Date:
20120215
Docket:
A-398-10
Citation:
2012 FCA 55
CORAM: SHARLOW
J.A.
DAWSON J.A.
TRUDEL
J.A.
BETWEEN:
PETER
LIVADITIS
Appellant
and
CANADA
REVENUE AGENCY
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered
from the Bench at Calgary, Alberta, on February 15,
2012)
TRUDEL J.A.
[1]
Mr.
Livaditis (the appellant)
unsuccessfully applied to the Minister of National Revenue (or the Minister’s
Delegate) for relief under the Voluntary Disclosures Program (VDP) seeking
relief from penalty and interest with respect to a previously undisclosed
capital gain for the 2006 taxation year. His request was denied at the second
level by the Minister’s Delegate because "enforcement was taken on the
account prior to the disclosure" (decision of the Minister’s Delegate,
appeal book at page 107).
[2]
The appellant’s
ensuing application for judicial review was dismissed by the Federal Court
(2010 FC 950).
[3]
In his reasons,
the Federal Court Judge (the Applications Judge) reviewed the impugned
administrative decision in light of the two following questions addressed by
the Minister’s Delegate (VDP Second Review Report, appeal book at page 153) :
1) Was any direct
contact by a CRA employee, other authority or administration, for
any reason relating to non-compliance (e.g. unfiled returns, audit, collection
issues) made with the taxpayer or is the taxpayer likely to have been aware of
the enforcement action?
2) Was any
enforcement action initiated against a person associated with, or related to,
the taxpayer or a third party, where the enforcement action is sufficiently
related to the present disclosure and is likely to have uncovered the
information being disclosed?
[4]
These questions
stem from Circular IC00-1R2 with respect to the VDP and the VDP Guidelines 2008-06,
June 2008, which lists the four
conditions to be met for a disclosure to be qualified as valid, the first one
being that it must be voluntary in the sense that both questions above must be
answered in the negative. Whether the disclosure was voluntary is the sole
issue surrounding the disclosure made by the appellant.
[5]
To dispose
of this appeal, few facts
are needed. Suffice to know that the appellant was the President of LaCaille
Fifth Avenue Inc. (LaCaille), a company whose business included a new
residential condominium project (Five West). In 2003, before construction began,
the appellant and four of his family members personally acquired condominium
units in the Five West project. In 2006, prior to the completion of the
project, they resold these units for a gain. The appellant realized a capital
gain that went unreported.
[6]
On August
26, 2008, the Minister of National Revenue sought from the Federal Court an
Order ex parte in order to impose on LaCaille a Requirement to Provide
Information and Documents (the Requirement) pursuant to subsection 231.2(1) of
the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) and subsection
289(1) of the Excise Tax Act, R.S.C. 1985, c. E-15 relating to a group
of unnamed persons. The purpose of this Requirement was to verify tax compliance
by purchasers of units in the Five West project.
[7]
The Order
sought was issued by the Federal Court on September 4, 2008 (docket T-1330-08,
appeal book at page 76) but was not served until November 2008.
[8]
Meanwhile,
on October 28, 2008, the appellant received a phone call from a representative
of the Canada Revenue Agency (CRA). As the appellant recollects it, the
conversation was "very brief and general" and served to inform him
that the CRA sought a meeting to gather "information pertaining to
purchasers who may have acquired condominium units in the Five West project"
(appellant’s affidavit, appeal book at page 28). The respondent’s recollection
of the same conversation is said to be somewhat inconsistent but could
reasonably be considered only to be more detailed (see VDP Second Review Report,
appeal book at pages 150 and f.).
[9]
In an event,
the telephone conversation between the CRA’s representative and the appellant
was followed on October 31 by a no-name disclosure for income tax purposes for
the 2006 taxation year wherein the unnamed person, later identified as being the
appellant, stated that he was "not aware of any audit or enforcement
measure being conducted on matters specifically involving the disposition at
the time of this letter". Therefore, the appellant asserted that the
disclosure was voluntary.
[10]
As already
stated, the Minister’s Delegate disagreed. So did the Applications Judge who
partially agreed with the Minister’s Delegate.
[11]
The
Minister’s Delegate answered favourably both questions mentioned above. On the
first one, he concluded that as a result of the October 28, 2008 telephone
conversation, the appellant was fully aware of the information sought by the
CRA and how "it would uncover that [the appellant] and members of his
family did not report any income resulting from the sales of condos in [the
Five West project]" (VDP Second Level Report, appeal book at page 153).
[12]
The
Applications Judge held that this finding was unreasonable because the
Minister’s Delegate had failed to provide a rationale for accepting the CRA
representative’s account of the telephone conversation rather than that of the
appellant (Applications Judge’s reasons at paragraphs 29 and 32). We
respectfully disagree with the Applications Judge for reasons given later.
[13]
On the
second question, the Applications Judge found that it was reasonable for the
Minister’s Delegate to have found that the Requirement constituted an
enforcement action as this second ground for finding the disclosure not
voluntary did not require that the appellant be aware of the existence of an
enforcement action. The appellant strongly opposes this conclusion. However, we
need not comment on this statement to dispose of this appeal and decline to do
so.
[14]
We are all
of the view that the evidence on record supported the conclusion of the
Minister’s Delegate as to the appellant’s awareness on October 28 of an
enforcement action set to be conducted by the CRA with respect to the
information being disclosed. There existed a reasonable basis upon which the
Minister’s Delegate could have decided as he did and this Court will not
interfere (Alberta (Information and Privacy Commissioner) v. Alberta Teachers' Association, 2011 SCC 61).
[15]
In
conclusion, we
agree with the judgment under appeal. Therefore, the appeal will be dismissed
with costs.
"Johanne Trudel"
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