. Dal Brickenden (self-represented) FOR APPLICANT
Mr. Victor Caux FOR RESPONDENT
SOLICITORS OF RECORD:
Mr. Dal Brickenden (self-represented) FOR APPLICANT
Morris Rosenberg FOR RESPONDENT
Deputy Attorney General of Canada
FEDERAL COURT Date: 20030729
BETWEEN:
Docket: T-411-02
DAL A.S. BRICKENDEN
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
- AND -
BETWEEN:
Docket: T-433-02
ARTEMIS HOLDINGS LTD.
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
- AND -
BETWEEN:
Docket: T-434-02
ARTEMIS HOLDINGS LTD.
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
REASONS FOR ORDER
AND ORDER
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