Date: 20100212
Docket: T-831-09
Citation: 2010 FC 145
Ottawa, Ontario, February 12,
2010
PRESENT: The Honourable Mr. Justice Shore
BETWEEN:
M.
W. (MAX) TOMASZEWSKI
Applicant
and
MINISTER OF FINANCE,
CANADA REVENUE AGENCY
Respondents
REASONS FOR JUDGMENT AND JUDGMENT
I. Overview
[1]
[33] … Since deciding what weight to accord to a particular fact is at
the heart of exercising discretion, it will normally be difficult to persuade a
court that an administrative decision-maker has acted unreasonably in this
regard.
(Telfer v. Canada (Revenue
Agency),
2009 FCA 23, 386 N.R. 212).
II. Introduction
[2]
This
is an application for judicial review pursuant to section 18.1 of the Federal
Courts Act, R.S.C, 1985, c. F-7 of a decision of the Canada Revenue
Agency (CRA) denying the Applicant’s second-level request for waiver of
interest for the taxation years of 1992 to 1995 based on financial reasons as
well as his first-level request for waiver of interest for those years based on
medical reasons.
III. Background
[3]
The
Applicant, Mr. M.W. (Max) Tomaszewski, has outstanding tax debts for the
taxation years of 1992, 1993, 1994 and 1995. In 2002, the Applicant requested
that the Minister of National Revenue exercise discretion pursuant to subsection
220(3.1) of the Income Tax Act, R.S.C. 1985, c. 1 (5th
Supp.) (ITA) to waive the interest that has accumulated on these debts. This
initial assessment was considered not properly conducted and the decision to
deny the Applicant’s request was made on August 29, 2007. The Applicant
sent a letter requesting a second review of his relief request on or about
December 17, 2008.
IV. Decision under Review
[4]
On
April 29, 2009 the Tax Services Office of the CRA in Victoria, British
Columbia
denied the Applicant’s request for tax relief.
[5]
The
CRA denied the Applicant’s request on the ground that he is not in a situation
of inability to pay his income tax due to financial hardship. In reaching this
decision, the CRA noted: the Applicant had provided signed financial statements
showing that his net worth has fluctuated between $5.5 million and $14.2
million between 1989 and 2007, statements from various financial institutions
showing income ranges from $100,000 to $250,000 a year for the last decade, a
divorce agreement reached in 2007 showing that the Applicant paid $1,250,000 to
his ex-wife, copies of bank statements from 2007 showing that the Applicant
transferred $100,000 to his bank account in Poland, the Applicant has paid for
his daughters to earn a combined total of five university degrees and
statements from the Applicant to the effect that he has been supporting his
mother and brother in Poland.
[6]
In
light of the evidence mentioned above, the CRA came to the conclusion that the
Applicant has failed to pay his tax debts because he has chosen to engage in
other discretionary spending.
[7]
The
Applicant also applied for relief from interest due to his medical condition of
heavy metal toxicity. On April 6, 2009, the CRA issued a first-level decision
rejecting the Applicant’s request on the ground that while heavy metal toxicity
may have psychological effects, it was considered that there was no apparent
correlation between any medical condition and his financial health during the
period in question or his mental abilities more generally (Exhibit “B” to the
Affidavit of Leslie Green).
V. Issues
[8]
1)
Was the Minister’s decision to deny the requested waiver of interest on
financial grounds unreasonable?
a. Should this
Court engage in a judicial review of the Minister’s first-level decision
refusing to waive interest for medical reasons?
VI. Positions of the Parties
[9]
At
the outset the Applicant spoke of the awards which he has won in regard to fourteen
properties that he renovated at personal cost to which heritage status had been
accorded, adding to Canada’s historical prestige. The Applicant then submits
the CRA erred by disregarding evidence showing that he has been under personal
and financial strain for the past decade. The Applicant submits that he has
provided the CRA with evidence of his cash flow difficulties, low credit
rating, his divorce in 2007, health issues related to heavy metal toxicity and
his support for his mother and brother which renders the CRA’s decision
unreasonable.
Financial
Decision
[10]
The
Respondents submit that, according to the guidelines contained in Information
Circular 07-1 (IC 07-1), the CRA generally examines the taxpayer’s history of
compliance with tax obligations, whether the taxpayer has knowingly allowed a
tax debt to accumulate, whether the taxpayer has exercised reasonable care
under the self-assessment system and whether the taxpayer acted quickly to
remedy any delay or omission attributable to the taxpayer.
[11]
The
Respondents submit the CRA came to a reasonable decision in determining the
Applicant’s circumstances do not warrant a waiver of interest, as the Applicant
did not demonstrate financial hardship amounting to an inability to provide the
basic necessities of life.
[12]
The
Respondents specify that the Applicant conducted his affairs negligently under
the self-assessment system and knowingly allowed his tax debt to accumulate. In
support of this argument, the Respondents note that the Applicant contributed
to his Registered Retirement Savings Plan (RRSP) every year between 1992 and
2000, except 1998 instead of reducing his tax debt.
[13]
The
Respondents argue that material before the CRA demonstrates that the Applicant
has had substantial net worth and earning capacity since 1992. The Respondents
point to the Applicant’s March 1, 2007 Net-Worth Statement showing assets of
over $14,000,000, in addition to statements of earnings between 1989 and 2000
which show annual incomes ranging between $100,000 and $200,000.
