[1] This is an application for judicial review of a decision made by Joanne Ralla, Assistant Director of the Surrey Taxation Centre at the Canada Customs and Revenue Agency [CCRA], on May 27, 2002, denying Deane Speakman Harold's [the Applicant] request to waive or cancel late-filing interest and penalties assessed with respect to the 1998, 1999, and 2000 taxation years, pursuant to subsection 220(3.1) of the Income Tax Act [the Act] as well as the Information Circular 92-2 entitled Guidelines for the Cancellation and Waiver of Interest and Penalties [the Guidelines].
FACTS
[2] The Applicant is an individual resident of British Columbia.
[3] By letter dated April 25, 2001, the Applicant asked for a waiver of interest and/or penalties for the 1998, 1999, and 2000 taxation years [the first fairness request], on the basis that:
1) His father-in-law died on January 10, 1994, in New Zealand, requiring his wife to go to New Zealand;
2) His mother-in-law suffered a stroke in October 1995, requiring him to care for her;
3) His wife had stomach surgery in September 1999, requiring him to care for her; and
4) There was a landslide on the his property on December 17, 1999, which required him to defend himself in a lawsuit.
[4] On August 29, 2001, CCRA Officer June Leib, Enquiries and Adjustments Division, reviewed the Applicant's first fairness request. In her report and worksheet, she considered the following factors and recommended that the Applicant's first fairness request be denied:
(a) The Applicant has a history of late-filing returns from 1996 to 1999;
(b) There were no extenuating circumstances beyond the Applicant's control. Although he attended university full-time, the Applicant reported T4 income in 1998, 1999, and 2000 of at least $85,000;
(c) The landslide on his property in 2000, and resulting lawsuit did not affect his ability to file his returns on time for 1996, 1997, or 1998;
(d) The Applicant assisted his family members in filing their individual tax returns on time for the years in issue.
[5] On September 18, 2001, CCRA Team Leader Kari Farmer, Enquiries and Adjustments Division, reviewed Ms. Leib's report as well as the Applicant's letter and denied the latter's first fairness request.
[6] By letter dated October 10, 2001, Ms. Farmer advised the Applicant of the CCRA's decision.
[7] By letter dated November 27, 2001, the Applicant made a second fairness request for waiver of interest and/or penalties for the 1998, 1999, and 2000 taxation years.
[8] On January 17, 2002, CCRA Officer Pat Maeda, Enquiries and Adjustments Division, reviewed the second fairness request. In her report, she considered the following factors and recommended that the Applicant's second fairness request be denied:
(a) The Applicant's 1991, 1992, and 1996 to 1999 tax returns were filed late;
(b) The date of the landslide at the Applicant's residence was December 17, 1999, which would not affect the filing of the 1998 and 1999 tax returns;
(c) The Applicant was able to file his 2000 tax returns on time despite the construction of a retaining wall at his residence and the lawsuit filed against him;
(d) The Applicant had been attending university on a full-time basis and working during the years in issue;
(e) There did not appear to be any extenuating circumstances which prevented the Applicant from filing his 1998 and 1999 tax returns on time; and
(f) The Applicant did not provide any additional information for the second review.
[9] In considering the Applicant's second fairness request, Ms. Ralla reviewed all of the Applicant's submissions and reports prepared by the CCRA officers. She considered the following factors and recommended that the Applicant's second fairness request be denied:
(a) There were no unusual circumstances preventing the Applicant from filing his returns on time;
(b) He had a poor filing history before the years in issue; and
(c) He did not provide any additional information for the second review.
[10] By letter dated February 6, 2002, Ms. Ralla advised the Applicant of the CCRA's decision to deny his second fairness request.
[11] By letter dated March 6, 2002, the Applicant made a third fairness request for waiver of interest and/or penalties for the 1998, 1999, and 2000 taxation years.
[12] Ms. Maeda reviewed the third fairness request. In her report, she recommended that the Applicant's latest request be denied on the basis that he did not provide any new information except to elaborate on the information previously submitted.
[13] Ms. Maeda submitted a report dated May 1, 2002, to Ms. Ralla, recommending the denial of the Applicant's third fairness request.
[14] By letter dated May 27, 2002, Ms. Ralla advised the Applicant of the CCRA's decision to deny his third fairness request.
[15] The latter decision is the subject of this application for judicial review.
[16] I would like to underline the fact that the Applicant submitted a new document, Dr. Breckenridge's letter, after receiving the CCRA's decision denying his third fairness request.
ISSUE
Did the Minister properly exercise his discretion, pursuant to subsection 220(3.1) of the Act, in denying the Applicant's request to cancel or waive interest and/or penalties for the 1998, 1999, and 2000 taxation years?
RELEVANT LEGISLATION
[17] Subsection 220(1) of the Act refers to the Minister's duty. It provides as follows:
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220(1) The Minister shall administer and enforce this Act and the Commissioner of Customs and Revenue may exercise all the powers and perform the duties of the Minister under this Act.
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220(1) Le ministre assure l'application et l'exécution de la présente loi. Le commissaire des douanes et du revenu peut exercer les pouvoirs et fonctions conférés au ministre en vertu de la présente loi.
