Vancouver, British Columbia, February 1, 2007
PRESENT: The Honourable Mr. Justice Blanchard
BETWEEN:
and
REASONS FOR ORDER AND ORDER
[1] The Applicant failed to pay her income taxes on the time for the taxation years 1995, 1996, 1998, and 1999, resulting in interest accrual.
[2] In 2003, the Applicant applied to the Minister of Finance (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 with respect to the period from January 1, 1995 to December 31, 2002, on the following three grounds: (i) waiver of penalties; (ii) waiver of interest on grounds of extraordinary circumstances; and (iii) waiver of interest on grounds of financial hardship. The Applicant’s request was particularly based on emotional health issues and ongoing financial hardship.
[3] Each of the above-noted three grounds of the Applicant’s initial request for waiver of interest and penalties (Fairness Request) was considered by a separate officer of the Canada Revenue Agency (CRA).
[4] On October 7, 2003, the Minister decided to waive the late filing penalties for both the 1998 and 1999 taxation years.
[5] A CRA officer reviewed the Applicant’s request for the waiver of interest on grounds of extraordinary circumstances. He found there were no circumstances to warrant a waiver of interest and that, in spite of the Applicant’s claims of stress in her personal life, she was able to maintain both regular and business income during the time in question and should have been able to meet her tax obligations.
[6] Another CRA officer reviewed the request for the waiver of interest on grounds of financial circumstances. He reported that he found no financial hardship to warrant the waiver of interest.
[7] On June 21, 2004, the Minister notified the Applicant of his decision to deny the waiver of interest on the grounds of either (i) extraordinary circumstances or (ii) financial hardship for the 1995, 1996, 1998 and 1999 taxation years. In response to that decision, the Applicant provided additional information for the Minister to review. The Minister treated this additional information as a new first level Fairness Request for the waiver of interest on the grounds of extraordinary circumstances and financial hardship.
[8] Another CRA officer reviewed this second first level Fairness Request and recommended, after considering the additional information, that there were no grounds to warrant the waiver of interest. This decision was confirmed by a CRA team leader and was communicated to the Applicant on April 12, 2005.
[9] On December 27, 2005, the Applicant sent the Minister a letter requesting further consideration, which the Minister treated as a request for second-level review. The Applicant provided a letter from her psychiatrist stating that the Applicant was being treated, since May 31, 2005, for chronic anxiety and has developed a specific phobia related to financial transactions.
[10] The second-level review was conducted by a CRA officer who reviewed this new information. The officer reviewed all of the information on the file, conducted further research into the Applicant’s financial circumstances and considered the Applicant’s health issues. The officer found that the psychiatrist’s letter was not relevant for the period in issue for the fairness relief and recommended that the request be denied. The officer’s recommendation was reviewed by a CRA manager and the Assistant Director of Revenue Collections and they decided to deny the Applicant’s Fairness Request. In his February 28, 2006 letter informing the Applicant of the negative decision, the Assistant Director, Revenue Collections, wrote the following:
We have examined all the submitted evidence related to your ongoing anxiety issues and surgery to remove a chest tumour. Although we can empathise [sic] the difficulties you no doubt encountered in dealing with and recovering from these experiences, we cannot agree that there is evidence that the circumstances were so extraordinary as to prevent you from paying your taxes on time. It is apparent from our review that you were able to maintain your employment and earn additional income from business activities during this time, which enabled you to keep your commitments to other creditors over that of your tax obligations.
[11] On April 5, 2006, the Applicant filed the within application for judicial review of the Minister’s decision.
I. Issue
[12] Did the Minister discharge his duty to act fairly in exercising his discretion under subsection 220(3.1) of the Act to deny fairness relief to the Applicant?
II. Standard of Review
[13] The applicable standard of review of a fairness decision of the Minister has been settled by the Federal Court of Appeal in Lanno v. Canada (Customs & Revenue Agency), 2005 FCA 153, at paragraphs 6-7. In that case, the Court conducted a pragmatic and functional analysis and determined the applicable standard to be reasonableness simpliciter. I will apply the reasonableness standard in reviewing the Minister’s decision in this case.
