Date: 20030908
Docket: T-1815-01
Citation: 2003 FC 1047
Ottawa, Ontario, September 8, 2003
Present: The Honourable Mr. Justice Simon Noël
BETWEEN:
CHARLES LÉGARÉ
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
and
YVAN MARCEAU, in his capacity as Chief, Appeals, Taxation Services Office, Québec
Respondents
REASONS FOR JUDGMENT AND JUDGMENT
[1] This case involves judicial review of a decision by Yvan Marceau, Chief, Appeals, Taxation Services Office, Québec, dated September 13, 2001, in which he denied review of the application to quash interest and penalties in the applicant's case.
[2] On November 14, 2000, the applicant received a letter from the Canada Customs and Revenue Agency ("the Agency"), telling him that for the 1998 and 1999 taxation years the applicant had additional business income.
[3] On December 7, 2000, the applicant sent a letter to the Agency explaining the special circumstances which affected him in 1998 and 1999. Inter alia, in support of his application to quash interest on the arrears, the applicant alleged: that he had had an operation in 1998; that he was having radiation treatments; that he was unable to work between July and November 1998; that it was his accountant who had the responsibility of completing and filing his tax returns for the taxation years in question; that his accountant had failed to report income from Visa and Mastercard accounts and direct payments in his tax returns; that his accountant had also failed to include reimbursements of general expenses from insurers; that he did not, or was unable to, check his tax returns before they were filed since he was too concerned with his state of health; and that all these circumstances prevented him from complying with the Income Tax Act ("ITA"), R.S.C. 1985 (5th Supp.), c. 1.
[4] In support of his application to quash the penalty for late filing of the tax return for the 1999 taxation year, the applicant explained that it was his accountant who was responsible for completing and filing his tax returns in time; that he contacted his accountant about his tax return a week before April 30, 2000, before going away for a few days' rest; and that he even contacted his accountant during the few days of rest to ensure [TRANSLATION] "that everything was under control".
[5] This application to quash is based on subsection 220(3.1) ITA, which gives the Minister the discretion to waive penalty or interest on application.
(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 (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.
[6] On January 15, 2001, the Agency denied the application to cancel the interest and penalties.
[7] On February 20, 2001, the applicant took advantage of an administrative review procedure and requested review of the decision of January 15, 2001, based on Information Circular IC-92-2, Guidelines for the Cancellation and Waiver of Interest and Penalties ("the Guidelines") for taxpayers wishing to make use of it. Paragraph 5 of the Circular, titled "Guidelines and Examples of Circumstances where Cancelling or Waiving Interest or Penalties may be Warranted", reads as follows:
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.
[8] In support of his application for review the applicant alleged the same grounds as in the first application, and in addition that: he had always carried out his tax obligations in the past; he had never allowed any outstanding balance to remain; he had never acted negligently or recklessly in conducting his business; he acted promptly to correct any delay or omission; the circumstances prevented him from seeing the errors made by his accountant; and finally, he was in good faith.
[9] I have absolutely no doubt about the applicant's good faith - especially as I recognize that the problems he experienced, being ill with cancer at age 35 with two young children, and supporting his family as well, are unpleasant and difficult circumstances.
[10] However, the Minister's decision on reviewing the application, dated September 13, 2001, in my opinion is reasonably justified in view of the latter's discretion. It seemed clear that the applicant was seriously ill in 1998 and 1999, and according to what he himself said, his failure to comply with the various provisions of the ITA resulted from errors made by a third party. As the Agency indicated in its first decision, a taxpayer is responsible for his failure to perform all the obligations laid down in the ITA. Consequently, an error made by his accountant or ignorance of the ITA by the latter, or the fact that the accountant did not file the return of the taxpayer he represented within the specified deadlines, are not extraordinary circumstances as such. This is consistent with the said Guidelines mentioned above, and also with the policy "Application of the Fairness Provision to Interest and Penalty", adopted in March 1996, which states at page 10 of the document:
The responsibility for meeting obligations under the legislation we administer (e.g. filing a timely and accurate return) rests with the client. Consequently, client representative error should not be the sole basis for granting fairness relief. The client should generally be responsible where the third party errs.
It is noted that granting fairness relief in cases of client representative error could undermine the voluntary assessment system. It could remove an important incentive for practitioners and clients to meet the Department's deadlines and comply with its rules. Third parties who provide erroneous advice for a fee should normally be regarded as being responsible to the client where the client has suffered certain damages such as penalty or interest charges as a result of acting upon the advice provided.
This policy should have been given to the applicant with the Agency's letter. Knowledge of this policy might have helped the applicant to have a better understanding of the Guidelines, and in particular the taxpayer's responsibility for errors made by third parties.
[11] I would add what Nadon J. explained in Dr. William Young and Dr. William Young M.B. CH. B. Inc. v. Her Majesty the Queen (1997), 138 F.T.R. 37:
Consequently, it was up to the applicants herein to convince the Minister that the illness or medical condition of both Dr. Young and his wife and of Mr. Rudd were factors beyond their control and that the interest owed was "primarily caused" by these factors.
[12] In the case at bar, it appears that the interest and penalties owed resulted from errors by the accountant, not from the applicant's illness, and it even appears from the facts in question that the latter called his accountant to follow up on his file even when he was convalescing. I therefore cannot accept that the applicant's illness was really the cause of the delay in filing the return. I understand that the applicant did to some extent perform his responsibilities by entrusting his file to an accountant in order to comply with the law, but that does not relieve him of his responsibility for the accountant's actions.
[13] Accordingly, although this decision is an unfortunate one for the applicant, I cannot substitute my opinion for that of the Agency. The latter exercised its discretion reasonably, taking into account the relevant material and analyzing the reasons in support of the application, consistent with procedural fairness.
[14] For these reasons, the judicial review is dismissed.
JUDGMENT
THE COURT ORDERS THE FOLLOWING:
The judicial review is dismissed.
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"Simon Noël"
Judge
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Certified true translation
Suzanne M. Gauthier, C. Tr., LL.L.
FEDERAL COURT
SOLICITORS OF RECORD
FILE: T-1815-01
STYLE OF CAUSE: CHARLES LÉGARÉ v. CANADA CUSTOMS AND REVENUE AGENCY and YVAN MARCEAU, in his capacity as Chief, Appeals, Taxation Services Office, Québec
PLACE OF HEARING: Québec
DATE OF HEARING: September 3, 2003
REASONS: Simon Noël J.
DATE OF REASONS: September 8, 2003
APPEARANCES:
Charles Légaré FOR HIMSELF
Nadine Dupuis FOR THE RESPONDENTS
SOLICITORS OF RECORD:
Charles Légaré FOR HIMSELF
Valcartier, Quebec
Department of Justice - Canada FOR THE RESPONDENTS
Ottawa, Ontario
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