Date: 20110525
Docket: T-1387-10
Citation: 2011 FC 616
Ottawa, Ontario, May 25,
2011
PRESENT: The Honourable Mr. Justice Mandamin
BETWEEN:
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MARION BUTLIN
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Applicant
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and
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CANADA (ATTORNEY GENERAL)
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Respondent
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REASONS FOR JUDGMENT AND
JUDGMENT
[1]
This application for judicial review
concerns a decision made by the Canada Revenue Agency (CRA), denying the
Applicant’s request to have her penalties and interests waived because her
post-traumatic stress disorder prevented her from filing her tax returns on
time.
[2]
For reasons that
follow, I am dismissing this application for judicial review.
Background
[3]
On February 1, 2003, during
the time when she was preparing her income tax returns for tax year 2002, Ms. Marion Butlin was injured in a bus accident. After
this event, she began to suffer from post-traumatic stress disorder (PTSD),
which caused her to experience anxiety regarding events and activities
associated with the accident, including filing her tax returns. Although she
was able to file her tax returns for 2002, she did not file subsequent tax
returns on time for several years. As of June 24, 2010, the Applicant owed tax
penalties of $15,686.10, and interest of $16,671.79.
[4]
On July 22, 2009 Dr. Virginia Simonds, the Applicant’s doctor, filed for Taxpayer’s Relief on behalf of the Applicant, requesting
the cancellation or waiver of her penalty and interest. This included a medical
note from Dr. Simonds dated August 27, 2009, confirming the Applicant’s PTSD
diagnosis and her therapy commencing in spring 2007. Dr. Simonds wrote:
One year ago in
August 2008 Marion revealed to
me that she has not been able to do her taxes since the accident in 2003. At
the time of the accident, Marion was in the middle of preparing her financial records for filing
2003 income taxes. After the accident when she tried to return to preparing her
tax return, she experienced intense cognitive and physical symptoms of anxiety.
Although this may seem unusual, it is not uncommon for symptoms of PTSD to
generalize to events surrounding or related to the primary event that caused
the trauma in the first place. The Diagnostic and Statistical Manual for Mental
Disorders (DSM-IV) states as part of the criteria for PTSD “intense
psychological distress at exposure to internal or external cues that symbolize
or resemble an aspect of the traumatic event” and “physiological reactivity on
exposure to internal or external cues that symbolize or resemble an aspect of
the traumatic event”. The DSM also states as part of the criteria for PTSD
“persistent avoidance of stimuli associated with the trauma.”
[5]
This request was denied
by the CRA on March 23, 2010. The CRA observed that the Applicant’s 2002
taxation return had been submitted on time, a few months after the accident,
and that the 2004 and 2005 income tax returns were filed in 2007 after
enforcement measures were taken but before therapy had been commenced. The
2003, 2006, 2007 and 2008 income tax returns were filed in 2009. The CRA therefore
concluded that this was not a case that would permit the cancellation of the
interest and penalty.
[6]
The Applicant then made
a request for reconsideration on April 26, 2010. In this application, she
described further her PTSD symptoms and explained that her daughter helped her
file her 2004 and 2005 taxes. However, once her daughter began university, she
could no longer assist the Applicant with her taxes. The Applicant assured the
CRA that she has been working on this problem with Dr. Simonds, putting aside
time to work on her taxes and regularly paying $400 per week for her back
taxes. She also included a list of physicians and specialists she had seen in
2006. Dr. Simonds also wrote a letter, affirming that the Applicant had been
“completely immobilized when trying to approach her tax obligations” but has
made “great gains in therapy and has since completed all of her returns.”
[7]
This second request was
rejected by the CRA on August 3, 2010, and is the subject of this application
for judicial review.
Decision Under Review
[8]
In its letter dated
August 3, 2010, the CRA did not find that the medical condition the Applicant
was being treated for prohibited her from filing her taxes on time.
[9]
The CRA noted that the
Applicant had been able to file the 2002 tax return, just four months after the
accident. The CRA also noted the Applicant had the services of an accountant who
could prepare and file her tax returns, and the Applicant had continued with
her business during the relevant tax years with increases in income, allowing
her to contribute to a Registered Retirement Savings Plan (RRSP) every year. As
such, the CRA denied the Applicant’s request for cancellation of the penalties
and interest.
Legislation
[10]
Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1.
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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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Issues
[11]
I would frame the
issues as follows:
a.
Was there a breach of
procedural fairness?
b.
Was the CRA’s decision to deny the Applicant’s
request for taxpayer relief reasonable?
Standard of Review
[12]
The standard of review
of the CRA’s decision not to exercise its discretion is reasonableness: Dunsmuir
v. New Brunswick, 2008 SCC 9; Telfer v Canada (Canada Revenue Agency), 2009 FCA 23 at para 24.
[13]
The standard of review
for breaches of procedural fairness is correctness: Ugro v Minister of
National Revenue, 2009 FC 826 at para 35 (Ugro).
