Girard v. Canada (Customs and Revenue Agency), 2001 FCT 295

Date: 20010405

Docket: T-357-00

Neutral reference: 2001 FCT 295

Between:

                                                              LUCIEN GIRARD

                                                                                                                                             Plaintiff

And:

                                 CANADA CUSTOMS AND REVENUE AGENCY

                                                                      - and -

                                  ANDRÉ PAQUIN, in his capacity as Director

                                     of the Quebec Taxation Services Office

                                                                                                                                  Defendants

                                                        REASONS FOR ORDER

NADON J.

[1]                 This is an application for judicial review made pursuant to s. 18.1 of the Federal Court Act, R.S.C. 1985, c. F-7, against a decision made on February 1, 2000 pursuant to s. 220(3.1) of the Income Tax Act ("the ITA") by which the director of the Quebec Taxation Services Office, André Paquin, rejected the plaintiff's application to cancel interest.

FACTS

[2]                 On October 2, 1995 the plaintiff was assessed by the Verification, Enforcement and Compliance Research Division of the Canada Customs and Revenue Agency (also known as the "Tax Evasion Branch") for 1991 to 1994. According to those notices of assessment the plaintiff owed a total sum of $1,761.64 in interests for 1991 to 1994.

[3]                 On December 15, 1995 the plaintiff filed a notice of objection to the notices of assessment of October 2, 1995. On February 28, 1996 the plaintiff filed an addendum to his notice of objection in which he asked that interest attributable to the defendants be cancelled. On April 2, 1996 Henri La Ferrière, Chief, Appeals, replied that an application to cancel interest under s. 220(3.1) of the ITA was premature since the assessments were not valid and executory as long as the objection had not been dealt with.

[4]                 On July 16, 1996 the defendants allowed the plaintiff's objection in part and issued notices of reassessment for the 1991 to 1994 taxation years. In these reassessments the defendants reduced the interest claimed from the plaintiff by $373.77 ($141.58 for 1991; $106.79 for 1992; $77.17 for 1993; and $48.23 for 1994).

[5]                 On October 3, 1996 the plaintiff filed a new notice of objection to the reassessments of July 16, 1996. On May 15, 1998 the defendants allowed the plaintiff's objection in part and issued notices of reassessment for the 1991 to 1994 taxation years. In these reassessments the defendants reduced the interest claimed from the plaintiff by $575.77 ($486.80 for 1991; $0 for 1992; $50.95 for 1993; and $38.02 for 1994). The plaintiff did not appeal these reassessments.

[6]                 On August 15, 1998 the plaintiff made a claim to cancel accumulated interest on these assessments. The plaintiff's principal reasons in support of his cancellation application were the following:

[TRANSLATION]

First, I would ask you to take into account the fact that the tax audit undertaken by the Tax Evasion Branch was subject to several delays for which I cannot be held responsible and on which I took no position.

. . . . .

I would also like to mention that from the time the Tax Evasion Branch initiated an audit of my tax file for 1991, 1992, 1993 and subsequently 1994, it seemed unfair that I should have to bear the cost of interest accumulating as the result of a process that involved several delays for discussions on points in dispute, waiting for documents to support arguments or consultations required to set out the individual's point of view . . .

Finally, I should like to mention the precarious physical condition of my wife which had, has and will have a significant effect on our family's financial position. For some 15 years my wife has suffered from multiple sclerosis. This degenerative disease of the nervous system requires special care and large expenditures month after month which are added to other financial obligations. You will understand that my first priority has been to ensure that my wife will receive the necessary care. I will add that this entire situation has greatly added to her stress, which as you know is very harmful for person's suffering from this illness.

[7]                 On May 12, 1999 the defendants cancelled part of the interest on the plaintiff's assessments, namely the interest accumulated for the period from June 5 to September 12, 1995 and the interest accumulated for the period from October 3, 1996 to July 3, 1997.

[8]                 On August 23, 1999 the plaintiff filed an application to review the decision of May 12, 1999 on the following grounds:

[TRANSLATION]

The first point I would draw to your attention has to do with the letter of April 2, 1996 (Appendix 2) from Henri Laferrière, then Chief, Appeals Division, in which he indicated that he would cancel the interest for the 1991 taxation year, admitting that there had in fact legally been a delay in making the assessments. However, he noted that this cancellation could not apply before conclusion of the discussions on the value of the assessments then being objected to. This amount of interest came to $947.56, which was never cancelled, although we arrived at an agreement on February 2, 1998. You will understand that this situation penalized me as its effect was to increase the amounts calculated for reimbursement purposes.

