[2]
Although the GST portion of their debt was later
almost entirely satisfied, the Applicants still owed interest and penalties to
the CRA. In December 2004 the Applicants requested relief from the interest and
penalties pursuant to the fairness provisions of the Excise Tax Act, R.S.C.
1985, c. E-15. Their request was dismissed by the CRA in a letter dated
July 18, 2006 (the First Fairness Decision). A second review was conducted
later that year, and the request for fairness relief was again denied, this
time in a decision by the Assistant Director, Revenue Collections (the
Assistant Director) of the CRA’s Vancouver Tax Services Office, dated December
4, 2006 (the Second Fairness Decision).
[3]
The Applicants ask that this Court overturn the
Second Fairness Decision.
II. Preliminary
Matter – Motion to Recuse
[4]
At the commencement of the hearing, counsel for
the Applicants, Mr. Osborne Barnwell, asked that I recuse myself from hearing
this application for judicial review. Following submissions on this motion, I
advised Mr. Barnwell orally that I would dismiss this motion. My reasons are
the following.
[5]
My first concern is that this motion could and
should have been brought sooner. Parties and their counsel may obtain the name
of a presiding judge scheduled to hear a matter from the Court’s Registry two
weeks in advance of a hearing. For the Federal Court, this has been the case
since May 4, 2004, when a Notice to the Parties and the Profession was
issued by the Chief Justice. That Notice, which is readily available (for
example, on the Federal Court’s website: “Notice to the Parties and the Legal
Profession”, online: Federal Court, <http://cas-ncr-nter03.cas-satj.gc.ca/portal/page/portal/fc_cf_en/Notices>),
states that:
The name of the presiding
judge or prothonotary will be available upon request through the Registry as of
two weeks prior to the commencement of scheduled hearings. This policy does not
extend to the hearing of motions at general sittings and urgent motions.
[6]
Mr. Barnwell submits that he was not aware of
the Notice to the Profession and, thus, did not know that I was to hear the
Application until he arrived in Court. It is no excuse to claim ignorance of such
a Notice, especially one which has been in effect for almost four years. In
addition, given Mr. Barnwell’s strong views on this issue, I would have
expected that he would have taken all available steps to discover the identity
of the presiding judge. In these circumstances, it is thus reasonably open to
this Court to refuse to hear the motion on the basis that it was not raised
earlier.
[7]
In spite of my concerns about the failure of
counsel to raise this matter earlier, I have considered his submissions and
find that they are without merit. Mr. Barnwell asserts that I should recuse
myself on the grounds of a reasonable apprehension of bias. The foundation of
this argument is a complaint that he made in August 2007 to the Canadian
Judicial Council (CJC) alleging that I was “clearly biased” in the handling of
immigration matters. Two immigration decisions were specifically cited. That
complaint was dismissed, both as to the specific matters raised and as to the
broad allegations of bias. Nevertheless, Mr. Barnwell argues that the
submissions made by him in support of that complaint still exist and would lead
a reasonable person to conclude that I cannot fairly decide any case where he
is counsel.
[8]
The test for recusal is that set out in the
recent decision of the Supreme Court of Canada in Wewaykum Indian Band v.
Canada, [2003] 2 S.C.R. 259 at para. 60:
In Canadian law, one standard
has now emerged as the criterion for disqualification. The criterion, as
expressed by de Grandpré J. in Committee for Justice and Liberty v. National
Energy Board, [1978] 1 S.C.R. 369, supra, at p. 394, is the reasonable
apprehension of bias: [page289]
... the apprehension of bias
must be a reasonable one, held by reasonable and right minded persons, applying
themselves to the question and obtaining thereon the required information. In
the words of the Court of Appeal, that test is "what would an informed
person, viewing the matter realistically and practically -- and having thought
the matter through -- conclude. Would he think that it is more likely than not
that [the decision-maker], whether consciously or unconsciously, would not
decide fairly."
[9]
It cannot be ignored that the allegation of
apprehension of bias is being made against a judge who is bound by an oath of
office and who bears a strong responsibility to be impartial. As stated by the
Supreme Court of Canada in Arsenault-Cameron v. PEI, [1999] 3 S.C.R. 851
at para. 2, “The test for apprehension of bias takes into account the
presumption of impartiality. A real likelihood of bias must be
demonstrated." Finally, I observe the reminder given by my colleague,
Justice Teitelbaum, in Samson Indian Nation and Band v. Canada, [1998] 3
F.C. 3 (T.D.), at paragraphs 73 to 75, as to the solemnity of the judicial oath
and the impartiality that it brings with it.
