[1] By application filed the 14th of March, 2001, the applicant seeks judicial review of a decision dated the 3rd of January, 2001, whereby the Director, Burnaby-Fraser Tax Services Office of the Canada Customs and Revenue Agency denied the applicant's request for relief from penalties and arrears interest relating to her 1989, 1990 and 1991 taxation years pursuant to the "fairness provisions" of the Income Tax Act [1] and more particularly, subsection 220(3.1) of that Act, which reads as follows:
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(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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(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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[2] In her Memorandum of Fact and Law, the applicant, who appeared on her own behalf at the hearing before the Court of her application, requested the following relief: first, that the decision under review be set aside; secondly, that her request for relief be referred back to Canada Customs and Revenue Agency for determination in accordance with such directions as the Court considers appropriate; and finally, such further and other relief as the Court may provide.
Background
[3] The applicant commenced a career as a realtor in 1985. At that time, she was married and had two children born during an earlier marriage and three born during her then existing marriage. One of her children by her second marriage suffered from eczema and allergies and another suffered from asthma. Each of those children were, from time to time, hospitalized. In 1987, the applicant's two children by her previous marriage joined the family unit in Canada. In 1990, one of those two children died in a fatal accident. Not surprisingly, given the strains and tragedy in her family life combined with her ongoing responsibilities in relation to her family and her employment responsibilities, the applicant was under considerable stress, particularly in the years in which she was working to integrate two families and the years immediately following her son's death. At least partially as a result, she relied on others, particularly her husband, to look after her income tax affairs which not only reflected income from her employment but also from rental property.
[4] In 1993, the respondent issued reassessments on her 1989, 1990 and 1991 income tax returns in which the respondent disallowed some business expenses and revised her income, substantially upwards.
[5] The applicant's returns in respect of her 1992 and 1993 taxation years were also reassessed, in late 1995, on essentially the same basis.
[6] Appeals in respect of the reassessments for the applicant's 1989 to 1991 and 1992 and 1993 taxation years were eventually settled.
[7] Once again, the applicant's returns for her 1994 and 1995 taxation years were reassessed. Objections with respect to those reassessments were eventually withdrawn.
[8] Despite regular payments made by the applicant to reduce her tax debt owing by reason of the reassessments, accumulated interest on the tax debt, as well as penalties and, in particular, penalties for gross negligence relating to her taxation years from 1992 to 1995, by September of 1999, her arrears totalled in excess of $154,000.00.
[9] By letter dated the 18th August, 1999, the applicant applied under the previously quoted "fairness provision" of the Income Tax Act for waiver of all interest and penalties "... accumulated in reference to my undisputed income tax outstanding arrears in the amount of $97,242 for the taxation years 1989, 1990 & 1991." [2]
[10] In her affidavit filed in respect of this matter, the applicant attested[3]:
During several discussion [sic] with Ms. Wilson [of the Canada Customs and Revenue Agency] in June 1999 and provided [sic] my financial information to her. Ms. Wilson agreed to suspend the monthly payment temporary [sic] and allowed me to submit the request to the Fairness Committee for relief interest and penalties of the 1989, 1990 & 1991 taxation years. According to her estimate I would get the response from the Committee within two to three months time ...
Material filed on behalf of the respondent indicated that there was no record of any agreement on the part of the respondent to suspend monthly payments or of any undertaking being given to the applicant regarding the time that would be required to respond to her waiver request. In any event, following August, 1999, no further payments were made by the applicant in an effort to reduce her tax debt which, as noted above, was at least in part acknowledged.
[11] A response to the applicant's request for relief was not forthcoming within the time that the applicant attested was indicated to her by Ms. Wilson. In fact, a "first level" response was not received until the 4th of October, 2000, and only then following a demand by the respondent for withdrawal of the objection to the reassessment of the applicant's income for 1994 and 1995, and compliance with that demand.
[12] The first level response read in part as follows[4]:
After deliberation and consultation with Agency officials, we regret to inform you that relief of penalties and arrears interest is not available to you for the following reasons:
1. No payments are being made towards the arrears even though you have been earning income throughout the years in question.
2. Financial hardship is not evident as you own rental property and have equity in the house which could drastically reduce your indebtedness.
3. We have no medical documentation regarding your mental state as it affected your ability to report your income and pay your taxes.
4. Your related GST account is non-compliant as there are outstanding returns for periods ending March 31, 2000 and June 30, 2000.
