Date: 20090911
Docket: T-1890-08
Citation: 2009 FC 901
Ottawa, Ontario, September 11,
2009
PRESENT: The Honourable Mr. Justice Phelan
BETWEEN:
HI-TECH
SEALS INC.
Applicant
and
ATTORNEY GENERAL OF CANADA
(MINISTER OF
NATIONAL REVENUE)
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
I. INTRODUCTION
[1]
The
Applicant seeks judicial review of a decision by the Minister of National
Revenue’s delegate (Delegate) not to grant discretionary relief from the
payment of penalties assessed for failure to remit withholding tax/source
deductions as required by the Income Tax Act 1985, c. 1 (5th Supp.).
[2]
The
facts are not in dispute nor is the standard of review. The issues in this
matter are whether the decision was reasonable and whether the Applicant
received procedural fairness in respect of “adequate reasons”.
II. BACKGROUND
[3]
The
core event in this case was the failure to remit taxes on a non-payroll payment
(payroll services were performed by another company) on March 31, 2008. The
precise details of the payments were not clearly set out in the Applicant’s Record
but it was clear that taxes were due April 3, 2008 and not paid until April 17,
2008. The penalty assessed for late remittance was $79,220.25.
[4]
The
Minister has authority under s. 220(3.1) of the Income Tax Act to cancel
or waive penalties and interest.
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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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[5]
There
are Guidelines dealing with the exercise of the Minister’s discretion and the
general basis for the exercise of the discretion is one of a) extraordinary
circumstances, b) actions of CRA, and c) inability to pay or financial
hardship. A more complete recitation of Part II of the Taxpayer Relief
Provisions/Guidelines is attached as an Annex to these Reasons.
[6]
The
company sought relief from the penalties on the grounds that the company’s
controller, who had to authorize the CRA remittance, was absent for “personal
reasons”. As it turns out, this is not a fulsome explanation – the controller
was away on holidays, as the Applicant now admits.
[7]
The
Respondent denied the request for relief noting that James Bond was a principal
shareholder and that he could have authorized remittance in a timely manner.
[8]
As
it turns out, Mr. Bond had a crucial role in an earlier tax relief request in
1997. He had been away on business and did not send the remittance until his
return. In that instance, the penalty was cancelled.
[9]
The
company then sought a second level review but submitted no new evidence. The
Delegate denied the request and in the decision-letter simply stated that the
penalties were assessed in accordance with the law and that there were no
circumstances beyond the company’s control which prevented compliance.
[10]
The
Tribunal Record contains the staff’s report to the Delegate as well as his
comments thereon and his signature accepting the report. The report
acknowledges a good compliance history, accepted that only the controller had
knowledge of the payment information, noted the unexplained absence of the
controller and concluded that either there should have been a back-up or the
controller should have contacted the employer and could have done so given
modern technology.
[11]
A
more detailed report, not signed by the Delegate, was found in the CRA file,
which noted the details of the 1997 request for relief which had been granted.
[12]
In
this judicial review, the Applicant filed an affidavit in effect challenging
the finding that Mr. Bond could have signed the remittance cheque. The evidence
was that Mr. Bond was out of the country at the relevant time and not available
to sign the remittance cheque.
III. ANALYSIS
A. Standard
of Review
[13]
The
Court agrees with the parties that the standard of review on the decision
itself is “reasonableness”. This has been recently reaffirmed by Justice
Beaudry in Jones Estate v. Canada (Attorney General), 2009 FC
646. On the question of procedural fairness/adequacy of reasons, the parties
agree and the Court concurs that “correctness” is the standard.
B. Reasonableness
[14]
The
Applicant has argued that the Delegate gave insufficient importance to the
controller’s absence and made a wrong assumption about Mr. Bond’s availability
to make the required remittance.
[15]
From
the record before the Delegate, there is no question that he was mindful of the
controller’s absence – CRA had been trying to find out where he was and why.
