Date: 20100622
Docket: T-1770-09
Citation: 2010 FC 673
Ottawa, Ontario, June 22, 2010
PRESENT: The Honourable Mr. Justice Mosley
BETWEEN:
ALLAN
LAUGHLIN OSBORNE
Applicant
and
THE ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
[1]
This
is an application for judicial review pursuant to section 18.1 of the Federal
Courts Act, R.S. 1985, c. F-7, of the decision made on October 8, 2009 by
the delegate of the Minister of National Revenue (“the Minister”), D.B. Gibson,
wherein it was determined that cancellation of the interest and penalty
requested by the applicant was not warranted and that the original decision
denying the applicant’s request for taxpayer relief should stand. The applicant
acted on his own behalf in this proceeding.
[2]
In
his refusal letter, pursuant to subsection 220(3.1) of the Income Tax Act,
R.S.C. 1985, c.1 (5th Supp.) (“the Act”), D. B. Gibson,
Director of the Nova Scotia Tax Services Office, Canada Revenue Agency (CRA),
advised the applicant that his request for waiver of interest and penalties
charged on his account for the 2001, 2003, 2004, and 2006 taxation years was
denied.
Background
[3]
Mr.
Allan Osborne, the applicant, is a resident of Eastern Passage, Nova Scotia and is a long-time
lobster and herring fisherman. The applicant suffers from degenerative disc
disease in his lumbar spine which has made it difficult for him to fish in
recent years.
[4]
When
Mr. Osborne became unable to fish due to severe back pain, his son used the
applicant’s boat, equipment and lobster license. Mr. Osborne sold his lobster
license to his son in 2006 but continues to own the boat in which his son
fishes. He has other assets including several vehicles and a trailer home which
he shares with his current partner. He now receives a modest income from his
share of a fish quota and funds from a First Nation of which he is a member.
[5]
The
applicant says he is not good with paperwork and had relied on an accountant to
look after his tax returns for many years, as she did for other fishers in his
area. He says he was audited on several occasions over the past years without
difficulty as the accountant looked after those matters for him. His problems
with CRA began with the 2000 tax year.
[6]
As
time passed, his annual returns were not filed or were filed late, Mr. Osborne
was assessed for imputed income and penalties were imposed when the tax was not
paid. Mr. Osborne says he trusted his accountant when she told him he didn’t
owe any taxes and that she would resolve matters with CRA. That was,
unfortunately, not done and interest accrued on the unpaid tax debt. CRA began
collection activities in 2004. Mr. Osborne eventually borrowed funds to pay the
tax debt outstanding but not the penalties and interest.
[7]
Mr.
Osborne wrote to CRA on October 24, 2008 to request waiver of the penalties and
interest on the ground of financial hardship.
[8]
In
his request, Mr. Osborne identified the amounts owing as relating to an audit
of his 2000 and 2001 taxation years. He claimed the audit did not reflect the
true tax payable for those taxation years as he had not earned the income for
which the tax was assessed. His medical problems prevented him from fishing on
a full time basis. He acknowledged that there may have been some discrepancies
due to actions he took, such as moving money and assets around to protect them.
During the hearing Mr. Osborne indicated that this was due to the failure of
his prior marital relationship.
[9]
On
June 24, 2009, Betty Walsh, a Taxpayer Relief Officer, prepared a report
entitled “Taxpayer Relief Package Request for First Review” in which she
recommended that the applicant’s request for relief for the 2001, 2003, 2004
and 2006 taxation years be denied on the basis of financial hardship because
the applicant would not enter into a payment arrangement, would not borrow
from the bank, had over $200,000 worth of assets and received a regular income
from the lease of his fishing boat and license.
[10]
By
letter dated August 27, 2009, the applicant requested a second independent
review of his account. In that second level request, the applicant discussed
the audit of his 2001 taxation year and again disputes the income ascribed to
him in the audit.
[11]
On
September 11, 2009, Colleen Mott, Taxpayer Relief Officer, signed a memorandum
entitled “Taxpayer Relief Package Request for Second Review” in which she
agreed with the first recommendation and recommended that the applicant’s
second request be denied. It was noted that the total penalty and interest
which was charged for 2001, 2003, 2004 and 2006 is $22,871.21 which included
gross negligence penalties of $4,921.65 on undeclared income for the 2001
taxation year.
[12]
On
October 8, 2009, Donald Gibson, Director of the Nova Scotia Tax Services Office,
CRA, advised the applicant that his request for waiver of interest and penalty
charged on his account for the 2001, 2003, 2004 and 2006 taxation years was
denied. Mr. Gibson noted that the applicant had a history of non-compliance
associated with his account and that he had been in constant contact with
Collections since November 23, 2004. It was also noted that the applicant had
continued to accumulate assets during the time he had a tax debt and that he
had sufficient equity in the assets to satisfy the debt.
