Date: 20020128
Docket: T-535-01
Neutral Citation: 2002 FCT 84
BETWEEN:
HÉLÈNE BOUDREAULT
Plaintiff
and
CANADA CUSTOMS AND REVENUE AGENCY
Defendant
REASONS FOR ORDER AND ORDER
BLAIS J.
[1] This is an application for judicial review by Hélène Boudreault (hereinafter "the plaintiff") from a decision by the Canada Customs and Revenue Agency (hereinafter "the defendant") on March 1, 2001 rejecting her application to waive interest under s. 220(3.1) of the Income Tax Act (hereinafter "the ITA").
FACTS
[2] The plaintiff is a pharmacist, and so receives a salary and does not make instalment payments.
[3] In February 1998 an instalment payment summary was sent to the plaintiff by the defendant, telling her that the total instalment payments made by her for 1997 amounted to $25,000.
[4] This instalment payment summary was sent to the plaintiff as the result of an error made in recording the amount of instalment payments made by another taxpayer.
[5] Three figures in the social insurance number were reversed at that time and the $25,000 instalment payment amount was accordingly credited to the plaintiff rather than the taxpayer who made the payment.
[6] Following receipt of the instalment payment summary, the plaintiff never attempted to contact a representative of the defendant to investigate the validity of the summary.
[7] In 1997 the plaintiff had taxable income of $48,321.20 and paid the sum of $7,215.43 as federal tax withheld at source.
[8] On line 476 of her tax return for 1997, dealing with tax paid by instalments, the plaintiff entered the amount of $25,000 and claimed a tax rebate amounting to $25,310.
[9] On March 25, 1998 the plaintiff signed and certified her tax return for 1997.
[10] On May 14, 1998, after the plaintiff filed her tax return for 1997, the defendant issued the plaintiff a rebate amounting to $24,908.85.
[11] On June 21, 2000 Lucie Poirier, of the defendant's Customer Service, sent the plaintiff a letter telling her that a $25,000 payment had been credited to her account by mistake and that the defendant was transferring this payment to the account for which it was intended and [making] a request for repayment of the sum of $24,908.85.
[12] On July 31, 2000 the plaintiff repaid the defendant the sum of $24,908.85. However, she did not repay the interest accumulated on the said sum.
[13] In August 2000 the plaintiff sent the defendant an application to waive interest pursuant to s. 220(3.1) of the ITA.
[14] Robert Lévesque, appeals officer, Pierre Côté, team leader, and Nicole Bérubé, also a team leader, assessed the plaintiff's application for waiver of interest, and in a letter dated September 25, 2000 Pierre Côté informed the plaintiff that her application to waive interest had been denied.
[15] By a letter dated October 16, 2000 the plaintiff requested administrative review of the decision of September 25, 2000.
[16] After analyzing the facts in the record and the reasons put forward by the plaintiff in support of her application for review, Diane Mongrain, appeals officer, and Yvan Marceau, appeals chief, on March 1, 2001 dismissed the application to waive interest filed by the plaintiff.
[17] On March 27, 2001 the plaintiff filed an application for judicial review of the defendant's decision of March 1, 2001.
DISPUTED DECISION
[18] The letter dated March 1, 2001, signed by Yvan Marceau, appeals chief, read as follows:
[TRANSLATION]
Further to your application of October 16, 2000, we have undertaken to review the decision made on September 25, 2000 pursuant to the discretionary authority conferred on the Minister by s. 220(3.1) of the Income Tax Act.
. . . . .
I have been able to conclude from my review that, in view of the circumstances surrounding your case and the purpose and spirit of the equity provisions, it would not be appropriate to cancel the interest in the amount of $5,662 relating to reimbursement of instalment payments of some $25,000 which did not belong to you.
I regret the decision is not more favourable.
APPLICABLE LEGISLATION
[19] Section 220(3.1) of the ITA was adopted to give the Minister of National Revenue discretionary authority to cancel interest or penalties on application. That provision reads as follows:
|
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. |
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.
|
POINTS AT ISSUE
[20] Did the Minister exercise his discretionary authority in accordance with the ITA in the decision made on March 1, 2001 rejecting the application to waive interest made by the plaintiff?
ANALYSIS
[21] Yes, the Minister exercised his discretionary authority in accordance with the ITA in the decision made on March 1, 2001 rejecting the application to waive interest made by the plaintiff.
Applicable standard of review
[22] In Kaiser v. Canada (Minister of National Revenue - M.N.R.), [1995] F.C.J. No. 349 (F.C.T.D.), Rouleau J. stated:
[para 8] 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.