Secondly, I submit that the services of the Objections Office indicated that they had approved interest reductions, justifying their validity by the delays which exceeded three months, the usual period for undertaking analysis of a file. Certain periods, described in Appendix 1 of the letter I wrote to Laval Mailhot, Appeals Chief, although they are consistent with this guideline, were not taken into account. In particular, I refer to the period between December 15, 1995 and July 16, 1996.

Thirdly, I refer you to the summary of my statement (Appendix 3) which indicates that overall I paid over $7,678.00, when my debts totalled $5,431.43 as a result of the adjustments made. I therefore repaid some $2,246.63 interest overall. You will agree that my debt would be completely erased if, in the reductions made, Mr. Laferrière's recommendation that interest for 1991 be cancelled had been implemented, since I would not have had to pay interest on the interest which had accumulated since 1991. For the reasons I indicated in my letter to the Appeals Chief, Mr. Mailhot, I agreed to pay a large sum of interest as I was not in a position to pay off my debt in its entirety. You may be sure that I would have done so promptly if I had been able to do so.

Finally, I submit that a full year has elapsed between my letter to the Appeals Chief and the answer to my request (Appendix 4). During this period interest has continued to accumulate while I was waiting for a reply in order to reach agreement with your Collections Branch. This lengthy delay in sending me a reply was also not taken into account in the decision rendered.

[9]                 The defendant André Paquin reassessed the plaintiff's claim to cancel interest and rejected the claim on February 1, 2000. In his letter of rejection Mr. Paquin indicated the following:

[TRANSLATION]

I have carefully noted your comments and have reviewed the entire file. I have concluded from my review that it would not be proper to cancel amounts of interest in addition to those which have already been cancelled, first at the time of the review by Pierre Bédard following your initial notice of objection, and then by Yves Côté following your second notice of objection. My conclusion is that the interest relating to any period in which the Department could potentially have processed your file within shorter deadlines has already been cancelled, thus complying with the requirements of No. 6 of Information Circular IC92-2, a copy of which is enclosed.

As regards the letter from Henri Laferrière on April 2, 1996 to which you refer, and which mentions "I do not see, apart from 1991, that there was any delay in making reassessments for the other years", my understanding is that this opened the possibility of cancelling some interest for 1991, not systematic cancellation of all interest concerned; further, interest for 1992, 1993 and 1994 was subsequently cancelled in addition to certain amounts relating to 1991.

[10]            On February 25, 2000 the plaintiff filed the instant application for judicial review of the decision by the defendant André Paquin on February 1, 2000.

POINTS AT ISSUE

[11]            I adopt the points at issue suggested by the defendants:

1.         Did the defendants act contrary to natural justice in their decision of February 1, 200?

2.         Did the defendants take all the relevant points into account in their decision of February 1, 2000?

ARGUMENTS

(a)        Plaintiff:

[12]            The plaintiff maintained that the persons responsible for processing his file failed to observe the rules of natural justice, in particular the right to be heard and informed and the right to an impartial, objective and fair decision.

[13]            The plaintiff alleged essentially that the defendant André Paquin did not take into account his arguments supporting his claim to cancel interest when the decision of February 1, 2000 was made. In the plaintiff's opinion Mr. Paquin should have considered the following points: the auditor responsible for his file at the Tax Evasion Branch did not allow him to present his point of view and committed an abuse of power by issuing a notice of reassessment without the plaintiff being heard; the Tax Evasion Branch undertook to audit his tax return for 1994 without the plaintiff being informed thereof and there were unreasonable delays in processing his file.

(b)        Defendants:

[14]            The defendants submitted, first, that s. 220(3.1) of the ITA was adopted to give the Minister of National Revenue ("the Minister") a discretionary power to cancel interest or penalties on request. They noted that in this regard the Minister had published Information Circular IC-92-2, titled "Guidelines Concerning Waiver of Interest and Penalties" and adopted the policy "Application of the Fairness Provisions to Interest and Penalty". The defendants considered that their decision was consistent with these guidelines and this policy and maintained that the plaintiff had not demonstrated any exceptional circumstances to show that he was unable to pay the accumulated interest of $1,761.64 due following receipt of the notices of assessment of October 2, 1995.

[15]            The defendants further argued that the process of cancelling interest was consistent with procedural equity in that the plaintiff had an opportunity to set out his position in writing at the time of his first request to cancel interest, dated August 15, 1998, and at the time of his application for a review (Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 871; Dubé v. Canada, 99 D.T.C. 5103 (F.C.T.D.)). In reply to the plaintiff's arguments that an officer of the Tax Evasion Branch gave him no opportunity to make his arguments, the defendants noted that since the plaintiff had been dealing with the Tax Evasion Branch between October 3, 1994 and October 2, 1995 there was no lack of procedural equity in the decision which the plaintiff is asking the Court to review.

