Date: 20030404
Docket: T-2190-01
Neutral citation: 2003 FCT 402
BETWEEN:
SAM MANDEL,
Plaintiff,
- and -
ATTORNEY GENERAL OF CANADA,
Defendant.
(Delivered orally from the bench at Toronto, Ontario on March 19, 2003.)
[1] The applicant, Mr. Mandel, seeks judicial review of the decision of the Minister of National Revenue (the Minister) as represented by the manager, Revenue Collections Division of the Canada Customs and Revenue Agency (CCRA), North York, Ontario, dated December 3rd, 2001, not to exercise the discretion conferred on the Minister by subsection 220(3.1) of the Income Tax Act, to cancel and waive the interest accrued on the applicant's tax debt in respect of the 1995 to 1999 taxation years.
[2] Subsection 220(3.1) of the Act, commonly referred to as one of the fairness provisions, provides as follows:
". . . 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(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 . . ."
[3] The applicant is indebted to the respondent in the amount of $38,837.32 as of December 3rd, 2001 with respect to the 1995 through 1999 taxation years. The liability arises primarily from a re-assessment in 1996, denying a business investment loss for the 1995 taxation year. In 1994 Mr. Mandel co-signed a loan in the amount of $60,000 at the Toronto-Dominion Bank to assist his son in setting up a physiotherapy clinic in Toronto.
[4] The business did not succeed and went bankrupt in mid-1995 whereupon the bank called the loan and demanded full payment from Mr. Mandel. He cashed in his RRSP pension and borrowed $16,000 from the Royal Bank of Canada to pay out the loan at Toronto-Dominion Bank.
[5] His attempt to characterize the payment as a business investment loss for the 1995 taxation year was unsuccessful at all levels. Mr. Mandel first requested a waiver of interest under the fairness provision by correspondence dated May 19th, 2000. On March 26th, 2001 a letter was sent to the applicant on behalf of the Fairness Committee, allowing interest relief between May 23rd, 2000, the date that CCRA received the fairness request, and February 28th, 2001, on the basis of the delay in reviewing the applicant's request for that period.
[6] On June 13th, 2001, Mr. Mandel requested an administrative review of CCRA's decision dated March 26th, 2001 on the basis of financial hardship. The initial decision of March 26th was upheld, and a letter dated July 10th, 2001 was sent to the applicant, denying his request for further interest relief.
[7] The applicant sought judicial review of the CCRA decision by application dated August 9th, 2001. The CCRA consented to that application on the basis that procedural errors may have been made in the review process and agreed to send the matter back for reconsideration.
[8] By order of the Federal Court Trial Division, dated November 5th, 2001, the application for judicial review was allowed, and the matter was referred back for reconsideration.
[9] Fairness review officers, other than those involved in the first request, were then assigned to review the applicant's request. Ultimately, it was determined that he did not suffer from financial hardship. The applicant was informed by correspondence from the manager of the Collections Division dated December 3rd, 2001, that no further interest relief would be granted.
[10] The applicant applied for judicial review of this decision by notice of application dated December 14th, 2001, and requested that the decision dated December 3rd, 2001, be reversed and that CCRA be directed to waive the interest and penalties charged.
[11] In essence, the applicant alleges two grounds of review. The first is that he entered into an agreement with CCRA in mid-1980 that it would not collect on his debt and interest would not accrue.
[12] The second ground is that due to ill health, the applicant is not capable of earning income and therefore the ministerial delegate erred in not waiving interest on the basis of financial hardship.
[13] For the reasons that follow, I have determined that the application must be dismissed. Regarding the alleged agreement, the applicant's argument, properly characterized, is that the Minister is estopped from adding interest to the liability as a result of the agreement reached between Mr. Mandel and a CCRA collection contact officer.
[14] The applicant cannot succeed on this ground for two reasons. First, estoppel does not lie against the Crown so as to eliminate a statutory liability regarding tax. The rationale underlying this proposition is that the Minister cannot contract out of the Act.
[15] This principle is discussed at length in Taylor v. Her Majesty the Queen, [1995] 95 D.T.C. 591 (T.C.C.), aff'd [1997] D.T.C. (F.C.A.).
[16] Second, the subject matter of this application relates to the waiver of interest. There is no evidence that the CCRA collection contact officer agreed to any waiver of interest.
[17] Regarding the argument that Mr. Mandel is in ill health and not capable of earning an income thus the ministerial delegate erred in not finding there existed financial hardship, I can appreciate the reasoning behind Mr. Mandel's representations. The hurdle that confronts him in this respect is that the standard for judicial review is patent unreasonableness: Sharma v. Canada (Minister of National Revenue) (2001), 206 F.T.R. 40 and Cheng v. Canada (Minister of National Revenue) (2001), 213 F.T.R. 85.
[18] Here, the ministerial delegate considered the fact the applicant's annual gross income from 1996 onward was in excess of $30,000, that he was able to meet his monthly expenses without being in a deficit position, that he had nominal debt and substantial equity, and on the basis of those considerations, determined that the applicant had not established financial hardship.
[19] I am unable to conclude that his conclusion was not reasonably open to him, nor am I able to conclude that the decision was not exercised in good faith, that it was made in consideration of extraneous factors, or that there was any breach of procedural fairness.
[20] While I am sympathetic to the applicant who has since his teenage years paid his taxes in a timely manner until such time as he encountered this specific problem, in view of the standard of review, it is not open to me to interfere with the exercise of the ministerial delegate's discretion merely because I might have been inclined to exercise it differently had I been charged with the responsibility.
[21] Therefore, there is no basis upon which to warrant the Court's intervention, and the application for judicial review will be dismissed. An order will so provide. In the circumstances, there will be no costs.
[Carolyn A. Layden-Stevenson]
Judge
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-2190-01
STYLE OF CAUSE: SAM MANDEL
-and-
THE ATTORNEY GENERAL OF CANADA
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: Wednesday, March 19, 2003
REASONS FOR [ORDER or JUDGMENT] : Layden-Stevenson, J.
DATED: Wednesday, March 19, 2003
APPEARANCES:
Sam Mandel
FOR APPLICANT
Surksha Nayar
FOR RESPONDENT
SOLICITORS OF RECORD:
Sam Mandel
Richmond Hill, Ontario
FOR APPLICANT
Morris Rosenberg
Deputy Attorney General of Canada
FOR RESPONDENT