[para 9] The jurisprudence has established the standard to be employed by the Courts when called upon to review the exercise of a discretionary power such as the one in question here. In Re Maple Lodge Farms Ltd. and Government of Canada et al. (1982), 137 D.L.R. (3d) 558 (S.C.C.), McIntyre, J. stated at p. 562:
In construing statutes such as those under consideration in this appeal, which provide for far-reaching and frequently complicated administrative schemes, the judicial approach should be to endeavour within the scope of the legislation to give effect to its provisions so that the administrative agencies created may function effectively, as the legislation intended. In my view, in dealing with legislation of this nature, the courts should, wherever possible, avoid a narrow, technical construction, and endeavour to make effective the legislative intent as applied to the administrative scheme involved. It is, as well, a clearly-established rule that 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.
(My emphasis)
[23] In Braceland v. Canada (Minister of National Revenue - M.N.R.), [1999] F.C.J. No. 434 (F.C.T.D.), Teitelbaum J. affirmed Rouleau J.'s comments in Kaiser, supra, about the role played by this Court in discretionary decisions. Braceland was also dealing with s. 220(3.1) of the ITA:
[para 14] It is clearly established that the Minister's decision under subsection 220.(3.1) of the Income Tax Act is discretionary and as such gives rise to a narrow scope of review. The standard of review for the Minister's decision pursuant to subsection 220.(3.1) of the Act is discussed in Kaiser v. Canada (Minister of National Revenue - M.N.R.)(F.C.T.D.) (1995), 93 F.T.R. 66.
[24] According to this Court's decisions, the standard of review applicable to discretionary decisions is the patently unreasonable standard.
Information Circular IC92-2, titled "Guidelines for the Cancellation . . . of Interest and Penalties"
[25] The plaintiff maintained that the defendant did not apply or misapplied the Information Circular IC92-2 guidelines by refusing to cancel the interest.
[26] In paragraph 6(d) of Information Circular IC92-2 it states the following:
|
6. Cancelling or waiving interest or penalties may also be appropriate if the interest or penalty arose primarily because of actions of the Department, such as: . . . . . (d) errors in processing . . . |
6. L'annulation des intérêts ou des pénalités ou la renonciation à ceux-ci peuvent également être justifiées si ces intérêts ou pénalités découlent principalement d'actions attribuables au Ministère comme dans les cas suivants : . . . . . d) des erreurs de traitement . . .
|
[27] The plaintiff alleged that the defendant committed an excess of jurisdiction as, in her submission, she complied in all respects with paragraph 6(d) of Information Circular IC92-2.
[28] The following information is contained in paragraph 10 of Information Circular IC92-2:
|
10. The following factors will be considered when determining whether or not the Department will cancel or waive interest or penalties: (a) whether or not the taxpayer or employer has a history of compliance with tax obligations; (b) whether or not the taxpayer or employer has knowingly allowed a balance to exist upon which arrears in interest has accrued; (c) whether or not the taxpayer or employer has exercised a reasonable amount of care and has not been negligent or careless in conducting their affairs under the self-assessment system; (d) whether or not the taxpayer or employer has acted quickly to remedy any delay or omission. |
10. Le Ministère tiendra compte des points suivants dans l'étude des demandes d'annulations des intérêts ou des pénalités ou de renonciation à ceux-ci : a) si le contribuable ou l'employeur a respecté, par le passé, ses obligations fiscales; b) si le contribuable ou l'employeur a, en connaissance de cause, laissé subsister un solde en souffrance qui a engendré des intérêts sur arriérés; c) si le contribuable ou l'employeur a fait des efforts raisonnables et s'il n'a pas fait preuve de négligence ni d'imprudence dans la conduite de ses affaires en vertu du régime d'autocotisation; d) si le contribuable ou l'employeur a agi avec diligence pour remédier à tout retard ou à toute omission.
|
[29] In paragraph 5 of the affidavit by Diane Mongrain, appeals officer, there is a list of the reasons which negatively influenced the defendant's decision:
[TRANSLATION]
a. The plaintiff took no steps to ensure that the amount she was claiming belonged to her;
b. She was earning a salary and did not pay instalments;
c. The plaintiff made up her tax returns herself and could not allege ignorance of her tax situation;
d. The plaintiff claimed the sum of $25,000 in filing her tax return: the return was signed and she did nothing to present the facts correctly;
e. The plaintiff argued that she believed these were adjustments for prior years, but it was an instalment payment summary, and there was no mention of adjustments;
f. The plaintiff is a pharmacist, an educated person, and it would have been easy for her to contact a representative of the Agency;
g. The plaintiff had less than $50,000 income annually and the fact that the amount of $25,000 was so large should have prompted her to ask questions;
. . . . .
i. Despite the fact the Agency made an error in recording the amount in the plaintiff's account, it is she who claimed the said amount knowing that it could not have belonged to her . . .