III. Analysis
[14] Did the Minister discharge his duty to act fairly in exercising his discretion under subsection 220(3.1) of the Act to deny fairness relief to the Applicant?
[15] The Applicant argues that her health condition was not considered in the decision by the Minister. She states that, in the decision, the CRA focuses on finances and does not adequately address physical and emotional health. She contends that her letters clearly stated that she was unable to function as a bookkeeper for her husband’s business, and therefore she was unable to file income tax returns in a timely fashion.
[16] She further contends that she does not believe the officers who reviewed the file had taken into account the emotional distress she and her family were under. The Applicant submits that the CRA officers are not qualified to produce opinions about physical and emotional health and are consequently not qualified to conclude reasonably with respect to her inability to pay her taxes. The Applicant argues that the Minister should have consulted a health care professional about her case. She contends that a medical professional would have been able to explain, contrary to the CRA's determination, how it is possible for someone to be able to meet certain obligations while not maintaining others in a time of stress.
[17] On this point, I agree with the Respondent. There is no obligation on the Minister to consult with a health care professional in making a fairness decision. It was reasonable for the Minister to determine that the impugned December 27, 2005 letter from the Applicant’s psychiatrist was not relevant to the period in issue. In the circumstances, the Minister acted fairly and in accordance with the rules of procedural fairness as developed in administrative law.
[18] The Applicant cites three decisions in support of her claim: Ross v. Canada (CCRA), 2006 FC 294; Dick v. Canada (CCRA), 2005 FC 560; and Bilida v. Revenue Canada, 51 D.T.C. 5041, 124 F.T.R. 172. In all three cases, the Minister’s decision to deny a waiver of penalties and interest was set aside by the Federal Court. I have reviewed these cases and find that they can be distinguished.
[19] In Ross, the Minister significantly overstated the annual surplus of the taxpayer’ income, and therefore the Court found the Minister’s conclusions regarding the ability to pay back the tax to be unreasonable. In Dick, the Minister failed to take into consideration that the taxpayer was a 72-year-old chronic alcoholic, and given his retirement income, unable to ever repay the amounts owed. Further, the taxpayer's liabilities were equal to his assets and the penalties and interest assessed against him far exceeded the taxes owing. In Bilida, the taxpayer was a 76-year-old widow living on an old age pension who was unable to pay the tax owed. The Court held that Revenue Canada’s delay in assessing the taxpayer’s returns contributed to the arrears and penalties.
[20] The circumstances of the taxpayers in the above cited cases are certainly not those of the Applicant. The Applicant was able to maintain employment and to earn additional income from her business activities, enabling her to meet her commitments to other creditors. It was not unreasonable for the Minister to conclude, in these circumstances, that the Applicant was simply showing preference to other creditors over the CRA. Further, the evidence indicates that the Applicant’s net worth shared with her spouse is estimated at $500,000.00, an amount she does not dispute. Relative to her net worth, the outstanding interest owing in the amount of $12, 632.63 is relatively small.
[21] On the record before me, I am satisfied that the Minister exercised his statutory discretion in good faith and in accordance with the principles of natural justice. I am satisfied that Minister properly considered the evidence before him and that the decision was not based on considerations irrelevant or extraneous to the statutory purpose. (Maple Lodge Farms v. Government of Canada, [1982] 2 S.C.R. 2, at page 8.)
[22] For the above reasons, the application for judicial review of the Minister’s February 28 2006, fairness decision will be dismissed.
ORDER
THIS COURT ORDERS that the application for judicial review of the Minister’s February 28, 2006, fairness decision is dismissed.
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FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-600-06
STYLE OF CAUSE: VERNA HAUSER v
CANADA REVENUE AGENCY
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: January 30, 2007
REASONS FOR ORDER AND ORDER: BLANCHARD J.
APPEARANCES:
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Ms. Verna Hauser |
(self-represented)
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Mr. Dave Everett
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SOLICITORS OF RECORD:
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n/a |
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Mr. John H. Sims, Q.C. Deputy Attorney General of Canada |