Date: 20061107
Docket: T-324-06
Citation: 2006 FC 1334
BETWEEN:
COYNE
TEDFORD
Applicant
and
THE
ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR
ORDER
GIBSON J.
INTRODUCTION
[1]
These
reasons follow the hearing of an application for judicial review of a decision
of an officer (the “Officer”) of the Canada Customs and Revenue Agency, now the
Canada Revenue Agency, on behalf of the Minister of National Revenue, denying
in large part the second-level request for relief from penalties and interest
accumulated by reason of the late filing of the Applicant’s income tax returns
for the filing period 1997 to 2003. The decision letter is dated the 18th
of January, 2006.
[2]
In
the Memorandum of Fact and Law filed by the Applicant, he seeks the following
relief:
a) An order in
the nature of certiori quashing, the decision of the Fairness Committee, the
Collections Department of the CRA, dated January 18, 2006.
b) An order that
this be dealt with expeditiously.
c) An order that
the time frame reviewed by the CRA be the same as the time frame requested and
referred to in the Fairness Request.
d) That the
matter be dealt with by the Minister as the Collection’s Department which
serves at the Minister’s pleasure has not demonstrated just prudence.
e) That a
telephone line, a Web site, and a designated person with knowledge be available
to the public to answer calls of the public concerning the Fairness Committee
and what is before it; no such facility now exists.
f)
An
order requiring the CRA to report back to the Court its findings, judgements,
explanations and decisions on this case and all other cases.
g) That the
applicant be granted his costs in these proceedings.
h) That the
Court, in accordance with the Federal Court Act, Section 18, paragraph
3:
“order a federal board
commission or other tribunal to do any act or thing it has unlawfully failed or
refused to do or has unreasonably delayed in doing so.”
Specifically under Bill
C-18, Interpretation Bulletin IC-92-2
Give relief to the
applicant for penalties and interest, the balance outstanding on his account,
approximately $36000 that were the result of circumstances beyond his control.
[3]
At
the close of the hearing, I advised the Applicant, who represented himself,
that much of the relief he was seeking was beyond the scope of this application
for judicial review and beyond the authority of this Court to grant, in any
event. I also advised the Applicant and counsel for the Respondent that the
application for judicial review would be dismissed without costs. I outlined
by reasons. I advised that these written reasons would follow.
BACKGROUND
[4]
By
“Petition” dated the 27th of April, 2005, the Applicant sought relief
from interest and penalties primarily accumulated by reason of late filing of
returns. Material attached to the Applicant’s “Petition” in fact dealt with
his tax history for the years from 1993 to 2004 and highlighted critical events
or “circumstances beyond his control” that he alleged impacted his ability to
file returns on a timely basis throughout that period. He noted that he lost
his home to a fire in 1994 and that extensive records relating to his
self-employment income and related expenses were in some cases destroyed and in
other cases badly damaged. In 1995, a children’s clothing store that he
operated was closed following what he described as an “illegal” seizure of all
of the inventory and records that were in the store. National Revenue audited
his situation for the 1995 and 1996 taxation years. He alleged that files
containing critical documents were lost by National Revenue “…for over one
year.” The Applicant noted that: “This whole matter would not be resolved
until 2002… .” The Applicant, who was self-employed in the “insurance
industry” noted that the industry was in turmoil in the time preceding the
attack on the World Trade Centre on the 11th of September, 2001, and
that that attack further seriously disrupted the “insurance industry”. He
urged that: “…these market conditions had a devastating effect on my income.
I am paid a commission on what I sell. I am self-employed.” Finally, the
Applicant noted that he was seriously ill for a six-month period in 2004.
[5]
The
Applicant’s first level of fairness request for relief was denied by letter
dated the 8th of July, 2005.
[6]
By
letter dated the 8th of August, 2005, the Applicant requested relief
at the second level. In support of his second level request, he submitted
essentially identical information to that provided in support of his first
level request. A Fairness Report was prepared within the Canada Customs and
Revenue Agency and concluded with the following paragraph:
I recommend approving
client’s request for interest relief from April 11, 2004 to January 31, 2005
for all the years in question. This is the timeframe in which the client was
incapacitated due to illness as per physicians letter. He has made no
arrangements with collections and the small amounts that are being credited to
his account from garnishees are negligible and he has offered no reason as
to why the returns for 1997, 1998, and 1999 were filed late, so no further
interest relief or penalty relief will be granted.
[emphasis
added]
This recommendation was essentially adopted
in the decision under review.
