Docket: T-918-16
Citation:
2017 FC 268
[ENGLISH TRANSLATION]
Ottawa, Ontario, March 8, 2017
PRESENT: The Honourable Mr. Justice Diner
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BETWEEN:
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ADRIANO
FURGIUELE AND JOSEPH OLIVERIO
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Applicants
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and
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CANADA REVENUE
AGENCY
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Respondent
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JUDGMENT AND REASONS
I.
Nature of the case
[1]
This is an application for judicial review under
section 18.1 of the Federal Courts Act, RSC (1985), c. F-7, against
a decision issued on May 6, 2016 [the Decision]. In that Decision, Diane
Lorenzato, Assistant Commissioner [the Assistant Commissioner] of the Human
Resources Branch of the Canada Revenue Agency [CRA] dismissed the grievances
filed by the applicants at the final level. The Assistant Commissioner found
that the applicants were not eligible for legal assistance from the CRA, as
they did not meet the criteria set out in the [translation]
Policy on Compensation and Legal Assistance that can be Granted to CRA
Employees [the Policy].
II.
Background
[2]
The two applicants, Mr. Oliverio and Mr.
Furgiuele, were CRA employees for a certain number of years. Prior to his
resignation on January 31, 2011, Mr. Oliverio worked for the CRA for 25 years. For
the last five years of his employment, he was an audit manger in the Small and
Medium Enterprise Division.
[3]
For his part, Mr. Furgiuele worked for the CRA
for 18 years. For the last five years of his employment, he was a team leader
on the workload development team [the Team], reporting to Mr. Oliverio. On
December 14, 2009, Mr. Furgiuele was dismissed.
[4]
In 2008, the company Gemmar Systems
International Inc. [Gemmar] contacted Mr. Oliverio directly regarding a
software purchase. Gemmar wanted to check whether the software constituted a
tax shelter. The respondent claims that, under the circumstances, it was not
normal for a taxpayer to contact a CRA manager directly rather than inquiring
with CRA Headquarters [HQ].
[5]
The applicants then asked Josée Bissonnette, an
auditor on the team, to conduct an audit to determine whether the purchase of
the software represented a tax shelter. When she left on maternity leave, the
applicants reassigned that audit to Geneviève Robillard, a junior auditor.
[6]
Ms. Robillard explained that she was not
comfortable carrying out that mandate and that she had basic knowledge in that
area. As such, she suggested that the matter be transferred to the tax
avoidance team. However, Mr. Oliverio asked that Ms. Robillard handle the
matter.
[7]
Ms. Robillard followed Mr. Oliverio’s orders. She
finally prepared a letter to Gemmar on December 8, 2008, in which she stated
that the acquisition of the software did not constitute a tax shelter. This
therefore represented significant tax consequences for Gemmar.
[8]
On April 13, 2010, Mr. Oliverio and the
Assistant Director, Audit requested a review of Ms. Robillard’s audit report. That
review was conducted by Ralph Amar, an auditor in the Aggressive Tax Planning
Division (previously “Tax Avoidance”) at the Montréal Tax Services Office.
[9]
Given the complexity of the file, Mr. Amar
contacted his union, as he was not comfortable with that work assignment. Despite
his reservations, he finally prepared his report on October 15, 2010, finding
that “[…] in the absence prima facie of any indicia as
to statements or representations, I concur with the view of the previous
auditor that the acquisition of the interest in the software by the taxpayer is
not an acquisition of a ‘tax shelter,’ as defined in the Act […]”
(Applicants’ Record, at p 128 [AR]).
[10]
After reading the report prepared by Mr. Amar,
CRA HQ was of the view that his findings were problematic. Isabelle Frappier,
an auditor on the aggressive tax planning team at HQ, was therefore asked to
conduct a new audit — the third, following those prepared by Ms. Robillard and
Mr. Amar.
[11]
On May 29, 2013, Ms. Frappier submitted her
report, in which she found, among other things, that the purchase of the
software in fact represented a tax shelter. The CRA therefore issued a notice
of assessment to Gemmar and cancelled the tax consequences previously granted.
[12]
Gemmar then initiated proceedings before the Superior
Court of Quebec, alleging that the audit conducted by Ms. Robillard caused it
significant economic harm. On January 20, 2015, the Attorney General of Canada
implicated 13 individuals, including the applicants.
[13]
In February and March 2015, the applicants
submitted a request for legal assistance, in accordance with the policy. On
July 14, 2015, their requests were denied. One month later, the applicants
filed a grievance challenging the denial of their requests.
