Date: 20050217
Docket: T-2182-03
Citation: 2005 FC 239
BETWEEN:
HealthSmith Medical Inc.
Applicant
- and -
The Minister of National Revenue
Respondent
REASONS FOR ORDER
PINARD J.:
[1] This is an application for judicial review under subsection 18.1(1) of the Federal Courts Act, R.S.C. 1985, c. F-7, in respect of the decision of the Minister of National Revenue (the "Minister") dated September 22, 2003, wherein the Minister denied the applicant's request for cancellation or waiver of interest pursuant to subsection 220(3.1) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the "Act").
Facts
[2] HealthSmith Medical Inc. (the "applicant") has had financial difficulties since its inception. In 1998 and 1999 the applicant was not current with its monthly remittances and was in arrears for 1997. In January 1999, the first attempt was made to catch up on late tax payments. A $1000 payment was followed by eight post-dated cheques of $718.96. The respondent did not receive five of the eight cheques for $718.96.
[3] By March 2000, the applicant's tax debt, including penalty and interest, was approximately $28,000. In July 2000, the applicant's 1999 T4 summary together with its 2000 arrears brought the applicant's total debt up to $47,714.75.
[4] During July and August 2000, the applicant entered into a payment arrangement with Canada Customs and Revenue Agency ("CCRA"). Anthony Ocana (director of the applicant) issued three $10,000 cheques dated July 15th, August 14th and September 13, 2000 to HealthSmith Medical Inc. HealthSmith Medical Inc. then issued three cheques to CCRA for $10,000 each on August 8th, 15th and September 15, 2000. Two of these went to pay the amount owed. The cheque dated September 15, 2000 was returned NSF on November 30, 2000 and was not replaced.
[5] On July 19, 2001, Dr. Ocana called CCRA Collections to discuss the applicant's tax account. He inquired how the applicant could get a waiver or cancellation of interest and was told that he should make the request in writing and that it was contingent on a payment arrangement and payment in full of the principal portion. On July 19, 2001, Dr. Ocana wrote to Mr. Lee, CCRA and suggested a payment plan of $500 per month until the principal was paid and asked that CCRA not make the applicant pay penalty and interest.
[6] On November 30, 2001, Dr. Ocana wrote to Mr. Barmania, CCRA and confirmed that the applicant had closed the clinic in the summer of 2001 due to the insolvency of the applicant. He requested that CCRA keep the interest and penalties to a minimum.
[7] On April 16, 2002, the applicant requested retroactive cancellation or waiver of interest and penalty on the basis of financial hardship.
[8] On April 24, 2003, a Collection Officer prepared a Fairness Summary, recommending that the applicant's request for cancellation or waiver of interest be denied. By letter dated April 30, 2003, the applicant was advised that its request for cancellation or waiver of interest had been denied.
[9] On August 26, 2003, the applicant requested a second review of its request for cancellation or waiver of interest.
[10] On September 15, 2003 a Second Level Fairness Report was prepared by a Collection Officer, who recommended denial of the applicant's request for cancellation or waiver of interest and penalty.
[11] On September 22, 2003, John Upton-Noot, Assistant Director, Revenue Collections denied the applicant's request for cancellation or waiver of interest and penalty and notified the applicant that its request had been denied.
Decision under Review
[12] The Assistant Director, Revenue Collections, concluded that CCRA was correct in its decision to deny the applicant's application for interest and penalty cancellation under the provisions of the Fairness Legislation.
[13] The Assistant Director gave the following reasons in support of his decision:
- A review of the evidence does not reveal the degree of financial hardship as contemplated by the Fairness Legislation for corporate clients. Financial hardship for a corporate client refers to situations where the continuity of business operations and the continued employment of a firm's employees are unnecessarily jeopardized. As the company ceased operations in the summer of 2001, the applicant's situation does not meet this requirement.
- Paragraph 10 of the Information Circular 92-2 ("IC 92-2") indicates that previous history of compliance must be considered with respect to granting relief. According to the history of the account, the company was late in filing the required payroll remittances on numerous occasions.
