OTTAWA, Ontario, October 27, 2006
PRESENT: The Honourable Mr. Justice Teitelbaum
BETWEEN:
and
REASONS FOR JUDGMENT AND JUDGMENT
[1] This is an application for judicial review of a decision of the Toronto North Tax Services Office communicated to the applicant by letter dated October 13, 2005, wherein the applicant was informed that the Fairness provisions in the Income Tax Act do not cover requests for Employment Insurance premium refunds, and in any case, that the applicant’s request was received beyond the 10 year limitation period governing Fairness reviews.
[2] The facts leading up to this application for judicial review may be summarized as follows. The applicant and his company, Peter McGaw & Associates Inc., had paid premiums under the Unemployment Insurance Act for the years 1987, 1988, 1989 and 1990.
[3] In 1991 it was determined that the applicant’s employment with the company was not insurable employment (because the applicant controlled more than 40% ownership of the Company). Accordingly, the above noted unemployment insurance premiums had been wrongly paid.
[4] The applicant applied to the Minister of National Revenue for a refund of the employer’s portion of the unemployment insurance premiums paid by his company. On January 7, 1992, the Minister approved refunds of the employer’s portion of the premiums paid during 1988, 1989 and 1990 but denied a refund of the premiums paid during 1987 on the basis that the three year limitation period for allowing such relief had expired.
[5] By letter dated December 29, 1992, the applicant requested that the Minister refund the employee portion of the unemployment insurance premiums that he had paid during the four years in question. By notices dated January 22, 1993, the Minister advised the applicant that his request for a refund was allowed for 1990 but denied for 1987, 1988 and 1989 on the basis that the request for those years had been made outside the three year limitation period for seeking refunds.
[6] Twelve years later, by letter dated June 27, 2005, the applicant renewed his request for a refund of the premiums, with interest, paid for 1988, 1989 and 1990 under the Fairness provision of the Income Tax Act. The applicant was advised on July 22, 2005, that his request was denied on the grounds that the Employment Insurance Act limits refunds to three years from the date on which a request is made.
[7] On September 16, 2005, the applicant sought a second level Fairness review, claiming damages for un-refunded insurance premiums, as well as for taxes and interest collected by the Canada Revenue Agency, with interest, for his 1988, 1989 and 1990 taxation years.
[8] Mr. Colin Cooke, Chief of Appeals, Toronto North Tax Services Office, advised the applicant by letter dated October 13, 2005, that his request was denied on the grounds that there are no Fairness provisions in regard to the refund of Employment Insurance premiums and the Employment Insurance Act limited refunds to three years. In any event, the applicant’s request had been made outside the10 year limitation period of the Fairness provisions.
[9] The applicant now seeks to have that decision set aside and asks the Court to direct the Minister to grant the relief sought by exercising his discretion under subsection 152(4.2) of the Income Tax Act.
[10] The following are the two issues to be decided.
1. Do the Fairness provisions of the Income Tax Act apply to the refund of employment insurance premiums; and,
2. Is the applicant outside the statutory prescribed limitation periods for making an application for a refund of the premiums in question.
[11] The applicant maintains that it was not until 1991 that it was discovered that he and his company had paid the premiums in error (as his employment was not insurable) and that his requests for a refund of both the employer and the employee portion of the premiums were made well within three years of that date. He takes objection to the fact that the Minister disallowed the request based on a three year limitation period which it applied commencing at a time before the error in paying the premiums was known to exist. He submits that this offends the principles of procedural fairness. He submits that the differing treatment given to the refunding of the employer’s portion of the premiums and the employee’s portion make it clear that the process is unfair and was not correctly applied.
[12] He further argues that it is contrary to common sense that the Fairness provisions of the Income Tax Act would not apply to employment insurance premiums paid in error, especially where reliance is placed on a three year limitation period in the Employment Insurance Act which is stipulated to commence without reference to the time the error becomes known.
[13] The respondent maintains that the Fairness provisions under the Income Tax Act do not permit the Minister to refund employment insurance premiums. The provisions allow the Minister to reassess a taxpayer outside the normal reassessment period on application by the taxpayer, but only in order to issue a refund or to reduce income tax payable by the taxpayer. In any event, the respondent submits that even if the Fairness provisions did apply the applicant’s request is outside the ten year limitation period contained therein.
