Date: 20070201
Docket: T-600-06
Citation: 2007
FC 113
Vancouver, British
Columbia,
February 1, 2007
PRESENT: The Honourable Mr. Justice Blanchard
BETWEEN:
VERNA
HAUSER
Applicant
and
CANADA REVENUE
AGENCY
Respondent
REASONS FOR ORDER AND ORDER
[1]
The Applicant failed to pay her income taxes on the time for the taxation
years 1995, 1996, 1998, and 1999, resulting in interest accrual.
[2]
In 2003, the Applicant applied to the Minister of Finance
(the Minister) pursuant to subsection 220(3.1) of the Income Tax Act,
R.S.C. 1985, c. 1 (5th Supp.) (the Act), for waiver of interest and penalties
with respect to the period from January 1, 1995 to December 31, 2002, on the
following three grounds: (i) waiver of penalties; (ii) waiver of interest on
grounds of extraordinary circumstances; and (iii) waiver of interest on grounds
of financial hardship. The Applicant’s request was particularly based on
emotional health issues and ongoing financial hardship.
[3]
Each of the above-noted three grounds of the Applicant’s
initial request for waiver of interest and penalties (Fairness Request) was
considered by a separate officer of the Canada Revenue Agency (CRA).
[4]
On October 7, 2003, the Minister decided to waive the late
filing penalties for both the 1998 and 1999 taxation years.
[5]
A CRA officer reviewed the Applicant’s request for the
waiver of interest on grounds of extraordinary circumstances. He found there
were no circumstances to warrant a waiver of interest and that, in spite of the
Applicant’s claims of stress in her personal life, she was able to maintain
both regular and business income during the time in question and should have
been able to meet her tax obligations.
[6]
Another CRA officer reviewed the request for the waiver of
interest on grounds of financial circumstances. He reported that he found no
financial hardship to warrant the waiver of interest.
[7]
On June 21, 2004, the Minister notified the Applicant of
his decision to deny the waiver of interest on the grounds of either (i)
extraordinary circumstances or (ii) financial hardship for the 1995, 1996, 1998
and 1999 taxation years. In response to that decision, the Applicant provided
additional information for the Minister to review. The Minister treated this
additional information as a new first level Fairness Request for the waiver of
interest on the grounds of extraordinary circumstances and financial hardship.
[8]
Another CRA officer reviewed this second first level Fairness
Request and recommended, after considering the additional information, that
there were no grounds to warrant the waiver of interest. This decision was
confirmed by a CRA team leader and was communicated to the Applicant on April
12, 2005.
[9]
On December 27, 2005, the Applicant sent the Minister a
letter requesting further consideration, which the Minister treated as a
request for second-level review. The Applicant provided a letter from her
psychiatrist stating that the Applicant was being treated, since May 31, 2005,
for chronic anxiety and has developed a specific phobia related to financial
transactions.
[10]
The second-level review was conducted by a CRA officer who
reviewed this new information. The officer reviewed all of the information on
the file, conducted further research into the Applicant’s financial
circumstances and considered the Applicant’s health issues. The officer found
that the psychiatrist’s letter was not relevant for the period in issue for the
fairness relief and recommended that the request be denied. The officer’s
recommendation was reviewed by a CRA manager and the Assistant Director of Revenue
Collections and they decided to deny the Applicant’s Fairness Request. In his
February 28, 2006 letter informing the Applicant of the negative decision, the
Assistant Director, Revenue Collections, wrote the following:
We have examined all the
submitted evidence related to your ongoing anxiety issues and surgery to remove
a chest tumour. Although we can empathise [sic] the difficulties you no
doubt encountered in dealing with and recovering from these experiences, we
cannot agree that there is evidence that the circumstances were so
extraordinary as to prevent you from paying your taxes on time. It is apparent
from our review that you were able to maintain your employment and earn
additional income from business activities during this time, which enabled you
to keep your commitments to other creditors over that of your tax obligations.
[11]
On April 5, 2006, the Applicant filed the within
application for judicial review of the Minister’s decision.
I. Issue
[12]
Did the Minister discharge his duty to act fairly in
exercising his discretion under subsection 220(3.1) of the Act to deny fairness
relief to the Applicant?
