Date: 20040120
Dockets: A-26-03
A-27-03
A-29-03
Citation: 2004 FCA 20
CORAM: RICHARD C.J.
LÉTOURNEAU J.A.
NOËL J.A.
Docket: A-26-03
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
RÉJEAN VILLENEUVE
Respondent
Docket: A-27-03
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
ROBIN VILLENEUVE
Respondent
Docket: A-29-03
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
GÉRALD GAUTHIER
Respondent
Hearing held at Québec, Quebec, January 19, 2004.
Judgment delivered at Québec, Quebec, January 20, 2004.
REASONS FOR JUDGMENT: LÉTOURNEAU J.A.
CONCURRING: RICHARD C.J.
NOËL J.A.
Date: 20040120
Docket: A-27-03
Citation: 2004 FCA 20
CORAM: RICHARD C.J.
LÉTOURNEAU J.A.
NOËL J.A.
Docket: A-26-03
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
RÉJEAN VILLENEUVE
Respondent
Docket: A-27-03
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
ROBIN VILLENEUVE
Respondent
Docket: A-29-03
BETWEEN:
ATTORNEY GENERAL OF CANADA
Applicant
and
GÉRALD GAUTHIER
Respondent
REASONS FOR JUDGMENT OF THE COURT
LÉTOURNEAU J.A.
[1] These three applications for judicial review were heard together. Since the fact situations in each do not differ significantly for the purposes of the dispute that is before us, the reasons that follow will dispose of all three cases, the original being placed in docket A-26-03 and a copy in dockets A-27-03 and A-29-03.
[2] As a result of an internal investigation by the Canada Customs and Revenue Agency (the Agency), a fraudulent tax refund scheme devised by some employees of the Agency was uncovered. This scheme allowed certain taxpayers to receive substantial tax refunds under cover of tax credits they claimed, in connivance with an Agency employee, when they knew they were not entitled to them (for example, a taxpayer would say he was married when he was not, or that he had dependent children when he did not, etc.). The taxpayers then paid rebates to the Agency employee who had proposed this course of action to them, the amount of the rebates being established on the basis of a percentage equivalent to two thirds of the refunds.
[3] The Minister of National Revenue (the Minister) accordingly imposed upon the guilty taxpayers the penalties provided in subsection 163(2) of the Income Tax Act (the Act), but Judge Lamarre-Proulx of the Tax Court of Canada cancelled these penalties in the cases that concern us on the ground that this action "stemmed from thoughtlessness, unawareness or an error of judgment, not from wrongful intent" (paragraph 31 of her reasons).
[4] This Court ruled recently in a case involving this same scheme (Attorney General of Canada v. Simard, 2003 FCA 427), but from a different angle. In that case Lamarre-Proulx J.T.C.C. had found that there were grounds for a penalty, but she reduced its amount. This Court held that the Tax Court of Canada did not have jurisdiction to reduce the penalty.
[5] In the case at bar, the judge relied on the judgment of this Court in Chabot v. Canada, 2001 FCA 383, as authority for holding that the respondents did not have the wrongful intent required by subsection 163(2) of the Act.
[6] With respect, I think the judge failed to consider the concept of gross negligence that may result from the wrongdoer's willful blindness. Even a wrongful intent, which often takes the form of knowledge of one or more of the ingredients of the alleged act, may be established through proof of willful blindness. In such cases the wrongdoer, while he may not have actual knowledge of the alleged ingredient, will be deemed to have that knowledge.
[7] Furthermore, I am of the opinion that the circumstances of the Chabot case are so different from those that concern us in the present case that it was patently unreasonable to draw the same conclusions in this case. In Chabot, the taxpayer had been penalized as a result of a legal disagreement between him and Revenue Canada over the validity of the establishment of systems for donation of paintings that were undervalued at the time of their purchase and overvalued at the time of their donation. Revenue Canada was of the opinion that there was no donation in such circumstances, a contention that was eventually rejected by this Court after several years of uncertainty. The Court, in the majority, said it found it "difficult to understand why Revenue Canada would assess penalties against such small taxpayers who, in good faith, tried to benefit from a tax credit that Revenue Canada itself dangled in front of their eyes and which, according to the guide, seemed so easy to obtain" (paragraph 41 of the reasons).
[8] In this case there is nothing like that. On the contrary, there are misrepresentations and payment of rebates. Before cashing the refund cheques, the respondents were either made aware of the misrepresentations or had strong suspicions as to the existence of misrepresentations or the legitimacy of the refunds themselves. By cashing the refunds and paying rebates, the respondents acquiesced and participated in the scheme that had been established to defraud the Agency. Their participation, which was free and voluntary, was an essential link in the realization of that scheme and they benefited economically from it. It is simply impossible not to conclude that this was willful blindness and consequently gross negligence.
[9] I would allow the applications for judicial review. I would reverse the decisions of the Tax Court of Canada and return the cases to it for redetermination on the basis that the taxpayers' appeal in the three cases in question must be dismissed. I would allow the applicant the costs in each of these cases, but would limit to a single set of costs those awarded in relation to the hearing of the applications.
"Gilles Létourneau"
J.A.
"I concur.
Richard C.J."
"I concur.
Marc Noël J.A."
Certified true translation
Suzanne Gauthier, C.Tr., LL.L.
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
DOCKETS: A-26-03, A-27-03, A-29-03
STYLE: THE ATTORNEY GENERAL OF CANADA v. RÉJEAN VILLENEUVE; THE ATTORNEY GENERAL OF CANADA v. ROBIN VILLENEUVE; THE ATTORNEY GENERAL OF CANADA v. GÉRALD GAUTHIER
PLACE OF HEARING: QUÉBEC, QUEBEC
DATE OF HEARING: JANUARY 19, 2004
CORAM: RICHARD C.J.
LÉTOURNEAU J.A.
NOËL J.A.
REASONS FOR JUDGMENT
OF THE COURT: LÉTOURNEAU J.A.
DATED: JANUARY 20, 2004
APPEARANCES:
Martin Gentile FOR THE APPLICANT
Jean Dauphinais FOR THE RESPONDENTS
SOLICITORS OF RECORD:
Department of Justice Canada FOR THE APPLICANT
Montréal, Quebec
Cain, Lamarre, Casgrain, Wells FOR THE RESPONDENTS
Chicoutimi, Quebec