Date: 20030110
Docket: T-1281-01
Neutral citation: 2003 FCT 16
BETWEEN:
FRANK G. ROBERTSON
Applicant
and
THE MINISTER OF NATIONAL REVENUE
Respondent
Let the attached edited version of the transcript of my Reasons for Order delivered orally from the bench at Halifax, Nova Scotia on December 17, 2002, be filed to comply with Section 51 of the Federal Court Act.
< < Carolyn A. Layden-Stevenson > >
Judge
COURT FILE NO. T-1281-01
Neutral citation: 2003 FCT 16
FEDERAL COURT - TRIAL DIVISION
BETWEEN:
FRANK G. ROBERTSON
Applicant
- and -
THE MINISTER OF NATIONAL REVENUE
Respondent
_________________________________________________________________
ORAL DECISION
_________________________________________________________________
HEARD BEFORE: The Honourable Madam Justice C. Layden-Stevenson
PLACE HEARD: Halifax, Nova Scotia
DATE HEARD: Tuesday, December 17, 2002
COUNSEL: Mr. John P. Bodurtha
Solicitor for the Respondent
_________________________________________________________________
Recorded By:
Drake Recording Services Limited
1592 Oxford Street
Halifax, Nova Scotia
B3H 3Z4
Per: Trisha Egan, Verbatim Reporter
THE COURT - ( ORALLY FROM THE BENCH )
The applicant, Frank Robertson applies for judicial
review of the decision of the Minister of National
Revenue, as determined by the ministerial
delegate, the Director of Tax Services, Halifax office,
Canada Customs and Revenue Agency, which I will refer
to as CCRA. The Decision relates to subsection
220(3.1) of the Income Tax Act commonly referred to as
the fairness provision. At the outset of the hearing,
the applicant withdrew all of the various relief
requested in his application save and except the
request that the impugned decision be set aside and be
referred back for redetermination. Also, at the outset
of the hearing, the applicant informed the Court that
he had uncovered an alternate route to pursue with
respect to waiver of the penalties assessed regarding
late filing of his tax returns. Although counsel for
the respondent Minister understood, as a result of
discussions with CCRA late last week, that a decision to
waive the applicable penalties had been made, in fact,
as of today, the team leader in the Halifax office
confirmed to counsel that no final decision has been
taken with respect to the penalties. Hence, this
judicial review relates both to the interest and
penalties regarding the applicant's tax returns for
1998 and 1999. The facts, stated summarily, are that the
applicant did not file his tax return in 1998. On May
7th, 2000, he mailed his 1998 and 1999 returns along
with correspondence wherein he explained the financial
difficulties he had encountered as a result of the
loss of his employment in November, 1997 and his
subsequent sporadic employment until October, 1999,
when he obtained the position that he continues to
hold. After receipt of his notices of assessment for
1998 and 1999, the applicant on October 29th, 2000,
applied for a waiver of interest and penalties under
the fairness provision of the Income Tax Act and
proposed a repayment schedule for his outstanding
taxes. His request was denied by correspondence dated
April 30th, 2001, from the team coordinator, Revenue
Collections. The applicant requested a further
independent review and received a negative decision
from the Director dated June 12th, 2001. It is this
latter decision that is the subject of this application for
judicial review. The relevant portions of the decision of
the ministerial delegate state:
"I have fully considered all the information
submitted in your letter. I have also
reviewed the information contained in the
original request. The Canada Customs and
Revenue Agency, CCRA, has the discretion to
cancel or waive all or part of properly
assessed penalty and interest. Discretion
will generally be exercised if the client has
not complied with the Income Tax Act due to
extraordinary circumstances beyond his
control. Extraordinary circumstances include
natural or human made disasters, civil
disturbances or disruptions in service,
serious illness or accident or serious
emotional or mental distress due to errors or
delays by the CCRA or when there is an
inability to pay amounts owing. As your
correspondence does not indicate that you
were prevented from filing the returns on
time, I regret to inform you that this is not
a case in which it would be appropriate to
cancel the late filing penalties. In
addition, our records indicate that you had
accumulated additional consumer debt in
December, 2000. In such situations, the
cancellation of interest charges is not
usually granted."
