Pan-Tax Inc. v. Revenue Canada, [1997] 2 CTC 315, 97 DTC 5276

Jerome A.CJ.:

This is a motion by the applicant, Pan-Tax Inc., for an Order directing the respondent to accept the applicant’s application to electronically file tax returns using the EFILE and SEND programs pending final determination of the application herein. At the hearing of this motion in Toronto, Ontario, on February 26, 1997, I dismissed this motion indicating that these written reasons would follow.

The proliferation of technology has electronically automated much of Canadian personal and corporate culture. In order to keep up with the demands of the information age and to increase its efficiency, Revenue Canada introduced electronic filing of income tax returns in 1993. The EFILE and SEND services were made available to personal and corporate clients who would honour their obligation to provide proper and accurate returns. The applicant, Pan-Tax Inc., prepares income tax returns for a variety of clients. In the past the applicant has used EFILE and SEND, methods of electronic communication, to transmit completed client tax returns to the respondent. On August 16, 1996, Sam Papadopoulos, EFILE coordinator, suspended the applicant’s EFILE/SEND privileges. Shortly thereafter the applicant was informed of the basis for this decision by letter. In his explanatory letter to the applicant, Mr. Papadopolous stated that the suspension of EFILE/SEND privileges was based on findings of unethical practices in return preparation, and documentation of significant complaints from taxpayers.

The applicant, although informed of its right to appeal by way of administrative review at the time of the original decision, did not appeal until five months later. The decision was confirmed on appeal by the Chief of Appeals, Toronto East Tax Services Offices on January 29, 1997. The applicant filed an originating notice of motion on February 5, 1997, asking for judicial review of the decision of the Chief of Appeals. The applicant asked for relief in the nature of mandamus and certiorari. The grounds for the main application and this motion are as follows:

1. The Applicant has been an authorized user of the EFILE and SEND programs since the inception of the program in or about 1993.

2. The Applicant has been in the business of preparing and filing tax returns on behalf of customers since 1992.

3. The Applicant has, since its inception, been regularly audited by Revenue Canada and has always been found to be in compliance with Revenue Canada’s regulations and requirements.

4. The Respondent has failed to provide any or any justifiable reason for its failure to accept the application of the applicant to electronically file returns using the EFILE and SEND programs for the 1996 taxation year.

5. The Applicant does the bulk of its business between the beginning of February and the end of April and, therefore, will suffer irreparable harm if its application to electronically file tax returns for the 1996 taxation year is not renewed, and the balance of convenience lies in the Applicant’s favour.

6. The Applicant meets the suitability screening test for both the EFILE and SEND chapters 3 and 6, (Revised 1996).

7. Such further and other grounds as counsel may advise and this Honourable Court may permit.

Although the applicant has not explicitly asked this court for injunctive relief, the application for an order allowing it to use the EFILE/SEND programs until the disposal of its judicial review application is essentially injunctive relief. It has long been held and most recently reiterated by the Supreme Court of Canada in RJR - MacDonald Inc. v. Canada (Attorney General). [1994] 1 S.C.R. 311, 54 C.P.R. (3d) 114 (S.C.C.) that the general principles to be considered with respect to injunctive relief are that there be a serious issue to be tried, irreparable harm and that the balance of convenience rest with the applicant. This three part test sets out the standards the applicant must meet in order to obtain this discretionary relief.

An order for mandamus to direct the Minister to withhold the impact of the decision of the Chief of Appeals is simply not available in this matter since there is no statutory requirement. In other words, no public duty exists that requires the respondent to accept or allow applications for this type of tax return filing. The best the Court could do by way of judicial review, would be to set aside the decision and have the matter returned to the Chief of Appeals for review in accordance with the law, the regulations and the Court’s decision. That, however, requires the Court to find that the decision is either contrary to law, based on an erroneous finding of fact, ignored relevant facts or was simply made in bad faith. In Barron v. Canada (Minister of National Revenue), A-322-96 (February 4, 1997) (F.C.A.), another tax matter involving a similar administrative decision, the Court of Appeal stated:

the Income Tax Act confers a discretion on the Minister and that, when an application for judicial review is directed against a decision made in the exercise of a discretion, the reviewing court is not called upon to exercise the discretion conferred on the person who made the decision. The court may intervene and set aside the discretionary decision under review only if that decision was made in bad faith, if its author clearly ignored some relevant facts or took into consideration irrelevant facts or if the decision is contrary to law.

