Date: 20060214
Docket: T-1584-04
Citation: 2006 FC 154
BETWEEN:
JULIE DEBORAH SURTHERLAND
Applicant
- and -
CANADA CUSTOMS & REVENUE AGENCY
Respondent
REASONS FOR ORDER
PINARD J.:
[1] This is an application for judicial review of the July 30, 2004 second level Fairness decision, made by Roger A. Ouellette, on behalf of the Minister of National Revenue, denying the applicant relief from interest and penalties with respect to the 1994 to 2001 taxation years.
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[2] Julie Deborah Sutherland (the "applicant") had been assessed by Canada Revenue Agency ("CRA") interest and penalties related to her income tax returns for the years 1994 to 2001 arising from her late payment of income taxes on her disability pension from 1994 to 2000, as well as her late filing of returns for 1999 and 2000.
[3] In April 2002, the applicant paid her outstanding debt to the CRA.
[4] In 2003, the applicant applied to the Minister pursuant to subsection 220(3.1) of the Income Tax Act, R.S.C. 1985, c. 1 (5th supp.) (the "Act") for waiver of interest and penalties ("Fairness") with respect to the 1994 to 2001 taxation years. The basis of the applicant's Fairness request was that she suffers from bipolar affective disorder as well as a number of other health problems.
[5] On October 27, 2003, the Minister notified the applicant of his decision to waive only the applicant's late filing penalty for the 2000 taxation year because the applicant was in the hospital at the time that her 2000 tax return was due. The Minister found no other extraordinary circumstances nor sufficient financial hardship to warrant the waiver of interest or penalties.
[6] On January 28, 2004, the Minister received a letter from the applicant that the Minister treated as a request for a second level of Fairness review. In that letter, the applicant emphasized the effects of her bipolar affective disorder on her ability to manage her tax affairs.
[7] The Fairness committee found that the applicant knew that no tax was being deducted from her pension income for at least six years before she took steps to rectify the situation by arranging for source deductions in 2000. The committee also recognized that the applicant had severe medical problems but it was of the opinion that the applicant should have been able to take action to prevent the accrual of interest before six years had elapsed.
[8] The Fairness committee concluded that the applicant should be denied relief from interest and penalties. The committee prepared a memorandum with its findings and recommendation to Roger Ouellette, the Assistant Director of the Revenue Collections Division, who reviewed the material and approved the committee's recommendation.
[9] On July 30, 2004, the Minister's second level Fairness decision to deny relief was sent to the applicant. In this letter, Mr. Ouellette noted that the applicant had been reminded annually since 1994 to arrange for source deductions from her disability pension, yet did not do so until September 2000. He also reiterated the Fairness committee's point that the applicant's disability should not have prevented her from making those arrangements.
[10] Like counsel for the respondent, it is my understanding that this last decision does not affect the previous relief granted in the first level Fairness decision, waiving the late filing penalty for the year 2000, in the amount of $712, as the applicant was in the hospital at the time the return was due.
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[11] The relevant provisions of the Act are as follows:
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.
[. . .]
(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.
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.
[. . .]
(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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[12] The applicant submits that the Fairness committee erred in finding her ineligible for waiver of interest and penalties, as there was adequate information before the committee to find her eligible for cancellation and waiver of interest and penalties for the years 1994 through 2001.
[13] The applicant submits that she suffers from an acute form of bipolar affective disorder. Her children also suffer from psychiatric disorder, while her mentally ill brother had recently committed suicide at the time of her first level request. This information was before the Fairness committee.
[14] Additionally, the applicant submits that the Fairness committee made the following errors:
- adjudicated her first level request on financial hardship grounds rather than on medical grounds;
- made an incorrect assumption when it concluded that she and her spouse purchased a home from monies saved during their cohabitation, when her RRSPs were instead accumulated in the year 2000 only and were quickly eradicated due to the loss of judgment attributable to her mental illness; and
- ignored section 12 of the Interpretation Act, R.S.C. 1985, c. I-21, which states that "[e]very enactment shall be construed as being remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects."
[15] Subsection 220(3.1) of the Act allows the Minister to waive interest and penalties otherwise payable in respect of 1985 and subsequent taxation years. Subsection 220(2.01) of the Act permits the Minister to delegate the discretion granted under subsection 220(3.1).
