Orsini v. R., [1996] 2 CTC 248, 96 DTC 6347

Cullen J.: — This is an application for judicial review, pursuant to section 18.1 of the Federal Court Act, of a decision of Brian Dawe, Director, Sudbury taxation centre, dated May 16, 1995, whereby Mr. Dawe refused to extend the time for the Orsini Family Trust (the “applicant” or the “trust”) to file a preferred beneficiary election and to waive any applicable penalties and interest that were generated by the assessment of the applicant’s 1992 T3 income tax return, pursuant to subsections 220(3.2) and (3.1) of the Income Tax Act, R.S.C. 1952, c. 148, as amended (“the Income Tax Act’).

The facts in this case are not in dispute. Mr. Martin Orsini is a trustee for the Orsini Family Trust, the applicant. On April 30, 1993, he submitted a T3 tax return to Revenue Canada for the 1992 taxation year. On February 24, 1994, however, he received a notice from Revenue Canada indicating that the trust had a tax balance owing of $4,930.31, representing late filing penalties and arrears interest. The indebtedness arose from the fact that the trust failed to file a preferred beneficiary election, pursuant to subsection 104(14) of the Income Tax Act. To be valid, the election must be filed within ninety days of the end of the trust’s taxation year and consist of the documents referred to in paragraphs 2800(1 )(a) and (b) of the Regulations. In the case of the applicant, the election should have been filed by March 30, 1993; the return, as noted above, was not filed until a month later.

Following the assessment of tax on the trust, there was considerable communication between Mr. Wall, the applicant’s accountant, Mr. Orsini and representatives of Revenue Canada. By letter dated March 9, 1994, Mr.Wall made submissions on behalf of the trust, requesting that the late submission be accepted and that the penalty be reduced. Mr. Wall also forwarded a copy of this letter to the Toronto district office of Revenue Canada on September 6, 1994, requesting the acceptance of a preferred beneficiary election and the waiver of interest and penalties.

On December 20, 1994, S.R.G. Harrison, the Chief of Appeals of the Ottawa taxation centre, wrote to Mr. and Mrs. Orsini and advised them that the issue of waiving penalties and interest had been addressed by the appeals section of the Sudbury taxation centre. No relief had been granted to the applicant either to permit the late filing of the election or to waive the interest and penalties.

By letter dated January 25, 1995, Mr. Wall forwarded copies of his letters to Mr. Dawe, the Director of the Sudbury taxation centre. In his letter, Mr. Wall again requested the waiver of the interest and penalties assessed against the trust. Mr. Dawe, however, determined that the applicant’s situation was not one in which it would be appropriate to accept the late-filed election. He advised Mr. Orsini of his decision by letter of April 3, 1995.

Mr. Orsini made additional representations by letter of April 28, 1995. The Director telephoned Mr. Orsini on May 8, 1995 and provided him with the opportunity to make further submissions. Following this conversation, Mr. Dawe again considered the applicant’s file, but decided that his previous decision not to grant relief under the “fairness legislation” remained unchanged. This decision — not to grant relief to the applicant — was communicated by letter dated May 16, 1995 and is subject to judicial review.

The sole issue before this Court is whether Mr. Dawe, the Minister’s statutory delegate, discharged his duty to act fairly in declining to exercise the discretion granted to him under subsections 220(3.2) and 220(3.1) of the Income Tax Act to extend the time to file a preferred beneficiary election and to cancel or waive the penalties in respect of the applicant’s 1992 taxation year.

Section 220 of the Income Tax Act, added by S.C. 1991, c.49, subsection 18(1), is applicable to the 1985 and subsequent taxation years and is often referred to as the “fairness legislation.” Subsection 220(3.2) permits the Minister to accept late-filed elections and reads as follows:

220 (3.2) Where

(a) an election by a taxpayer or a partnership under a provision of this Act or a regulation that is a prescribed provision was not made on or before the day on or before which the election was otherwise required to be made, or

(b) a taxpayer or partnership has made an election under a provision of this Act or a regulation that is a prescribed provision,

the Minister may, on application by the taxpayer or the partnership, extend the time for making the election referred to in paragraph (a) or grant permission to amend or revoke the election referred to in paragraph (b).

If the Minister permits an election to be filed pursuant to subsection 220(3.2), the taxpayer could still be liable for a penalty pursuant to subsection 220(3.5). Subsection 220(3.1), however, permits the Minister to waive or cancel any applicable penalty or interest amounts. It states:

220 (3.1) The Minister may at any time waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by a taxpayer or partnership and, notwithstanding subsections 152(4) to (5), such assessment of the interest and penalties payable by the taxpayer or partnership shall be made as is necessary to take into account the cancellation of the penalty or interest.

A decision made under the “fairness legislation” is discretionary. It is not a case where a decision-maker must arrive at a certain outcome; rather, the decision-maker, after considering all of the circumstances, may come to a certain conclusion. Discretionary decisions cannot be made arbitrarily or in bad faith and, like other decisions, are subject to judicial review. The scope of judicial review, however, is quite narrow. This Court should not substitute its decision for that of the Minister’s statutory delegate. Rather, the Court must determine whether the decision was made fairly, not arbitrarily or in bad faith. So long as the evidence in the record supports the decision, this Court should not interfere.

Having considered the written and oral submissions of the parties, I do not find that the applicant was denied procedural fairness or that the respondent erred in any other way. The applicant, both through Mr. Wall and Mr. Orsini, made a number of submissions to Revenue Canada. Indeed, there is no question that Revenue Canada was well aware of the applicant’s situation. Although I may not have decided in the same way, in fact I’m certain I would not have, I cannot say that Mr. Dawe did not fully consider the applicant’s submissions and arrive at a decision supported by the evidence.

This application is dismissed.

Application dismissed.