Date: 20031023
Docket: T-41-03
Citation: 2003 FC 1241
Vancouver, British Columbia, Thursday, the 23rd day of October, 2003
Present: THE HONOURABLE MADAM JUSTICE HENEGHAN
BETWEEN:
SIMON P. J. DOREY
Applicant
- and -
CANADA CUSTOMS AND REVENUE AGENCY
(INTERNATIONAL TAX SERVICES OFFICE)
Respondent
REASONS FOR ORDER AND ORDER
INTRODUCTION
[1] Mr. Simon P.J. Dorey (the "Applicant") seeks judicial review pursuant to the Federal Court Act, R.S.C. 1985, c. F-7, as amended, of a decision made by the Canada Customs and Revenue Agency (International Tax Services Office) (the "Respondent"), dated November 19, 2002. The decision relates to a request by the Applicant for the position exercised by the Respondent, as a duly authorized delegate of the Minister of National Revenue (the "Minister") of the Minister's discretion to waive interest and penalties pursuant to the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the "Act"), as amended.
FACTS
[2] The Applicant began renting premises from a non-resident taxpayer in February 1999. In November 1999, he opened a Non-Resident Tax Remitter Account, number NRJ 032503, for the purpose of remitting withholding tax imposed under the Act to the Respondent. The Applicant completed a Non-Resident Tax Remittance Registration Form and made his initial remittance of withholding tax on December 14, 1999, paying the withholding tax due on rent payments for February to November 1999.
[3] The Applicant subsequently made monthly remittances of withholding tax, due on the 15th day of the month following the date on which the rent subject to tax was paid on time except for the months of May and June 2000. When he was late with the payment in May 2000, he was notified that a late-remitting penalty would be applied to future late remittances. He was assessed a $25.00 late remitting penalty for June 2000.
[4] The Applicant, in his capacity as a Canadian resident paying rent subject to withholding tax to a non-resident, was required to file an NR4 Information Return for the 1999 taxation year by March 31 of the year 2000. This obligation is imposed by section 215(1) of the Act and sections 202(1) and 202(7) of the Income Tax Regulations, C.R.C.C. 945, (the "Regulations") as amended. He did not file the NR4 form by March 2000 and was subsequently notified, on or about July 7, 2000, that the form was late and late filing may result in penalties. The Applicant filed the 1999 NR4 Return with the Respondent on July 31, 2000.
[5] On September 6, 2000, the Applicant was assessed a penalty of $400.00 together with arrears interest of $17.31, pursuant to section 162(7) of the Act, relative to the late filing of the NR4 form. The Applicant has not paid the penalty. By letter dated November 9, 2000, the Applicant applied for cancellation of the penalty and interest charge pursuant to section 220(3.1) of the Act, a provision colloquially known as the "Fairness Package". This statutory provision allows the Minister to waive or cancel all or any portion of any penalty with interest that is otherwise payable under the Act.
[6] The Applicant's first request for consideration under section 220(3.1) of the Act was received by the Respondent on November 17, 2000. It was assigned to Mr. Steve McKenna, a Fairness Officer, for review, preparation of a report and a recommendation. The Fairness Officer prepared a report and recommended that the request be denied, on July 6, 2001. That report and recommendation was forwarded to the Fairness Officer's Team Leader, Ms. Janina Nickus, who reviewed and endorsed the negative recommendation on July 13, 2001.
[7] The Applicant filed a second request for cancellation of the penalty and interest by letter dated August 23, 2001. That request was received by the Fairness Team on October 19, 2001. The second request was assigned to a different Fairness Officer, Lee Bridger, for review and the preparation of a report and recommendation. She prepared a report on April 10, 2002, recommending that the Applicant's request be granted in part by reduction of the penalty from $400.00 to $200.00 with a corresponding adjustment in the interest.
[8] The report and recommendation of Ms. Bridger were forwarded to the Team Leader, Ms. Nickus. She reviewed and endorsed the recommendation on April 10, 2002. A formal decision to reduce the late filing penalty to $200.00 and to adjust the interest was issued under the signature of Elmer LeBlanc, then the Director of the International Tax Services Office. By letter dated April 12, 2002, the Applicant was notified of this decision.