THE LEGISLATIVE SCHEME
[7]
The
“fairness program” under the Income Tax Act (the “Act”) is founded on
subsection 220(3.1) of the Act which reads as follows:
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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
152(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.
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220. (3.1) Le ministre peut, à tout moment,
renoncer à tout ou partie de quelque pénalité ou intérêt payable par ailleurs
par un contribuable ou une société de personnes en application de la présente
loi, ou l'annuler en tout ou en partie. Malgré les paragraphes 152(4) à (5),
le ministre établit les cotisations voulues concernant les intérêts et
pénalités payables par le contribuable ou la société de personnes pour tenir
compte de pareille annulation.
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[8]
The
discretion of the Minister under subsection 220(3.1) of the Act may be
delegated by virtue of subsection 220(2.01). It was not in dispute in this
matter that the Officer who made the decision denying the Applicant’s request
was appropriately designated to do so on behalf of the Minister.
[9]
The
broad discretionary authority vested in the Minister under subsection 220(3.1)
of the Act is supplemented by Information Circular IC-92-2 dated the 18th
of March, 1992, and entitled “Guidelines for the Cancellation and Waiver of
Interest and Penalties”.
[10]
Sections
5, 6 and 7 of the Guidelines read as follows:
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…
5. Penalties and interest may be
waived or cancelled in whole or in part where they result in circumstances
beyond a taxpayer’s or employer’s control. For example, one of the following
extraordinary circumstances may have prevented a taxpayer, a taxpayer’s
agent, the executor of an estate, or an employer from making a payment when
due, or otherwise complying with the Income Tax Act:
(a) natural or human-made disasters
such as, flood or fire;
(b) civil disturbances or
disruptions in services such as, a postal strike;
(c) a serious illness or accident;
or
(d) serious emotional or mental
distress such as, death in the immediate family.
6. Cancelling or waiving interest
or penalties may also be appropriate if the interest or penalty arose
primarily because of actions of the Department, such as:
(a) processing delays which result
in the taxpayer not being informed, within a reasonable time, that an amount
was owing;
(b) material available to the public
contained errors which led taxpayers to file returns or make payments based
on incorrect information;
(c) a taxpayer or employer received
incorrect advise such as in the case where the Department wrongly advises a
taxpayer that no instalment payments will be required for the current year;
(d) errors in processing; or
(e) delays in providing information
such as the case where the taxpayer could not make the appropriate instalment
or arrears payments because the necessary information was not available.
7. It may be appropriate, in
circumstances where there is an inability to pay amounts owing, to consider
waiving or canceling interest in all or in part to facilitate collection. For
example,
(a) When collection has been
suspended due to an inability to pay.
(b) When a taxpayer is unable to
conclude a reasonable payment arrangement because the interest charges absorb
a significant portion of the payments. In such a case, consideration may be
given to waiving interest in all or in part for the period from when payments
commence until the amounts owing are paid provided the agreed payments are
made on time.
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…
5. Il
sera convenable d’annuler la totalité ou une partie des intérêts ou des
pénalités, ou de renoncer à ceux-ci, si ces intérêts ou ces pénalités
découlent de situations indépendantes de la volonté du contribuable ou de
l’employeur. Voici des exemples de situations extraordinaires qui pourraient
empêcher un contribuable, un agent d’un contribuable, l’exécuteur d’une
succession ou un employeur de faire u paiement dans les délais exigés ou de
se conformer è d’autres exigences de la Loi de l’impôt sur le revenu :
a) une
calamité naturelle ou une catastrophe provoquée par l’homme comme une
inondation ou un incendie;
b) des
troubles civils ou l’interruption de services comme une grève des postes.
c) une
maladie grave ou un accident grave;
d) des
troubles émotifs sérieux ou une souffrance morale grave comme un décès dans
la famille immédiate.
6. L’annulation
des intérêts ou des pénalités ou la renonciation à ceux-ci peuvent également
être justifiées si ces intérêts ou pénalités découlent principalement
d’actions attribuables au Ministère comme dans les cas suivants :
a) des
retards de traitement, ce qui a eu pour effet que le contribuable n’a pas été
informé, dans un délai raisonnable, de l’existence d’une somme en souffrance;
b) des
erreurs dans la documentation mise à la disposition du public, ce qui a amené
des contribuables à soumettre des déclarations ou à faire des paiements en se
fondant sur des renseignements erronés;
c) une
réponse erronée qu’un contribuable ou un employeur a reçue concernant une
demande de renseignements comme dans le cas où le Ministère a informé par
erreur un contribuable qu’aucun acompte provisionnel n’est nécessaire pour
l’année en cours;
d) des
erreurs de traitement;
e) des
renseignements fournis en retard comme dans le cas où un contribuable n’a pus
faire les paiements voulus d’acomptes provisionnels ou d’arriérés parce qu’il
n’avait pas les renseignements nécessaires.
