Date: 20071026
Docket: T-1969-06
Citation: 2007 FC 1111
Ottawa, Ontario,
October 26, 2007
PRESENT: The Honourable
Madam Justice Mactavish
BETWEEN:
THE ESTATE OF GARY MCLEOD
Applicant
and
THE MINISTER OF NATIONAL
REVENUE
Respondent
REASONS FOR
JUDGMENT AND JUDGMENT
[1]
The
Estate of the late Gary McLeod seeks judicial review of a “fairness” decision
by which the Minister of National Revenue denied Mr. McLeod’s request for
relief from the interest and penalties assessed in relation to his 2000 to 2004
taxation years.
[2]
For
the reasons that follow, I am of the view that the Minister’s decision was
unreasonable. As a result, the application for judicial review will be
allowed.
Background
[3]
By
all accounts, Gary McLeod was a very successful businessman until 1999, when a
devastating series of tragedies began to strike his family. In 1999, Lisa –
one of Mr. McLeod’s daughters – was diagnosed with a serious illness. After
three years of failing health, this illness took Lisa’s life in 2002.
[4]
In
2000, Mr. McLeod’s other daughter, Jennifer, became seriously ill. Jennifer was
forced to undergo several difficult treatments, one of which was only available
in the United
States.
This led to a battle between Mr. McLeod and the Ontario Health Insurance Plan,
which had denied coverage for the treatment.
[5]
To
compound matters, the stress of Mr. McLeod’s situation resulted in the
breakdown of his marriage.
[6]
Then,
in April of 2005, just when his doctors say that he was starting to get back on
his feet, Mr. McLeod was involved in a catastrophic motor vehicle accident that
left him seriously injured, and unable to work.
[7]
The
stressors in Mr. McLeod’s life resulted in his developing serious mental and
emotional problems, including depression. This led to a failed suicide attempt
in June of 2006, which resulted in his hospitalization in a psychiatric
facility.
[8]
In
July of 2006, while awaiting a decision in relation to this fairness request,
Mr. McLeod made another attempt on his life. Tragically, this attempt was
successful.
[9]
In
October of 2006, Mr. McLeod’s request for fairness relief was denied.
The Fairness Request
[10]
An
initial fairness request filed by Mr. McLeod was allowed, and he was granted
relief from late filing penalties for the 2000 and 2001 taxation years.
[11]
It
is Mr. McLeod’s second fairness request that underlies the decision at issue in
this application. This request was filed on May 5, 2006, and was based
entirely on subsections 5(c) and 5(d) of Information Circular 92-2, which
provides that:
Penalties and interest may be waived or
cancelled in whole or in part where they result in circumstances beyond a
taxpayer’s control. For example, one of the following extraordinary
circumstances may have prevented a taxpayer, a taxpayer’s agent, the executor
of an estate, or an employer from making a payment when due, or otherwise
complying with the Income Tax Act:
[…]
(c) a serious illness or accident; or
(d) serious emotional or mental distress,
such as a death in the immediate family.
The Decision Under
Review
[12]
By
letter dated October 5, 2006, a Minister’s delegate denied fairness relief to
Mr. McLeod. The letter states that “Based on the available information, we are
not convinced that the delay in meeting his tax obligations was entirely due to
the circumstances presented”.
[13]
The
Fairness Committee Report underlying the Minister’s delegate’s decision notes
that Mr. McLeod had previously received fairness relief in relation to late
filing penalties for his 2000 and 2001 taxation years. The Report further
observes that Mr. McLeod was not facing financial hardship, and could have made
the necessary payments when they came due.
[14]
The
Report recommended that additional relief for the 2000 and 2001 taxation years
be denied “as Lisa was married and living away from home when diagnosed, and
she continued in her employment until she passed away. Jennifer had her
surgery in October 2001, and she is in remission”.
[15]
No
penalties and interest were assessed in relation to Mr. McLeod’s 2002 taxation
year, and as a result, the Report notes that no consideration of possible
fairness relief was necessary.
[16]
The
Report states that Mr. McLeod’s 2003 tax return was due in April of 2004, and
that there were no extenuating circumstances in existence at that time. As a
consequence, relief was not recommended in relation to the 2003 tax year.
[17]
With
respect to Mr. McLeod’s 2004 tax year, the Report notes that Mr. McLeod’s tax
return was due on June 15 of 2005, but was not filed until December of that
year. The Report then notes that Mr. McLeod was elected as Chair of the
Financial Advisors Association of Canada in May of 2005.