[14]
In December 2015, the respondent asked Nancy
Tanguay, a member of the CRA’s Continuous Program Integrity Review team, to
prepare an expert report on the merits of the grievances filed by the
applicants. Ms. Tanguay concluded, among other things, that the applicants had
been negligent in their duties.
[15]
Following the submission of Ms. Tanguay’s
report, Martin Houde, a senior policy and program analyst in the Workplace
Relations and Compensation Directorate, recommended in a document entitled [translation] “Précis
of the final-level grievance” that the grievances be dismissed.
[16]
On May 6, 2016, the Assistant Commissioner
dismissed the grievances at the final level in accordance with section 208 of
the Public Service Labour Relations Act, SC 2003, c. 22, s. 2. As
indicated in the decision, the reasons on which the Assistant Commissioner
based her refusal of the grievances were as follows:
[translation]
[…] I find that you did not meet the
reasonable expectations of the CRA […]
[1.] by assigning this case to the workload
development team, as that team was not responsible for conducting audit work;
[2.] by assuming that that team could
conduct audits, you accepted to have the case audited when the taxpayer in
question had not filed its returns and no notice of assessment had been issued;
[3.] by failing to ensure that the audit
work was entered in the Audit Information Management System (AIMS) for the
taxpayer in question;
[4.] by failing to refer this case to
aggressive tax planning and the Income Tax Rulings Directorate at Headquarters,
as the taxpayer in question wanted a letter confirming the tax consequences of
the transactions planned in 2008.
(RD, at p. 8)
[17]
The Assistant Commissioner also considered the
seniority and senior positions of the applicants.
[18]
That decision is the subject of this judicial
review.
III.
Issue
[19]
The applicants allege that (A) the conclusions
drawn by the Assistant Commissioner are not reasonable and that (B) she was too
strict in her interpretation of the Policy, i.e. the meaning of “reasonable expectations”.
IV.
Analysis
[20]
The parties recognize, and the Court agrees,
that the standard of review applicable to these issues is that of
reasonableness, as they are related to the application of an internal
government agency policy to employees (Brauer v Canada (Attorney General),
2014 FC 488, at para 26 [Brauer]).
A.
The Assistant Commissioner’s conclusions
(1)
The audits conducted by the Team
[21]
The applicants argue that the Assistant
Commissioner ignored four substantial elements when she concluded that the
applicants’ team was not responsible for conducting the audit in the case in
question: (1) the applicants’ statements that the team regularly audited files;
(2) the expert report, in which Ms. Tanguay could neither confirm nor deny that
the team regularly audited files; (3) the testimonies of the other two CRA
employees who did not contradict the applicants’ position (that their team
conducted audits); (4) the report by Ms. Robillard, which confirmed that the
applicants’ team [translation] “could do audits” (RD, at la p. 32).
[22]
For its part, the respondent alleges that the
Team does not audit files, citing section 8.3.2 of the Audit Manual [the
Manual] and that the applicants were or should have been aware of the rules set
out in the Manual. The respondent also relied on the testimonies of two
employees, who stated that issues related to planned transactions or tax
shelters are referred to and handled by HQ.
[23]
Finally, at the hearing, the applicants alleged
that there was no evidence on record that showed that, in practical terms, the
Team did not do audits prior to handling the Gemmar file. The respondent in
turn argued that there is no conclusive evidence to conclude that, in practical
terms, the Team regularly conducted field audits.
[24]
First, the Court would note that its role in a
judicial review is not to reweigh or reassess all the evidence on record (see: Vigan
v Canada (Minister of Citizenship and Immigration), 2016 FC 398, at para
15). Instead, it is the Court’s role to examine whether the conclusions drawn
by the Assistant Commissioner are reasonable.
[25]
It must also be noted that an administrative
decision-maker is not required to mention all evidence in his or her decision. Similarly,
it is well-established in Canadian law that there is a presumption that the
administrative decision-maker has considered all evidence on record and that it
is up to the party alleging an omission to refute that presumption (Mughrabi
v Canada (Minister of Citizenship and Immigration, 2008 FC 898, at para
15).
[26]
To justify the Court’s intervention, the
applicants must prove that there was an omission and must establish that it
makes the decision as a whole unreasonable (Hussain v Canada (Minister of
Citizenship and Immigration), 2012 FC 1298, at para 46). However, the
omission of important evidence can merit intervention by the Court (Botros v
Canada (Minister of Citizenship and Immigration), 2013 FC 1046, at para
25). For example, a situation in which an administrative decision-maker rules
that a party did not submit any evidence in support of an argument or
substantive point that being put forth, when it is clear from the record that
such evidence was submitted, can have the effect of refuting the presumption
that the administrative decision-maker considered all the evidence (Canadian
Copyright Licensing Agency (Access Copyright) v British Columbia (Education),
2017 FCA 16, at paras 23–25).
[27]
Moreover, although some evidence mentioned by
the applicants is not explicitly addressed in the Assistant Commissioner’s
letter, Strickland J. stated in Taticek v Canada (Canada Border Services Agency),
2014 FC 281, at para 44 [Taticek] that “[j]urisprudence
establishes, however, that a précis or an internal memorandum with
recommendations to the decision-maker may serve as reasons”. The Court
therefore feels that the reasons set out in the final-level grievance précis
prepared by Ms. Houde [the Précis], thus recommending that the requests for
legal assistance be dismissed, are also relevant to this case.