[16]            Finally, the defendants maintained that they took all relevant matters into account in exercising their discretion. In the defendants' submission, the decision of February 1, 2000 dealt with the plaintiff's two concerns, namely the question of interest and the question raised regarding the letter from Mr. La Ferrière on April 2, 1996. Consequently, the defendants argued that the plaintiff's application for judicial review was without basis in fact or in law.

ANALYSIS

[17]            Section 220(3.1) of the ITA gives the Minister the discretion to cancel all or any portion of any interest or penalties payable by a taxpayer. The provision reads as follows:

[18]            In addition to this provision, the Minister has established guidelines on the exercise of his discretionary power, contained in Information Circular IC-92-2, titled "Guidelines Concerning Waiver of Interest and Penalties", and dated March 18, 1992. In March 1996 the Minister also issued a document titled "Application of the Fairness Provisions to Interest and Penalty", which restates the guidelines and procedures regarding the application inter alia of s. 220(3.1) ITA.

[19]            In Dubé, supra, Pinard J. summarized as follows the rules applicable in an application for judicial review of a decision made pursuant to s. 220(3.1) ITA, at 5105:

On the subject of the exercise of a similar discretion, the Supreme Court of Canada stated the following in [1982] 2 S.C.R. 2">Maple Lodge Farms Limited v. Canada, [1982] 2 S.C.R. 2 (S.C.C.), at pages 7 and 8:

. . . It is, as well, a clearly-established rule that the 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 . . .

In my view, in the context of a request to cancel penalties and interest based on subsection 220(3.1) of the Act, nothing in either the Act or Information Circular 92-2 indicates that the Minister must allow the applicant to respond to his or her objections, that the Minister is required to make a decision or to form an opinion on the facts set out in the applicant's request, that the Minister must provide the applicant with the opportunity to make oral representations, or that the Minister must give reasons for his or her decision. In my view, it is sufficient, save in exceptional cases, to simply allow the applicant to make written representations . . .

[20]            In the case at bar the plaintiff had an opportunity, in connection with his request to cancel interest, to make written representations and present his arguments on two occasions, at the time of his initial request and at the time of his application for a review. He was also given a decision supported by reasons by the defendants. The letter of rejection from the defendant André Paquin clearly indicated that the plaintiff's arguments had been considered. Mr. Paquin replied to the plaintiff's allegations about the delays caused by the Department and Mr. La Ferrière's letter.

[21]            Additionally, the arguments made by the plaintiff in support of his application for judicial review deal, for the most part, with the processing of his file before he made his application to cancel interest. In my view, the defendant André Paquin did not have to consider the actions of the Tax Evasion Branch officers in issuing the notices of reassessment when he dealt with the request to cancel interest. If the plaintiff was dissatisfied with the proceedings at the time of these reassessments he should have followed the appeal procedure laid down for such a situation. Since we are concerned here with a judicial review of the refusal to cancel interest, only the arguments relevant to that request must be considered.

[22]            In my opinion the plaintiff was not able to show that there was any lack of procedural equity in the case at bar. Additionally, there is nothing in the record to indicate that the rules of natural justice were infringed or that the defendants failed to take relevant material into account in exercising their discretion, relied on irrelevant factors or did not exercise their discretion in good faith.

CONCLUSION

[23]            In my view, the application for judicial review must be dismissed: the whole without costs.

Ottawa, Ontario

April 5, 2001

Certified true translation

Suzanne M. Gauthier, LL.L. Trad. a.

FEDERAL COURT OF CANADA

TRIAL DIVISION

NAMES OF COUNSEL AND SOLICITORS OF RECORD

FILE:                                                             T-357-00

STYLE OF CAUSE:                                   Lucien Girard v. Canada Customs and Revenue Agency et al.

PLACE OF HEARING:                              Québec, Quebec

DATE OF HEARING: March 16, 2001

REASONS FOR ORDER:                         NADON J.

DATED:                                                        April 5, 2001

APPEARANCES:

Lucien Girard                                                THE PLAINTIFF FOR HIMSELF

Véronica Romagnino                                    FOR THE DEFENDANTS

SOLICITORS OF RECORD:

Morris Rosenberg                                        FOR THE DEFENDANTS

Deputy Attorney General of Canada

Ottawa, Ontario