Date: 20110504
Docket: T-558-09
Citation: 2011
FC 518
Ottawa, Ontario, May 4, 2011
PRESENT: The Honourable Madam Justice Heneghan
BETWEEN:
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JAKA HOLDINGS LTD., JEAN TRAN, AND
PHUOC NGUYEN
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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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REASONS FOR ORDER AND ORDER
INTRODUCTION
[1]
Jaka
Holdings Ltd. (“Jaka”), Jean Tran and Phuoc Nguyen (collectively the
“Applicants”) seek judicial review of the decision dated March 12, 2009, made
by Ms. Sandra Brownlee, the Director of Regina Tax Services Office (the
“Director”), Canada Revenue Agency (the “CRA” or the “Respondent”).
[2]
In that
decision, the Director denied Jaka’s second level request for the cancellation
of penalties and/or interest, assessed under the Income Tax Act, R.S.C.
1985, c. 1 (5th Supp.) (the “Income Tax Act”) and the Excise
Tax Act, R.S.C. 1985, c. E-15, as well as its request for relief from gross
negligence penalties.
BACKGROUND
[3]
No
tribunal record was requested in connection with this application for judicial
review, and no tribunal record was filed. The relevant facts will be taken from
the affidavits, including exhibits, filed on behalf of the parties.
[4]
The
Applicants filed two Affidavits of Ms. Jean Tran, the sole shareholder of Jaka.
The first, sworn to on May 20, 2009, purports to set out a timeline for the
conduct of an audit of Jaka by the CRA that began in October 2003.
[5]
In her
second Affidavit, sworn to on August 13, 2009, Ms. Tran attached a letter from
Counsel for the CRA, purporting to set out the amounts claimed by the CRA. This
letter, dated August 7, 2009 purports to be a statement of interest and
penalties claimed from Jaka, Ms. Tran and Mr. Nguyen.
[6]
The CRA
filed three Affidavits. The first is the Affidavit of Sheila Nixon, a Director
with the Regina Tax Services Offices of the CRA. Ms. Nixon attached five
documents as exhibits to her Affidavit.
[7]
The
Respondent also filed two Affidavits of Brian Mills. Mr. Mills is a team leader
in the Audit Division in the Regina Tax Services Offices of the CRA.
[8]
Both the Affidavits
of Mr. Mills, each dated June 25, 2009, relate to the first level refusal of
the waiver requests advanced on behalf of Jaka, Ms. Tran and Mr. Nguyen.
[9]
Mr. Mills
wrote the first level refusal letter to Jaka on June 25, 2008. He advised Jaka
that it could request an independent review of his decision.
[10]
On
September 15, 2008, Jaka requested an independent review of its request to
waive or cancel penalties and/or interest.
[11]
Mr. Mills
wrote the refusal letters to Ms. Tran and Mr. Nguyen on February 26, 2009. He
advised both Ms. Tran and Mr. Nguyen that they could request a second
administrative review. There is nothing in the record to show that they have
done so.
[12]
As
discussed, the CRA began an audit of Jaka in October 2003. It is unclear from
the materials filed if the individual Applicants were also subject to an audit
but that is irrelevant to this proceeding since the only decision that is
subject to this application for judicial review is the decision dated March 12,
2009 and that decision concerns only the corporation Jaka.
[13]
Both
the Applicants and the Respondent included in their respective application
records the first level review decisions made by Mr. Mills relating to the
individual Applicants. These decisions are dated February 26, 2009.
[14]
Mr.
Mills’ decisions of February 26, 2009 are not mentioned in the application for
judicial review. They are not the subject of this application for judicial
review and will not be addressed on their merits. However, the production of
these two decisions raises a question of procedural fairness since there is a
marked similarity between the two decisions of Mr. Mills and that of the
Director, beginning with the opening paragraph. All of these decisions follow a
similar structure.
DISCUSSION
[15]
The
first matter to be addressed is the appropriate standard of review. According
to the decision of the Supreme Court of Canada in Dunsmuir v. New
Brunswick,
[2008] 1 S.C.R. 190, decisions of statutory decision-makers are reviewable
either on the standard of correctness or of reasonableness.
[16]
According
to the Supreme Court of Canada’s decision in Canada (Citizenship
and Immigration) v. Khosa, [2009] 1 S.C.R. 339 at para. 43, the standard
of correctness will apply to questions of procedural fairness. The standard of
reasonableness will apply to questions of fact and of questions of mixed fact
and law; see Dunsmuir at para. 53.