Medical
Decision
[14]
The
Respondents, nevertheless, contend that the Applicant is entitled to a second-level
review of his request for interest relief due to his medical condition and that
the matter should be referred to the Minister for reconsideration.
VII. Relevant Legislative Provisions
[15]
The
Minister of National Revenue has the discretion to waive or cancel interest
pursuant to subsection 220(3.1) of the ITA:
|
Waiver of
penalty or interest
(3.1) The Minister may, on or before
the day that is ten calendar years after the end of a taxation year of a
taxpayer (or in the case of a partnership, a fiscal period of the
partnership) or on application by the taxpayer or partnership on or before
that day, waive or cancel all or any portion of any penalty or interest
otherwise payable under this Act by the taxpayer or partnership in respect of
that taxation year or fiscal period, and notwithstanding subsections 152(4)
to (5), any assessment of the interest and penalties payable by the taxpayer
or partnership shall be made that is necessary to take into account the
cancellation of the penalty or interest.
|
Renonciation aux pénalités et aux intérêts
(3.1) Le ministre peut, au plus tard
le jour qui suit de dix années civiles la fin de l’année d’imposition d’un
contribuable ou de l’exercice d’une société de personnes ou sur demande du
contribuable ou de la société de personnes faite au plus tard ce jour-là,
renoncer à tout ou partie d’un montant de pénalité ou d’intérêts payable par
ailleurs par le contribuable ou la société de personnes en application de la
présente loi pour cette année d’imposition ou cet exercice, 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.
|
VIII. Standard of Review
[16]
The
Court notes that the waiver of interest under subsection 220(3.1) of the ITA is
discretionary. In the case of Telfer, above, the Federal Court of
Appeal held that the discretionary standard of reasonableness normally applies
to exercises of discretion, such as taxpayer relief requests (Telfer at
para. 24).
[17]
When
applying the standard of reasonableness, a court must show deference to the
reasoning of the agency under review and must be cognizant of the fact that
certain questions before administrative tribunals do not lend themselves to one
specific result. As the Supreme Court of Canada explained, reasonableness is
concerned mostly with “the existence of justification, transparency and
intelligibility within the decision-making process”, as well as “whether the
decision falls within a range of possible, acceptable outcomes which are
defensible in respect of the facts and law” (Dunsmuir v. New
Brunswick,
[2008] SCC 9, [2008] 1 S.C.R. 190 at para. 47).
IX. Analysis
Financial Decision
[18]
CRA
officers exercise their discretion to waive interest with reference to the
non-binding guidelines issued in IC 07-1 which state that relief may be granted
if payment of accumulated interest would cause a “prolonged inability to
provide basic necessities” such as food, medical attention, transportation, or
shelter (Respondents’ Record (RR) at p. 10).
[19]
The
IC 07-1 guidelines advise CRA officers to refer to such factors as the
taxpayer’s compliance history, whether the taxpayer knowingly allowed a tax
debt to accumulate and whether the taxpayer had acted quickly enough to remedy
any delay when determining whether waiver is appropriate (RR at p. 11).
[20]
In
this case, it is clear the Applicant has had a challenging history of
compliance in regard to his tax obligations and has knowingly allowed his tax
debt to accumulate. The evidence indicates that the Applicant has engaged in relatively
significant spending in recent years, including a $1,250,000 divorce payment to
his ex-wife. It is clear from the evidence that the Applicant has carried on
his business and personal life within his family context without paying the
substantial tax debt that he owes. It is the Court’s conclusion that the CRA
exercised its discretion reasonably in denying the Applicant’s request for
waiver. Although the Court duly notes that the Applicant has stated, with
examples, that he has done all he could to ward off bankruptcy by attempting to
continuously pay his creditors, even if, it be, in small amounts rather than to
declare bankruptcy.
Medical Decision
[21]
The
Court agrees with the Respondents that the Applicant’s request for judicial
review of the CRA’s first-level decision regarding the cancellation of interest
due to the Applicant’s medical condition is premature. The Applicant is of the
view that prior to treatment for his medical condition, certain financial
decisions which he made were hasty, and without proper reflection due to confusion
caused by his medical condition. If the Applicant believes the first-level
request was not made in a fair and reasonable manner, he ought to apply to the
CRA to have it reconsidered.
X. Conclusion
[22]
The
Court concludes that the CRA’s decision rejecting the Applicant’s request for relief
for waiver on the basis of financial hardship is within the realm of
reasonableness.
[23]
The
Court also agrees with the Respondents, in its conclusion, that the
matter of the Applicant’s application on medical grounds be referred to the CRA
for reconsideration and redetermination.
JUDGMENT
THIS COURT ORDERS that
1)
the
Application for judicial review with respect to the request for relief on the
basis of financial hardship be dismissed;
2)
the
Application for judicial review with respect to the request for relief on the
basis of health reasons be referred to the Minister for reconsideration and
redetermination;
3)
no
order as to costs be made as the matter is still to be referred to the CRA for
reconsideration and redetermination on medical grounds.
“Michel M.J. Shore”
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