Date:
20130312
Docket:
T-168-12
Citation: 2013
FC 222
Ottawa, Ontario,
March 12, 2013
PRESENT: The
Honourable Mr. Justice O'Reilly
BETWEEN:
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JURGEN JERRY LUKING
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Applicant
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and
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THE MINISTER OF PUBLIC SAFETY
AND EMERGENCY PREPAREDNESS
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Respondent
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REASONS FOR
JUDGMENT AND JUDGMENT
I. Overview
[1]
In
2008, Mr Jurgen Jerry Luking purchased a 53’ pleasure craft, the “Seaesta 11,”
in the United States for $418,000 USD. Mr Luking phoned Transport Canada to find out how to register the boat in Canada. He followed up with a letter to the Registrar
of Vessels, attaching an application to register the boat and a copy of the
bill of sale. He paid the registration fee of $250.00 and received a
certificate of registry.
[2]
In
March 2008, Mr Luking sailed the boat from the US to Bedwell Harbour, BC. He reported to an agent of the Canada Border Services Agency (CBSA), who told him to
report to the larger port in Sidney, BC. Mr Luking told the officer that he
would do so at a later date. In May 2008, Mr Luking sailed to Sidney and
reported to the CBSA by phone. The CBSA officer’s notes state that Mr Luking
was “out to do a tour” and had nothing to declare. The officer gave Mr Luking a
clearance number.
[3]
In
June 2008, Mr Luking received a notice from the BC Ministry of Small Business
and Revenue about the provincial sales tax owing on the boat. Mr Luking duly
paid the amount of $29,260.
[4]
Mr
Luking made a number of subsequent trips to Canada, each time reporting to the
CBSA. In August 2009, an officer noticed that Mr Luking had apparently not paid
any Goods and Services Tax (GST) on the boat and asked Mr Luking about it. Mr
Luking replied that he thought he had already paid the taxes owing on the boat.
He offered to check his records and then contact CBSA.
[5]
On
review, Mr Luking found that he had paid the provincial tax, but not the GST.
He called the CBSA officer to explain. The officer told him that his file had
been transferred to the Criminal Investigations Division.
[6]
In
2010, another CBSA officer sent Mr Luking a Notice of Ascertained Forfeiture
assessing him a penalty of $166,664.96, 40% of the boat’s value, for failing to
report to customs and to pay the duty owing on the boat. The actual GST payable
was much less - $20,883.12.
[7]
Mr
Luking acknowledges that he failed, as a result of an innocent error, to report
the importation of the boat. He seeks to overturn the decision, taken on behalf
of the Minister of Public Safety and Emergency Preparedness, requiring him to
pay such a large penalty. He contends that the Minister’s delegate failed to
treat him fairly and rendered an unreasonable decision.
[8]
Therefore,
the issues are:
1. Did the
Minister treat Mr Luking unfairly?
2. Was the
Minister’s decision unreasonable?
II. The decision under
review
[9]
The
decision under review was rendered primarily by a CBSA adjudicator acting on
the Minister’s behalf. The adjudicator found that Mr Luking had made a false
statement when he told a CBSA officer in August 2009 that he had already paid
GST on the boat. Further, while Mr Luking had consistently reported to the CBSA
each time he entered Canada, he had not reported the importation of the boat
itself. In fact, he informed the CBSA that the boat was registered in Canada, which led the officer to conclude that it was a Canadian vessel.
[10]
The
adjudicator also noted that Mr Luking was a NEXUS member at the relevant time.
Higher penalties are assessed against members of NEXUS, regardless of their
intent. After Mr Luking pointed out that he was not a member of NEXUS, which
the CBSA subsequently acknowledged, the adjudicator found that Mr Luking was a
member of another program, CANPASS, whose members have comparable
responsibilities. That, too, was incorrect. Still, the adjudicator found that
the penalty imposed on Mr Luking was justified because of the false statement
he had made to a CBSA officer about having paid the GST.
[11]
In
2010, Mr Luking requested a meeting with the Minister or a delegate to explain
his lack of intent to contravene his statutory obligations. The adjudicator
offered to meet with Mr Luking but stated that it was not necessary as all
submissions had to be made in writing. Subsequently, Mr Luking asked for copy
of the CBSA’s policies and guidelines. The adjudicator provided Mr Luking with
some excerpts of the CBSA Enforcement Manual. Mr Luking asked for a complete
copy of the Manual, but was denied.
[12]
In
2011, another decision-maker in the CBSA’s Appeals Division found that Mr
Luking had tried to evade Canadian duties by disguising his boat with “Canadian
plates with a Canadian registration number”. Further, he had misled the CBSA
officer in Sidney when he stated that he was simply “out to do a tour”.
[13]
Accordingly,
Mr Luking’s objections to the assessed penalty of $166,664.96 were rejected.
III. Issue One – Did the
Minister treat Mr Luking unfairly?
[14]
Mr
Luking argues that he was treated unfairly when the adjudicator denied him an
oral hearing where he could put forward evidence and submissions on issues
relevant to the amount of any penalty against him, including his lack of intent.
Since he swore an affidavit that he made an innocent mistake, the adjudicator’s
conclusion that he actively attempted to deceive the CBSA amounted to an
adverse credibility assessment, which should not have been made without a hearing.
In addition, there was no valid reason for refusing to provide Mr Luking with a
copy of the Enforcement Manual. Given the amount of the penalty in issue, the
CBSA must abide by substantial fairness requirements.