[9] The Applicant then filed an application for judicial review in this Court, cause number T-749-02. The Respondent filed a notice of motion in writing, pursuant to the Federal Court Rules, 1998, asking that the application for judicial review be allowed. By an order dated August 13, 2002, Justice Dawson allowed the Applicant's application for judicial review of the April 12, 2002 decision of Mr. LeBlanc, set that decision aside and remitted the Applicant's fairness request back to the Respondent for reconsideration by a different officer.
[10] According to the affidavit filed in this proceeding by Rick Leigh, the Director of the International Tax Services Office in Ottawa, the Applicant's request was assigned to a Resource Officer, Eric Justason. Mr. Justason's duties include the review of fairness applications. Mr. Justason reviewed the Applicant's request and prepared a report and recommendation. The report was completed on November 7, 2002 and recommended that the Applicant's request to cancel the reduced penalty be denied but that interest charges on the penalty be cancelled from the date of his first request, that is November 10, 2000, to the date of the decision in relation to the third request, that is following the Order of Justice Dawson on August 13, 2002.
[11] Mr. Justason's report was reviewed by Mr. Leigh. He agreed with the recommendation that the reduced penalty not be cancelled and that the interest be cancelled from November 10, 2000 until the date of a decision to be made in relation to the third request. Mr. Leigh issued a formal decision and notified the Applicant of that decision by letter dated November 19, 2002. The Applicant subsequently commenced this application for judicial review in which he seeks the following relief:
- Waiver of the penalty ($200) and associated interest being levied against me for alleged failure to file an NR4 information form for the year 1999 by the due date in 2000.
- Costs of judicial review and for the time taken to prepare and attend the initial requests to the Fairness Committee and for the Judicial Review, estimated at $5,000
- Apology for the stress caused.
- Additional relief as this Honourable Court thinks fit.
SUBMISSIONS
[12] The Applicant's main argument is that he was never notified of an obligation to file an annual information return in connection with payment of the withholding tax. He says that in the absence of notice to him about filing this form, he should not be penalized, in any way for the late filing of the form, especially since all taxes in connection with the rent paid by the non-resident, have been paid. He says that the process by which the Respondent assessed his various requests for cancellation of the penalty and interest were unfair, unreasonable and arbitrary.
[13] He says that the Respondent unfairly relied on the determination of his second request in reaching the recommendation and ultimate decision on his third request. In this regard, he refers to the fairness "Fact Sheet" prepared by Mr. Justason in connection with the third request. The Applicant says this reliance was improper because the agents of the Respondent had not followed their own procedures in reaching a determination of the second request. The decision on his second request was the subject of the application for judicial review in cause number T-749-02.
[14] The Applicant says that the Respondent acted arbitrarily in reducing the penalty from $400.00 to $200.00. He argues that no penalty at all should have been imposed and accordingly, no interest should have been assessed in relation to that penalty.
[15] For its part, the Respondent generally argues that the Act imposes an obligation upon a person who is remitting tax in connection with a non-resident, to file an annual information return. The Applicant is such a person and, regardless of specific notice, is deemed to know the law. In brief, ignorance of the law is no excuse and the Applicant is subject to the provisions of the Act and the Regulations, specifically section 215(1) of the Act and sections 202(1) and 202(7) of the Regulations.
[16] At the same time, the Applicant is entitled to avail himself of the ameliorative benefit of section 220(3.1) of the Act. That provision gives the Minister broad discretion to waive or cancel penalties and interest that may otherwise be payable under the Act. The discretion that is conferred on the Minister is informed by the factors set out in an Information Circular, entitled "Guidelines for the Cancellation and Waiver of Interest and Penalties", IC-92-2, dated March 18, 1992.
[17] The Respondent further submits that the decision in issue was a discretionary one and is subject to a deferential standard of review by this Court. Unless the Applicant can show that the Respondent ignored relevant evidence, considered irrelevant or extraneous matters, acted in bad faith or that the decision is clearly contrary to law, then this Court should not interfere.
[18] The Respondent argues that the record shows that it considered only relevant matters including its earlier delays in dealing with prior requests by the Applicant and its failure to follow its own procedures in dealing with his second request. It says there is no evidence of reliance on irrelevant factors or of acting in bad faith. Finally, it says that there is no evidence that it acted contrary to law.