This proposition would indicate that the decision in question must clearly be unsupportable on the facts in order for the court to intervene.

The conditions of the EFILE and SEND privileges are set out in a policy bulletin and also form part of the EFILE/SEND application. Having signed the applications for Pan-Tax since the inception of the program in 1993, both partners of Pan-Tax must have been aware of these conditions. Not only did they sign the application but they also certified that the information was true. The EFILE/SEND applications, state in part, that in the event of a failure to adhere to the service and conditions of the application, the privilege of filing by EFILE or having access to SEND on the behalf of taxpayers could be taken away from Pan-Tax without notice.

At least two substantial complaints are identified in the text of paragraphs 18, 19 and 20 of the affidavit of Themistocles Sam Papadopoulos, EFILE coordinator, dated and filed February 10th, 1997. These allegations may be characterized as serious. If the allegations contained in paragraphs 19 and 20 are true, as counsel for the Minister has suggested, they come very close to fraud. This does not amount to a minor variation or deviation from the necessary standard but constitutes a major departure from the standard which would be required of any tax filing service, much less one which had made this kind of application and accepted these condi- tions. On its face the decision of Revenue Canada seems more than reasonable. This minimizes the seriousness of the question to be tried.

The Court further stated in Barron, supra, that because of the administrative nature of the review, the applicant was accorded the level of procedural fairness he was entitled to. The Court found that;

The record also shows that the respondents were given a full opportunity to make representations in support of their requests; true, they were not given the opportunity to make oral representations, but the law is clear that, save in exceptional cases, fairness does not require an oral hearing.

Those proceedings [administrative decisions] are not adversarial and if the respondents were not given the opportunity to confront the case against them, it is because there was no such case.

In another decision of the Federal Court of Appeal, where an administrative decision was in issue, Everett v. Canada (Minister of Fisheries & Oceans) (1994), 169 N.R. 100, 25 Admin. L.R. (2d) 112 (Fed. C.A.), at 106 [N.R.] the Court stated:

If such generalized allegations and foundationless requests could compel a minister to order an oral hearing with advance cross-examination, then the administrative process would be effectively stultified. In my view, that is not the law. While there will undoubtedly be cases in which the controverted nature of the evidence is such as to require a minister to order an oral hearing on a licence application, this is not such a case.

This matter is also “not such a case.” The decision under review is clearly an administrative decision. Accordingly, the applicant was entitled to procedural fairness which includes in this context, notification of, but not notice for, the decision and the reasons for the decision suspending its EFILE/SEND privileges. The ability to file tax returns electronically is a privilege, not a right. This privilege may be given if an applicant meets certain pre-conditions and can be taken away when those conditions are no longer met. The applicant was given an opportunity to appeal the decision, which it did some five months after notification of the original decision. On appeal the applicant was given ample opportunity to submit supporting material for an administrative review (appeal). The review was conducted and the previous ruling affirmed. For the reasons and on the merits of the case there is no serious question to be tried. The question, although not serious, is neither frivolous nor vexatious and therefore the remaining parts of the test should be briefly examined.

The ability to file tax returns electronically does not prevent Pan-Tax from filing returns, either manually or by post. This may constitute inconvenience but certainly does not amount to irreparable harm.

The granting of interlocutory and interim orders is purely discretionary. There is no evidence of unfair or even unjudicious decision-making in this matter and accordingly no discretionary powers will be exercised.

For these reasons, on February 26, 1997, I dismissed the application.

Motion dismissed.