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[18] Subsection 220(2.01) of the Act is related to the possible delegation of powers or duties:
| 220(2.01) The Minister may authorize an officer or a class of officers to exercise powers or perform duties of the Minister under this Act.
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220(2.01) Le ministre peut autoriser un fonctionnaire ou une catégorie de fonctionnaires à exercer les pouvoirs et fonctions qui lui sont conférés en vertu de la présente loi.
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[19] Subsection 220(3.1) refers to the waiver of penalty or interest:
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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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[20] The Guidelines provide examples of circumstances beyond a taxpayer's control:
| 5. Penalties and interest may be waived or cancelled in whole or in part where they result from circumstances beyond a taxpayer'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 a return or make payments based on incorrect information;
...
(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.
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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 un paiement dans les délais exigés ou de se conformer à 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;
[...]
d) des erreurs de traitement;
e) des renseignements fournis en retard comme dans le cas où un contribuable n'a pu faire les paiements voulus d'acomptes provisionnels ou d'arriérés parce qu'il n'avait pas les renseignements nécessaires.
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[21] Section 10 of the Guidelines refers to the factors considered when determining whether or not to cancel or waive interest or penalties:
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10. The following factors will be considered when determining whether or not the Department will cancel or waive interest or penalties:
(a) whether or not the taxpayer or employer has a history of compliance with tax obligations;
(b) whether or not the taxpayer or employer has knowingly allowed a balance to exist upon which arrears has accrued;
(c) whether or not the taxpayer or employer has exercised a reasonable amount of care and has not been negligent or careless in conducting their affairs under the self-assessment system;
(d) whether or not the taxpayer or employer has acted quickly to remedy any delay or omission.
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10. Le Ministère tiendra compte des points suivants dans l'étude de demandes d'annulation des intérêts ou des pénalités ou de renonciation à ceux-ci :
a) si le contribuable ou l'employeur a respecté, par le passé, ses obligations fiscales;
b) si le contribuable ou l'employeur a, en connaissance de cause, laissé subsister un solde en souffrance qui a engendré des intérêts sur arriérés;
c) si le contribuable ou l'employeur a fait des efforts raisonnables et s'il n'a pas fait preuve de négligence ni d'imprudence dans la conduite de ses affaires en vertu du régime d'autocotisation;
d) si le contribuable ou l'employeur a agi avec diligence pour remédier à tout retard ou à toute omission.
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ANALYSIS
Standard of Review
[22] In Edwards v. Canada (Customs and Revenue Agency), (2002) FCT 618, [2002] F.C.J. No. 841, Pinard J. confirmed the adequate standard of review applicable where the Court is asked to review a decision made pursuant to a discretionary authority:
[10] In Boudreault v. Canada (C.C.R.A.), [2002] F.C.J. No. 126 (T.D.)(QL), Justice Blais confirmed the standard of review established by Justice Rouleau in Kaiser v. Minister of National Revenue (1995), 93 F.T.R. 66, when the Courts are called upon to review the exercise of a discretionary power such as the one in question here. The following was stated at page 68:
The purpose of this legislative provision is to allow Revenue Canada, Taxation, to administer the tax system more fairly, by allowing for the application of common sense in dealing with taxpayers who, because of personal misfortune or circumstances beyond their control, are unable to meet deadlines or comply with rules under the tax system. The language used in the section bestows a wide discretion on the Minister to waive or cancel interest at any time. To assist in the exercise of that discretion, policy guidelines have been formulated and are set out in Information Circular 92-2.
The jurisprudence has established the standard to be employed by the courts when called upon to review the exercise of a discretionary power such as the one in question here. In Re Maple Lodge Farms Ltd. and Government of Canada et al., [1982] 2 S.C.R. 2">[1982] 2 S.C.R. 2; 44 N.R. 354; 137 D.L.R. (3d) 558 (S.C.C.), McIntyre, J., stated at p. 562:
"In construing statutes such as those under consideration in this appeal, which provide for far-reaching and frequently complicated administrative schemes, the judicial approach should be to endeavour within the scope of the legislation to give effect to its provisions so that the administrative agencies created may function effectively, as the legislation intended. In my view, in dealing with legislation of this nature, the courts should, wherever possible, avoid a narrow, technical construction, and endeavour to make effective the legislative intent as applied to the administrative scheme involved. It is, as well, a clearly-established rule that courts should not interfere with the exercise of a discretion by a statutory authority merely because the court might have exercised the discretion in a different manner had it been charged with that responsibility. Where 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."
...
[12] At the hearing before me, both counsel for the parties submitted that the standard of review applicable to the discretionary decision in the case at bar is patent unreasonableness. I agree.
Therefore, the standard of review applicable to the decision under review is that of patently unreasonable.
Did the Minister properly exercise his discretion, pursuant to subsection 220(3.1) of the Act, in denying the Applicant's request to cancel or waive interest and/or penalties for the 1998, 1999, and 2000 taxation years?