ANALYSIS
[19] Sections 215(1) and 220(3.1) of the Act are relevant and provide as follows:
| 215(1) When a person pays, credits or provides, or is deemed to have paid, credited or provided, an amount on which an income tax is payable under this Part, or would be so payable if this Part were read without reference to subsection 216.1(1), the person shall, notwithstanding any agreement or law to the contrary, deduct or withhold from it the amount of the tax and forthwith remit that amount to the Receiver General on behalf of the non-resident person on account of the tax and shall submit with the remittance a statement in prescribed form. |
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215(1) La personne qui verse, crédite ou fournit une somme sur laquelle un impôt sur le revenu est exigible en vertu de la présente partie, ou le serait s'il n'était pas tenu compte du paragraphe 216.1(1), ou qui est réputée avoir versé, crédité ou fourni une telle somme, doit, malgré toute disposition contraire d'une convention ou d'une loi, en déduire ou en retenir l'impôt applicable et le remettre sans délai au receveur général au nom de la personne non-résidente, à valoir sur l'impôt, et l'accompagner d'un état selon le formulaire prescrit. |
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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. |
[20] Sections 202(1) and 202(7) of the Regulations are also relevant and provide as follows:
| 202(1) Every person resident in Canada who pays or credits, or is deemed by Part I or Part XIII of the Act to pay or credit, to a non-resident person an amount as, on account or in lieu of payment of, or in satisfaction of, (a) a management or administration fee or charge, (b) interest, (c) income of or from an estate or trust,(d) rent, royalty or a similar payment referred to in paragraph 212(1)(d) of the Act, including any payment described in any of subparagraphs 212(1)(d)(I) to (viii) of the Act, (e) a timber royalty as described in paragraph 212(1)(e) of the Act, (f) [Repealed, SOR/2003-5, s. 2] (g) a dividend, including a patronage dividend as described in paragraph 212(1) (g) of the Act, or (h) a payment for a right in or to the use of (I) a motion picture film, or (ii) a film or video tape for use in connection with television, (I) [Repealed, SOR/88-165, s. 1] shall, in addition to any other return required by the Act or these Regulations, make an information return in prescribed form in respect of such amount. |
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202(1) Toute personne résidant au Canada qui paie à une personne non-résidente ou porte à son crédit, ou qui est réputée, selon la partie I ou la partie XIII de la Loi, lui payer ou porter à son crédit une somme au titre ou en paiement intégral ou partiel a) d'un honoraire ou frais de gestion ou d'administration, b) d'un intérêt, c) du revenu d'une succession ou d'une fiducie ou en provenant, d) d'un loyer, d'une redevance ou d'un semblable paiement mentionnés à l'alinéa 212(1)d) de la Loi, y compris tout paiement don't il est fait mention à l'un des sous-alinéas 212(1)d)(I) à (viii) de la Loi, e) d'une redevance forestière visée à l'alinéa 212(1)e) de la Loi, f) [Abrogé, DORS/2003-5, art. 2] g) d'un dividende, y compris une ristourne au sens de l'alinéa 212(1)g) de la Loi, ou h) d'un paiement pour un droit d'utilisation ou autre sur (I) un film cinématographique, ou (ii) un film ou une bande magnétoscopique pour la télévision, I) [Abrogé, DORS/88-165, art. 1] doit remplir une déclaration de renseignements selon le formulaire prescrit, en plus de toute autre déclaration exigée par la Loi ou le présent règlement, à l'égard de telle somme.
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| 202(7) Subject to subsection (8), an information return required under this section shall be filed on or before March 31 and shall be in respect of the preceding calendar year. |
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202(7) Sous réserve du paragraphe (8), une déclaration de renseignements exigée en vertu du présent article doit être produite au plus tard le 31 mars et doit viser l'année civile précédente. |
[21] Section 215(1) clearly imposes an obligation upon a person, like the Applicant, to withhold the income tax due from a person, like his non-resident landlord, in respect of taxable monies, such as rent, that are paid to a non-resident person. Sections 202(1) and 202(7) of the Regulations clearly impose an obligation upon the Applicant to file an annual form in relation to the withholding tax.
[22] The Act is one of general application. It is well-established that persons are deemed to have knowledge of the law. In Pirotte v. Canada (Unemployment Insurance Commission, [1977] 1 F.C. 314, a case involving a claim for unemployment insurance benefits, the Court of Appeal said as follows at page 317:
... It is a fundamental principle that ignorance of law does not excuse failure to comply with a statutory provision. (Mihm v. Minister of Manpower and Immigration [1970] S.C.R. 348 at p. 353.) The principle is sometimes criticized as implying an unreasonable imputation of knowledge but it has long been recognized as essential to the maintenance and operation of the legal order.