- Paragraph 10 of IC 92-2 also indicates that the actions of the directors must be taken into consideration. For example, whether they acted quickly to remedy a problem and whether they knowingly allowed a balance to exist, thereby accruing interest. Based on the director's own submission, it appears that he learned about the problem in 1999, but did nothing personally to remedy it until the spring of 2001.
Analysis
[14] The decision to deny the applicant's request for cancellation or waiver was dated September 22, 2003. The application for judicial review was filed on November 20, 2003. The individual representing the applicant is the director of the applicant company. The applicant sought leave, pursuant to rule 120 of the Federal Court Rules, 1998, SOR/98-106, (the "Rules") to be represented by the director of the company, Dr. Anthony Ocana, rather than by a solicitor. The respondent consented to this motion. On July 27, 2004, Prothonotary John A. Hargrave ordered that Dr. Anthony Ocana may represent HealthSmith Medical Inc.
[15] At the hearing before me, Dr. Ocana sought leave to file the letter containing the impugned decision which he stated he received on October 22, 2003, as it would appear from a stamping on the letter. The letter was filed by consent and learned counsel for the respondent did not press forward with her argument based on prescription.
[16] Turning to the merits of the application for judicial review, the relevant provision of the Act 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 (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.
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[17] When reviewing a discretionary decision taken by the Minister under subsection 220(3.1) of the Act, a considerable degree of deference is required, and the standard of review is that of patent unreasonableness (see Cheng v. Canada, [2001] F.C.J. No. 1532 (T.D.) (QL)). The reviewing Court may only intervene and set aside the Minister's decision if it was made in bad faith, if the decision-maker clearly ignored some relevant facts or considered irrelevant ones, or if the decision is contrary to law (Cooper v. Canada (Minister of National Revenue), [2004] F.C.J. No. 1641 (T.D.) (QL)).
[18] In my opinion, the applicant has not been able to demonstrate that the Minister's decision was patently unreasonable.
[19] In assessing whether to cancel or waive interest or penalty the Minister relied on CCRA's records and correspondence from the applicant. The Minister found that the applicant had ceased business in June 2001 and had no employees at that time. Since the applicant had ceased business before the request for cancellation or waiver of interest was received, the payment of the accrued and accruing interest on the account would not jeopardize the continued operation of the business, nor the continued employment of the applicant's employees. Based on the information before the Minister, this conclusion was not unreasonable.
[20] The applicant has submitted affidavit evidence regarding the existence of the business after the deadline for filing had passed. The respondent does not oppose an application by the applicant pursuant to rule 8 of the Rules, however the respondent objects to the inclusion of Exhibits "E" and "H" as they were not produced in the course of the Minister's review. The applicant has not provided any reason or special circumstances why the certificate was not produced during the Minister's review and consequently it should not be admitted (Gitxsan Treaty Society v. Hospital Employees' Union, [2000] 1 F.C. 135 at 143 (C.A.)).
[21] The Minister also assessed the applicant's situation using the IC 92-2 guidelines. The applicant had a history of non-compliance with remittance of source deductions and filing of T4 summaries, in addition to the NSF cheque that was not replaced. The applicant did not act quickly to remedy the problems with the account, which is another criteria used in determining whether to waive interest. The applicant was aware of problems dating back to 1999, however did not take prompt action to rectify the situation. On the facts before him, I do not believe that the Minister exercised his discretion in bad faith, or that he ignored relevant facts and therefore did not err in refusing to waive or cancel the interest.
[22] For all the above mentioned reasons, the application for judicial review is dismissed, with costs.
JUDGE
OTTAWA, ONTARIO
February 17, 2005
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-2182-03
STYLE OF CAUSE: HealthSmith Medical Inc. v. The Minister of National Revenue
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: January 12, 2005
REASONS FOR ORDER: The Honourable Mr. Justice Pinard
DATED: February 17, 2005
APPEARANCES:
Dr. Anthony M. Ocana FOR THE APPLICANT
Authorized Agent
Ms. Linda Bell FOR THE RESPONDENT
SOLICITORS OF RECORD:
Dr. Anthony M. Ocana FOR THE APPLICANT
Delta, British Columbia
John H. Sims, Q.C. FOR THE RESPONDENT
Deputy Attorney General of Canada