[23] The first point that must be addressed is the admissibility of Dr. Breckenridge's letter submitted by the Applicant once the decision under review had been issued. During the hearing, I informed the Applicant that as it was not part of the material considered by the decision maker, the said letter should not be considered.
[24] The Minister had to consider whether the occurrences submitted by the Applicant amounted to extraordinary circumstances resulting in his failure to properly and correctly report his taxable personal income for 1998, 1999, and 2000.
[25] Ms. Maeda submitted a report dated May 1, 2002, to Ms. Ralla. The latter reviewed the following documents in regards to the Applicant's third fairness request:
(1) The report prepared by Ms. Maeda;
(2) The fairness worksheet prepared by Ms. Maeda;
(3) The Applicant's first fairness request letter;
(4) The report prepared by Ms. Leib;
(5) The fairness worksheet prepared by Ms. Leib;
(6) The Applicant's second fairness request letter and enclosures;
(7) The Applicant's third fairness request letter; and
(8) The report prepared by Ms. Maeda.
[26] After reviewing the above documents, Ms. Ralla applied section 10 of the Guidelines, and considered:
(a) Whether or not the taxpayer has a history of compliance with tax obligations;
(b) Whether or not the taxpayer has knowingly allowed a balance to exist upon which arrears interest has accrued;
(c) Whether or not the taxpayer has exercised a reasonable amount of care and has not been negligent or careless in conducting his affairs under the self-assessment system;
(d) Whether the taxpayer is subject to hardship that affects his ability to pay assessed amounts; and
(e) Whether or not the taxpayer has acted quickly to remedy any delay or omission.
[27] In deciding to deny the Applicant's third fairness request, Ms. Ralla considered:
(a) During the years in issue, the Applicant managed to look after a number of his obligations, including rental properties, as well as help others prepare their returns;
(b) He managed all of his other obligations, including going to school, so he should have been able to file his returns on time; and
(c) There were no extraordinary circumstances that prevented him from filing his returns on time.
[28] Although I am sympathetic to the difficulties encountered by the Applicant, I do not believe that the Minister's delegate unfairly exercised his discretion. Furthermore, I find no basis whatsoever to support a conclusion that the Minister's delegate failed to consider all of the information submitted by the Applicant before arriving at the decision under review.
[29] I am of the view that, since the Applicant was able to assist family members in filing their tax returns during the 1998, 1999, and 2000 taxation years, he should have been able to ensure that his own tax returns were punctually filed for these years.
[30] In his third fairness request, the Applicant writes:
Mention was made that on time filing of my family's returns for 1996-2000 should have indicated that I could have filed my own on time, but I made every effort with what disposable time I had to maintain their on-time performance for the years in question, and my full-time attendance at university, employment at two part time jobs, domestic responsibilities impacted by adversity described above, and handling consulting and revenue [property] rental administration and capital asset disposal created a nightmare of record keeping for me.
[31] Nightmare of record keeping or not, ensuring that one's income tax returns are filed before the deadline remains the responsibility of each individual.
[32] In the decision under review, the Minister's delegate informs the Applicant that if his "records or books were not complete when filing time approached, an income tax return could have been filed estimating the Applicant's income, and an adjustment to correct the original return could have been requested later."
[33] Accordingly, I believe the Applicant could have exercised a better amount of care in conducting his affairs under the self-assessment system.
[34] Another relevant factor is the fact that the Applicant had a history of non-compliance with tax obligations. Indeed, from Ms. Maeda's worksheet (Exhibit "H"), it seems that the Applicant filed his 1991, 1992, 1996, 1997, 1998, and 1999 tax returns late.
[35] As to the Applicant's only argument that the Guidelines provide reasonable support for waiving his interest and/or penalties, I find section 3 of the said Guidelines to be quite on point:
These are only guidelines. They are not intended to be exhaustive, and are not meant to restrict the spirit or intent of the legislation. As the Department gains experience in applying the legislation, these guidelines may be adjusted, as necessary.
[36] Once again, as stated in [1982] 2 S.C.R. 2">Maple Lodge Farms Ltd. v. Government of Canada, [1982] 2 S.C.R. 2, at page 7:
... Where 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. ...
[37] In determining the issue at bar, the foregoing must be kept in mind. Accordingly, I am satisfied that the Minister properly exercised his discretion, pursuant to subsection 220(3.1) of the Act, in denying the Applicant's request to cancel or waive interest and/or penalties for the 1998, 1999, and 2000 taxation years.
ORDER
THEREFORE, THIS COURT ORDERS that this application for judicial review is dismissed with costs in favour of the Respondent.
(Sgd.) "Pierre Blais"
Judge
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-990-02
STYLE OF CAUSE: Deane Speakman Harold v.
Canada Customs and Revenue Agency
PLACE OF HEARING: Vancouver, B.C.
DATE OF HEARING: May 29, 2003
REASONS FOR ORDER: Blais J.
DATED: May 30, 2003
APPEARANCES
Mr. Deane Speakman Harold For Applicant on his own behalf
Mr. J.S. (Bill) Basran For Respondent
SOLICITORS OF RECORD
Mr. Morris Rosenberg For Respondent
Deputy Attorney General of Canada
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