[23] However frustrating it may be, the Applicant is subject to the above-quoted provisions of the Act. At the same time, he is entitled to resort to those provisions which allow the Minister to moderate the consequences of failure to comply with the strict requirements to file returns. That is the purpose of section 220(3.1) as discussed in Kaiser v. M.N.R. (1995), 95 D.T.C. 5187 at page 5188-5189:
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.
[24] The standard of review for a decision made in the exercise of ministerial discretion was addressed in Maple Lodge Farms Ltd. v. Government of Canada, [1982] 2 S.C.R. 2 where the Supreme Court of Canada held that a discretionary decision made pursuant to statutory authority should not be interfered with simply because the Court might have exercised the discretion in a different manner. At page 7, the Court said:
... It is, as well, a clearly-established rule that the courts should not interfere with the exercise of a discretion by a statutory authority merely because the court might have exercised the discretion in a different manner had it been charged with that responsibility. Where the statutory discretion has been exercised in good faith and, where required, in accordance with the principles of natural justice, and where reliance has not been placed upon considerations irrelevant or extraneous to the statutory purpose, the courts should not interfere.
[25] In light of this standard of review, the question is whether the Respondent, acting as the delegate of the Minister, acted in accordance with the principles of natural justice and relied only on relevant, not extraneous, considerations.
[26] On the basis of the record, I see no breach of the principles of natural justice. The Applicant was given the opportunity to present his case to the Respondent. He was afforded the opportunity to make continuing submissions. The Applicant seems to place much weight on the fact that he was not specifically informed about the obligation to file the NR4 information form. The Respondent acknowledges this but says that the statutory obligation imposed by the Act and Regulations, in that regard, does not include any requirement of notice. I see no breach of natural justice arising in relation to the lack of notice or in the manner in which the Respondent dealt with the Applicant's request for the exercise of discretion conferred under section 220(3.1).
[27] The Applicant argues that the penalty assessed him should be cancelled. There is no basis upon which this Court can grant that relief. The Act confers the discretion to cancel or waive penalties and interest, upon the Minister or his delegate, not upon the Court. The power conferred upon the Court in an application for judicial review is set out in section 18.1(3) of the Federal Court Act, supra, which provides as follows:
| (3) On an application for judicial review, the Trial Division may (a) 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; or (b) declare invalid or unlawful, or quash, set aside or set aside and refer back for determination in accordance with such directions as it considers to be appropriate, prohibit or restrain, a decision, order, act or proceeding of a federal board, commission or other tribunal. |
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(3) Sur présentation d'une demande de contrôle judiciaire, la Section de première instance peut_: a) ordonner à l'office fédéral en cause d'accomplir tout acte qu'il a illégalement omis ou refusé d'accomplir ou don't il a retardé l'exécution de manière déraisonnable; b) déclarer nul ou illégal, ou annuler, ou infirmer et renvoyer pour jugement conformément aux instructions qu'elle estime appropriées, ou prohiber ou encore restreindre toute décision, ordonnance, procédure ou tout autre acte de l'office fédéral. |
[28] The Court has limited power on an application for judicial review. It cannot substitute its view for that of the Respondent. The Respondent has assessed the Applicant's request for the application of the "fairness" provisions and, in my opinion, has done so in a principled and reasonable manner. While it was open to the Respondent to cancel the penalty and interest, it was not obliged to do so.
[29] In the result, I see no basis for interfering with the decision reached by the Respondent and the application for judicial review is dismissed. In the exercise of my discretion, I make no order as to costs.
ORDER
The application for judicial review is dismissed, no order as to costs.
(Sgd.) "Elizabeth Heneghan"
J.F.C.
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-41-03
STYLE OF CAUSE: SIMON P.J. DOREY v. CANADA CUSTOMS AND REVENUE AGENCY
PLACE OF HEARING: VANCOUVER, BC,
DATE OF HEARING: OCTOBER 15, 2003
REASONS FOR ORDER AND ORDER: HENEGHAN J.
DATED: OCTOBER 23, 2003
APPEARANCES:
Simon P.J. Dorey FOR APPLICANT
Mr. Michael Taylor & Ms. Lynn Burch FOR RESPONDENT
SOLICITORS OF RECORD:
Mr. Simon P.J. Dorey FOR APPLICANT
Mr. Michael Taylor & Ms. Lynn Burch
Department of Justice FOR RESPONDENT