[30] Further, in paragraph 6 of Diane Mongrain's affidavit she writes that not only did she consult Information Circular IC92-2, she also consulted the policy titled "Application of Fairness Provisions to Interest and Penalty" dated March 1996. On the facts it is clear that the plaintiff did not, according to the well-known equity expression, have "clean hands". It is understandable she might want to benefit from an error made by the defendant. That is not acceptable. It was she who by her actions endangered her chances of getting a discretionary adjustment under s. 220(3.1) of the ITA.
Whether guidelines binding
[31] In para. 3 of Information Circular IC92-2 there is the following:
|
3. These are only guidelines. They are not intended to be exhaustive, and are not meant to restrict the spirit or intent of the legislation. As the Department gains experience in applying the legislation, these guidelines may be adjusted, as necessary. |
3. Ce qui est énoncé ici ne constitue que des lignes directrices. La présente circulaire n'est donc pas exhaustive et ne doit pas être interprétée comme limitant l'esprit ou l'intention des mesures législatives. Ces lignes directrices pourront être modifiées au besoin suivant l'expérience acquise.
|
[32] These guidelines do not have binding force and are not binding on the Minister in the exercise of his discretionary authority, so as to exclude all other valid or relevant reasons for which he might exercise his discretionary authority or refuse to do so.
[33] In Maple Lodge Farms Ltd. v. Government of Canada, [1982] 2 S.C.R. 2, McIntyre J. of the Supreme Court of Canada said in this connection:
[8] . . . The discretion is given by the Statute and the formulation and adoption of general policy guidelines cannot confine it. There is nothing improper or unlawful for the Minister charged with responsibility for the administration of the general scheme provided for in the Act and Regulations to formulate and to state general requirements for the granting of export permits. It will be helpful to applicants for permits to know in general terms what the policy and practice of the Minister will be. To give the guidelines the effect contended for by the appellant would to be elevate ministerial directions to the level of law and fetter the Minister in the exercise of his discretion.
(My emphasis)
[34] In the same paragraph McIntyre J. cited a passage from a Federal Court of Appeal judgment in which the Supreme Court concurred:
The Minister may validly and properly indicate the kind of considerations by which he will be guided as a general rule in the exercise of his discretion (see British Oxygen Co. Ltd. v. Minister of Technology [1971] A.C. (H.L.) 610; Capital Cities Communications Inc. v. Canadian Radio-Television Commission [1978] 2 S.C.R. 141, at pp. 169-171), but he cannot fetter his discretion by treating the guidelines as binding upon him and excluding other valid or relevant reasons for the exercise of his discretion (see Re Hopedale Developments Ltd. and Town of Oakville [1965] 1 O.R. 259).
(My emphasis)
[35] In short, Information Circular IC92-2 is a tool used as a guide when an administrative decision is taken by the defendant, but is not binding on the Minister.
[36] In the case at bar the Minister's discretionary authority conferred by s. 220(3.1) of the ITA was exercised in good faith at the time in accordance with Information Circular IC92-2, the policy "Application of Fairness Provisions to Interest and Penalty" and the rules of natural justice.
[37] The evidence available to Diane Mongrain, appeals officer, and Yvan Marceau, appeals chief, allowed the latter to conclude that the application by the plaintiff to waive the interest should be denied.
[38] Counsel for the plaintiff submitted Mildred Bilida (Appellant) v. Revenue Canada (Respondent), 97 D.T.C. 5041. In that case the taxpayer was denied the right to claim farming losses after seven years. The Court had concluded that the plaintiff was in good faith and that the Department of National Revenue had waited a long time to inform the taxpayer that his farming losses would not be considered. These points and certain other factors led the Court to intervene.
[39] That decision is quite different from the case at bar, in which the plaintiff knew or at least should have known from the outset that her claim for reimbursement was without foundation.
[40] The plaintiff did not succeed in persuading the Court that the defendant's employees made any error that could justify its intervention.
[41] The application for judicial review is accordingly dismissed.
|
|
Pierre Blais
Judge |
OTTAWA, ONTARIO
January 28, 2002
Certified true translation
Suzanne M. Gauthier, C. Tr., LL.L
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
FILE: T-535-01
STYLE OF CAUSE: Hélène Boudreault
and
Canada Customs and Revenue Agency
PLACE OF HEARING: Québec
DATE OF HEARING: January 17, 2002
REASONS FOR ORDER AND ORDER BY: BLAIS J.
DATED: January 28, 2002
APPEARANCES:
Louis Sirois FOR THE PLAINTIFF
Marie-Josée Bertrand FOR THE DEFENDANT
SOLICITORS OF RECORD:
Gosselin, Daigle, Sirois & Associés FOR THE PLAINTIFF
Québec, Quebec
Morris Rosenberg FOR THE DEFENDANT
Deputy Attorney General of Canada
Ottawa, Ontario