[10]
In dealing with this motion that I recuse myself
from hearing the present application, I must ask myself whether an informed
person, "viewing the matter realistically and practically - and having
thought the matter through" would conclude that there is sufficient
justification for disqualification in this case.
[11]
Mr. Barnwell makes no attempt, in this motion,
to explain how a complaint in respect of immigration matters could lead to a
reasonable apprehension of bias in respect of a matter that arises under the Excise
Tax Act (or, for that matter, in respect of other immigration matters).
Further, Mr. Barnwell acknowledges that the complaint was dismissed by the
CJC.
[12]
Mr. Barnwell’s arguments appear to rest on an
allegation that, because he made a complaint to the CJC, I am generally predisposed
to decide against his clients. If Mr. Barnwell is correct, I would be forced to
recuse myself from every case where Mr. Barnwell is counsel. Indeed, it follows
from Mr. Barnwell’s submissions that, once a complaint to the CJC is made
– regardless of its merits or subject matter – a judge will be presumed to be
biased in every case where the party before him or her has brought a complaint
to the CJC. That is an absurd result and one that has been specifically
discredited in the jurisprudence.
[13]
In P.S.-M v. A.J.-L.C. (1993), 101 D.L.R.
(4th) 345 (Que. C.A.) a husband
brought a motion for recusal of the presiding judge on the grounds of
reasonable apprehension of bias. The motion was based partly on the fact that
both the husband and a psychologist he had retained as his expert witness had
filed complaints against the judge with the CJC. The majority of the Quebec
Court of Appeal was of the view that the mere presence of complaints filed with
the CJC did not warrant disqualification and held at page 360:
This court is not prepared to
accredit the principle that any professional ethics complaint concerning a
judge necessarily entails his withdrawal from the case; otherwise, it is not
hard to imagine the dishonest manoeuvres of a party wishing to paralyze the
proceedings or trying to avoid a decision that he anticipates will be
unfavourable to him.
See also: Allain
Sales & Services Ltd. v. Guardian Insurance Co. of Canada, [1996] N.B.J. No. 346 (Q.B.)
(QL); Suresh v. Canada (Minister of Citizenship and Immigration), [1998]
F.C.J. No. 1764 (T.D.) (QL), aff’d [2000] F.C.J. No. 1026 (C.A.) (QL).
[14]
In conclusion, the apprehension of bias alleged
by Mr. Barnwell is not well-founded. An informed person, viewing the matter
realistically and practically – and having thought the matter through – would
not think that it is more likely than not that I, whether consciously or
unconsciously, would not decide fairly. The motion for recusal is dismissed.
III. Reasonableness
of the Second Fairness Decision
[15]
I now turn to the merits of the application for
judicial review.
A. Legislative
Scheme
[16]
Under the Excise Tax Act, the Minister of
National Revenue (the Minister) may, in his discretion, waive or cancel
interest (s. 281.1(1)) or penalties (s. 281.1(2)). These provisions are
commonly referred to as the “fairness provisions”.
[17]
Although the fairness provisions in the Excise
Tax Act are silent as to the criteria to be used by the Minister in
exercising his discretion, GST Memorandum No. 500-3-2-1 Cancellation of
Waiver of Penalties and Interest (GST Memorandum 500-3-2-1) outlines the
kinds of circumstances where the Minister may decide to exercise his
discretion. The situations described in the Memorandum are:
·
extraordinary circumstances that may have
prevented a person from making a payment when due, such as floods or fire or a
serious illness in the family (GST Memorandum 500-3-2-1, para. 6);
·
where the penalties or interest were incurred
primarily because of the actions of the CRA, most notably processing delays (GST
Memorandum 500-3-2-1, para. 7); and
·
where there is an inability to pay amounts owing
(GST Memorandum 500-3-2-1, para. 8).
