0001
FEDERAL COURT
____________________________________
Court Number T-2203-06
BETWEEN:
RICHARD G. McLEAN
Applicant
- and -
CANADA REVENUE AGENCY
Respondent
______________________________________________
EXCERPT (RULING)
September 5, 2007
Held at the Federal Court of Canada
Calgary, Alberta
Volume 1
_______________________________________________
TAKEN BEFORE:
The Honourable Mr. Justice Barnes
0002
APPEARANCES
TAKEN BEFORE:
The Honourable Mr. Justice Barnes
--------------------------------------
R. G. McLean NO COUNSEL
G. C. Laschuk, Esq. Appeared for the Respondent
--------------------------------------
Jennifer
MacGillivray Court Registrar
Julie Snijder, CSR(A) Court Reporter
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0003
TABLE OF CONTENTS
PAGE
APPEARANCES 2
RULING 4
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0004
01
(EXCERPT BEGINS)
02 THE
COURT: These are my reasons for a
03 decision on
this application. This is an
04 application
for judicial review brought by
05 Richard
McLean from a decision by the Canada Revenue
06 Agency
which denied his claim to relief from
07 arrears,
interest, and late-filing penalties in
08 connection
with his 2002 and 2003 income tax
09 returns.
10
Mr. McLean had sought relief
11 under
Section 220 of the Income Tax Act, which
12 provides
broad discretionary authority in the
13 Minister
and her delegates to waive or cancel all or
14 any portion
of any penalty or interest otherwise
15 payable by
a taxpayer.
16
That authority is further
17
supplemented by departmental guidelines which,
18 broadly
speaking, provide for relief where
19
extraordinary circumstances beyond a taxpayer's
20 control may
have prevented payment or other
21 compliance
with statutory requirements.
22
These would include
23 disasters,
civil disturbances, serious illness or
24 accident or
serious emotional distress such as that
25 arising
from the death of a family member.
26
Departmental conduct may be considered but has no
0005
01 application
here. Finally, an inability to pay
02 amounts
owing may be considered to facilitate
03 collection
of tax arrears.
04
Mr. McLean candidly
05
acknowledges that his tax return for 2002 was filed
06 almost
three years late and that he owed tax arrears
07 in that
year of $8,943.89. His claim for
08
discretionary relief related to interest and
09 penalties
amounting to $7,788.16.
10
He also acknowledges that his
11 2003 tax
return was filed more than two years late
12 and that he
owed tax arrears of $4,987.79. His
13 claim for
relief from penalties and interest for
14 that year
amounted to $3,880.35.
15
Mr. McLean's request for
16 relief was
set out in his letter of August 9th,
17 2006, to
the assistant director of Individual
18 Returns and
Compliance Division of Revenue Canada
19 Rick
LaPage.
20
The circumstances relied upon
21 by Mr.
McLean were stated as follows: (1) The
22 physical
incapacity and disability followed by knee
23 surgery in
2002 and rehabilitation into 2003.
24 (2) The
loss of employment followed by a failed
25 business
partnership. (3) A family lawsuit in
26 Ontario, which was resolved in 2002.
0006
01
Because of the financial
02
difficulties faced by Mr. McLean, his letter
03 indicated
that he met his personal obligations by
04 cashing in
RRSPs, by borrowing from family members,
05 and by
moving into the basement of a friend. He
06 asserted
that he was indebted to others in the total
07 amount of
$61,000. In addition, of course, he owed
08 tax arrears
for 2002 and 2003.
09
Mr. Gray rendered his
10 fairness
decision by letter dated November 16, 2006.
11 He denied
relief. That letter did not specifically
12 address all
of the hardship issues raised by
13 Mr. McLean;
however, it did point out that
14 Mr. McLean
had had a long history of late filing,
15 including
three years where tax was owing and
16 interest
arrears charged.
17
Mr. Gray's letter summed up
18 the
negative decision in the following way, and this
19 is a quote
(quoted as read):
20
"I have also been advised that
21
Wendy Oryniak contacted you for further
22
information regarding your medical
23
condition. To date the information has
24
not been provided. Although I sympathize
25
with the obstacles you have encountered, I
26
can only consider the available
0007
01
information, and therefore it is my
02
determination that the CRA exercised its
03
discretion on behalf of the Minister in a
04
fair and reasonable manner. The
05
circumstances outlined by you in support
06 of
your request for relief are not
07
sufficient to warrant cancellation of
08
interest or penalties related to your 2002
09
and 2003 income tax returns."
10
The above decision was
11 supported
by an internal review and recommendation
12 report
authored by one of Mr. Gray's subordinates.
13 That report
set out all of Mr. McLean's arguments
14 but recommended
that relief be denied.
15
The author of that report
16 referred to
Mr. McLean's job loss, his surgery and
17 recovery,
his failed business venture, and the time
18 required to
sort out the corporate tax situation and
19 the family
law dispute and the fact that he had not
20 heard from
the department in the intervening years.
