Date: 20130320
Docket: A-167-12
Citation: 2013 FCA 86
CORAM: PELLETIER
J.A.
GAUTHIER
J.A.
MAINVILLE J.A.
BETWEEN:
FRANK CHARLES HOKHOLD
D.D.S., B. S.C. (PHARM)
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
GAUTHIER J.A.
[1]
Dr. Hokhold appeals
from a decision of Sheridan J. of the Tax Court of Canada (the Judge) whose
reasons for judgment are cited as 2012 TCC 154.
[2]
Dr. Hokhold
is a dentist formerly practicing in Merritt, a small community in British Columbia. He filed his 2002 tax return very late (January 2005). He failed to file
returns for the 2003 to 2006 years and filed his 2007 return in June 2008.
Amended returns were filed for the years 2002 through 2007 in September 2008.
[3]
Dr. Hokhold
was assessed and reassessed by the Minister of National Revenue (the Minister)
in April 2005 for the 2002 year, and in January 2006 for the 2003 tax year. He
was subsequently assessed and reassessed for the 2004 to 2007 years.
[4]
Dr. Hokhold
appealed the Minister’s assessments and reassessments for all of the above tax
years (2002 through 2007) to the Tax Court of Canada because the Minister
disallowed in large part a series of deductions for business expenses,
including deductions related to the use of a motor vehicle, meals and
entertainment, wages paid to the appellant’s children, loss of income, loss of
business equipment and loss of goodwill. He also contested the late filing
penalties imposed by the Minister for the years 2004 to 2007. He included in
his Notice of Appeal a claim for damages and he sought an apology from the
respondent.
[5]
In her
decision, the Judge dismissed the appeal in respect of the 2002 and 2003 tax
years because Dr. Hokhold had failed to file an objection before the expiration
of the time period set out in section 165 of the Income Tax Act, R.S.C.,
1985, c. 1 (5th Supp.) (the
Act). Thus, Dr. Hokhold could not meet the conditions for appealing to
the Tax Court of Canada set out in subsection 169(1) of the Act.
[6]
The Judge
adjusted upwards the deductions for vehicle use (50% rather than the 20%
allowed by the Minister) and family wages (75% versus 10% originally allowed),
and maintained the Minister’s evaluation of allowable deductions for meals and
entertainment, as well as the Minister’s position that the estimated business losses,
loss of business equipment and loss of goodwill are not deductible business
expenses within the meaning of the Act (subsection 18(1) of the Act).
The Judge then noted that she had no jurisdiction to grant damages resulting
from the alleged misconduct.
[7]
Before the
Judge, the Minister conceded that penalties ought not to be imposed in respect
of the years 2004, 2005, and 2007. Thus, the Judge upheld the late filing
penalty for the year 2006 only, noting that the evidence had not persuaded her
that Mr. Hokhold had exercised due diligence that might excuse his late filing,
despite evidence on the record with respect to the undoubted difficulties he
faced.
[8]
Dr. Hokhold
challenges each of the Judge’s determinations with respect to the specific
deductions claimed as well as her finding confirming the late filing penalty
for year 2006. In addition, he now argues before this Court that his rights
under sections 8 and 12 of the Canadian Charter of Rights and Freedom,
Part I of the Constitution Act 1982, enacted
as Schedule B to the Canada Act, 1982, (U.K.) 1982 c. 11, (Charter), have
been violated by the illegal and improper garnishment of his bank accounts by
the Minister.
[9]
At the
hearing, Dr. Hokhold focused his representations particularly on the fact that
the Judge ignored or failed to give proper weight to some of the evidence
before her with respect to the 2002 and 2003 tax years. He referred to his
correspondence with the Canada Revenue Agency (CRA) included in the Appeal
Book, particularly to his letter dated June 19, 2006. Concerning the evidence
with respect to the use of his motor vehicle, he also submitted that the
Judge’s decision that only 50% is deductible is simply wrong given the evidence
before her, particularly in respect of his weekly business trips to Kamloops, and his frequent travel to Vancouver for professional development courses and
conferences. In his view, the mileage involved in attending those activities
simply cannot be compared with the limited use his family made of the motor
vehicle in and around Meritt.
[10]
With respect
to meals and entertainment, Dr. Hokhold conceded that he may have originally
included meals that could not in fact be deducted (because of his initial
misunderstanding of the applicable legislative provisions). However, he was
adamant that the Judge’s statement at paragraph 20 of her reasons that he had
“attempted to characterize virtually every crumb that went into their mouths as
meal expenses” simply did not make sense, and was insulting. This, he says,
must be an error sufficient to warrant this Court’s intervention.
[11]
As for the
wages paid to his children, Dr. Hokhold pointed to what he considers to be an
error in the description of the rate paid per hour in the relevant years. If
accepted, the rate of $15.00 per hour should be enough, in his view, to justify
this Court allowing the deduction as claimed.
[12]
Finally, with
respect to the various losses suffered on account of the garnishment of his
bank account, which allegedly prevented him from making payments in respect of
his business equipment and his home (which was also his office), and which
resulted in damage to his credit rating and goodwill associated with his
business, Dr. Hokhold says that he simply does not have the resources to sue in
tort as suggested by the Judge. He notes that these losses, are also very real.