[18]
Where an “extraordinary circumstance beyond the
person’s control has prevented the person from complying with the Act”, paragraph
9 of the memorandum sets out a number of factors that “will” be considered to
determine whether the penalties and interest should be waived. It is important to
note that the listed factors are only mandated when the Mister concludes that
circumstances beyond the control of the person exist, as contemplated by paragraph
6 of GST Memorandum 500-3-2-1. In contrast, for claims of departmental delay or
inability to pay amounts owing, under by paragraphs 7 and 8 of the memorandum,
there are no listed factors. On this point, GST Memorandum 500-3-2-1 differs
from a similar fairness memorandum that applies when a person seeks waiver of
penalties and interest assessed under the fairness provisions of the Income
Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (see, Information Circular 92-2 –
Guidelines for the Cancellation and Waiver of Interest and Penalties [Information
Circular 92-2]).
[19]
In sum, the Minister has a wide discretion to
consider when to grant fairness relief of the payment of interest and penalties
assessed under the Excise Tax Act. He is guided by GST Memorandum
500-3-2-1 but, of course, not bound by it.
B. Standard
of Review
[20]
The parties agree that the appropriate standard
of review of a fairness decision is that of reasonableness simpliciter (Vitellaro
et al. v. Canada
(Customs and Revenue Agency), 2005 FCA 166 at para.
5; Lanno v. Canada Customs and Revenue Agency, 2005 FCA 153, at paras.
3-7). On this standard, I can only overturn the Second Fairness Decision if I
determine that the decision is not supported by reasons that stand up to a
“somewhat probing examination” (Canada (Director of Investigation and
Research) v. Southam Inc., [1997] 1 S.C.R. 748 at para. 56).
C. Non-reviewable
findings
[21]
In this case, I am not persuaded that a number
of the errors alleged by the Applicants to exist in the Second Fairness
Decision are in fact reviewable errors. Specifically, having reviewed the
record and the submissions of the parties, I conclude that:
1.
The Assistant Director did not err by failing to
consider the total debt outstanding in determining whether there is financial
hardship. Unlike the case of Nail Centre, above, relied on by the
Applicants, there is, in effect, no outstanding GST debt in the case at bar.
All of the amounts owing at this stage consist of interest and penalties.
2.
It was reasonable for the Assistant Director to
take into account the Applicants’ home in India. In spite of requests, the Applicants failed to provide any
documentary evidence of its value or the alleged problems associated with
selling real property in India.
3.
The Assistant Director did not err by failing to
explicitly reference the factors set out in paragraph 9 of GST Memorandum
500-3-2-1. Given that the reasons claimed by the Applicants did not involve a
circumstance beyond their control, paragraph 9 was not engaged. The case of Gandy
v. Canada
(Customs and Revenue Agency), 2006 FC 862, relied
on by the Applicants, is distinguishable as Gandy involved a decision
made under the Income Tax Act. As previously noted, the requirements of
Information Circular 92-2 differ from those of GST Memorandum 500-3-2-1.
4.
On the facts of this case, it was not
unreasonable for the Assistant Director to fail to give weight to any delay by
the CRA.
5.
The test for financial hardship relied on by the
Assistant Director was not unduly onerous. Specifically, there was nothing
unreasonable in the findings of the Assistant Director with regard to the
equity in the Harhumesh’s family home or the costs of private schooling for his
children.
6.
The Assistant Director acted reasonably in
giving little weight to the submissions of the Applicants on how the GST debt
arose in the first place.
[22]
Overall, I find that the approach taken by the
Assistant Director and the CRA in considering the request for relief was
appropriate. The Assistant Director did not ignore evidence and did not take
into account irrelevant factors in exercising his discretion. However, as
discussed below, I still have a serious concern with the Second Fairness
Decision.
D. Assessment
of Monthly Income and Expenses
[23]
The main thrust of the Applicants’ submissions
to the CRA was that they were not financially able to pay off the interest and
penalties in light of their day-to-day expenses. To respond to the Applicants’
assertion that they would suffer financial hardship, CRA officials (correctly, in
my view) focused on the monthly income and expenses for the Applicants’
household. My problem arises from the failure of CRA officials to provide
adequate explanations of how this analysis was carried out.