Although there is no formal avenue to appeal a decision made under the Fairness provisions of the Income Tax Act, new information not presented in the original request may be submitted to me in writing for further consideration...
[13] New information was submitted by the applicant including, in particular, medical documentation regarding the stress that the applicant was under, particularly in the period to which her request for relief related.
Decision Under Review
[14] Following the submission to the respondent by the applicant of the supplementary information above referred to, the decision under review, contained in a letter dated the 3rd of January, 2001, was provided to the applicant[5]. After extending to the applicant apologies for the delay in responding to her request for relief, the substance of the second-level decision was in the following terms:
As a result of my review of your file, I regret to inform you that relief is not available in this instance. I found that the decision of the Fairness committee was correct within the context of the Legislation for the following reasons:
· You have the ability to pay this debt based on the equity in your personal assets.
· It was determined that delays on the file were not attributable to Department error.
· The extraordinary circumstances you have cited did not prevent you from complying with the Income Tax Act.
In conclusion, the criteria for Fairness has [sic] not been met.
Issues
[15] In her Memorandum of Fact and Law, the applicant described the issues on this application for judicial review in the following terms:
1. Had the Minister taken too long in conducting the audit and appeal processing?
2. Was [sic] the officials in the Collections area and in the Fairness Committee of CCRA negligent in process [sic] my Fairness file?
3. Whether the discretion has been properly exercised by the Minister or his statutory delegate?
4. The Minister erred in applying the criteria set out in the Information Circular (IC 92-2) and failed to consider all the information submitted by me in making a determination under subsection 220.(3.1) of the Income Tax Act.
In addition to the forgoing issues, during the course of the hearing before me, the issue of standard of review arose.
[16] The "criteria" set out in Information Circular 92-2 referred to in the fourth issue quoted above are set out in an appendix to these reasons.
Analysis
1) Standard of Review
[17] The traditional guiding statement as to standard of review on applications such as this is found in Barron v. Minister of National Revenue[6] where Mr. Justice Pratte, on behalf of the Court, wrote at page 200:
Before saying why we think that these findings are wrong [those of the Trial Judge], it may be useful to recall that subsection 152(4.2) of 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.
While the subsection of the Income Tax Act that was there under consideration was not that relevant to this matter, the forgoing principles have generally been adopted on judicial review of "fairness" decisions such as the one here before the Court. The leading statement of the principles, I think it is clear, is found in the decision of the Supreme Court of Canada in Maple Lodge Farms Limited v. The Government of Canada [7].
[18] In Sharma v. The Minister of National Revenue [8] , my colleague, Mr. Justice Pelletier, noted at paragraph [21] that "... much has been written on the subject of standard of review since the decision in Maple Lodge Farms ...". The same might be said with respect to the Barron decision. After reviewing the guidance regarding the "pragmatic and functional analysis" with regard to standard of review found in Pushpanathan v. Canada (Minister of Citizenship and Immigration) [9] and in Baker v. Canada (Minister of Citizenship and Immigration) [10], Mr. Justice Pelletier analysed the factors at issue in a "fairness" decision under the Income Tax Act, albeit not the same fairness provision here at issue, and concluded at paragraph [24]:
All of the factors considered suggest a considerable degree of deference to the Minister's decision. In the circumstances, I conclude that the standard of review is patent unreasonableness.
As here, the Minister's "decision" to which Mr. Justice Pelletier was referring was in fact a decision made on behalf of the Minister of National Revenue by an official duly authorized to act on behalf of the Minister. I adopt the analysis and conclusion of Mr. Justice Pelletier as my own.
2) Substantive Issues
[19] I cannot conclude that the Minister took "too long" in conducting the audit and appeal processes in relation to the assessment of the applicant's income for her 1989, 1990 and 1991 taxation years. Indeed, the applicant was a party to the "appeal processes" in relation to those years and participated in a settlement arising out of those processes in a manner such that I find it impossible to conclude that the applicant could now rely on the time taken in those processes as a substantive basis for relief from the "fairness" decision that is here under review.
[20] While the process in Canada Customs and Revenue Agency leading to the first-level "fairness" decision in this matter was certainly open to a degree of criticism, that decision having been communicated to the applicant only after more than a year of consultation and consideration, only after concession by the applicant to a demand that objections relating to reassessments for taxation years not the subject of the "fairness" request and without apparent notification to the applicant that the decision-makers regarded her personal representations regarding the stress that she was under as being insufficient to support that allegation of stress, the same cannot be said of the decision here under review.