[18]
Finally,
the Report notes that doctors’ reports from the summer of 2005 indicated that
Mr. McLeod looked well and was able to walk with the assistance of crutches. As
a result, the Report recommends that fairness relief be denied for the 2004
taxation year as Mr. McLeod could have hired an accountant to handle his tax
matters.
Issues
[19]
While
the Estate raises a number of issues on this application, including issues of
procedural fairness and bias, I am of the view that I need only address the
merits of the decision.
Standard of Review
[20]
This
case involves a discretionary decision made by the Canadian Revenue Agency,
pursuant to the ‘fairness’ provisions of the Income Tax Act, 1985, c. 1
(5th Supp.). It is not the task of this Court, sitting on judicial review, to
substitute its own view of the situation for the decision of the respondent.
Rather, the task of the Court is to determine whether the decision of the
respondent was reasonable: see Lanno v. Canada (Canada Customs and
Revenue Agency), [2005] F.C.J. No. 714, 2005 FCA 153.
[21]
That
is, the question is whether the decision can withstand a somewhat probing
examination: Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247,
2003 SCC 20.
Analysis
[22]
I
am of the view that the decision under review was unreasonable for several
reasons.
[23]
Firstly,
with respect to the denial of additional relief for Mr. McLeod’s 2000 and 2001
taxation years, it is not clear to me how the fact that Mr. McLeod’s daughter
lived away from home, was married and continued to work up until her death had
any bearing on the degree of emotional or mental distress that Mr. McLeod may
have suffered in conjunction with her illness and death, or on his capacity to
deal with his financial affairs.
[24]
Indeed,
the medical and psychiatric evidence provided to the Canada Revenue Agency
suggested that over the period between 2002 and 2006, the severe emotional
strain which Mr. McLeod had been under “took a toll on his overall mental
health, resulting in depression, anxiety, sleep disturbance and multiple
psychosomatic problems.”
[25]
Relief
was also denied for the 2003 tax year on the basis that the income tax return
for that taxation year was due in April of 2004, and there were no extenuating
circumstances in existence at that time.
[26]
However,
the medical evidence provided to the Agency suggested that Mr. McLeod’s
condition did not start to improve until the end of 2004.
[27]
With
respect to Mr. McLeod’s 2004 tax year, fairness relief was denied as the
doctors’ reports from the summer of 2005 indicated that Mr. McLeod looked well
and was able to walk with the assistance of crutches.
[28]
However,
the medical evidence provided to the Agency indicates that the automobile accident
occurred on April 11, 2005, and that Mr. McLeod was hospitalized for some nine
weeks thereafter. This means that he did not leave the hospital until shortly
after the date on which his 2004 income tax return was due.
[29]
Moreover,
the medical evidence demonstrates that Mr. McLeod was in very serious condition
while he was in hospital. The record demonstrates that Mr. McLeod had suffered
multi-system traumatic injuries, as well as an open right femur fracture, a
posterior dislocation of his left knee, and a fractured pelvis. He required
surgery to repair a liver laceration, and also underwent a bowel resection.
Additional surgery was required to repair his femur.
[30]
In
these circumstances, the finding that Mr. McLeod was in a position to deal with
his financial affairs during the relevant period is unreasonable.
[31]
Reference
was also made to Mr. McLeod’s having been “elected” as Chair of the Financial
Advisors Association of Canada in May of 2005. Although the Report does not
say so explicitly, the inference drawn from this appears to have been that Mr.
McLeod must have been in reasonable shape, if he were able to assume such a
responsibility.
[32]
Firstly,
there was no evidence before the Agency that Mr. McLeod stood for election to
this position, which was evidently a volunteer position in an industry
association. He may well have simply moved up the “ladder”, as is so often the
case with organizations such as this.
[33]
More
important, however, is that whatever voluntary position he may have assumed,
the fact is that the Agency knew that in the spring and summer of 2005 that Mr.
McLeod was totally disabled, and unable to work. We know this because by this
point, it was garnisheeing Mr. McLeod’s long term disability payments.
[34]
As
a result, it was unreasonable to draw the inference from Mr. McLeod’s role with
the Financial Advisors Association of Canada that he must therefore have been
in reasonable shape, and able to hire an accountant to attend to his taxation
issues.
Conclusion
[35]
For
these reasons, I find that the decision under review cannot withstand a
somewhat probing examination. As a consequence, the application for judicial
review is allowed. Costs
were not sought, nor are they ordered.
JUDGMENT
THIS COURT ORDERS AND ADJUDGES that this application for
judicial review is allowed, and the matter is remitted to a different
Minister’s delegate for re-determination.
“Anne
Mactavish”
Email this Content