BETWEEN:
and
THE ATTORNEY GENERAL OF CANADA
REASONS FOR ORDER
[1] These reasons follow the hearing of an application for judicial review of a decision of an officer (the “Officer”) of the Canada Customs and Revenue Agency, now the Canada Revenue Agency, on behalf of the Minister of National Revenue, denying in large part the second-level request for relief from penalties and interest accumulated by reason of the late filing of the Applicant’s income tax returns for the filing period 1997 to 2003. The decision letter is dated the 18th of January, 2006.
[2] In the Memorandum of Fact and Law filed by the Applicant, he seeks the following relief:
a) An order in the nature of certiori quashing, the decision of the Fairness Committee, the Collections Department of the CRA, dated January 18, 2006.
b) An order that this be dealt with expeditiously.
c) An order that the time frame reviewed by the CRA be the same as the time frame requested and referred to in the Fairness Request.
d) That the matter be dealt with by the Minister as the Collection’s Department which serves at the Minister’s pleasure has not demonstrated just prudence.
e) That a telephone line, a Web site, and a designated person with knowledge be available to the public to answer calls of the public concerning the Fairness Committee and what is before it; no such facility now exists.
f) An order requiring the CRA to report back to the Court its findings, judgements, explanations and decisions on this case and all other cases.
g) That the applicant be granted his costs in these proceedings.
h) That the Court, in accordance with the Federal Court Act, Section 18, paragraph 3:
“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 so.”
Specifically under Bill C-18, Interpretation Bulletin IC-92-2
Give relief to the applicant for penalties and interest, the balance outstanding on his account, approximately $36000 that were the result of circumstances beyond his control.
[3] At the close of the hearing, I advised the Applicant, who represented himself, that much of the relief he was seeking was beyond the scope of this application for judicial review and beyond the authority of this Court to grant, in any event. I also advised the Applicant and counsel for the Respondent that the application for judicial review would be dismissed without costs. I outlined by reasons. I advised that these written reasons would follow.
BACKGROUND
[4] By “Petition” dated the 27th of April, 2005, the Applicant sought relief from interest and penalties primarily accumulated by reason of late filing of returns. Material attached to the Applicant’s “Petition” in fact dealt with his tax history for the years from 1993 to 2004 and highlighted critical events or “circumstances beyond his control” that he alleged impacted his ability to file returns on a timely basis throughout that period. He noted that he lost his home to a fire in 1994 and that extensive records relating to his self-employment income and related expenses were in some cases destroyed and in other cases badly damaged. In 1995, a children’s clothing store that he operated was closed following what he described as an “illegal” seizure of all of the inventory and records that were in the store. National Revenue audited his situation for the 1995 and 1996 taxation years. He alleged that files containing critical documents were lost by National Revenue “…for over one year.” The Applicant noted that: “This whole matter would not be resolved until 2002… .” The Applicant, who was self-employed in the “insurance industry” noted that the industry was in turmoil in the time preceding the attack on the World Trade Centre on the 11th of September, 2001, and that that attack further seriously disrupted the “insurance industry”. He urged that: “…these market conditions had a devastating effect on my income. I am paid a commission on what I sell. I am self-employed.” Finally, the Applicant noted that he was seriously ill for a six-month period in 2004.
[5] The Applicant’s first level of fairness request for relief was denied by letter dated the 8th of July, 2005.
[6] By letter dated the 8th of August, 2005, the Applicant requested relief at the second level. In support of his second level request, he submitted essentially identical information to that provided in support of his first level request. A Fairness Report was prepared within the Canada Customs and Revenue Agency and concluded with the following paragraph:
I recommend approving client’s request for interest relief from April 11, 2004 to January 31, 2005 for all the years in question. This is the timeframe in which the client was incapacitated due to illness as per physicians letter. He has made no arrangements with collections and the small amounts that are being credited to his account from garnishees are negligible and he has offered no reason as to why the returns for 1997, 1998, and 1999 were filed late, so no further interest relief or penalty relief will be granted.
[emphasis added]
This recommendation was essentially adopted in the decision under review.
THE LEGISLATIVE SCHEME
[7] The “fairness program” under the Income Tax Act[1] (the “Act”) is founded on subsection 220(3.1) of the Act which reads as follows:
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220. (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.
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220. (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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[8] The discretion of the Minister under subsection 220(3.1) of the Act may be delegated by virtue of subsection 220(2.01). It was not in dispute in this matter that the Officer who made the decision denying the Applicant’s request was appropriately designated to do so on behalf of the Minister.