The Decision Under
Review
[13]
Mr.
Gibson, acting as the Minister’s delegate declined to waive the federal and
provincial omission penalties (gross negligence penalties) and associated
interest assessed to the applicant’s personal income tax account for the 2001,
2003, 2004, and 2006 taxation years. Mr. Gibson denied the applicant’s request
on the basis of a review of the applicant’s tax situation in relation to the
reasonableness of care exercised in the administration of his affairs under the
self-assessment system, and in applying the taxpayer relief provisions of the ITA,
the delegate considered that Mr. Osborne’s financial hardship was not such that
would warrant the cancellation of the penalty and arrears of interest.
[14]
The
letter dated October 8, 2009, constitutes Mr. Gibson’s reasons for decision:
Canada Revenue Agency / Agence du revenu Canada
Nova Scotia Tax Services Office
Halifax NS B3J 2T5
October 08, 2009
Account Number: 109 004 903
ALLAN OSBORNE
45 NANCY OSBORNE LANE
EASTERN PASSAGE NS B3G 1H6
Dear Mr. Osborne:
Re: ALLAN OSBORNE
Account number: 109 004 903
We are writing in response to your letter
dated August 27, 2009, requesting an administrative review of our decision
concerning the interest and penalty charged on the above account for the 2001,
2003, 2004 and 2006 taxation years.
In your letter you indicated that you
have questions in regards to the audit conducted, and that the penalties and
interest on the account are causing you financial hardship.
We have completed the review of your
submission in relation to the taxpayer relief provisions of the “Income Tax
Act” (ITA).
Information Circular IC07-1 “Taxpayer
Relief Provisions” is available for your reference on our Website at the
following address: www.cra-arc.gc.ca/forms
or by calling toll-free 1-800-959-2221.
After considering all the circumstances
of your case, we remain of the opinion that cancellation of the interest and
penalty is not warranted and that the original decision to deny your request
should stand. Furthermore, interest will continue to accrue until the account
is paid in full.
A review of all the circumstances of this
case, including your most recent submission, has failed to substantiate that you
were prevented from complying with the filing and remitting requirements due to
factors beyond your control or due to actions of the Agency, or that payment of
the liability in its entirety would cause undue hardship.
In applying the taxpayer relief provisions
off the Act (s), the CRA must consider whether or not the individual:
-has a history of compliance with tax
obligations;
-knowingly allowed a balance to exist;
-exercised a reasonable amount of care;
and
-acted quickly to remedy any delays or omissions.
You have a history of non-compliance
associated with this account. Your personal income tax account has been in
Collections since November 23, 2004, with Collections being in constant contact
with you since that time. Legal actions had to be taken by Collections and no
voluntary payments were made by you until recently.
The taxpayer relief provisions give the
Minister the discretion to cancel or waive all or part of any penalty or
interest payable. This is the case if the penalty or interest has resulted from
extraordinary circumstances, is due mainly to actions of the Canada Revenue
Agency (CRA), or if there is an inability to pay.
We would like to point out that the
taxpayer relief provisions empower Agency officials to make discretionary decisions
pertaining to the forgiveness of interest when taxpayers apply.
Any questions you have regarding the
audit conducted will have to be discussed with Audit. In regards to your
financial situation, you have continued to accumulate assets during the time
you had a tax debt, and you have sufficient equity in assets.
If you feel that discretion was not
properly exercised during our review of your request for relief, you can apply
to the Federal Court for a judicial review within thirty (30) days of the day
you received this letter. For more information on the judicial review process
and how to apply, phone the Registry of the Federal Court at 426-3282. This
information is also available at the Federal Court Web site: http://www.fct-cf.gc.ca/index_e.html.
Thank you for bringing your concerns to
our attention. While we appreciate your position, we regret that we cannot
grant the relief requested. We invite you to contact D. MacLeod of Revenue Collections,
at 426-6522, to discuss any questions which you may have regarding this letter.
Yours sincerely,
D.B. Gibson
Director
Nova Scotia Tax Services
Office
Issue
[15]
The
sole issue raised by the parties in their submissions is the following:
Was the decision of the Minister’s
delegate not to waive or cancel penalty or interest on the applicant’s tax
liability unreasonable?
Analysis
[16]
The
standard of review applicable to the exercise of the Minister's discretion
under subsection 220(3.1) of the Income Tax Act is reasonableness: Telfer
v. Canada (Revenue Agency), 2009 FCA 23, [2009] F.C.J. No. 71, at para. 2.
[17]
In
Sandler v. Canada (Attorney General), 2010 FC 459, [2010] F.C.J. No.