[28]
In this case, the Court is of the view that the
applicants’ argument does not hold up. The two applicants were senior public
servants and they had a duty to apply the rules set out in the Manual. It is
clear from section 8.3.2 of the Manual that the audit of files and the handling
of issues related to tax shelters was not part of the Team’s mandate.
[29]
Simply because the applicants allege that the
common practice when Mr. Furgiuele was leading the group allowed them to audit
the Gemmar file does not mean that the Assistant Commissioner’s conclusions are
unreasonable. Similarly, the argument that Ms. Tanguay could neither confirm
nor deny the common practice in her expert report and that the responses
regarding the matter from two employees were not [translation] “categorical” in
no way undermines the reasonableness of the decision.
[30]
Finally, the statements by Ms. Robillard quite
simply explain that, when Mr. Furgiuele was leading the team, audits were
conducted, while that practice ceased when a new head took over. That testimony
in no way undermines the Assistant Commissioner’s reasons.
[31]
The Court is of the view that the applicants did
not establish that the Assistant Commissioner unreasonably assessed the
evidence on record. The conclusion that it was not up to the Team to audit the Gemmar
file was reasonable. Moreover, the Précis prepared by Ms. Houde considered the
applicants’ position and the relevant evidence, including the Report by Ms.
Frappier and the statement by Ms. Robillard, concluding that the applicants
were conducting or ordering audits contrary to the rules set out in the Policy.
[32]
For all these reasons, the Court dismisses the
applicants’ argument regarding the first issue.
(2)
Failure to issue a notice of assessment
[33]
The applicants argue that the conclusion that
the file was not the subject of a notice of assessment was unreasonable, as the
transaction had not yet taken place and the file was therefore clearly not the
subject of a notice of assessment.
[34]
However, it is clear from section 9.5.0 of the
Manual that only files that are the subject of a notice of assessment are
normally audited. That is why Ms. Houde concluded, on page 7 of the Précis,
that [translation] “it seems that the complainants assigned an audit file when
that file should not normally have been the subject of an audit” (RD, at
p. 33). That conclusion is reiterated by the Assistant Commissioner in her
reasons. The conclusions drawn by Ms. Houde and the Assistant Commissioner are
entirely reasonable.
(3)
Entry in AIMS
[35]
At the hearing, the applicants argued that the
Assistant Commissioner’s support regarding the failure to enter the audit work
in AIMS is unreasonable, as that omission did not represent a human error, and
was not intentional or made in bad faith.
[36]
The respondent suggests that the entry of audits
in AIMS is crucial, as it allows other auditors to monitor the file and understand
the merits of the audit.
[37]
The Court recognizes that, taken in isolation,
the failure to enter audit work in AIMS, when it is required under section
8.3.9 of the Manual, could represent a simple human error made in good faith. However,
the Assistant Commissioner does not rely solely on that fact; she lists four,
considered in light of the level and seniority of the applicants. The Court therefore
feels that the Assistant Commissioner’s consideration of the failure to enter
the audit work in AIMS as being one of the determining factors is reasonable.
(4)
Ms. Frappier’s report
[38]
Finally, the applicants argue that Ms. Frappier’s
report reached a different conclusion than the reports previously prepared by
Ms. Robillard and Mr. Amar because Ms. Frappier was better informed and
equipped to draw conclusions regarding the issue of whether Gemmar’s
acquisition of the software constituted a tax shelter. The applicants allege
that, when the facts were assessed in 2013, Gemmar had already acquired the
software, meaning that Ms. Frappier was better placed to conduct the audit. According
to the applicants, it goes without saying that there was a significant
difference between the conclusions reached in Ms. Frappier’s audit and those in
the reports by Ms. Robillard and Mr. Amar.
[39]
That argument had previously been put forth by
the applicants during the grievance process. At page 13 of the Précis, Ms.
Houde notes the following:
[translation]
[…] despite the complainant’s claim that Ms.
Frappier benefited from new information, it seems instead that Ms. Frappier
conducted her audit based on the same documents provided to the auditors (Ms.