[24]
As part of the process, officials in the CRA reviewed
all of the documentation and prepared a “Fairness Request Summary”. It is
evident that this Fairness Request Summary was before the Acting Director and,
in my view, forms part of the reasons. Reviewing the Fairness Request Summary,
I observe that a significant portion is devoted to an analysis of the financial
data provided by the Applicants. Part of that data was summarized in a “Monthly
Income and Expense Statement” (referred to by the CRA as an IEAL). The
importance of this IEAL is demonstrated by the following extracts from the
Fairness Request Summary:
The IEAL indicates total
mnthly hh income as $4197 with total mnthly expenses as $9308.54 leaving a
deficit of $5161.54 per mnth. However, upon further review of the IEAL it
appears the spouse’s income was not included and some of the expenses are total
debts owing, not monthly expenses. In addition, there are RESP’s, RRSP’s and
the kid’s tuition for their private school listed as monthly expenses.
Assigned c/o also charged out
T1 returns for both Hargurmesh and spouse, Harinderpreet. When she reviewed the self-employed returns of the spouse, she
noticed similar expenses being claimed on both the IEAL and the T1 return.
Therefore, we disallowed some of those expenses on the IEAL.
The IEAL that we accept is
revised to show a surplus of approx. $4k per month. . . .
[25]
Hand-written notations on the submitted IEAL
appear to show how CRA officials amended the document. As discussed in the
above passage, some of the expenses submitted by the Applicants were total
debts and not monthly payments; I have no difficulty with these adjustments.
However, I cannot understand how the calculations for the IEAL were completed
with respect to the inclusion of the income of Harhumesh’s spouse and
adjustments to other expenses.
[26]
The first problem that I have with analysis of
the IEAL relates to the spouse’s stated income. In the original IEAL, the
spousal income was listed as $1500. This is contrary to the statement by CRA
Officials in the Fairness Request Summary that “the spouse’s income was not
included”. While it was open to the officials to disagree with the $1500 figure
submitted, it was an error for them to state that no income was included.
[27]
I have more serious concerns with the
calculations that were carried out by CRA officials when they adjusted the IEAL
to reflect the income of Harhumesh’s spouse. In doing so, they relied on an
income tax return summary on file (referred to in the Fairness Request Summary as
a T1 return) for the spouse. Apparently, on the basis of this T1 return, the
officials increased the spousal income from $1,500 to $5,138. It is quite
unclear to me how CRA officials came up with the $5,138 figure, although it is
arithmetically close to the spouse’s total gross income set out in her T1 return
(T1, line 166), plus her income tax refund (T1, line 486), divided by 12. My
best guess is that the CRA officials disallowed all expenses that were claimed
against the gross income of $60,000 on the spouse’s T1 return. However, in the
absence of background information, I am unable to probe the reasonableness of
the CRA’s figure for Harhumesh’s spouse.
[28]
Finally, I question whether CRA officials
deducted or disallowed certain expenses twice. The first deduction was from the
income set out in the IEAL. As noted above, CRA officials disallowed expenses
claimed by the spouse as reflected in her T1 return. As a result of this
disallowance, the spousal income was increased by an amount equal to the
disallowed expenses. However, it also appears that the same amounts were
deducted from the claimed expenses on the IEAL, thereby reducing the
expenses of the household. I reach this conclusion on the basis of the words of
the CRA official quoted above where she states that:
When she reviewed the
self-employed returns of the spouse, she noticed similar expenses being claimed
on both the IEAL and the T1 return. Therefore, we disallowed some of those
expenses on the IEAL. [Emphasis added.]
[29]
If I am correct in my interpretation of the
notations and comments in the Fairness Request Summary, CRA officials
disallowed the same expenses twice. The disallowed amounts could have been used
to increase the income or to decrease the expenses in the IEAL – but not
both. As a result, the CRA’s calculation of total monthly family income minus
total monthly family expenses would be overstated.
[30]
It may be that there are reasonable explanations
for the adjustments to the IEAL. However, based on the record before the Court,
I am unable to replicate the calculations of CRA officials and, thus, cannot conduct
a “somewhat probing” examination. Given the importance of the IEAL in
determining the Applicants’ ability to pay the interest and penalties, I
consider this to be a fatal error in the Second Fairness Decision and am
prepared to allow this application for judicial review.
IV. Conclusion
[31]
For these reasons, the application for judicial
review will be allowed, with costs to the Applicants.
JUDGMENT
THIS COURT
ORDERS AND ADJUDGES that
1.
The application for judicial review is allowed;
2.
The Second Fairness Decision is quashed and the
matter referred back to a different decision maker for redetermination; and
3.
Costs are awarded in favour of the Applicants,
such costs to be assessed in accordance with the middle of column III of Tariff
B.
“Judith
A. Snider”
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