541, Justice O’Reilly indicated that this Court “can overturn the Minister's
decision under the fairness provision only if it was unreasonable, in the sense
that it falls outside the range of possible acceptable outcomes based on the
facts and the law,” citing: Telfer, above, at para. 25.
[18]
Mr.
Osborne has now paid the outstanding tax debt but seeks waiver of the interest
and penalties totalling $23,897.94 as payment of this amount of money would
cause him financial hardship. While I have sympathy with the situation in
which he now finds himself, I agree with the respondent that Mr. Osborne has
not advanced any grounds upon which the decision of the Minister’s delegate
could be set aside.
[19]
The
difficulty with this matter is that Mr. Osborne did not take personal responsibility
for his tax affairs until recently and placed undue reliance on a third party,
his accountant, to deal with them. He says he passed the notices that he
received from CRA to her and relied on assurances he received from her that he
did not owe the tax, penalties and interest. There is no evidence in the record
from the accountant. In any event, Mr. Osborne’s tax obligations were his
personal responsibility and could not be delegated to someone else to resolve,
particularly after CRA began collection actions.
[20]
In
my view, the Minister’s delegate observed the principles of procedural fairness
and did not err in the sense contemplated by subsection 18.1(4) of the Federal
Courts Act in making the decision. The delegate considered the facts before
him, acted in good faith and did not rely upon irrelevant or extraneous
factors. Unfortunately for the applicant, I am unable to find grounds upon
which this Court can grant relief in the delegate’s decision.
[21]
I
would note that the information provided by the applicant to CRA in his request
letters identified significant assets and few liabilities. Also, the applicant further
demonstrated that his monthly income, while modest, exceeded his monthly
expenses. On that basis, I have to agree with the respondent that it was open
to the Minister to determine that the payment of the penalties and interest
owed by the applicant would not cause him financial hardship: Affidavit of
D.B. Gibson, paras. 5(a) and 5(b), Exhibits “B” and “C”.
[22]
I
also take into consideration that the applicant stated in his second request
for waiver of penalty and interest dated August 27, 2009 that he did not make
any attempt in the past to set up a payment arrangement for his debt because he
did not believe that the debt was his. In that same letter, the applicant
admits that he is forgetful, lax when it comes to getting paperwork done on
time and was unaware that his taxes for the 2003, 2004, 2005, 2006, 2007 and 2008
taxation years were not filed on time: Affidavit of D.B. Gibson, para. 5(f),
Exhibit “G”.
[23]
I
note that Mr. Osborne sold his lobster license to his son in 2006 and continues
to own his boat and home. I also consider that Mr. Osborne ignored his debt
pursuant to the Income Tax Act for four (4) years while abdicating
responsibility for his tax affairs to a third party. I appreciate that Mr. Osborne
went through a dispute with his ex-wife. However, this does not justify the
applicant’s attempt to hide his assets.
[24]
I
adopt the statement of the Federal Court of Appeal in Telfer, above, at
para. 40, finding that the Minister did not act unreasonably in the course of
deciding not to give the taxpayer what would effectively be an interest-free
loan:
40 The above considerations, as well as
the unstructured nature of the Minister's statutory power under subsection
220(3.1), militate against a court's subjecting the decision-making process
to close scrutiny. Despite the Minister's statutory duty to consider a
taxpayer's Notice of Objection "with all due dispatch" (subsection
165(3)), it will require circumstances more compelling than those in the present
case to persuade a reviewing court that the Minister acted unreasonably in the
course of deciding not to give to a taxpayer what would effectively be an
interest-free loan. [My Emphasis]
[25]
As
was stated by Justice Hughes in McCracken v. Canada, 2009 FC
1189, [2009] F.C.J. No. 1486, at para. 19, “where the Minister's extraordinary
discretion is being invoked, broad latitude must be offered to the Minister,”
citing Telfer, above, at paras. 33-34.
[26]
Given
the above facts based on the information submitted to the decision maker, the
decision to deny waiver of penalty and interest fell within the range of
possible, acceptable outcomes which are defensible in respect of the facts and
the law.
[27]
I am
not persuaded that the decision lacked the degree of “justification,
transparency and intelligibility” required by the unreasonableness standard of
review: Telfer, above, at
para. 41.
[28]
I
find that the Minister’s delegate decision to deny waiver of penalty and
interest in this case was not unreasonable. Accordingly, I must
dismiss the application.
[29]
There
is no request for costs and none will be awarded. I expect that the respondent
will attempt to work out a payment arrangement with the applicant prior to taking
further collection action.
JUDGMENT
IT IS THE JUDGMENT
OF THIS COURT that the application is dismissed. There is no award of
costs.
“Richard
G. Mosley”
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