Date: 20101124
Docket: T-398-10
Citation: 2010 FC 1178
Ottawa, Ontario, November 24,
2010
PRESENT: The Honourable Mr. Justice Phelan
BETWEEN:
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AMOS CHWAIEWSKY
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Applicant
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and
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ATTORNEY GENERAL OF CANADA
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Respondent
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REASONS FOR JUDGMENT AND
JUDGMENT
I. INTRODUCTION
[1]
The
Applicant taxpayer asks that the Minister of National Revenue’s (Minister)
decision not to waive or cancel penalties or interest on unpaid taxes be set
aside. The Minister’s decision is made pursuant to s. 220(3.1) of the Income
Tax Act.
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220. (3.1) The Minister may, on or before the day that is ten calendar
years after the end of a taxation year of a taxpayer (or in the case of a
partnership, a fiscal period of the partnership) or on application by the
taxpayer or partnership on or before that day, waive or cancel all or any
portion of any penalty or interest otherwise payable under this Act by the
taxpayer or partnership in respect of that taxation year or fiscal period, and
notwithstanding subsections 152(4) to (5), any assessment of the interest and
penalties payable by the taxpayer or partnership shall be made that is
necessary to take into account the cancellation of the penalty or interest.
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220. (3.1) Le ministre peut, au plus tard le jour qui suit de dix années
civiles la fin de l’année d’imposition d’un contribuable ou de l’exercice
d’une société de personnes ou sur demande du contribuable ou de la société de
personnes faite au plus tard ce jour-là, renoncer à tout ou partie d’un
montant de pénalité ou d’intérêts payable par ailleurs par le contribuable ou
la société de personnes en application de la présente loi pour cette année
d’imposition ou cet exercice, 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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[2]
The
Minister has a policy in respect of this discretionary decision to relieve
amounts owing which is based upon (i) extraordinary circumstances, (ii) actions
of Canada Revenue Agency, and (iii) inability to pay or financial
hardship.
II. FACTUAL
BACKGROUND
[3]
The
Applicant and his wife are joint tenants of a condominium in Winnipeg and a
cottage.
[4]
The
Applicant worked in the construction industry for over 40 years and has his own
company Soma Holdings Ltd. (Soma) which had substantial financial assets.
[5]
The
Applicant claimed that his former accountant failed to make the necessary tax
filings for the tax years 2000-2004. When these filings were made and T4 slips
issued to the Applicant and his wife, he became liable for approximately
$150,000 in taxes, penalties and interest. The penalties were based on his
gross negligence in failing to file his personal tax returns.
[6]
A
First Request for relief from interest and penalties was filed in June 2007.
The basis for the request was financial hardship (inability to pay) and
extenuating circumstances (misplaced trust in his accountant). The request was
denied and no judicial review was requested.
[7]
On
February 20, 2009, the Applicant made another request (Second Request) for
reasons of financial hardship and extenuating circumstances. The Second Request
was denied and is the subject of this judicial review.
[8]
In
outlining the reasons for refusal of the Second Request, the Minister referred
(inter alia) to the following:
·
the
history of non-compliance, both personal and corporate.
·
gross
negligence penalties were assessed.
·
no
meaningful payment arrangements had been made including potential offset of CPP
and OAS.
·
financial
hardship analysis takes into account the financial affairs of everyone in the
household.
·
net
worth of husband and wife was $273,000 (a disputed point).
·
no
consideration of arrears was given in respect of a TD Bank loan taken out in
June 2009.
Although Mr. Chwaiewsky faces financial
challenges, he has the ability to resolve his arrears balance by arranging his
financial matters in order to do so. This would include borrowing against
available equity and/or disposing of assets.
[9]
In
the course of this judicial review, the Applicant included in his Record an
affidavit from Mrs. Chwaiewsky to the effect that she would not consent to the
sale of the joint properties. This affidavit was not before the Minister’s
delegate.
[10]
The
Applicant contends that there are three matters at issue:
1. The
standard of review;
2. The
unreasonableness and error of law in concluding that the Applicant could sell
his joint properties; and
3. The
failure to include the TD Bank loan in the making of the Minister’s decision.
III. ANALYSIS
A. Standard
of Review/Preliminary Issues
[11]
The
standard of review analysis is straightforward. The parties agree, and the
Court concurs, that the standard is reasonableness (Telfer v. Canada (Revenue
Agency),
2009 FCA 23).
[12]
It
is also important to bear in mind that this is a highly discretionary matter.
The taxpayer is asking for relief from that which Parliament has imposed and
which other taxpayers are required to pay (or for which they could be liable).
It is in the nature of a privilege but it is not a right.
[13]
The
affidavit of the Applicant’s wife is not admissible. There are no valid reasons
advanced for its inclusion, nor has any evidentiary basis been laid. It is self-serving
at best and potentially not particularly germane.
B. Joint
Property
[14]
The
Applicant submits that the Minister’s decision is based on an error of law
because he concluded that the Applicant could sell the joint properties and
have sufficient funds to pay off the CRA debt. This position is based on the
legal principle that a joint tenant cannot claim the whole of the value of the
joint property but merely the net interest of that property.
[15]
As
ingenious as this argument is, and correct as to law, it fails to take the
comments in the decision in context. The Minister, in deciding whether to grant
relief, is not doing an audit net worth but looking at the general worth of the
household. The use of household worth is reasonable – it is rationally connected
to the purposes of the exercise of discretion.
[16]
The
Minister’s quoted comments are not a statement of law but a conclusion that the
taxpayer has some resources available to address tax arrears. These include but
are not limited to sale of the joint properties.
[17]
The
Minister’s conclusion is reasonable in the context in which it was made. It is
not a statement of law or a finding on what the net proceeds of the disposal of
these assets would be.
C. Toronto
Dominion Bank Loan
[18]
The
Applicant argued that the Minister acted unreasonably in not considering this
loan in his assessment of ability to pay. The difficulty with this position is
that the Applicant never raised the issue of the loan as an aspect of the
request for relief.
[19]
It
is difficult to fault the Minister for concluding that the Applicant gave no
consideration to this loan when the Applicant never put the loan in issue.
[20]
Finally,
the reasonableness of the Minister’s decision must also be considered as a
whole. A review of the record confirms that the Minister’s delegate examined
each relevant factor from combined household work, particular circumstances
related to supporting an adult daughter to the history of problems with the
taxpayer’s accounts. It was a careful, thorough, thoughtful and balanced decision.
[21]
As
a consequence of all of the above, the Court can find no basis for review of
this decision.
IV. CONCLUSION
[22]
This
application for judicial review will be dismissed. The parties had agreed to a
costs regime and consequently there will be no costs awarded despite the
Respondent’s success.
JUDGMENT
THIS COURT’S JUDGMENT
is that
the application for judicial review is dismissed. No
costs are awarded as the parties have agreed to a costs regime.
“Michael
L. Phelan”
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