[9] The broad discretionary authority vested in the Minister under subsection 220(3.1) of the Act is supplemented by Information Circular IC-92-2 dated the 18th of March, 1992, and entitled “Guidelines for the Cancellation and Waiver of Interest and Penalties”.
[10] Sections 5, 6 and 7 of the Guidelines read as follows:
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… 5. Penalties and interest may be waived or cancelled in whole or in part where they result in circumstances beyond a taxpayer’s or employer’s control. For example, one of the following extraordinary circumstances may have prevented a taxpayer, a taxpayer’s agent, the executor of an estate, or an employer from making a payment when due, or otherwise complying with the Income Tax Act:
(a) natural or human-made disasters such as, flood or fire;
(b) civil disturbances or disruptions in services such as, a postal strike;
(c) a serious illness or accident; or
(d) serious emotional or mental distress such as, death in the immediate family.
6. Cancelling or waiving interest or penalties may also be appropriate if the interest or penalty arose primarily because of actions of the Department, such as:
(a) processing delays which result in the taxpayer not being informed, within a reasonable time, that an amount was owing;
(b) material available to the public contained errors which led taxpayers to file returns or make payments based on incorrect information;
(c) a taxpayer or employer received incorrect advise such as in the case where the Department wrongly advises a taxpayer that no instalment payments will be required for the current year;
(d) errors in processing; or
(e) delays in providing information such as the case where the taxpayer could not make the appropriate instalment or arrears payments because the necessary information was not available.
7. It may be appropriate, in circumstances where there is an inability to pay amounts owing, to consider waiving or canceling interest in all or in part to facilitate collection. For example,
(a) When collection has been suspended due to an inability to pay.
(b) When a taxpayer is unable to conclude a reasonable payment arrangement because the interest charges absorb a significant portion of the payments. In such a case, consideration may be given to waiving interest in all or in part for the period from when payments commence until the amounts owing are paid provided the agreed payments are made on time.
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… 5. Il sera convenable d’annuler la totalité ou une partie des intérêts ou des pénalités, ou de renoncer à ceux-ci, si ces intérêts ou ces pénalités découlent de situations indépendantes de la volonté du contribuable ou de l’employeur. Voici des exemples de situations extraordinaires qui pourraient empêcher un contribuable, un agent d’un contribuable, l’exécuteur d’une succession ou un employeur de faire u paiement dans les délais exigés ou de se conformer è d’autres exigences de la Loi de l’impôt sur le revenu :
a) une calamité naturelle ou une catastrophe provoquée par l’homme comme une inondation ou un incendie;
b) des troubles civils ou l’interruption de services comme une grève des postes.
c) une maladie grave ou un accident grave;
d) des troubles émotifs sérieux ou une souffrance morale grave comme un décès dans la famille immédiate.
6. L’annulation des intérêts ou des pénalités ou la renonciation à ceux-ci peuvent également être justifiées si ces intérêts ou pénalités découlent principalement d’actions attribuables au Ministère comme dans les cas suivants :
a) des retards de traitement, ce qui a eu pour effet que le contribuable n’a pas été informé, dans un délai raisonnable, de l’existence d’une somme en souffrance;
b) des erreurs dans la documentation mise à la disposition du public, ce qui a amené des contribuables à soumettre des déclarations ou à faire des paiements en se fondant sur des renseignements erronés;
c) une réponse erronée qu’un contribuable ou un employeur a reçue concernant une demande de renseignements comme dans le cas où le Ministère a informé par erreur un contribuable qu’aucun acompte provisionnel n’est nécessaire pour l’année en cours;
d) des erreurs de traitement;
e) des renseignements fournis en retard comme dans le cas où un contribuable n’a pus faire les paiements voulus d’acomptes provisionnels ou d’arriérés parce qu’il n’avait pas les renseignements nécessaires.