Further, there was nothing before the Delegate to suggest that Mr. Bond was not
available. Therefore it was a reasonable presumption that he was available, and
that presumption was not rebutted. It is important to bear in mind that the
burden of establishing grounds for the exercise of discretion is entirely on an
applicant. The Applicant failed to advance an argument that no one was
available to authorise remittances.
[16]
On
the basis of what was filed at CRA, the Delegate’s decision was reasonable. The
Applicant’s attempt to supplement the record by an affidavit of new evidence in
this judicial review simply confirms the reasonableness of the decision. Of
equal importance is that it is improper to attempt to supplement the record of
the decision without leave of the Court.
[17]
Even
if that new evidence were admitted, it would establish that the payments were
for bonuses – the decision to pay having been made months in advance and thus remittance
ought to have been anticipated. That new evidence shows that the controller was
absent because of holidays not because of some unforeseen personal circumstance
such as a death in the family. Lastly, that new evidence shows that Mr. Bond
was out of the country when an important payment was due (as had also occurred in
1997) and that the company allowed both the controller and a principal
shareholder to be absent at a critical time with no apparent back-up plan.
[18]
It
is difficult to see how this new evidence would have assisted the company in
persuading the Delegate, but in any event it was not before the Delegate
because the Applicant had not put it in evidence.
[19]
The
Applicant had also argued that the Delegate fettered his discretion because the
1997 penalty relief was considered a “one time” relief. The gravamen of this
submission is that this present request for relief was not considered on its
merits because the Delegate viewed the “one time” relief as foreclosing consideration
of the current request.
[20]
The
difficulty with the Applicant’s position is that there is no evidence that the
“one time” relief formed part of the reasons for decision either at the first
stage or before the Delegate.
[21]
The
Applicant put its compliance history in issue and it would have been
appropriate to cite the similarity of circumstances in 1997 as a factor in
reaching a negative decision. However, this did not occur and the Applicant can
hardly now complain.
[22]
Therefore,
the Court concludes that either based on the record before the Delegate or if
the new evidence were admissible, which it is not, the Delegate’s decision was
reasonable.
C. Adequacy
of Reasons
[23]
The
letter decision would not have constituted adequate reasons. It is not
sufficient for the Respondent to assert that the “reasons” or “reasoning” can
be found by stitching together various parts of the CRA file and divining out
what was in the mind of the decision maker.
[24]
However,
in this case, the report with notes and signature of the Delegate as well as
the decision letter are readily available and adequately explain the reasons
for the refusal of relief. There is no basis for this grounds of judicial
review.
IV. CONCLUSION
[25]
For
these reasons, the judicial review is denied with costs.
JUDGMENT
THIS COURT
ORDERS AND ADJUDGES that this application
for judicial review is denied with costs.
“Michael
L. Phelan”
ANNEX
IC07-1 – Taxpayer Relief Provisions
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¶ 23. The Minister may
grant relief from the application of penalty and interest where the following
types of situations exist and justify a taxpayer's inability to satisfy a tax
obligation or requirement at issue:
(a) extraordinary
circumstances
(b) actions of the CRA
(c) inability to pay or
financial hardship
¶ 24. The Minister may
also grant relief if a taxpayer's circumstances do not fall within the
situations stated in ¶ 23.
¶ 25. Penalties and
interest may be waived or cancelled in whole or in part where they result
from circumstances beyond a taxpayer's control. Extraordinary circumstances
that may have prevented a taxpayer from making a payment when due, filing a
return on time, or otherwise complying with an obligation under the Act
include, but are not limited to, the following examples:
(a) natural or man-made
disasters such as, flood or fire;
(b) civil disturbances or
disruptions in services, such as a postal strike;
(c) a serious illness or
accident; or
(d) serious emotional or
mental distress, such as death in the immediate family.