21
Her recommendation was as
22 follows
(quoted as read):
23 "I
recommend that the repeat LFP and
24
arrears interest be upheld for the 2002
25
and 2003 tax years for the following
26
reason: (1) The client has a history of
0008
01
filing late. He has only filed on time
02
once in 1987. (2) Even though the client
03
has filed late 18 out of the last
04 19
years, he has only been charged arrears
05
interest in five tax years, an LFP in
06
two tax years, and a repeat LFP in
07
three tax years. This is due to
08
substantial deductions for the years. He
09
was not charged arrears interest or an
10
LFP. (3) The client has not provided any
11
documentation to support his claim that
12
his medical condition prevented him from
13
meeting his tax obligations. (4) Although
14
the client has made three monthly payments
15
since August 2006 of $1,000 each, there is
16
$22,180.61 balance outstanding. (5) The
17
client has not filed his 2004 or 2005 tax
18
returns."
19
After reviewing that report,
20 Mr. Gray
summed up his decision in the following
21 file note,
which is also contained in his affidavit,
22 (quoted as
read):
23
"Agree. Compliance record is extremely
24 poor.
While taxpayer was apparently
25
dealing with medical issues, he has not
26
provided any substantiation as to impact.
0009
01
Taxpayer relates no steps taken to
02
consider compliance, let alone steps taken
03 to
attempt to comply under his
04
circumstances. The taxpayer has not even
05
filed his 2004 and 2005 returns. The
06
taxpayer's circumstances are of his own
07
making, with the possible exception of his
08
medical issue, but he has provided no
09
substantiating information. Such
10
information would have to be independent
11 to
receive consideration given his
12
history. Penalties and interest are
13
therefore upheld."
14
The parties agree that the
15 standard of
review in this application is that of
16 reasonableness,
and that is in accordance with legal
17 authority,
including Lanno v. Canada 2005 FCA 153, a
18 decision of
the Federal Court of Appeal.
19
What that means is that the
20 Minister's
decision must be supported by reasons
21 that can
stand up to a probing judicial examination.
22 Those
reasons need not be compelling, but they must
23 rationally
support the conclusion reached.
24
The Court cannot substitute
25 its own
view for that of the Minister or his
26 delegates
simply because the Court might have
0010
01 reached a
different conclusion on the same facts.
02 By way of
example, I must be satisfied that the
03 decisionmaker
overlooked important evidence,
04 considered
evidence that ought not to have been
05 considered,
made material errors of fact, or made a
06 decision
that cannot be rationally supported by the
07 reasons
given for it.
08 I
accept as a correct
09 statement
of the law on this issue the following
10 passage
from Justice Frederick Gibson's decision in
11 Young v. Canada 2006 FC 1164 at paragraph 21. I
12 quote
(quoted as read):
13
"The reasonableness or reasonableness
14
simpliciter standard provides that a Court
15
should not interfere with the decision
16
unless it is clearly wrong in the sense of
17 being
based on a wrong principle or a
18
misapprehension of the facts. An
19
unreasonable decision is one that in the
20
main is not supported by any reasons that
21
can stand up to a somewhat probing
22
examination. However, a reasonable
23
decision is not necessarily a correct
24
decision, and there can be more than one
25
reasonable decision arising out of the
26 application
of a discretionary provision
0011
01 of
law to a particular fact situation."
02
In order to assess the
03
reasonableness of the decision in this proceeding, I
04 am required
to examine only the evidence that was
05 before the
decisionmaker. This would include
06 Mr.
McLean's submissions and also the documentary
07 history of
his dealings with the department.
08
The law is equally clear that
09 I cannot
consider evidence that was not before the
10
decisionmaker. By way of example, Mr. McLean has
11 included
with his affidavit medical evidence and the
12 particulars
of his family law litigation that were
13 not shared
with the department. These I cannot
14 consider.
To the extent that they may support
15 Mr. McLean's claim, they could have been provided to
16 the
department along with his request for relief.
17 Indeed,
it is somewhat
18 surprising
that Mr. McLean provided no medical
19
corroboration to the department because that
20 information
was specifically requested of
21 Mr. McLean,
and he declined to put it forward at the
22 time.
23
At the same time, I will not
24 consider as
evidence Mr. Gray's ex post facto
25 assertion
at paragraph 33 of his affidavit that this
26 new medical
evidence is unpersuasive and would not
0012
01 have
altered his decision.
02
I have carefully considered
03 Mr. McLean's arguments and the case authorities he
04 has relied
upon, but I am not persuaded that
05 Mr. Gray's
decision was legally unreasonable.
06
While is it true that
07 Mr. McLean
did face some personal difficulties
08 throughout
2002 and 2003, he put forward virtually
09 no evidence
forward to the department to explain why
10 he was
unable to at least file his tax returns on
11 time or
well within the lengthy periods of time that
12 he actually
took, leaving aside for the moment the
13 issue of
payment of the tax arrears.