7. Il peut être convenable dans des situations où il y a incapacité de verser le montant exigible d’examiner la possibilité de renoncer ou d’annuler la totalité ou une partie des intérêts afin d’en faciliter le recouvrement, par exemple dans les cas suivants :
a) lorsque les mesures de recouvrement ont été suspendues à cause de l’incapacité de payer;
b) lorsqu’un contribuable ne peut conclure une entente de paiement qui serait raisonnable parce que les frais d’intérêts comptent pour une partie considérable des versements; dans un tel cas, il faudrait penser à renoncer à la totalité ou à une partie des intérêts pour la période où les versements débutent jusqu’à ce que le montant exigible soit payé pourvu que les versements convenus soient effectués à temps. |
[11] In short, the Guidelines provide for waiver or cancellation of penalties and interest where the penalties and interest have accumulated, in whole or in part, as a result of “…circumstances beyond a taxpayer’s…control”, where penalties and interest have accumulated “…primarily because of actions of the Department,…” which is to say the Canada Revenue Agency, or where waiver or cancellation will “facilitate collection”.
[12] On the facts of this matter, the Applicant urges that the accumulated penalties and interest should have been waived because the accumulation resulted from circumstances beyond his control, namely, the fire which destroyed his home, the “illegal” seizure of his children’s clothing business, the tumult in the insurance industry in the period before and following the 11th of September, 2001, and his illness in 2004.
[13] While the Applicant, at hearing, and in written materials, expressed concern about difficulties in communicating with the appropriate officials at the Canada Revenue Agency, lack of clear and effective communication of the nature, details and process associated with the fairness program and the fact that responsibility for the program was vested in officials whose primary responsibility would appear to be collection of taxes, interest and penalties, thus creating a semblance of conflict of interest on their part, these concerns were not strenuously pursued as a basis for cancellation or waiver of interest or penalties “…primarily because of actions of the Department…”.
[14] The issue of waiver to “facilitate collection” does not arise on the facts of this matter.
THE ISSUES
[15] The Applicant succinctly described the issues on this application at paragraph 26 of his Memorandum of Fact and Law in the following terms:
Did the CRA err in facts and in its conclusions?
[16] The Respondent raised a preliminary concern regarding the inclusion of materials in the Applicant’s Application Record that were not before the decision-maker. The Respondent then went on to comment on the appropriate standard of review “for findings of fact” and finally to consider the application of what the Respondent urged to be the appropriate standard to the decision under review.
ANALYSIS
Preliminary Issues
[17] It is trite law that, except in extraordinary circumstances, which do not arise on the facts of this matter, an application for judicial review should be conducted on the basis of the material that was before the decision-maker. Based on that principle, the Court has had no regard to material included in the Applicant’s Application Record that was not before the Canada Revenue Agency.
[18] Prior to the hearing of this matter, the Respondent had been identified in the style of cause herein as “Canada Customs and Revenue Agency”. On consent, the Respondent has been re-designated as the Attorney General of Canada.
Standard of Review
[19] Counsel for the Respondent urged that the decision here under review was entirely a factual determination and that the standard of review in such circumstances has been determined by Parliament and is expressed in paragraph 18.1(4)(d) of the Federal Courts Act[2] which provides that decisions or orders based on fact are only reviewable if the findings of fact are erroneous and made in a perverse or capricious manner or without regard for the material before the Court. The foregoing test essentially equates to review on a standard of patent unreasonableness[3].
[20] I disagree. I am satisfied that the appropriate standard of review of the decision here before the Court is reasonableness simpliciter. In Dort Estate v. Canada (Minister of National Revenue)[4], my colleague Justice Sean Harrington wrote at paragraph 8 of his reasons:
In accordance with the decisions of the Supreme Court in Dr. Q. v. College of Physicians and Surgeons of British Columbia,…and Law Society of New Brunswick v. Ryan, …the judicial review of decisions of administrative tribunals must be approached functionally and pragmatically. Depending on the circumstances, the applicable standard of review is correctness, unreasonableness or patent unreasonableness. In Lanno v. Canada (Customs and Revenue Agency),…the Federal Court of Appeal overruled the trial judge who had applied the standard of patent unreasonableness, and held that the appropriate standard was reasonableness. The decision under review in that case was a decision of a tax official not to exercise his discretion under section 152(4.2) of the Act so as to permit the reassessment of Mr. Lanno’s returns beyond the normal reassessment period, which reassessment would have resulted in a refund. That section, like the section in question in this case, section 220(3.1), was part of the Fairness Package which was introduced in 1991. Mrs. Dort submitted that a discretionary decision with respect to the waiver of interest is likewise subject to a reasonableness standard of review. That submission is correct. The Federal Court of Appeal has just recently specifically extended Lanno,…to section 220(3.1) of the Income Tax Act (Comeau c. Agence des douanes et du Revenue du Canada….