[15]
I
am not satisfied that Mr Luking was treated unfairly. Obviously, CBSA decision-makers
must act fairly, especially when the impact of their decisions is substantial.
But here, Mr Luking was given a number of opportunities to make written
submissions. The adjudicator did not make any express credibility finding. She
found Mr Luking’s statements to the CBSA and his conduct to be misleading, but
in doing so simply weighed the available evidence. In any case, the question whether
Mr Luking had intentionally misled the CBSA was merely one factor to take into
account. It was not the sole basis for the CBSA’s decision about the
appropriate penalty.
[16]
Regarding
the failure to provide Mr Luking with a complete copy of the Enforcement
Manual, the adjudicator did provide him with the relevant excerpts. I do not
accept Mr Luking’s argument that he was entitled to more.
IV. Issue Two – Was the
Minister’s decision unreasonable?
[17]
Since
Mr Luking accepts that he contravened his statutory obligations, the only question
is whether the amount of the penalty was unreasonable. In support of the amount
assessed, the Minister points out the following:
• Mr
Luking brought the boat into Canada with Canadian plates and a Canadian
registration number, claiming that he was merely out for a “tour”;
• Mr Luking
falsely told an officer that he had paid the GST on the boat; and
• An
elevated penalty (at Level 2, 40% of the boat’s value) applies when goods are
concealed or disguised, or untrue statements are made following their
discovery.
[18]
The
question, therefore, is whether there was evidence showing that Mr Luking had
concealed or disguised the boat, had misled the CBSA officer about whether he
had paid the GST on it, or had made any other untrue statement.
[19]
Mr
Luking acknowledges that he failed to explicitly report the importation of his
boat. However, there is no evidence that he concealed or disguised it. In fact,
he duly reported to the port of Sidney as he was asked to do. He contacted CBSA
on numerous occasions. Further, contrary to the adjudicator’s findings, a boat
does not display license plates. Mr. Luking could not have concealed the boat’s
origins with false plates. In addition, he had duly registered his boat as he
was required to do. The fact that he registered his US-purchased boat in Canada cannot constitute evidence that he disguised its origins.
[20]
As
for his statement about paying GST, Mr Luking simply told a CBSA officer that
he believed he had paid it. He undertook to check his records and did
so, after which he contacted CBSA to disclose his error. Mr Luking never told
the CBSA that he had, in fact, paid the GST, only that he believed he had. An
expression of honest belief that on further investigation turns out to have
been mistaken is not an untrue statement. The evidence does not indicate that
Mr Luking knowingly made a false statement about having paid the GST.
[21]
Finally,
the fact that Mr Luking told the CBSA in Sidney that he was out for a “tour”
does not, in itself, indicate an intention to deceive. He initially reported to
Bedwell Harbour and was told to check in at Sidney, which he did. The fact
that he did so in the course of a subsequent excursion is not indicative of
deception on his part.
[22]
The
Minister directed my attention to the recent case of Shin v Canada (Minister of Public Safety and Emergency Preparedness), 2012 FC 1106. There, Mr
Justice John O’Keefe found that a Level 2 penalty was not warranted in
circumstances where the person was unsure about her obligations under the Customs
Act, RSC,
1985, c 1 (2nd Supp), and might have been confused, because
of language difficulties, when questioned about the valuable watch she was
importing into Canada, even though she had made a false statement about when
she had acquired the watch. I fail to see how this case advances the Minister’s
position. Justice O’Keefe clearly concluded that a Level 2 penalty was not
warranted in the circumstances. Here, the evidence shows that Mr Luking acted
in a good faith, and had not disguised or misrepresented the origins of his
boat. I do not see a reasonable basis for imposing a Level 2 penalty on him.
V. Conclusion and
Disposition
[23]
Mr
Luking’s intent is not relevant to the question whether he violated the Customs
Act (Leasak
v Canada (Minister of Public Safety and Emergency Preparedness), 2006 FC 1397 at
para 50). Indeed, that issue does not even arise here because Mr Luking
concedes his contravention. However, intent is relevant to the quantum of the
penalty.
[24]
The
Customs Enforcement Manual notes that a lack of intention is a mitigating
factor and that offences of omission are less culpable. The Manual provides
that a Level 1 penalty should apply when: (i) goods are not reported to CBSA
or, they are reported, but untrue statements are made about their acquisition;
(ii) the goods are not concealed; and (iii) full disclosure is made at the time
of discovery. A Level 2 penalty applies when (i) goods are concealed or
disguised; (ii) untrue statements are made at the time of discovery; or (iii)
the person has been the subject of a previous seizure action.
[25]
I
need not decide whether a Level 1 penalty would be appropriate in the
circumstances. However, in my view, the decision to impose a Level 2 penalty is
not reasonably supported by the evidence. There is no evidence that could
support a reasonable finding that Mr Luking disguised his boat or made an
untrue statement when the boat’s importation was discovered. There is no
evidence that he expressed anything other than his honest belief regarding
payment of the GST. Further, he voluntarily disclosed his error in a timely way.
[26]
Accordingly,
I find that the amount of the penalty imposed on Mr Luking was unreasonable. I
must, therefore, allow this application for judicial review, with costs, and
order another decision-maker within CBSA to reconsider the penalty imposed on
Mr Luking.
JUDGMENT
THIS
COURT’S JUDGMENT is that:
1. The
application for judicial review is allowed, with costs, and reconsideration by
another decision-maker within CBSA of the penalty imposed is ordered.
“James W. O’Reilly”
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