[21] Upon notification to the applicant of the first-level decision, she was given an opportunity to make further submissions. She availed herself of that opportunity. Affidavit evidence before me clearly indicates that the supplementary submissions were fully taken into account in the advice to the decision-maker at the second-level. The respondent acted with commendable alacrity at the second-level.
[22] Whatever my own response to the situation that the applicant found herself in during her taxation years 1989, 1990 and1991, against a standard of review of patent unreasonableness, I can come to no other conclusion but that, taking into account the process leading to the first level decision, the breadth of the discretion provided to the Minister or his or her delegate by subsection 220(3.1) of the Income Tax Act and the criteria set out in Information Circular IC 92-2, the decision under review was open to the respondent.
[23] Similarly, 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.
Conclusion
[24] On the basis of the forgoing brief analysis, this application for judicial review must be dismissed.
Costs
[25] While, on the face of the respondent's Memorandum of Fact and Law, the respondent requests that this application for judicial review be dismissed with costs, the issue of costs was not pressed before me by counsel for the respondent. There will be no Order as to costs.
______________________________
J.F.C.C
Ottawa, Ontario
October 15, 2001
Appendix
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SUBJECT: GUIDELINES FOR THE CANCELLATION AND WAIVER OF INTEREST AND PENALTIES
NO: 92-2 DATE: March 18, 1992
Introduction
1. This circular provides information and guidelines to taxpayers and employers regarding certain legislation contained in Bill C-18, enacted December 17, 1991. The legislation gives discretion to cancel or waive all or a portion of any interest or penalties payable, and it applies to
taxation years back to 1985.
2. This circular outlines the guidelines that Revenue Canada, Taxation will follow when applying the legislation. It also explains how taxpayers or employers can make a request to cancel or waive interest and penalties for years dating back to 1985, and describes the information required for such requests to be considered.
3. 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.
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OBJET : LIGNES DIRECTRICES CONCERNANT L'ANNULATION DES INTÉRÊTS ET DES PÉNALITÉS
No : 92-2 DATE : le 18 mars 1992
Introduction
1. La présente circulaire fournit des renseignements et des lignes directrices aux contribuables et aux employeurs en ce qui concerne certaines mesures législatives contenues dans le projet de loi C-18, promulgué le 17 décembre 1991. Ces mesures législatives donnent au Ministère le pouvoir discrétionnaire d'annuler la totalité ou une partie des intérêts et des pénalités payables, ou encore de renoncer à ces intérêts et à ces pénalités. Ces mesures s'appliquent à l'année d'imposition 1985 et aux années d'imposition suivantes.
2. La circulaire énonce les lignes directrices qui serviront à appliquer les nouvelles mesures législatives. Elle explique la manière don't les contribuables et les employeurs peuvent demander l'annulation des intérêts et des pénalités ou la renonciation à ceux-ci à l'égard de l'année d'imposition 1985 et des années d'imposition suivantes. Elle précise également les renseignements qu'ils devront fournir pour que leur demande puisse être traitée.
3. Ce qui est énoncé ici ne constitue que des lignes directrices. La présente circulaire n'est donc pas exhaustive et ne doit pas être interprétée comme limitant l'esprit ou l'intention des mesures législatives. Ces lignes directrices seront modifiées au besoin suivant l'expérience acquise.
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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.
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7. It may be appropriate, in circumstances where there is an inability to pay amounts owing, to consider waiving or cancelling 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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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 interest 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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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 des 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.
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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 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 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 convenues soient effectués à temps.
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10. Le Ministère tiendra compte des points suivants dans l'étude des demandes d'annulation des intérêts ou de 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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d rédier
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[1] R.S.C., 1985, (5TH Supp.), c. 1, as amended.
[2] Applicant's Record, Tab 4, Exhibit "E" to the Applicant's Affidavit sworn the 23rd of February, 2001.
[3] Applicant's Record, Tab 3, paragraph 3(c).
[4] Applicant's Record, Tab 4, Exhibit "K" to the Applicant's Affidavit sworn the 23rd of February, 2001.
[5] Applicant's Record, Tab 2.
[6] [1997] 2.C.T.C. 198 [F.C.A.].
[8] [2001] D.T.C. 5360 (F.C.T.D.)
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