[citations omitted]
[21] The reasonableness or reasonableness simpliciter standard provides that a court should not interfere with the decision before it unless it is clearly wrong in the sense of being based on a wrong principle or a misapprehension of the facts. An unreasonable decision is one that, in the main, is not supported by any reasons that can stand up to a somewhat probing examination. However, a reasonable decision is not necessarily a correct decision, and there can be more than one reasonable decision arising out of the application of a discretionary provision of law to a particular fact situation[5].
[22] I adopt the standard of review of reasonableness simpliciter.
REVIEWABLE ERROR
[23] The applicant urges that the decision under review and the Respondent’s working papers leading to the decision indicate that the period in question in his request for relief is 1997 until 2003 whereas his request for relief relates to the period from 1993 to the present and that the Minister “…used the time of recovery after a series of extraordinary circumstances beyond the applicant’s control to inflict serious penalties and interest charges…” which was neither fair nor just.
[24] The material before the Court simply does not support the Applicant’s position[6].
[25] While the decision letter itself indicates that the Filing Period in issue is 1997 to 2003, background material before the Court does not indicate that earlier years covered by the Applicant’s request were ignored. The substance of the decision is in the following terms:
I have reviewed all the pertinent information and my decision is to cancel interest from April 11, 2004 to January 31, 2005 for the years mentioned above. This is the time frame that you were under your doctor’s care. I appreciate the fact that you have suffered some business setbacks, but your letter does not identify a reason why the returns for the years 1997, 1998 and 1999 were not filed on a timely basis. Over 75% of the penalties and interest charged was for those three years.
[26] While the “Filing Period” reference in the decision letter is indeed unfortunate, in fact, the notation that by far the greater part of penalties and interest charged related to the years covered by the Filing Period identified is entirely accurate. Charges for earlier years were either nil or relatively insignificant.
[27] Further, while it might be technically inaccurate to say that submissions for relief did “…not identify a reason why the returns for the years 1997, 1998 and 1999 were not filed on a timely basis”, the events advanced to justify the late filing for those years were relatively remote. The Applicant acknowledged at hearing that he could have filed returns for those years on a timely basis, based on the documentation and information then available to him and, when full and complete documentation and information became available, he could have filed amended returns, if appropriate. The Applicant made a conscious choice not to proceed in that manner. It has proved to be a costly choice, but perhaps the one that seemed most reasonable to him at the time and in the then prevailing circumstances. It was, in the end, his choice and has proved to be a substantially expensive choice.
[28] Based upon the totality of the material before the decision-maker, against a standard of review of reasonableness simpliciter, I am satisfied that the decision arrived at, and that is here under review, was open to the decision-maker.
CONCLUSION
[29] Based on the foregoing brief analysis, I am satisfied that, as I disclosed to the Applicant and counsel for the Respondent at the close of the hearing of this application for judicial review, the application must be dismissed.
COSTS
[30] The Respondent seeks costs against the Applicant given the Respondent’s success on this application. In the exercise of my discretion under Rule 400(1) of the Federal Courts Rules[7], I decline to order costs against the Applicant. There will be no order as to costs.
“Frederick E. Gibson”
JUDGE
Ottawa, Ontario
November 7, 2006
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-324-05
STYLE OF CAUSE: COYNE TEDFORD
Applicant
and
THE ATTORNEY GENERAL OF CANADA
Defendant
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: October 31, 2006
APPEARANCES:
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Mr. Coyne Tedford
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(Self represented) |
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Mr. Steven D. Leckie
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SOLICITORS OF RECORD:
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None
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John H. Sims, Q.C. Deputy Attorney General of Canada
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[1] R.S.C. 1985, c. 1 (5th Supp.).
[2] R.S.C. 1985, c. F-7.
[3] See Thanaratnam v. Canada (Minister of Citizenship and Immigration) [2005] F.C.J. No. 587, 2005 FCA 122, April 8, 2005, at paragraph 26.
[4] [2005] F.C.J. No. 1460 (T.D.), 2005 F.C. 1201, September 2, 2005, (not cited before the Court).
[5] See: Maloshicky v. Canada (Customs and Revenue Agency), [2005] F.C.J. No. 1203, 2005 F.C. 978, July 12, 2005, (not cited before the Court).
[6] See for example page 55 of the Respondent’s Record as it relates to notations regarding the earlier years covered by the Applicant’s request for relief.
[7] SOR/98-106.