[14] The respondent submits that the applicant’s recourse for recovering the wrongly paid premiums was governed by the Unemployment Insurance Act, which required the applicant to apply to the Minister in writing within three years after each given year.
[15] It is the respondent’s position that the Minister simply did not have the jurisdiction to grant the applicant’s request and accordingly, there is no basis for the assertion that he failed to observe the principles of natural justice and procedural fairness in exercising his discretion.
[16] The Fairness provision of the Income Tax Act, subsection 152(4.2) reads as follows:
|
(4.2) Notwithstanding subsections (4), (4.1) and (5), for the purpose of determining, at any time after the end of the normal reassessment period of a taxpayer who is an individual (other than a trust) or a testamentary trust in respect of a taxation year, the amount of any refund to which the taxpayer is entitled at that time for the year, or a reduction of an amount payable under this Part by the taxpayer for the year, the Minister may, if the taxpayer makes an application for that determination on or before the day that is ten calendar years after the end of that taxation year,
(a) reassess tax, interest or penalties payable under this part by the taxpayer in respect of that year; and
(b) 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 of deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer’s liability under this Part for the year.
(emphasis added)
|
(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 là 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 ‘un montant payable par le contribuable pour l’année en vertu de la présente partie, le ministre peut, si le contribuable demande pareille détermination au plus tard le jour qui suit de dix années civiles la fin de cette année d’imposition, à la fois :
a) établir de nouvelles cotisations concernant l’impôt, les intérêts et 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.
(C’est moi qui souligne) |
[17] Section 63(1) of the Unemployment Insurance Act (which is the legislation in effect during the relevant period here) provides as follows:
|
63. (1) Where a person has made an overpayment on account of employee’s premiums or has made a payment of employee’s premiums under this Act during a year when the person was not employed in insurable employment, the Minister shall refund to the person the amount of the overpayment or payment if application in writing is made to the Minister by the person not later than three years after the end of that year.
(emphasis added)
|
63. (1) Lorsqu’une personne a effectué un versement excédentaire au titre de ses cotisations ouvrières prévues par la présente loi pour une année ou a effectué un versement au titre de cotisations ouvrières prévues par la présente loi pour une année, alors qu’elle n’exerçait pas un emploi assurable, le ministre doit, si cette personne lui en fait la demande par écrit dans les trois ans qui suivent la fin de cette année, lui rembourser le trop-perçu.
(C’est moi qui souligne) |
[18] The wording of the legislation is unequivocal. The Fairness provisions of the Income Tax Act apply only to income tax and the Unemployment Insurance Act mandates that a request for a refund of premiums paid in a given year be made no later than three years after the end of that year. The respondent is correct therefore, that there is no discretion on the part of the Minister to make the refund of premiums which the applicant has requested. Although I am sympathetic to the applicant’s situation, given that he made the request for the refund soon after he became aware that the premiums were wrongly paid, the legislation is clear and there is nothing the Court can do to assist here.
[19] One would expect that a ruling as to the insurability of employment would be sought by an individual before they paid employment insurance premiums. Having reviewed the Records of the parties in this case, I cannot ascertain the events leading up to the insurability ruling or why it was not requested sooner. That course of action would have avoided the situation in which the applicant now finds himself.
[20] In addition, the applicant is claiming within the application for judicial review, “$5,000 for the stress, duress, and time lost to achieving fair treatment in this matter”.
[21] This claim for damages cannot be made within an application for judicial review as the Courts have determined that no damages may be awarded on judicial review; Al-Mhamad v. C.R.T.C. 2003 CarswellNat 186; 2003 FCA 45; leave to appeal to the SCC refused.
JUDGMENT
[22] On the basis of the facts of this case, the request for judicial review is denied with costs, if claimed by the respondent.
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-2042-05
STYLE OF CAUSE: Peter McGaw v. Canada Revenue Agency
PLACE OF HEARING: Collingwood, Ontario
DATE OF HEARING: October 24, 2006
REASONS FOR JUDGMENT: TEITELBAUM J.
APPEARANCES:
|
Peter McGaw (on his own behalf)
|
|
|
Brent Cuddy
|
SOLICITORS OF RECORD:
|
Peter McGaw Nottawa, Ontario
|
|
|
John H. Sims, Q.C. Deputy Attorney General of Canada
|