[17]
Where
the prior jurisprudence has already established the appropriate standard of
review, that standard can be used; see Dunsmuir at para. 57. In Telfer v. Canada (Revenue Agency) (2009), 386 N.R. 212 at para. 24, the
Federal Court of Appeal stated that the decision to cancel or waive penalties
and interest is a discretionary one, reviewable on the standard of
reasonableness.
[18]
In
Ralph v. Attorney General of Canada (2010), 410 N.R. 175 (F.C.A.), the
Federal Court of Appeal commented on the absence of a tribunal record and said as
follows at paras. 29 to 32:
[29] Some confusion arose before this
Court as to what evidence was before the Board. This was because on the
application for judicial review in the Federal Court no certified tribunal
record was requested or filed. Instead, each party filed an affidavit in the
Federal Court. It was not clear that the narrative contained in the affidavits
was confined to information provided to the Board, or that documents in the
Appeal Book had been placed before the Board.
…
[31] This confusion should be avoided in
a future case. Rule 317 of the Federal Courts Rules allows a party to
request material in the possession of a decision-maker. An applicant for
judicial review in the Federal Court may include such a request in its notice
of application. Rule 318 then obliges a decision-maker to transmit a certified
copy of the requested material to the Court and the person making the request
within 20 days of the service of the request under Rule 317.
[32] In the present case, the appellant
did make a request that the Board provide a copy of the record before it to the
Registry of the Federal Court of Appeal. This request was contained in the
notice of appeal filed with this Court. Such form of request is neither proper
nor effective. Evidence not before the Federal Court cannot be placed before
this Court on an appeal unless an order is granted permitting a party to file
new evidence. See: Rule 351. The appropriate time for invoking Rule 317 is by
requesting material in the notice of application in the Federal Court.
[19]
As
noted at the beginning of these reasons, no tribunal record was requested by
the Applicants in their Notice of Application for judicial review. The purpose
of requesting the tribunal record is to allow the Court to review the documents
that were actually before the Federal Board when it made its decision; see the
decision in Canada (Attorney General) v. Canada (Information Commissioner),
[1998] 1 F.C. 337 at para. 26.
[20]
In
this case, Ms. Nixon made reference in her Affidavit to the documents that were
before Ms. Brownlee, the decision-maker, at the time she made her decision. According
to paragraph 16 of Ms. Nixon’s Affidavit, those five documents consisted of the
following:
1. The first level request made by Jaka
dated March 14, 2008;
2. First level report dated April 16,
2008;
3. First level decision dated June 25,
2008;
4. Jaka’s second level request dated
September 15, 2008; and
5. Second level report dated February 25,
2009.
[21]
In
their Application Record, the Applicants included a list of documents which
they called “supporting materials”. That list consists of the following:
(a) March 12, 2009, decision letter from
Canada Revenue Agency;
(b) February 26, 2009, decision letter to
Jean Tran from Canada Revenue Agency;
(c) February 26, 2009, decision letter to
Phuoc Nguyen from Canada Revenue Agency;
(d) September 15, 2008, letter from
Darryl Lucke to Canada Revenue Agency;
(e) June 25, 2008, letter from Canada
Revenue Agency to Darryl Lucke;
(f) February 13, 2008, Applicants’
Request for Taxpayer Relief;
(g) February 19, 2008, letters to JAKA
Holdings from Canada Revenue Agency regarding GST Arrears and Income Tax
Arrears;
(h) February 19, 2008, letter to Phuoc
Nguyen from Canada Revenue Agency regarding Income Tax Arrears;
[22]
There
was some overlap between the materials produced by the Applicants and the
materials identified in paragraph 16 of Ms. Nixon’s Affidavit. Specifically,
both the Applicants and the Respondent have produced copies of the Applicants’
request for taxpayer relief under cover of a letter dated March 14, 2008, the
first level decision dated June 25, 2008 and the second level request on behalf
of Jaka dated September 15, 2008.
[23]
In
the ordinary course of events, documents that were not before the
decision-maker would not be considered. However, in this case, an issue of
procedural fairness has arisen with respect to an apparent similarity between
the contents of the two first level decisions contained in the letters dated
February 26, 2009, concerning the two individual Applicants, and the decision
dated March 12, 2009 concerning Jaka.
[24]
The
decisions dated February 26, 2009 were written by Mr. Mills. Mr. Mills was also
the author of the first level decision with respect to Jaka. The February 26,
2009 decisions are included in the Applicants’ Application Record however,
these decisions are also included in the Respondent’s Application Record, as
exhibits to the two Affidavits of Mr. Mills.