[16] The Minister's discretion is broad in the context of Fairness decisions. The Act and its regulations are silent as to what criteria are to be used by the Minister in exercising his discretion. In these circumstances, the Minister may use any criteria he chooses, as long as he abides by a general duty to act fairly in accordance with the rules of procedural fairness as developed in administrative law (The Estate of the Late Henry H. Floyd v. The Minister of National Revenue (1993), 93 D.T.C. 5499 at 5501 (F.C.T.D.) and Kaiser v. The Minister of National Revenue (1995), 95 D.T.C. 5187 at 5188 (F.C.T.D.)).
[17] To facilitate the exercise of his discretion, the Minister has created guidelines in the form of Information Circular 92-2. However, although the Minister can formulate these general policy guidelines, he cannot fetter his discretion by treating the guidelines as binding and excluding all other relevant reasons for exercising his discretion (Maple Lodge Farms Limited v. Government of Canada, [1982] 2 S.C.R. 2 at pages 6 and 7).
[18] In Lanno v. Canada Customs and Revenue Agency, 2005 D.T.C. 5245, the Federal Court of Appeal determined that the standard of review applicable to discretionary Fairness decisions made by the Minister is reasonableness simpliciter.
[19] The grounds upon which the decision of the Minister may be reviewed are set out in section 18.1 of the Federal Courts Act, R.S.C. 1985, c. F-7, which reads:
18.1 (1) An application for judicial review may be made by the Attorney General of Canada or by anyone directly affected by the matter in respect of which relief is sought.
(2) An application for judicial review in respect of a decision or an order of a federal board, commission or other tribunal shall be made within 30 days after the time the decision or order was first communicated by the federal board, commission or other tribunal to the office of the Deputy Attorney General of Canada or to the party directly affected by it, or within any further time that a
18.1 (1) Une demande de contrôle judiciaire peut être présentée par le procureur général du Canada ou par quiconque est directement touché par l'objet de la demande.
(2) Les demandes de contrôle judiciaire sont à présenter dans les trente jours qui suivent la première communication, par l'office fédéral, de sa décision ou de son ordonnance au bureau du sous-procureur général du Canada ou à la partie concernée, ou dans le délai supplémentaire qu'un juge de la Cour fédérale peut,
judge of the Federal Court may fix or allow before or after the end of those 30 days.
(3) On an application for judicial review, the Federal Court may
(a) 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; or
(b) declare invalid or unlawful, or quash, set aside or set aside and refer back for determination in accordance with such directions as it considers to be appropriate, prohibit or restrain, a decision, order, act or proceeding of a federal board, commission or other tribunal.
(4) The Federal Court may grant relief under subsection (3) if it is satisfied that the federal board, commission or other tribunal
(a) acted without jurisdiction, acted beyond its jurisdiction or refused to exercise its jurisdiction;
(b) failed to observe a principle of natural justice, procedural fairness or other procedure that it was required by law to observe;
(c) erred in law in making a decision or an order, whether or not the error appears on the face of the record;
(d) based its decision or order on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it;
(e) acted, or failed to act, by reason of fraud or perjured evidence; or
(f) acted in any other way that was contrary to law.
(5) If the sole ground for relief established on an application for judicial review is a defect in form or a technical irregularity, the Federal Court may
(a) refuse the relief if it finds that no substantial wrong or miscarriage of justice has occurred; and
(b) in the case of a defect in form or a technical irregularity in a decision or an order, make an order validating the decision or order, to have effect from any time and on any terms that it considers appropriate.
avant ou après l'expiration de ces trente jours, fixer ou accorder.
(3) Sur présentation d'une demande de contrôle judiciaire, la Cour fédérale peut :
a) ordonner à l'office fédéral en cause d'accomplir tout acte qu'il a illégalement omis ou refusé d'accomplir ou dont il a retardé l'exécution de manière déraisonnable;
b) déclarer nul ou illégal, ou annuler, ou infirmer et renvoyer pour jugement conformément aux instructions qu'elle estime appropriées, ou prohiber ou encore restreindre toute décision, ordonnance, procédure ou tout autre acte de l'office fédéral.