The issue is whether the Minister has properly
exercised his discretion with regard to relevant
considerations and without regard to erroneous factors.
See: GoldMaker v.Canada,( Minister of National Revenue)
(2000), 2 C.T.C. 149 ( F.C.T.D.) The standard of review is
patent unreasonableness: Chan v. Her Majesty
The Queen (2001), D.T.C. 5575 (F.C.A.)and Sharma v.
Minister of National Revenue(2001)D.T.C. 5360 (F.C.T.D.)
As stated earlier, the letter of refusal provides the
reasons for the refusal. The Director, in his affidavit
sworn September 20th, 2001, deposes at paragraph 7 that he
considered the following factors: (a) the request made
by the applicant and the reasons therefore; (b) the fact
that the applicant did not indicate he was prevented from
filing his income tax returns on time; (c) the applicant
has accumulated additional consumer debt in December, 2000;
(d)the financial hardship was not such that warranted the
cancellation of penalties and interest, and (e) the
guidelines established in Information Circular 92-2 and
Internal Directive ARD 9201 dated April 16th, 1992 were
not met in these circumstances.
Regarding paragraph(b),the use of the word "prevented", at
first blush, would appear to mean circumstances outside the
applicant's control. However, when viewed in
conjunction with the Director's report dated June 12th,
2001, the meaning to be attributed to "prevented" is
not so clear. In the second paragraph of his report
the Director states:
"The client filed both his 1998 and 1999
returns on May 18th, 2000. No reasons have
been given for filing late."
The applicant, in fact, provided detailed reasons for
the failure to file his returns in his correspondence
to CCRA dated October 29th, 2000. It may well be that
the Director did not consider these reasons to be
sufficient. However, in the face of his statement
that no reasons were given, I cannot say that the
reasons were considered, let alone found to be
insufficient.
With respect to paragraph(c), additional consumer debt,
the refusal letter specifically states:
"In addition, our records indicate that you
had accumulated additional consumer debt in
December, 2000. In such situations, the
cancellation of interest charges is not
usually granted."
This finding of fact is erroneous. The record clearly
indicates that there was not additional debt, but a debt
consolidation. The applicant provided all of the
supporting documentation regarding the loan
consolidation in correspondence to CCRA dated February
20th, 2001. Indeed, the Director in his report dated
June 12th, 2001, refers specifically to the payouts made
by the applicant. The comments contained in the Director's
report fly in the face of his affidavit and the reason
delineated in his refusal letter and are contradictory.
There is an additional statement in the Director's report
indicating a reported expense of $100.00 for recreation on
the applicant's income and expense statement. Although
nothing turns on this, it, too, is an erroneous finding
because the applicant allocated $50.00 per month for
recreation, not $100.00
Attached to the Director's affidavit are the
notations of CCRA officers containing recommendations
not to apply discretion in favour of the applicant.
One such notation on June 5th states:
"Interest is not the reason for the hardship.
Taxpayer made decisions not to borrow and pay
tax arrears, paying other creditors while
ignoring tax obligations."
The evidence indicates that the applicant did attempt
to borrow the money to pay the tax arrears. A second
notation on June 5th, 2001 contains the following
statement:
"Agree with above comments, large unsecured
credit balances, Visa, etc. are the cause of
any hardship."
In fact, the applicant had consolidated his loans in
December, 2000. There were no unsecured credit
balances as of the date of the notation. There
was merely the one consolidated loan with Canada Trust
that has been referred to previously.