…
¶ 33. Where circumstances
beyond a taxpayer's control, actions of the CRA, or inability to pay or
financial hardship has prevented the taxpayer from complying with the Act,
the following factors will be considered when determining whether or not the
CRA will cancel or waive penalties and interest:
(a) whether or not the
taxpayer has a history of compliance with tax obligations;
(b) whether or not the
taxpayer has knowingly allowed a balance to exist on which arrears interest
has accrued;
(c) whether or not the taxpayer
has exercised a reasonable amount of care and has not been negligent or
careless in conducting their affairs under the self-assessment system; and
(d) whether or not the
taxpayer has acted quickly to remedy any delay or omission.
…
¶ 103. If a request
was denied or partly granted, there is no right of objection for a taxpayer
to dispute a decision under the taxpayer relief provisions. However, if the
taxpayer believes that the Minister's discretion has not been properly
exercised, the taxpayer can write to ask that the director of the tax
services office or the tax centre reconsider the original decision and review
the situation again. During the second review, the taxpayer will have the
opportunity to make more representations for the CRA's consideration. To find
the addresses of CRA offices, see ¶ 31.
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¶ 23. Le ministre peut
accorder un allègement de l'application des pénalités et des intérêts lorsque
les situations suivantes sont présentes et qu'elles justifient l'incapacité
du contribuable à s'acquitter de l'obligation ou de l'exigence fiscale en
cause :
a) circonstances
exceptionnelles;
b) actions de l'ARC;
c) incapacité de payer ou
difficultés financières.
¶ 24. Le ministre peut
également accorder un allègement même si la situation du contribuable ne se
trouve pas parmi les situations mentionnées au paragraphe 23.
¶ 25. Les pénalités et
les intérêts peuvent faire l'objet d'une renonciation ou d'une annulation, en
tout ou en partie, lorsqu'ils découlent de circonstances indépendantes de la
volonté du contribuable. Les circonstances exceptionnelles qui peuvent avoir
empêché un contribuable d'effectuer un paiement lorsqu'il était dû, de
produire une déclaration à temps ou de s'acquitter de toute autre obligation
que lui impose la Loi sont les suivantes, sans être exhaustives :
a) une catastrophe
naturelle ou causée par l'homme, telle qu'une inondation ou un incendie;
b) des troubles publics ou
l'interruption de services, tels qu'une grève des postes;
c) une maladie grave ou un
accident grave;
d) des troubles émotifs
sévères ou une souffrance morale grave, tels qu'un décès dans la famille
immédiate.
…
¶ 33. Lorsque des
circonstances indépendantes de la volonté du contribuable, des actions de
l'ARC, ou l'incapacité de payer ou les difficultés financières ont empêché le
contribuable de respecter la Loi, les facteurs suivants seront considérés
pour déterminer si l'ARC annulera ou renoncera aux pénalités et aux intérêts,
ou non :
a) le contribuable a
respecté, par le passé, ses obligations fiscales;
b) le contribuable a, en
connaissance de cause, laissé subsister un solde en souffrance qui a engendré
des intérêts sur arriérés;
c) le contribuable a fait
des efforts raisonnables et n'a pas été négligent dans la conduite de ses
affaires en vertu du régime d'autocotisation;
d) le contribuable a agi
avec diligence pour remédier à tout retard ou à toute omission.
…
¶ 103. Si une demande a été refusée ou partiellement
acceptée, il n'y a aucun droit de faire opposition au profit d'un
contribuable pour contester une décision prise conformément aux dispositions
d'allègement pour les contribuables. Cependant, si le contribuable estime que
le pouvoir discrétionnaire du ministre n'a pas été exercé correctement, il
peut demander, par écrit, que le directeur du bureau des services fiscaux ou
du centre fiscal reconsidère la décision initiale et réexamine la situation.
Au cours du second examen, le contribuable aura la possibilité de soumettre
des observations supplémentaires que l'ARC prendra en considération. Voir le
paragraphe 31 pour obtenir les adresses des bureaux de l'ARC.
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