Analysis
Procedural Fairness
[14]
The Applicant submits
that the “Summary Sheet” provided to the decision maker would suggest that more
factors were taken into consideration than indicated in the August 3, 2010
decision letter. These factors include the fact that in the early 1990s, if the
Applicant owed for a tax year, she would wait until she filed the next year’s
taxes and the refund was allocated for the previous year; that in the opinion
of the reviewer there was an excess of time granted for filing the delinquent
returns; and that the 2003 return was not filed until August 4, 2009, over five
years after the original due date, despite the fact that the Applicant had
originally indicated that it would be filed by 2005. The Applicant says that
if these other factors were considered, they should have been disclosed to her
in order to allow her the opportunity to respond to the issue. The CRA also
should have considered the fact that the Applicant had been making payments of
$400 per week to address the outstanding debt.
[15]
The Respondent submits
that the CRA was not required to seek further information, documents, or
submissions from the Applicant before rendering a final decision. The
Respondent says that the Applicant had the opportunity to present documents and
information to support her requests for relief. Therefore the Respondent
submits that there was no breach of procedural fairness.
[16]
The Applicant is
inviting me to speculate on what factors the CRA relied on for its decision
other than what was outlined in its letter of August 3, 2010. The CRA does not
refer to this Summary Sheet or these other factors in its letter. I do not
find there is enough evidence to find there was a breach of procedural
fairness.
The reasonableness of the CRA’s decision
[17]
The Applicant submits
that even when presented with medical evidence, the CRA failed to appreciate
the seriousness and severity of her medical condition as well as the effects of
such a condition, and in the absence of any contradictory medical opinion,
chose not to accept Dr. Simonds’ medical evidence, preferring its own opinion
instead. Specifically, the Applicant points out that she had explained in her
own letter as confirmed in Dr. Simonds’ letter that she had been in the middle
of preparing for her tax returns for that year at the time of the accident.
The Applicant also explains that while she did have an accountant, her
accountant could only take direction from her, and her condition made it
difficult for her to discuss the matter with anyone other than her daughter.
[18]
The Applicant also
submits that the CRA erred in concluding that her medical condition did not
prohibit her from filing her income taxes, based partly on her ability to
continue to work and to contribute to her RRSPs. The Applicant argues that this
would mean anyone seeking a waiver due to a medical condition would be
unsuccessful if they were able to continue working.
[19]
The Respondent takes
the position that it was within a range of possible acceptable outcomes for the
CRA to determine that no extraordinary circumstances existed, and the Applicant’s
medical condition did not prevent her from filing her tax returns on time. The
Respondent points out that Dr. Simonds’ assertion that the Applicant had not
been able to file her tax returns since her accident in 2003 was incorrect, as
the returns for some of the tax years had been filed. The Respondent submits
that jurisprudence has established that where a taxpayer has health problems
but is still able to operate a business, it is reasonable for the CRA to conclude
that those health problems do not prevent a taxpayer from dealing with his tax
obligations: Ugro, at para 77.
[20]
I find that the CRA did
consider the evidence put forward by the Applicant. In her second application,
the Applicant offered an explanation for how she had her 2004 and 2005 taxes
filed and as such the CRA does not mention the 2004/2005 tax returns in its
second decision letter. Instead, the CRA highlights the fact that the
Applicant had been able to file the 2002 tax return on time, despite the
accident. The Applicant had emphasized she was in the process of preparing her
financial records at the time when the accident occurred but it was open to the
CRA to find that she did not adequately explain how she was able to complete
her tax return after the accident.
[21]
The CRA also noted that
the Applicant had the services of an accountant who could have prepared and
filed her tax returns. Although the Applicant now submits that her accountant
could not do so without taking direction from her, this submission was not
before the CRA. The Applicant had two opportunities to put forward the
necessary additional information to support her submissions on why she was not
able to file her tax returns on time. In her letter of April 26, 2010, she
mentions that it was “beyond embarrassing and extremely difficult to discuss”
the fact that she had received a call from the CRA regarding her interest
charges and penalties. However, her letter does not mention her inability to
give instructions to her accountant. The Applicant cannot now reproach the CRA
for failing to consider a matter that was not submitted to the CRA before the
decision was made.
[22]
It was within the CRA’s
discretion to conclude that it did not find that the Applicant’s medical
condition prohibited her from filing her taxes on time. The CRA was entitled to
weigh the Applicant’s actions, both in filing her 2002 return after the
accident and continuing to successfully operate her business, against the
medical opinion about the PTSD claimed. The CRA provided its reasons for
denying the Applicant’s request for cancellation of penalties and interest
under extraordinary circumstances, and I see no need to interfere with its
decision.
Conclusion
[23]
For these reasons, I
therefore dismiss this application for judicial review.
[24]
I make no order for
costs.
JUDGMENT
THIS COURT ORDERS and adjudges that:
1.
The application for
judicial review is dismissed.
2.
I make no order for
costs.
“Leonard
S. Mandamin”
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