Date: 20040428
Docket: T-586-03
Citation: 2004 FC 625
Montréal, Quebec, April 28, 2004
Present: The Honourable Madam Justice Danièle Tremblay-Lamer
BETWEEN:
ROBERT R. HINDLE
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
REASONS FOR ORDER AND ORDER
[1] This is an application for judicial review of a March 12, 2003 decision of the Minister of National Revenue denying the applicant's request under the Fairness Package Provisions of the Income Tax Act, R.S.C. 1985, c.1 (5th supp.) ( « the ITA » ), to reopen the statute-barred 1990 and 1991 taxation years in order to claim business expenses incurred during those years.
[2] The applicant was a partner in a law firm from February 1, 1988 to September 30, 1989. Upon the applicant's withdrawal from the firm, the partnership and the firm were dissolved.
[3] Business expenses incurred for the operation of the partnership were paid by the applicant during 1990 and 1991. These expenses were disallowed as deductible business expenses. Two of the applicant's former partners, Mr. Brian Cornish and Mr. Normand Quesnel, brought the matter to litigation.
[4] The applicant was asked by the respondent to sign a waiver of the statutory time limit for assessment and appeal in these matters. He was told that upon final resolution of the litigation that arose between his former partners and the respondent, the results would be equally applied to the applicant and another former partner.
[5] On October 14, 1997, the respondent made adjustments to the 1991 and 1992 taxation years in accordance with the expenses incurred by the applicant.
[6] The respondent received information relating to the applicant's expenses in June of 1998. The delay between the October 1997 decision and June 1998 is due to the determination between the partners of the dissolved firm and the respondent regarding what representations had been made, which ones had been accepted or rejected and the impact on the applicant's losses and the years to which they should be applied.
[7] On September 9, 1998, the applicant filed a Notice of Objection relating to the June 22, 1998 assessment for the 1997 taxation year. On September 21, 1998, the respondent issued a reassessment of the 1997 taxation year. On December 21, 1998, the respondent sent the applicant a letter informing him that his Notice of Objection was nullified by said reassessment but that he could file a new Notice of Objection relating to the reassessment.
[8] On May 30, 2000, the objection was denied by the respondent and the reassessment for the 1997 taxation year was confirmed.
[9] On October 25, 2000, an informal appeal was made to the Tax Court of Canada and it confirmed the respondent's conclusion.
[10] A formal appeal to the Tax Court of Canada was later filed but was then withdrawn on July 20, 2001.
[11] On October 11, 2001, the applicant sent the respondent a letter requesting that the expenses be allowed under the Fairness Provisions of the ITA.
[12] On July 26, 2002, the respondent denied the applicant's request concluding that this was not a case in which it would be appropriate to apply the Fairness Provisions.
[13] The applicant requested a review of this decision on August 14, 2002.
[14] On March 12, 2003, the respondent denied the applicant's request for a review.
[15] The applicant seeks a judicial review of this decision.
ANALYSIS
[16] Pursuant to subsection 152(4.2) of the ITA, the Minister of National Revenue has the discretion to reopen the 1990 and 1991 statute-barred taxation years in order to allow the applicant's claim to some business expenses that he allegedly incurred in the 1990 and 1991 taxation years.
[17] Subsection 152(4.2) reads as follows:
| 152(4.2) Notwithstanding subsections 152(4), 152(4.1) and 152(5), for the purpose of determining, at any time after the expiration of the normal reassessment period for a taxpayer who is an individual (other than a trust) or a testamentary trust in respect of a taxation year,
(a) the amount of any refund to which the taxpayer is entitled at that time for that year, or
(b) a reduction of an amount payable under this Part by the taxpayer for that year,
the Minister may, if application therefor has been made by the taxpayer, (c) reassess tax, interest or penalties payable under this Part by the taxpayer in respect of that year, and
(d) redetermine the amount, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer's tax payable under this Part for the year or deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer's liability under this Part for the year. |
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152(4.2) Malgré les paragraphes (4), (4.1) et (5), pour déterminer à un moment donné après la fin de la période normale de nouvelle cotisation applicable à un contribuable -- particulier, autre qu'une fiducie, ou fiducie testamentaire -- pour une année d'imposition le remboursement auquel le contribuable a droit à ce moment pour l'année ou la réduction d'un montant payable par le contribuable pour l'année en vertu de la présente partie, le ministre peut, sur demande du contribuable :
a) établir de nouvelles cotisations concernant l'impôt, les intérêts ou les pénalités payables par le contribuable pour l'année en vertu de la présente partie; b) déterminer de nouveau l'impôt qui est réputé, par les paragraphes 120(2) ou (2.2), 122.5(3), 122.51(2), 127.1(1), 127.41(3) ou 210.2(3) ou (4), avoir été payé au titre de l'impôt payable par le contribuable en vertu de la présente partie pour l'année ou qui est réputé, par le paragraphe 122.61(1), être un paiement en trop au titre des sommes dont le contribuable est redevable en vertu de la présente partie pour l'année. |
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[18] The jurisprudence has established that the appropriate standard of review of discretionary decisions such as the one at bar is that of the patently unreasonable decision (Barron v. Canada (Minister of National Revenue) 97 D.T.C. 5121 (F.C.T.D.), Chrétien v. Canada, 2002 D.T.C. 7047 (F.C.T.D.)).
[19] This is a very high threshold which allows the Court to intervene only if the decision was made in bad faith, if its author ignored relevant facts or took into account irrelevant ones, or, if the decision is contrary to the law.
[20] In his decision, Mr. Laporte explains that the alleged expenses requested by the applicant were incurred during the 1991 and 1992 taxation years and not in 1990 and 1991. Since no taxes were owed for the 1991 taxation year, the Fairness Provisions are not applicable. However, Mr. Laporte did not take into account that the additional expenses for 1990 and 1991 would have had an impact on future years i.e. 1997 for which the applicant duly filed a Notice of Objection. Thus, on that basis alone, I am of the view that he ignored relevant facts and improperly exercised his discretion.
[21] For these reasons, the application for judicial review is granted. The decision of the CCRA is set aside and the matter is referred back to the CCRA for redetermination by a person authorized by the ITA to perform the duties of the Minister with respect to subsection 152(4.2) of the ITA.
ORDER
THIS COURT ORDERS that the application for judicial review is granted. The decision of the CCRA is set aside and the matter is referred back to the CCRA for redetermination by a person authorized by the ITA to perform the duties of the Minister with respect to subsection 152(4.2) of the ITA.
"Danièle Tremblay-Lamer"
J.F.C.
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-586-03
STYLE OF CAUSE: ROBERT R. HINDLE
Applicant
and
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: April 26, 2004
THE HONOURABLE MADAM JUSTICE DANIÈLE TREMBLAY-LAMER
DATED: April 28, 2004
APPEARANCES:
Me Andrew Dragan FOR APPLICANT
Me Louis Sébastien FOR RESPONDENT
SOLICITORS OF RECORD:
Hindle & Assoc. FOR APPLICANT
Montréal, Quebec
Morris Rosenberg FOR RESPONDENT
Deputy Attorney General of Canada
Montréal, Quebec