They should qualify under the Act as business losses even though they
are not “outlay or expenses made or incurred” by him to earn income (subsection
18(1) of the Act). He argues that, otherwise, this legal rule is simply
unfair and, moreover, bad law.
[13]
As explained
at the hearing, this appeal is not a hearing de novo and this Court
cannot simply substitute its own assessment of the evidence for that of the
Judge.
[14]
The standard
of review to be applied by this Court in appeals from a trial court such as
the Tax Court of Canada was set out by the Supreme Court of Canada in Housen
v. Nikolaisen, 2002 SCC 33. In respect of questions of law, the standard of
review is correctness. However, in respect of questions of facts or mixed facts
and law (such as those raised by Dr. Hokhold) this Court can only intervene if
the findings of the Judge contain a palpable and overriding error.
[15]
As noted by
this Court in South Yukon Forest Corp. v Canada, 2012 FCA 165 at paragraph
46:
Palpable and overriding error is a highly deferential
standard of review: H.L. v. Canada (Attorney General),
2005 SCC 25, [2005] 1 S.C.R. 401;
Peart v. Peel Regional Police Services (2006) 217 O.A.C. 269
(C.A.) at paragraphs 158-59; Waxman, supra. "Palpable" means an error that is
obvious. "Overriding" means an error that goes to the very core of
the outcome of the case. When arguing palpable and overriding error, it is not
enough to pull at leaves and branches and leave the tree standing. The entire
tree must fall.
[16]
Moreover, in Housen,
above, at paragraph 46, the Supreme Court of Canada made it clear that a trial
judge is presumed to have considered all the information on the record and that
the failure to rely expressly on, or to mention, some of the evidence in the
reasons is insufficient proof to reverse such a presumption.
[17]
In respect of
the new Charter argument, I need only to say that the Tax Court of
Canada has no jurisdiction to deal with claims of this nature. Thus, the issue
is not properly before us.
[18]
The Judge’s
findings in respect of the 2002-2003 years were based on the fact that the
Notices of Objection were filed on April 17, 2009. This was acknowledged by Dr.
Hokhold at page 165 of the transcript (A. B. vol. 7, see also his answer as to
why he did not object earlier at page 166-167). That said, even if Dr.
Hokhold’s letter to the CRA dated June 19, 2006 could constitute a Notice of
Objection in respect of the 2002 and 2003 tax years, this correspondence took
place more than 90 days after the day of sending of the relevant Notices of
Assessment and Reassessment.
[19]
Dr. Hokhold
had the right to seek an extension of time to file his objection pursuant to
subsection 166.1(1) and 166.2(1) of the Act, but he failed to do so.
Thus, the Judge had no choice but to apply section 169 of the Act. She
made no error by dismissing the appeal in respect of those two years.
[20]
I have also
concluded that the Judge made no error in applying subsection
18(1) of the Act to the losses claimed by the appellant.
[21]
The Judge
made clear findings in respect of the weight of the evidence she heard. She
did not accept all the evidence that Dr. Hokhold submitted to her. For example,
she did not accept that his weekly trips to Kamloops were strictly for
business. This evidently had an impact on her assessment regarding the
deduction for the use of the vehicle.
[22]
Further, the
Judge did not accept Dr. Hokhold’s evidence that his family meals in Kamloops and during professional conferences attended by the family elsewhere were business
expenses. She also noted that “where an expense would have been incurred in
any case, for example to feed or cloth the taxpayer it cannot be claimed as a
business deduction.” She was entitled to make such findings. Although I agree
that the statement referred to at paragraph 10 above was inappropriate, it
should not be taken as literally as Dr. Hokhold suggests. When read in context,
it means that the Judge found the amounts claimed for meals exaggerated.
[23]
With respect
to the children’s wages, it is apparent that the evidence was far from perfect.
Payments where often made in cash, records of hours worked where not properly
kept and the hourly rates used by Dr. Hokhold were challenged during his cross
examination. The appellant confirmed that the children were paid $10.00, even
during the period where he had used $15.00 in his calculations. He admitted
that he did not know why the rates used for 2007 fluctuated so much. (see pages
108-109, 114,122-123 of the transcript, A.B. Vol 6 ). Mrs Hokhold, a witness
the Judge found convincing, did not address this issue. The Judge evidently had
to make some estimates. Again, she was entitled to do so. In fact, despite the
state of the evidentiary record before her, the Judge significantly increased
the allowed deductions.
[24]
Dr. Hokhold
has a heavy burden to meet in this appeal. I have not been persuaded that the
Judge committed a reviewable error that would justify our intervention. While I
recognize the difficult situation in which Dr. Hokhold finds himself in, this
Court’s hands are tied.
[25]
Therefore, I
propose that the appeal be dismissed. The Judge determined that each party
should bear its own costs. I believe that this solution is also appropriate in
this appeal.
"Johanne Gauthier"
“I
agree
J.
D. Denis Pelletier”
“I
agree
Robert
M. Mainville”
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