With respect to the Director's finding that financial
hardship was not such that warranted the cancellation of
penalties and interest, the applicant argues that the CCRA
erred in its finding that he had $1,100.00 surplus monthly
income. The Director found that the applicant was not
suffering financial hardship and that he had a surplus of
monthly income. In his report, he states:
"The client repeatedly mentions in his
correspondence that his net monthly income
for a family of six is below the poverty
line. However, based on the client's income
for 2000 on DD.3 and his expenses, the client
has a monthly surplus of $800.00 after his monthly payment of $300.00 to CCRA."
The applicant calculates his surplus at $80.96 per
month. The document relied upon by the Director is
contained in the record but there is nothing to indicate
how the calculations were completed. The Director was not,
on cross-examination, able to enlighten the applicant
in this regard, nor could counsel provide assistance at
the hearing. In my view, the applicant is entitled to
know where the calculations came from or how they were
arrived at.
I am mindful of the comments of my colleague, Rouleau,J.
in Kaiser v. The Minister of National Revenue, (1995), 93
F.T.R. 66 and I quote those comments for the benefit of the
Director in this case:
"The purpose of this legislative provision is
to allow Revenue Canada Taxation to
administer the tax system more fairly by
allowing for the application of common sense
in dealing with taxpayers who, because of
personal misfortune or circumstances beyond
their control, are unable to meet deadlines
or comply with rules under the tax system.
The language used in the section bestows a
wide discretion on the Minister to waive or
cancel interest at any time. To assist in
the exercise of that discretion, policy
guidelines have been formulated and are set
out in Information Circular 92-2."
I refer to that primarily because, and I don't mean
to imply that the Director has acted in bad
faith or anything of that nature, but I do refer to
paragraph 7(e) of his affidavit, and it would appear
to me that, certainly on its face, it appears that
the Director has attempted to place the applicant into
pigeon-holed criteria cited in the guidelines and
the directive, notwithstanding that it is specifically
stated that they are not intended to be exhaustive. The
comments of Justice Rouleau are enlightening in that
regard. In any event, and not withstanding those
comments, I am also mindful that the Court is not to
substitute its findings or its opinion for those of the
ministerial delegate and, while that is so, neither is
it the Court's function to speculate on what the
Director's ultimate decision might have been but for
the erroneous findings of fact.
Here, the Director made erroneous findings of fact that,
in my view, taint the decision. The reasons, particularly
those that relate to the late filing of the returns, do not
adequately explain the Director's position. In the
circumstances, this decision is patently unreasonable.
The application for judicial review is allowed. The
decision dated June 12th, 2001 is set aside and the
matter is remitted back for reconsideration.
MR. BODURTHA
Thank you, Madam Justice.
MR. ROBERTSON
Thank you, Madam Justice.
CERTIFICATE OF VERBATIM REPORTER
I, Sandy Adam, Certified Verbatim Reporter, hereby certify
that I have transcribed the foregoing and that it is a true
and accurate transcript of the evidence given in this matter
FRANK G. ROBERTSON (Applicant) and THE MINISTER OF NATIONAL
REVENUE (Respondent), taken by way of electronic recording
pursuant to Section 15 of the Court Reporters Act.
____________________________
Sandy Adam
Certified Verbatim Reporter
Sunday, January 5, 2003 at Halifax, Nova Scotia
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1281-01
STYLE OF CAUSE: Frank G Robertson
and
The Minister of National Revenue
PLACE OF HEARING: Halifax, Nova Scotia
DATE OF HEARING: December 17, 2002
REASONS FOR ORDER : Madam Justice Layden-Stevenson
DATED: January 10, 2003
APPEARANCES:
Frank G. Robertson FOR APPLICANT
John Bodurtha FOR RESPONDENT
SOLICITORS OF RECORD:
no one FOR APPLICANT
Morris Rosenberg FOR RESPONDENT
Deputy Attorney General of Canada
Justice Canada Atlantic Regional Office
1400- 5251 Duke Street
Halifax, Nova Scotia
B3J 1P3