7. Il
peut être convenable dans des situations où il y a incapacité de verser le
montant exigible d’examiner la possibilité de renoncer ou d’annuler la
totalité ou une partie des intérêts afin d’en faciliter le recouvrement, par
exemple dans les cas suivants :
a) lorsque
les mesures de recouvrement ont été suspendues à cause de l’incapacité de
payer;
b) lorsqu’un
contribuable ne peut conclure une entente de paiement qui serait raisonnable
parce que les frais d’intérêts comptent pour une partie considérable des
versements; dans un tel cas, il faudrait penser à renoncer à la totalité ou à
une partie des intérêts pour la période où les versements débutent jusqu’à ce
que le montant exigible soit payé pourvu que les versements convenus soient
effectués à temps.
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[11]
In
short, the Guidelines provide for waiver or cancellation of penalties and
interest where the penalties and interest have accumulated, in whole or in
part, as a result of “…circumstances beyond a taxpayer’s…control”, where
penalties and interest have accumulated “…primarily because of actions of the
Department,…” which is to say the Canada Revenue Agency, or where waiver or
cancellation will “facilitate collection”.
[12]
On
the facts of this matter, the Applicant urges that the accumulated penalties
and interest should have been waived because the accumulation resulted from
circumstances beyond his control, namely, the fire which destroyed his home,
the “illegal” seizure of his children’s clothing business, the tumult in the
insurance industry in the period before and following the 11th of
September, 2001, and his illness in 2004.
[13]
While
the Applicant, at hearing, and in written materials, expressed concern about
difficulties in communicating with the appropriate officials at the Canada
Revenue Agency, lack of clear and effective communication of the nature,
details and process associated with the fairness program and the fact that
responsibility for the program was vested in officials whose primary
responsibility would appear to be collection of taxes, interest and penalties,
thus creating a semblance of conflict of interest on their part, these concerns
were not strenuously pursued as a basis for cancellation or waiver of interest
or penalties “…primarily because of actions of the Department…”.
[14]
The
issue of waiver to “facilitate collection” does not arise on the facts of this
matter.
THE ISSUES
[15]
The
Applicant succinctly described the issues on this application at paragraph 26
of his Memorandum of Fact and Law in the following terms:
Did the CRA err in facts
and in its conclusions?
[16]
The
Respondent raised a preliminary concern regarding the inclusion of materials in
the Applicant’s Application Record that were not before the decision-maker.
The Respondent then went on to comment on the appropriate standard of review
“for findings of fact” and finally to consider the application of what the
Respondent urged to be the appropriate standard to the decision under review.
ANALYSIS
Preliminary Issues
[17]
It
is trite law that, except in extraordinary circumstances, which do not arise on
the facts of this matter, an application for judicial review should be
conducted on the basis of the material that was before the decision-maker.
Based on that principle, the Court has had no regard to material included in
the Applicant’s Application Record that was not before the Canada Revenue
Agency.
[18]
Prior
to the hearing of this matter, the Respondent had been identified in the style
of cause herein as “Canada Customs and Revenue Agency”. On consent, the Respondent
has been re-designated as the Attorney General of Canada.
Standard of Review
[19]
Counsel
for the Respondent urged that the decision here under review was entirely a
factual determination and that the standard of review in such circumstances has
been determined by Parliament and is expressed in paragraph 18.1(4)(d) of the Federal
Courts Act which provides that decisions or
orders based on fact are only reviewable if the findings of fact are erroneous
and made in a perverse or capricious manner or without regard for the material
before the Court. The foregoing test essentially equates to review on a
standard of patent unreasonableness.
[20]
I
disagree. I am satisfied that the appropriate standard of review of the
decision here before the Court is reasonableness simpliciter. In Dort
Estate v. Canada (Minister of National Revenue), my colleague
Justice Sean Harrington wrote at paragraph 8 of his reasons:
In accordance with the decisions of the Supreme
Court in Dr. Q. v. College of Physicians and Surgeons of British Columbia,…and
Law Society of New Brunswick v. Ryan, …the judicial review of decisions
of administrative tribunals must be approached functionally and pragmatically.