[25]
These
decisions are not, and cannot, be the subject of this application for judicial
review. In the first place, the application for judicial review specifically
states that it concerns the decision of March 12, 2009, concerning Jaka.
Secondly, pursuant to the Federal Courts Act, R.S.C. 1985, c. F-7 and
the Federal Courts Rules, SOR/98-106 (the “Rules”), an application for
judicial review can relate to only one decision.
[26]
Nonetheless,
the production of the decisions relating to the individual Applicants raises an
issue of procedural fairness, specifically that of fettering of discretion of
the decision-maker. This issue was not addressed by either the Applicants or
the Respondent upon the hearing of this application for judicial review on
April 7, 2011. The issue was raised by the Court, at the conclusion of the
hearing on that date and the Direction was issued, giving the parties the
opportunity to address this issue, should they wish to do so.
[27]
Both
parties did address this question and further submissions were heard from both
parties at a resumption of the hearing on April 26, 2011.
[28]
The
Applicants argue that the many similarities between the second level decision
of March 12, 2009 and the first level decisions of February 26, 2009 suggests
that the March 12th decision was effectively “copied” from the
earlier decisions of February 26th, and that this “copying” amounts
to a breach of procedural fairness that is the fettering of discretion by the
decision-maker.
[29]
For
its part, the Respondent submits that since the fairness relief request was
made on behalf of all three Applicants and the three Applicants relied on the
same grounds, it is not surprising that the decisions dealing with the three
Applicants would show some similarities.
[30]
I
am not persuaded by this argument. While the request for taxpayer relief was
presented on behalf of the three Applicants, it is apparent from reviewing the
materials that were before the Director, that is the materials identified in
paragraph 16 of Ms. Nixon’s Affidavit, that Jaka was the principal focus of the
audit activities of the CRA. It is unclear from the materials filed by the
parties if the individual Applicants were also subject to an audit.
[31]
The
similarity of the three decisions is very disturbing and has not been
explained. The Respondent, in making the above submissions, merely attempts to
offer a justification.
[32]
It
is well-established that a remedy in an application for judicial review is
discretionary. It is equally well-established that not every breach of
procedural fairness will give rise to a remedy. In this regard, I refer to the
decisions in Mobil Oil Canada Ltd. v. Canada-Newfoundland Offshore
Petroleum Board, [1994] 1 S.C.R. 202 and Stevens v. Conservative Party
of Canada, [2006] 2 F.C.R. 315 (F.C.A.).
[33]
In
Stevens, the Federal Court of Appeal said the following at para. 52:
It is not uncommon that a court, in its
discretion, refuses to quash a decision made unlawfully. Although the absence
of prejudice is the reason most often cited, it is not the only one; the extent
of the consequences, for example, could be another reason as valid as the lack
of consequences. (See Mobil Oil Canada Ltd. v. Canada-Newfoundland Offshore
Petroleum Board, [1994] 1 S.C.R. 202, at pages 228-229 ("remedies . .
. are impractical"); Canadian Cable Television Assn. v. American
College Sports Collective of Canada, Inc., [1991] 3 F.C. 626 (C.A.); Nooshinravan
v. Canada (Minister of Citizenship and Immigration), 2001 FCT 598; Angus
v. Canada, [1990] 3 F.C. 410 (C.A.), at page 440); Devinat v. Canada
(Immigration and Refugee Board), [2000] 2 F.C. 212 (C.A.), at paragraph 71 et
seq.).
[34]
In
the circumstances of this case, in particular having regard to the state of the
record as presented by the parties, I am not prepared to find that a truly
independent review by a different decision-maker would yield the result that
was rendered by the Director. In other words, I am not prepared to assume that
the breach of procedural fairness resulting from the apparent copying of a
prior decision carries no consequences for the Applicant Jaka.
[35]
In
these special circumstances, I am prepared to allow this application for
judicial review. The decision of March 12, 2009 is set aside and the matter
remitted to another decision-maker for determination.
[36]
In
the exercise of my discretion over costs, pursuant to the Rules, I make no
order as to costs. Neither party raised the issue which is determinative of this
application and in my opinion, each party can bear its own costs.
ORDER
THIS COURT ORDERS that the application for judicial
review is allowed, the decision of March 12, 2009 is set aside and the matter
is remitted to a different decision-maker for determination. In the exercise of
my discretion over costs pursuant to the Federal Courts Rules,
SOR/98-106, there is no order as to costs.
“E.
Heneghan”
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