Date: 20050120
Docket: T-2208-03
Citation: 2005 FC 86
BETWEEN:
BRADLEY RAHEY and
JOANNE RAHEY
Applicants
and
MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
PHELAN J.
[1] In a variation of the adage of "paying your money and taking your chances", the Raheys chose not to pay their taxes and took their chances. Not always the best choice of conduct.
[2] The Applicants ask this Court to overturn a "fairness decision", where their request for relief, from interest and penalties on income taxes due, was dismissed. The Applicants chose to await the results of a tax reassessment and were assured by officials of the Respondent that they did not have to pay the taxes while the reassessment was proceeding but that interest was accruing. Nothing was said about penalties.
BACKGROUND
[3] The Raheys who owned a business in Sydney, Nova Scotia, had a long-standing dispute with the Respondent over taxes commencing in 1994 when they were audited for the tax years 1992 and 1993.
[4] It was not until May 27, 1998 that Notices of Assessment were issued for 1992 and 1993 and only after the Respondent's officials and the Raheys' accountant had correspndence about various conclusions and discrepancies. The Raheys paid $25,000 towards the balance owing of $62,167.96 and $86, 515.98 for the respective years. A Notice of Objection was filed.
[5] On September 11, 1998, a Statement of Account was issued showing the amount due and indicating that, while the amount did not have to be paid immediately, interest would accumulate.
[6] Thereafter the Applicants say that they received no further correspondence or Notices of Assessment until September 2002. What is said to have been missed are Notices of Assessment in July 1999 showing balances owing for 1992 and 1993, Notices of Assessment for 1998 and 1999 each of which still showed balances owing for the 1992 and 1993 tax years.
[7] Even in the absence of these documents, in July 1999 the Applicants made a further payment on account for the 1992 and 1993 tax years.
[8] The Applicants suggest that the non delivery of the Notices of Assessment may have been due to a change of their street name and some confusion about postal service. However, the Respondent's officials met with the Raheys' accountant and informed him of the outstanding tax liability. The official's notes of the meeting and subsequent contact with the accountant are detailed and consistent. There is no affidavit from the accountant filed in this matter.
[9] The Respondent, in response to requests for relief from interest, granted such relief for the periods of March 28, 199? to May 27, 1998 and April 10, 2003 to October 24, 2003.
[10] However, with respect to the other periods, relief from interest and penalties was denied. The Respondent acknowledged that a "stall" code had been put on the Raheys' file between July 7, 1999 and November 2002 which meant that no collection action was taken. However, the Respondent based the decision not to grant relief on the fact that the Raheys did have notice that a balance for 1992 and 1993 was owing.
ANALYSIS
[11] For the purposes of this case, I accept the Respondent's submission that the standard of review is patent unreasonableness. No argument was addressed as to section 18.1(4) of the Federal Court Act and the legislated standard of review contained therein.
[12] In the absence of any contradictory evidence from the Raheys' accountant, the Respondent's evidence as to what the accountant, who was the Raheys' agent for tax purposes, was told must be accepted. The documentary evidence also confirms that the Raheys had knowledge of the balance owing for 1992 and 1993.
[13] The Respondent argues that all relevant factors were considered in the refusal to grant relief - or at least there is no evidence that the relevant factors were not considered. I agree but only in part.
[14] The Respondent does not appear to have considered the issue of whether penalties were justified. The focus of the Respondent's consideration was the reasonableness of the delay in determining the amounts and in not taking collection action. By the Respondent's own admission, in granting relief for some periods, there were problems in the handling of these assessments.
[15] There is no evidence that the Applicants tried to evade payment or were negligent. The Respondent's own officials indicated that payment was not immediately required. While the officials warned that interest was accruing, they were silent on the assessment of penalties.
[16] Having given a warning of the consequences of failure to pay being the accrual of interest, there is no basis for assessing penalties. No reason was advanced in this Court as to the justification for assessing penalties.
[17] Therefore I find that the Respondent's decision in respect of refusal to grant relief for penalties assessed to be unjustified.
[18] With respect to the refusal to grant relief from interest, the Respondent's decision should not be disturbed. The Raheys knew that amounts were owing and that interest was accruing. They took the chance that their reassessment would be more favourable than it turned out to be. It is not unreasonable or unfair that they bear the interest consequences of their choice of conduct
[19] For these reasons the application for judicial review will be granted in part.
[20] Given the result in this matter, each party shall bear their own costs.
Judge
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-2208-03
STYLE OF CAUSE: Bradley Rahey and Joanne Rahey v. Minister of National Revenue
PLACE OF HEARING: Sydney, Nova Scotia
DATE OF HEARING: December 16, 2004
REASONS FOR ORDER: Phelan J.
DATED: January 20, 2005
APPEARANCES:
Michael Tobin FOR THE APPLICANTS
John Ashley
Christa MacKinnon FOR THE RESPONDENT
SOLICITORS OF RECORD:
Michael Tobin
North Sydney, Nova Scotia FOR THE APPLICANTS
Mr. John H. Sims
Deputy Attorney General of Canada
Ottawa, Ontario FOR THE RESPONDENT