Date: 20050425
Docket: T-913-04
Citation: 2005 FC 560
Vancouver, British Columbia, Monday, the 25th day of April, 2005
Present: THE HONOURABLE MR. JUSTICE von FINCKENSTEIN
BETWEEN:
HARVEY DOUGLAS DICK
Applicant
- and -
CANADA CUSTOMS AND
REVENUE AGENCY
Respondent
REASONS FOR ORDER AND ORDER
[1] The Applicant is a 72 year-old pensioner. He has a long history of alcoholism that began in his 30's, as well as a history of dependence on prescription drugs. He has sought help many times throughout his lifetime from various doctors and therapists. Several of these doctors and therapists have written letters to the Canada Customs and Revenue Agency ("CCRA") on the Applicant's behalf detailing his struggles with addiction and his efforts to put his life back on track. They emphasize that prescription drug and alcohol dependency is a "serious illness or accident" in accordance with section 5 of the Guidelines for the Cancellation and Waiver of Interest and Penalties (No: IC 92-2) (the "Fairness Package"). His family doctor worries he may even commit suicide due to his psychiatric condition and financial situation.
[2] The Applicant owes a total of $48,224.48 including late filing penalties for the 1995, 1997, 1998 and 2000 taxation years. He filed his 1995, 1997 and 1998 tax returns only after demands were made by the CCRA and did not pay the taxes owing for those years. The Applicant has a history of non-compliance.
[3] He earned gross income of $47,500 in 1995, $35,000 in 1997, $42,000 in 1998 and $52,500 in 2000. In 2003, the Applicant completed a Monthly Income and Expense Statement at the request of the CCRA which listed total assets of $180,538, including stocks and bonds worth $16,500, an RRSP worth $10,500 and a co-op apartment worth $150,000. The Applicant's total liabilities including his taxes were $177,000. A second net-worth statement was sent to CCRA on April 3, 2002, by the Applicant which listed his assets as $186,600 and liabilities of $173,000.
[4] The Applicant has made four fairness requests due to illness, financial hardship (his only income is CPP, OAS and GIS) and circumstances beyond his control. The final decision dated April 14, 2004, made by L. Garford of CCRA, stated that the agency was correct in their decision to deny the Applicant's application for the cancellation of arrears interest and penalties based on financial hardship. Mr. Garford found that the materials submitted did not indicate the required degree of financial hardship contemplated by the Fairness Package. In particular, he found:
In carefully weighing your complete submission, the Fairness Committee has determined that even with your substance abuse diagnosis you were able during the years in question to handle your business affairs. You earned self-employed income, contributed to RRSP's for a total of $40,999.00 between 1997 and 2000, purchased real property sometime in the beginning of 2001. The equity in your real property based on your recent submission is approximately $36,000. These investments were made while the tax account was in arrears, therefore it would indicate that you had funds to reply the tax debt outstanding, but the funds were used for other purposes.
[5] Both parties agree that the standard of review for a decision of the Minister (which has been delegated to officials of CCRA) under the Fairness Package is patent unreasonableness and can only be set aside if the decision under review was made in bad faith, if the decision-maker clearly ignored relevant facts or took into consideration irrelevant facts, or if the decision is contrary to law (see Cheng v. Canada, [2001] F.C.J. No. 1532; 55 D.T.C. 5575.
[6] The question thus becomes: Did the CCRA make any patently unreasonable findings in coming to its decision?
[7] The Applicant submits that:
a) the CCRA did not use professional or certified medical authorities to evaluate his alcoholism and prescription drug addiction and assess their effects on him. He is unable to effectively manage his business affairs due to his chronic illness;
b) some of his assets are in the form of non-liquid, virtually worthless, mining shares which he had accepted previously when he was not making sound business decisions due to his illness;
c) his RRSP contribution amount was also based on these shares and the CCRA was wrong in finding that he could contribute $41,000 to his RRSPs;
d) the equity in his co-op cannot be realized as he still has a mortgage of $111,000;
e) his income is now only from his pension and is $12,000 per year. As a result, he has no hope of repaying the rapidly rising interest charges on his tax account.
[8] The Respondent asserts that:
a) a decision to waive or cancel a taxpayer's interest or penalty is a discretionary one;
b) cancellation of interest or penalty is not a widely available option and is limited to circumstances beyond the taxpayer's control;
c) there was no evidence that there were circumstances beyond the Applicant's control and the late filing of the returns were certainly within his control;
d) the Applicant has a history of non-compliance with tax obligations, except in years when he was entitled to a refund; in those years he filed on time.
Consequently, this is not a case where the discretion should be exercised.
[9] While the Respondent's consideration would apply in most cases, I note that the CCRA did not take into consideration:
i) the fact that the Applicant is 72 years old and, given his chronic alcoholism and substance abuse, is unlikely to ever earn the amounts owed;
ii) the penalty and interest owing far exceed the tax owing;
iii) the Applicant at the hearing advised that he could borrow the money from a personal friend to pay the taxes owing, if penalty and interest were waived; and
iv) section 7(b) of the Fairness Package.
[10] Section 7(b) of the Fairness Package provides:
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.
[11] These provisions seem to be directly applicable to this case. I find it was patently unreasonable for the CCRA not to take the four factors, mentioned in paragraph 9 above, into account. Evidently, the CCRA could make any relief based on s. 7(b) of the Fairness Package contingent on the tax debt being paid contemporaneous with the penalty and interest relief granted.
[12] Consequently, the decision of April 14, 2004, will be set aside and the matter sent back to the CCRA for reconsideration in light of the above.
ORDER
THIS COURT ORDERS that:
1. The decision of the CCRA dated April 14, 2004, is set aside.
2. The matter is sent back to the CCRA for reconsideration by a different official of the CCRA. Such reconsideration should specifically take into account paragraphs 9 and 10 of the reasons for order above.
(Sgd.) "K. von Finckenstein"
Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-913-04
STYLE OF CAUSE: HARVEY DOUGLAS DICK
- and -
CANADA CUSTOMS AND REVENUE AGENCY
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: April 21, 2005
REASONS FOR ORDER AND ORDER: von FINCKENSTEIN, J.
DATED: April 25, 2005
APPEARANCES:
Mr. Harvey Douglas Dick on his own behalf
Ms. Patricia Babcock for Respondent
SOLICITORS OF RECORD:
Mr. John H. Sims, Q.C. for Respondent
Deputy Attorney General of Canada
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