(4) Les mesures prévues au paragraphe (3) sont prises si la Cour fédérale est convaincue que l'office fédéral, selon le cas :
a) a agi sans compétence, outrepassé celle-ci ou refusé de l'exercer;
b) n'a pas observé un principe de justice naturelle ou d'équité procédurale ou toute autre procédure qu'il était légalement tenu de respecter;
c) a rendu une décision ou une ordonnance entachée d'une erreur de droit, que celle-ci soit manifeste ou non au vu du dossier;
d) a rendu une décision ou une ordonnance fondée sur une conclusion de fait erronée, tirée de façon abusive ou arbitraire ou sans tenir compte des éléments dont il dispose;
e) a agi ou omis d'agir en raison d'une fraude ou de faux témoignages;
f) a agi de toute autre façon contraire à la loi.
(5) La Cour fédérale peut rejeter toute demande de contrôle judiciaire fondée uniquement sur un vice de forme si elle estime qu'en l'occurrence le vice n'entraîne aucun dommage important ni déni de justice et, le cas échéant, valider la décision ou l'ordonnance entachée du vice et donner effet à celle-ci selon les modalités de temps et autres qu'elle estime indiquées.
[20] This Court is not called upon to exercise the discretion conferred on the Minister or to substitute its own decision for that of the Minister. This Court should not conclude that the Minister is wrong merely because the Court would have exercised the discretion differently. The review is instead limited to the manner in which the Minister exercised his discretion (Maple Lodge Farms Limited, supra).
[21] It is my opinion that, in the present case, it was reasonable for the Minister to conclude that despite the applicant's documented medical problems, she had allowed an extraordinary period of time to elapse before taking steps to rectify her tax situation and that she should therefore not qualify for Fairness relief.
[22] For the period under review, the applicant was able to file her returns on time in all years except 1999 and 2000, which were each filed approximately six months late. It was only the taxes associated with those returns which were not paid until 2002.
[23] Additionally, the applicant had been reminded annually since 1994 that she should arrange for source deductions to be taken from her disability pension. It is not unreasonable for the Minister to conclude that the fact that she did not take action until September 2000 was a delay which cannot reasonably be explained by the applicant's circumstances.
[24] Before the commencement of the annual reminders from the Minister to arrange for source deductions, the applicant was also lectured about fiscal responsibility by the Master in chambers at the discharge hearing in her second bankruptcy in 1993. In my opinion, it was reasonable for the Minister to conclude that Fairness relief is not appropriate in these circumstances.
[25] In response to the applicant's submission that the Minister erred in referencing her income, RRSPs and ability to purchase a home, I disagree. On my reading of the paragraph, contrary to the applicant's submission, there is no assumption made that the applicant's home was purchased with RRSP monies. These facts, whether right or wrong, were put forth as evidence of the applicant's financial position. Regardless, the Minister's July 30, 2004 decision letter clearly shows that the applicant's inordinate delay was the reason for the Minister's refusal to grant Fairness relief at the second level.
[26] Regarding the applicant's submission that the first level request was adjudicated on the basis of financial hardship rather than on medical grounds, I do not think this issue is determinative, as the second level Fairness information (the same information as was submitted with the first level request) clearly referenced her medical issues, and therefore cured any deficiency (had there been any) in the process to that point-in-time.
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[27] I am unable to conclude, based on the facts before me, that the Minister improperly exercised his discretion in the present case. The applicant was afforded the opportunity to make representations as to why the interest should be waived and the Minister had before him all the relevant facts necessary on which to base a reasoned and objective decision. Absent bad faith on the part of the Minister, a breach of the principles of natural justice or consideration of extraneous or irrelevant factors, there is nothing to warrant the Court's interference with the exercise of his discretion. I am not satisfied that any of these exist in the present case.
[28] As it is my opinion that the Minister discharged his duty to act fairly in exercising his discretion under subsection 220(3.1) of the Act to deny Fairness relief to the applicant and as I find that the decision is reasonable, this application for judicial review is dismissed, without costs.
JUDGE
OTTAWA, ONTARIO
February 14, 2006
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1584-04
STYLE OF CAUSE: JULIE DEBORAH SURTHERLAND v. CANADA CUSTOMS & REVENUE AGENCY
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: January 19, 2006
REASONS FOR ORDER BY: Pinard J.
DATED: February 14, 2006
APPEARANCES:
Ms. Julie Deborah Sutherland THE APPLICANT ON HER OWN BEHALF
Ms. Susan Wong FOR THE RESPONDENT
SOLICITORS OF RECORD:
Julie Deborah Sutherland THE APPLICANT ON HER OWN BEHALF
White Rock, British Columbia
John H. Sims, Q.C. FOR THE RESPONDENT
Deputy Attorney General of Canada