Depending on the circumstances, the applicable standard of review is
correctness, unreasonableness or patent unreasonableness. In Lanno v. Canada (Customs and Revenue
Agency),…the
Federal Court of Appeal overruled the trial judge who had applied the standard
of patent unreasonableness, and held that the appropriate standard was
reasonableness. The decision under review in that case was a decision of a tax
official not to exercise his discretion under section 152(4.2) of the Act so as
to permit the reassessment of Mr. Lanno’s returns beyond the normal
reassessment period, which reassessment would have resulted in a refund. That
section, like the section in question in this case, section 220(3.1), was part
of the Fairness Package which was introduced in 1991. Mrs. Dort submitted that
a discretionary decision with respect to the waiver of interest is likewise
subject to a reasonableness standard of review. That submission is correct. The
Federal Court of Appeal has just recently specifically extended Lanno,…to
section 220(3.1) of the Income Tax Act (Comeau c. Agence des douanes
et du Revenue du Canada….
[citations omitted]
[21]
The
reasonableness or reasonableness simpliciter standard provides that a
court should not interfere with the decision before it unless it is clearly
wrong in the sense of being based on a wrong principle or a misapprehension of
the facts. An unreasonable decision is one that, in the main, is not supported
by any reasons that can stand up to a somewhat probing examination. However, a
reasonable decision is not necessarily a correct decision, and there can be
more than one reasonable decision arising out of the application of a
discretionary provision of law to a particular fact situation.
[22]
I
adopt the standard of review of reasonableness simpliciter.
REVIEWABLE ERROR
[23]
The
applicant urges that the decision under review and the Respondent’s working
papers leading to the decision indicate that the period in question in his
request for relief is 1997 until 2003 whereas his request for relief relates to
the period from 1993 to the present and that the Minister “…used the time of
recovery after a series of extraordinary circumstances beyond the applicant’s
control to inflict serious penalties and interest charges…” which was neither
fair nor just.
[24]
The
material before the Court simply does not support the Applicant’s position.
[25]
While
the decision letter itself indicates that the Filing Period in issue is 1997 to
2003, background material before the Court does not indicate that earlier years
covered by the Applicant’s request were ignored. The substance of the decision
is in the following terms:
I have reviewed all the
pertinent information and my decision is to cancel interest from April 11, 2004
to January 31, 2005 for the years mentioned above. This is the time frame that
you were under your doctor’s care. I appreciate the fact that you have
suffered some business setbacks, but your letter does not identify a reason why
the returns for the years 1997, 1998 and 1999 were not filed on a timely
basis. Over 75% of the penalties and interest charged was for those three
years.
[26]
While
the “Filing Period” reference in the decision letter is indeed unfortunate, in
fact, the notation that by far the greater part of penalties and interest
charged related to the years covered by the Filing Period identified is
entirely accurate. Charges for earlier years were either nil or relatively
insignificant.
[27]
Further,
while it might be technically inaccurate to say that submissions for relief did
“…not identify a reason why the returns for the years 1997, 1998 and 1999 were
not filed on a timely basis”, the events advanced to justify the late filing
for those years were relatively remote. The Applicant acknowledged at hearing
that he could have filed returns for those years on a timely basis, based on
the documentation and information then available to him and, when full and
complete documentation and information became available, he could have filed
amended returns, if appropriate. The Applicant made a conscious choice not to
proceed in that manner. It has proved to be a costly choice, but perhaps the
one that seemed most reasonable to him at the time and in the then prevailing
circumstances. It was, in the end, his choice and has proved to be a
substantially expensive choice.
[28]
Based
upon the totality of the material before the decision-maker, against a standard
of review of reasonableness simpliciter, I am satisfied that the
decision arrived at, and that is here under review, was open to the
decision-maker.
CONCLUSION
[29]
Based
on the foregoing brief analysis, I am satisfied that, as I disclosed to the
Applicant and counsel for the Respondent at the close of the hearing of this
application for judicial review, the application must be dismissed.
COSTS
[30]
The
Respondent seeks costs against the Applicant given the Respondent’s success on
this application. In the exercise of my discretion under Rule 400(1) of the Federal
Courts Rules, I decline to order costs against
the Applicant. There will be no order as to costs.
“Frederick E. Gibson”
Ottawa, Ontario
November
7, 2006
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