II. Standard of
Review
[13]
The applicable standard of review
of a fairness decision of the Minister has been settled by the Federal Court of
Appeal in Lanno v. Canada (Customs & Revenue Agency), 2005 FCA 153, at
paragraphs 6-7. In that case, the Court conducted a pragmatic and functional
analysis and determined the applicable standard to be reasonableness
simpliciter. I will apply the reasonableness standard in reviewing the Minister’s
decision in this case.
III. Analysis
[14]
Did the Minister discharge his duty to act fairly in
exercising his discretion under subsection 220(3.1) of the Act to deny fairness
relief to the Applicant?
[15]
The Applicant argues that her
health condition was not considered in the decision by the Minister. She states
that, in the decision, the CRA focuses on finances and does not adequately
address physical and emotional health. She contends that her letters clearly
stated that she was unable to function as a bookkeeper for her husband’s
business, and therefore she was unable to file income tax returns in a timely
fashion.
[16]
She further contends that she does not believe the officers
who reviewed the file had taken into account the emotional distress she and her
family were under. The Applicant submits that the CRA officers are not
qualified to produce opinions about physical and emotional health and are
consequently not qualified to conclude reasonably with respect to her inability
to pay her taxes. The Applicant argues that the Minister should have consulted
a health care professional about her case. She contends that a medical
professional would have been able to explain, contrary to the CRA's determination,
how it is possible for someone to be able to meet certain obligations while not
maintaining others in a time of stress.
[17]
On this point, I agree with the Respondent. There is no
obligation on the Minister to consult with a health care professional in making
a fairness decision. It was reasonable for the Minister to determine that the
impugned December 27, 2005 letter from the Applicant’s psychiatrist was not
relevant to the period in issue. In the circumstances, the Minister acted
fairly and in accordance with the rules of procedural fairness as developed in
administrative law.
[18]
The Applicant cites three decisions in support of her
claim: Ross v. Canada (CCRA), 2006 FC 294; Dick v. Canada (CCRA),
2005 FC 560; and Bilida v. Revenue Canada, 51 D.T.C. 5041, 124 F.T.R.
172. In all three cases, the Minister’s decision to deny a waiver of penalties
and interest was set aside by the Federal Court. I have reviewed these cases
and find that they can be distinguished.
[19]
In Ross, the Minister significantly overstated the
annual surplus of the taxpayer’ income, and therefore the Court found the
Minister’s conclusions regarding the ability to pay back the tax to be
unreasonable. In Dick, the Minister failed to take into consideration
that the taxpayer was a 72-year-old chronic alcoholic, and given his retirement
income, unable to ever repay the amounts owed. Further, the taxpayer's liabilities
were equal to his assets and the penalties and interest assessed against him far
exceeded the taxes owing. In Bilida, the taxpayer was a 76-year-old
widow living on an old age pension who was unable to pay the tax owed. The
Court held that Revenue Canada’s delay in assessing the taxpayer’s returns
contributed to the arrears and penalties.
[20]
The circumstances of the taxpayers in the above cited cases
are certainly not those of the Applicant. The Applicant was able to maintain
employment and to earn additional income from her business activities, enabling
her to meet her commitments to other creditors. It was not unreasonable for the
Minister to conclude, in these circumstances, that the Applicant was simply
showing preference to other creditors over the CRA. Further, the evidence
indicates that the Applicant’s net worth shared with her spouse is estimated at
$500,000.00, an amount she does not dispute. Relative to her net worth, the
outstanding interest owing in the amount of $12, 632.63 is relatively small.
[21]
On the record before me, I am satisfied that the Minister
exercised his statutory discretion in good faith and in accordance with the
principles of natural justice. I am satisfied that Minister properly considered
the evidence before him and that the decision was not based on considerations
irrelevant or extraneous to the statutory purpose. (Maple Lodge Farms v.
Government of Canada, [1982] 2 S.C.R. 2, at page 8.)
[22]
For the above reasons, the application for judicial review
of the Minister’s February 28 2006, fairness decision will be dismissed.
ORDER
THIS COURT ORDERS that the
application for judicial review of the Minister’s February 28, 2006, fairness
decision is dismissed.
|
|
I HEREBY CERTIFY that the above document is a true copy of the
original filed of record in the Registry of the Federal Court the
______ day of
____________________, A.D. 200____
Dated this _____ day of _________________, 200____
_____________________________________________
Sandra McPherson, Registry Officer
|
|
"Edmond P. Blanchard"
Email this Content