Beacock v. Canada (Attorney General), 2005 FC 567

Date: 20050426

Docket: T-2262-03

Citation: 2005 FC 567

Ottawa, Ontario, Tuesday, the 26^th day of April 2005

Present:           THE HONOURABLE MADAM JUSTICE DAWSON

BETWEEN:

BRENDA BEACOCK

Applicant

- and -

ATTORNEY GENERAL OF CANADA

Respondent

                                      REASONS FOR ORDER AND ORDER

DAWSON J.

[1]                Subsection 220(3.1) of the Income Tax Act, R.S.C. 1985, c. 1 (5^th Supp.) ("Act")¹ confers a discretion upon the Minister of National Revenue ("Minister") to waive or cancel all, or any portion, of any penalty or interest otherwise payable under that Act by a taxpayer. Mrs. Beacock brings this application for judicial review of the Minister's decision refusing her application for a waiver of the interest which Mrs. Beacock owes under the Act. Her responsibility to pay such interest arose after an income tax audit for the 1998 and 1999 taxation years found errors in Mrs. Beacock's accounting records.

[2]                The letter which advised Mrs. Beacock of the negative decision explained the reasons for that decision in the following terms:

A review of the facts of this case has failed to show that payment of the liability in its entirety would cause financial hardship. You have a significant amount in mutual funds as well as equity in property. Family members have purchased approximately $32,000 worth of RRSP's over the last two years. Financial hardship for an individual refers to the lack of what is needed for basic living requirements such as food, clothing and shelter.

Furthermore, on your claim of bookkeeping error, the fairness provisions expect the taxpayer to be responsible of the actions of third parties such as accountants.

[3]                The Minister's exercise of discretion is entitled to significant deference by this Court. In Sharma v. M.N.R., 2001 DTC 5360, Mr. Justice Pelletier, then of this Court, after reviewing the factors relevant to the pragmatic and functional analysis, concluded that the Minister's discretion under subsection 220(3.2) of the Act was patent unreasonableness. In Cheng v. Canada (2001), 213 F.T.R. 85, this analysis was adopted by my colleague Mr. Justice Gibson with respect to the Minister's discretion under subsection 220(3.1) of the Act. On the basis of these authorities, I agree that the applicable standard of review to be applied to this decision is the most deferential standard of patent unreasonableness. As such, the Court can only intervene if satisfied that the decision-maker acted in bad faith, ignored relevant facts, took irrelevant facts into account, or otherwise acted contrary to law. The Court is not entitled to simply substitute its decision for that of the Minister.

[4]                Notwithstanding the considerable deference owed to decisions of this nature, I have concluded that in the present case, the decision-maker did ignore relevant evidence and did consider irrelevant factors with the result that the decision is patently unreasonable and should be set aside.

[5]                Specifically, in concluding that payment of the interest debt would not cause financial hardship, the decision-maker relied upon the facts that Mrs. Beacock "[has] a significant amount in mutual funds as well as equity in property". While it is correct that Mrs. Beacock owned mutual funds and had equity in property, the financial information provided by Mrs. Beacock showed significant debt liabilities and that Mrs. Beacock's total liabilities were in excess of her total assets. This fact was not addressed in the decision, or in the "account summary", or the "memoranda of decision" that led to the decision. By apparently failing to consider the taxpayer's liabilities, and only looking to her assets, the decision-maker ignored facts relevant to the issue of hardship.

[6]                As well, counsel for the Minister was, in oral argument, unable to explain how it was relevant to this taxpayer's situation that, in the two-year period preceding the decision, "family members" had purchased RRSP's. (In fairness to counsel, his task was not made easier by the failure of the Minister to have filed a tribunal record). In the absence of some explanation, which was not provided, I conclude that by considering the financial situation of unspecified "family members", the decision-maker considered irrelevant facts.

[7]                In the result, the application for judicial review will be allowed.

[8]                Costs normally follows the event. As Mrs. Beacock is self-represented she is not entitled to an award of any counsel fee. She is entitled to an award of costs in respect of her out of pocket expenses, which I fix in the amount of $100.00 in respect of monies paid for the filing fee and photocopy expenses.

ORDER

[9]                THEREFORE, THIS COURT ORDERS THAT:

1.          The application for judicial review is allowed and the Minister's decision communicated by letter dated October 31, 2003 is set aside. Mrs. Beacock's request for interest relief is to be remitted for redetermination by a different representative of the Minister.

2.          The respondent shall pay to the applicant costs, fixed in the amount of $100.00 on account of disbursements.

"Eleanor R. Dawson"

______________________________

Judge

¹ Subsection 220(3.1):

                                                       FEDERAL COURT

                      NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                               T-2262-03

STYLE OF CAUSE: Brenda Beacock v. Attorney General of Canada

PLACE OF HEARING:         Vancouver, British Columbia

DATE OF HEARING:           April 12, 2005

REASONS FOR ORDER AND ORDER

DATED:                                  April 26, 2005

APPEARANCES:

Mrs. Brenda Beacock                           FOR THE APPLICANT

Self-represented

Mr. Victor Caux                                    FOR THE RESPONDENT

SOLICITORS OF RECORD:

Self-represented                                    FOR THE APPLICANT

Vancouver, British Columbia

Mr. John H. Sims, Q.C.                         FOR THE RESPONDENT

Deputy Attorney General of Canada