Docket: T-725-12
Citation:
2012 FC 1202
Ottawa, Ontario, October 15, 2012
PRESENT: The Honourable Mr. Justice
Zinn
BETWEEN:
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ESTATE OF
CORINNE KELLEY (EXECUTORS RONALD AND DEBORAH HAYDEN)
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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
[1]
The executors of the Estate of Corinne Kelley [the
Haydens] seek to set aside a decision of Doug McLean, Director of the Winnipeg
Tax Services Office, dated February 22, 2012, denying, in part, their request
for taxpayer relief pursuant to subsection 220(3.1) of the Income Tax Act,
RSC 1985, c 1 (5th Supp). This is the second adjudication of their request for
taxpayer relief.
[2]
On November 15, 2011, Justice Mosley heard an
application by the Haydens to review a decision of the Canada Revenue Agency [CRA]
denying the first request for relief from interest and penalties assessed to
the estate of Corinne Kelley. Justice Mosley quashed that decision on November
22, 2011, and sent the matter back to the CRA for reconsideration in accordance
with his Reasons. The present application is a judicial review of the
reconsidered decision.
[3]
Justice Mosley summarized the facts of this case
in Kelley Estate v Canada (Attorney General), 2011 FC 1335, provided
direction to the CRA and optimistically stated: “This is a matter that should
be resolved with the exercise of reasonable discretion by the agency and
without additional public expenditures.”
[4]
I have concluded that this decision again must
be quashed and returned for yet another decision by a different
decision-maker. I reach this conclusion because the decision-maker
unreasonably failed to consider one of the specific directions given by Justice
Mosley in paragraph 36 of his Reasons for Judgment - to consider the fact that
the Haydens never received a T4RSP slip in Corinne Kelley’s name for $5,502.
[5]
The Haydens say that the $5,502 T4RSP slip was
in George Kelley’s name but with Corinne Kelley’s Social Insurance Number.
This is corroborated by the CRA’s own records. They say they called the CRA
and that the CRA told them that no information could be provided about George
Kelley’s account. They say that they therefore sent that T4RSP to the
executors of George Kelley’s estate, and treated it as their responsibility.
According to the CRA’s advice at the time, that appears to have been the
correct thing to do.
[6]
The first time the Haydens might have
been alerted that the $5,502 ought to have been attributed to Corinne Kelley
was in October 2008, when a Notice of Reassessment was sent. That reassessment
was based on considerably more income than the T4RSP received by the Haydens in
2006 indicated, and apparently triggered the Haydens to attempt to understand
where all this extra income was from. However, even though the amount was
higher, the connection to George Kelley’s RRSP might not have been immediately
self-evident. Moreover, by the CRA’s own admission, information should not
have been flowing to the Haydens until November 18, 2008, when their
authorization as executors was established, so it is not clear that the Haydens
reasonably could have learned where the extra income was from until after
November 18, 2008. The CRA points to a letter sent to the Haydens on September
16, 2008, that states that “Corrine Kelley held a registered retirement savings
plan (RRSP) in the amount of $45,361.84 on July 31, 2003. … This amount will
be added to the 2003 income tax return.” At the hearing the Haydens denied
having received that letter.
[7]
Furthermore, although the Haydens filed an
affidavit in the application heard by Justice Mosley stating that they had
received a T4RSP in October 2006 reflecting an amount of $39,719.00, as is
stated in paragraph 35 of the Reasons of Justice Mosley, they now inform the
Court that their statement was in error and that the amount ought to have read
$34,734.18, the amount reflected on the T4RSP reproduced at page 54 of the
Application Record. If that is accepted, then the Director ought to also
consider whether the Haydens’ failure to pay the tax on that part of the income
earlier than they did has some justification.
[8]
Lastly, during the hearing respondent’s counsel
noted that the two T4RSP forms that issued in the amounts of $34,734.18 and
$39,719.00 were with respect to different RRSP accounts and the report of the
larger sum has nothing to do with the report of the smaller sum. That fact may
not have been clear to the decision-maker who relied on a recommendation that
stated: “As the estate was not aware of the missing T4RSP income [of
$39,719.00] until 2006, I believe a reduction in arrears [of] interest from
April 30, 2004, to October 3, 2006, is warranted.” It may well be that the
Haydens were not aware of the “missing” RRSP amount until 2008 or later.
[9]
For these reasons, the decision must be set
aside and a new decision rendered. It is obvious to the Court that both
parties would be well served if prior to that decision being made there was a
frank and full discussion between the parties as to the precise chronology of
events and the knowledge the Haydens had, or did not have, or ought to have
had, at the relevant times regarding the missing RRSP funds.
JUDGMENT
THIS COURT’S JUDGMENT is that the
application is granted and the matter is remitted to the Canada Revenue Agency
for reconsideration by a different decision-maker in accordance with these
reasons.
"Russel W. Zinn"
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