Bissonnette and Ms. Robillard) at the time. The expert indicated that the
difference was that Ms. Frappier conducted her audit with care, using the
appropriate and relevant audit techniques and the tools available to all
auditors […] It is important to note that Ms. Frappier’s work was to redo the
2008-2009 audit and her mandate was not to identify problems in the 2008-2009
audit or in the initial audit.
(RD, at p. 39.)
[40]
There is nothing in the record to indicate that
these conclusions are unfounded or otherwise unreasonable. Regardless, the
issue before the Court at this time is not whether Ms. Frappier relied on the
same documents as Mr. Amar or Ms. Robillard, but instead to determine whether
the conclusions drawn by the Assistant Commissioner are reasonable. The Court
is of the view that they are.
B.
Interpretation of “reasonable expectations”
[41]
The policy states that legal assistance can be
granted if, in his or her duties, the employee (i) acted honestly and without
malice and (ii) met the reasonable expectations of the CRA.
[42]
The applicants argue that the assistant
Commissioner unreasonably interpreted and applied the meaning of the expression
“reasonable expectations” used in the Policy,
being overly rigid and strict. The applicants allege that the purpose of the
Policy is to provide assistance to employees who, despite their errors, acted
in good faith. According to the applicants, refusal of legal aid under the
Policy would only be justified in exceptional circumstances, when the employee
in question committed malicious acts or acted in bad faith.
[43]
First, it is important to note that this Court,
at para 19 in Taticek, ruled that it should normally show deference
regarding the interpretation of policies and procedures established by the
employer.
[44]
Regarding the interpretation of internal
policies applicable to employees of government agencies, Mosley J., in Brauer,
applied the purposive approach adopted by the Supreme Court in Rizzo &
Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, to interpret an internal policy
applicable to the Canadian Armed Forces. In applying that method, Mosley J.
concluded that the interpretation of the word “community”
used in the policy by the administrative decision-maker was not reasonable, as
it went against the very meaning of the policy. In that case, the
administrative decision-maker’s interpretation was too rigid, meaning that the
policy would only apply in exceptional circumstances.
[45]
In the case at hand, the Court is of the view
that the Assistant Commissioner’s interpretation is not the same as the
administrative decision-maker’s interpretation in Brauer.
[46]
The Policy establishes a two-part conjunctive
test subject to the discretion of the CRA. The Policy does not define the scope
of the CRA expression “reasonable expectations”.
The fact that it sets forth two requirements suggests that the first may refer
to criminal acts or intentional acts in bad faith; the second may reasonably include,
for example, a misdeed, unreasonable laxity or an accumulation of several
faults or errors, evaluated in light of the level and seniority of the
employee.
[47]
In this case, it was not unreasonable to
conclude that the CRA could expect the applicants, employees at a higher level
and with considerable seniority, to know, respect and follow the rules set out
in the Manual. However, given the numerous errors committed by the applicants,
whether or not in bad faith, and their level and seniority, the Court is of the
view that the Assistant Commissioner’s interpretation of the Policy does not
result in an overly strict or rigid application. In fact, the Court does not
find it unreasonable that multiple failures to respect the Manual could
constitute unacceptable laxity.
[48]
Unlike Brauer, the Court is of the view
that the interpretation of the Policy does not in any way undermine its purpose
and does not render it “inapplicable in all but the
most exceptional circumstances” (at para 65). On the contrary, the Court
is of the view that the Assistant Commissioner’s interpretation of the Policy
reasonably responds to its purpose: granting legal assistance if the
employee acted honestly and without malice and if the employee
met the reasonable expectations of the CRA.
[49]
The Court would also note that the Policy is
discretionary in nature. In Maple Lodge Farms v Government of Canada,
[1982] 2 S.C.R. 2, at pp. 7–8, the Supreme Court stated that “[w]here the statutory discretion has been exercised in good
faith and, where required, in accordance with the principles of natural
justice, and where reliance has not been placed upon considerations irrelevant
or extraneous to the statutory purpose, the courts should not interfere.”
That same reasoning applies to internal government agency policies (Wannis v
Canadian Food Inspection Agency, 2013 FC 963, at paras 31–34).
[50]
In the case at hand, there is no evidence on
record to suggest that the Assistant Commissioner acted in bad faith or that
she considered irrelevant evidence. Thus, under such circumstances,
jurisprudence teaches that the Court should show deference to the
administrative decision.
V.
Conclusions
[51]
The application for judicial review is therefore
dismissed. On consent, the parties proposed that costs be awarded to the
respondent in the amount of $3,000.00. The Court accepts the parties’ proposal.
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