14 Notwithstanding
his health,
15 family law,
and business problems, he continued to
16 deal with
those other matters in more or less a
17 timely way,
but he chose to put his personal income
18 tax
obligations on hold for two and three years
19
respectively. In short, he set certain priorities,
20 and his
personal tax obligations were not among
21 them.
22
Although I am sure that
23 Mr. McLean's knee surgery was debilitating and
24 painful, he
offered no medical evidence to establish
25 the extent
to which this interfered with his ability
26 to work or
to prepare a tax return. The fact that
0013
01 Mr. McLean
was forced to move his residence is not a
02
consideration which would warrant relief, and indeed
03 today he
did not argue differently.
04
It was also his obligation to
05 make
arrangements for the collection of mail, and if
06 he chose
not to do so, he can hardly use that as an
07 excuse for
not filing his tax returns. From his
08 past
dealings with the department, he was well-aware
09 of that
obligation, including the consequences of
10 not doing
so when tax was payable, and he
11
acknowledged that fact today in argument.
12
In his argument to the Court,
13 Mr. McLean
asserted that he was obliged to resolve
14 his
business tax filings in priority to his personal
15 tax
obligations. That argument was only vaguely
16 alluded to
in his initial request for relief to the
17 department,
but in any event, it has no legal merit.
18 The
taxpayer has an obligation to deal with all of
19 his
obligations on a timely basis. A personal tax
20 return must
be filed on time even if it may require
21 a later
amendment.
22
Mr. McLean argues that
23 Mr. Gray
was fixated on his compliance history and
24 that that
history was adopted essentially as a
25
prerequisite for the granting of relief.
26
I do not interpret the
0014
01 decision in
the same way. It seems to me when read
02 in the
context of all of the supporting
03
documentation that Mr. Gray did not confine the
04 decision to
the issue of noncompliance. Under the
05 guidelines
he was, of course, entitled to consider
06 the history
of noncompliance, and it is clear that
07 he did so.
08
He also noted that the
09 medical
excuse had not been documented and that
10 Mr. McLean
had no convincing explanation for why he
11 had failed
to file tax returns for 2002 and 2003.
12 Mr. Gray
also concluded the other matters relied
13 upon by Mr.
McLean were largely of his own making.
14
Essentially, Mr. McLean made other choices and set
15 other
priorities for his time and resources.
16
It is perhaps also noteworthy
17 that Mr.
McLean nowhere stated that he was or
18 remained
unable to pay all or any part of his
19 interest
arrears or penalties for those tax years.
20 Indeed, it
appears that he was cashing RRSPs and
21 borrowing
money to pay other creditors through that
22 time.
23
If Mr. McLean was asserting
24 financial
inability as an explanation for
25
noncompliance, and that was by no means made clear
26 from the
content of his submissions to the
0015
01 department,
Mr. Gray was entitled to receive far
02 more than
he received from Mr. McLean. For
03 instance,
did Mr. McLean have further savings or
04 RRSPs? Did
he own real estate? What kind of car
05 did he
drive? Mr. McLean may well have owed money
06 to others,
but that fact says nothing about his net
07 worth in
the absence of a statement verifying his
08 assets at
the time.
09
In fairness to Mr. McLean,
10 before the
Court today he did acknowledge that
11 financial
hardship, although present at the time,
12 was not the
principal basis for his claim to relief.
13
This is not a case like
14 Robertson
v. Minister of National Revenue 2003
15 FCT 16.
There the department made several material
16 factual
errors in support of the decision to deny
17 relief.
Here Mr. McLean challenges the weight
18 assigned to
the evidence by the department but can
19 point to no
obvious errors of fact. It is not the
20 function of
the Court to reweigh the evidence on an
21 application
such as this for judicial review.
22
Similarly, in Carter-Smith v.
23 Canada 2006 FC 1175, the Court was concerned that
24 the
department had ignored important evidence
25 leading to
the decision to deny relief. I can see
26 nothing in
the record that indicates that Mr. Gray
0016
01 ignored
anything of importance to his decision.
02
Although Mr. McLean has
03
supplemented his case before the Court with
04 additional
evidence and arguments, he did not fault
05 Mr. Gray
for failing to take account of things that
06 were not
put before him at the time.
07
At the end of the day,
08 Mr. McLean
did not make a compelling case for relief
09 because his
failure to comply with his tax
10 obligations
was largely because of choices and other
11 priorities
that he made -- admittedly made within a
12 difficult
set of circumstances.
13 In
the result, I am not
14 satisfied
that Mr. McLean has met the burden of
15 proof of
showing that Mr. Gray's decision was in a
16 legal sense
unreasonable, and this application for
17 judicial
review is dismissed.
18
The Crown has requested costs
19 under
Column 3. Mr. McLean seeks no costs against
20 the Crown.
In view of Mr. McLean's concession and
21 the fact
that this was not a complicated application
22 factually
or legally, I will award costs to the
23 Crown but
in the amount of $500 inclusive of
24
disbursements.
25
(EXCERPT ENDS)
26 * *
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