Date: 20021113
BETWEEN:
METRO-CAN CONSTRUCTION LIMITED
Applicant
- and -
HER MAJESTY THE QUEEN
AND
THE MINISTER OF NATIONAL REVENUE
Respondents
[1] The applicant, Metro-Can Construction Limited, has applied for judicial review of a decision of Ms. Loretta Bemister, the Chief of Appeals of the Vancouver office of the Canada Customs and Revenue Agency ("CCRA"), dated March 8, 2002, which denied the applicant's request for waiver of interest on its income tax account pursuant to subsection 220(3.1) of the Income Tax Act (the "Act").
Background
[2] On June 18, 1990, the Minister of National Revenue (the "Minister") assessed the applicant for its 1989 taxation year ending July 31, 1989. The applicant's 1990 taxation year ending July 31, 1990 was assessed on January 17, 1991.
[3] On June 1, 1993, the Minister reassessed Metro-Can for both its 1989 and 1990 taxation years. The purpose of the reassessments is not relevant to these proceedings; thus, I need not describe it further than to say it involved section 80 of the Act. Notices of Objection to the 1993 reassessments were filed by the applicant on August 17, 1993.
[4] The Minister confirmed the reassessments on June 19, 1995. Metro-Can appealed to the Tax Court of Canada; the appeal was dismissed on October 2, 1998. Metro-Can appealed that decision to the Federal Court of Appeal, which dismissed the appeal on June 22, 2000. Subsequently, the Supreme Court of Canada dismissed Metro-Can's application for leave to appeal on March 15, 2001. Finally, on June 28, 2001, the Federal Court of Appeal dismissed Metro-Can's application to re-hear the case.
[5] Meanwhile, on August 1, 2000, Metro-Can filed an application with the Minister to waive interest and penalties under subsection 220(3.1) of the Act. On August 7, 2001 the request for waiver was denied by John Asher, Team Leader in the CCRA's Coquitlam, British Columbia office.
[6] On October 1, 2001, Metro-Can appealed Mr. Asher's decision. On March 8, 2001, Ms. Bemister dismissed the appeal.
Issues
[7] The applicant questions whether the Minister used an improper process in coming to the decision not to waive interest. In particular, the applicant sets out the following issues in its brief at paragraph 27:
(a) did the Minister ignore relevant facts, take into consideration irrelevant facts or make the decision contrary to law?
(b) did the wrong person hear Metro-Can's October 1, 2001 appeal from Mr. Asher's initial determination not to waive interest?
Legislation
[8] Subsection 220(3.1) of the Income Tax Act provides 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. |
Analysis
[9] Subsection 220(3.1) of the Act confers discretion on the Minister with regard to waiving or cancelling penalties or interest. The Minister is under no obligation to do so. Thus, on judicial review, the Court must determine whether the Minister, or his statutory delegate, has properly exercised his discretion. The standard of review, as articulated by Mr. Justice Pelletier in Sharma v.M.N.R., [2001] 3 C.T.C. 169 (F.C.T.D.), is patent unreasonableness. As Mr. Justice Mackay noted in Alasdair MacKay v M.N.R., 2002 F.C.T. 234 (F.C.T.D.), this standard requires a high degree of deference by the reviewing court to the exercise of discretion, especially since the discretion concerns a relieving provision under the Income Tax Act.
[10] The Income Tax Act provides no process or factors that must be followed or considered by the Minister in the course of rendering a decision under subsection 220(3.1). However, information circular 92-2 sets out guidelines, with examples of circumstances where cancelling or waiving interest may be warranted. Paragraph 3 of the guidelines emphasizes that these are only guidelines and are not meant to be exhaustive. Paragraph 5 lists examples of extraordinary circumstances, beyond the taxpayer's control, where interest may be cancelled or waived. Paragraph 6 lists instances where the interest arose primarily because of the actions of the CCRA. Finally, paragraph 7 lists examples where there is an inability to pay on the taxpayer's part. Again, the examples given in IC 92-2 are not meant to be exhaustive.
[11] The following factors were considered by Ms. Bemister in making her decision:
(a) the request made by the Applicant and the reasons therefor;
(b) the guidelines in Information Circular 92-2 ...;
(c) the reasons for the application were not consistent with any of the guidelines;
(d) the complexity of the legal issues which were the subject of the Objection and appeals;
(e) the large quantity of information which was reviewed with respect to the Objection filed; and
(f) from the receipt of the Notice of Reassessment the Applicant was aware of its liability.
(Respondent's Record, Affidavit of Loretta Bemister, tab 2, para. 15)
[12] There is no mention that Ms. Bemister considered the issue of delays allegedly caused by the CCRA or by the Tax Court in giving its decision or the delays while the case was before the Federal Court of Appeal division or the Supreme Court of Canada.
[13] The applicant contends that the decision-maker took into account irrelevant factors, the main one being that Metro-Can had known the amount of its tax liability since it was reassessed on June 1, 1993 and yet never made any payments. The applicant submits because it had filed Notices of Objection, it did not know the final amount of its liability and that this should not have been held against it.
[14] The applicant also relies on the Federal Court of Appeal's decision in Hillier v. The Attorney General of Canada (2001), DTC 5399 (F.C.A.). In that case, one of the factors considered by the decision-maker was that the applicant did not dispute his liability. The Court held that the appellant did indeed dispute his liability as he had filed notices of objection. Thus, from the time they were filed until the final reassessment, the appellant did not know what his actual liability was.
[15] In the case at bar, the Notice of Reassessment that was objected to and appealed is dated June 1, 1993. Pursuant to subsections 152(8) and 248(1) of the Income Tax Act, an assessment of tax (and a reassessment) is deemed to be valid but subject to change if so determined by the proper authorities or by the Courts.
[16] I am satisfied that until the proper authorities or the Court change the assessment, the assessment is deemed valid. Thus, the applicant's argument on this point, that the applicant did not know the amount owing, cannot stand.
[17] The applicant also contends that there are large gaps in the time line that may amount to delay on the CCRA's part. Alternatively, the applicant argues that even if the delays are not the fault of the Department, but rather inherent in the objection and appeal process, he should not be subjected to a large accrual of interest.
[18] Metro-Can filed its Notices of Objection to the reassessments on August 17, 1993; confirmation of the assessments occurred on June 19, 1995. Thus, some 22 months had elapsed. While such a time period may ostensibly seem to be long, nothing in the record shows that it is unreasonable. Similarly, neither the time period between the request for waiver (August 1, 2000) and the denial by Mr. Asher (August 7, 2001), nor the time period between the applicant's appeal of Mr. Asher's decision (October 1, 2001) and the dismissal of the appeal by Ms. Bemister (March 8, 2002) are undue.
[19] Finally, the applicant contends that the wrong person made the final decision. Paragraph 14 of IC 92-2 states:
14. If taxpayers or employers believe that the Department has not exercised its discretion in a fair and reasonable manner, then they may request, in writing, that the director of a district office or taxation centre review the situation.
[20] The applicant submits that it requested a review of Mr. Asher's decision on October 1, 2001. That review was conducted by Ms. Bemister, who is neither the director of a district office nor of a taxation centre; she is the Chief of Appeals for the Vancouver office of the CCRA.
[21] The applicant relies on no jurisprudence for this argument.
[22] In my opinion, this argument must fail. Subsection 220(2.01) of the Act grants the Minister the power to delegate to an officer or class of officers the authority to exercise the powers and perform the duties of the Minister under subsection 220(3.1). It must be recalled that IC 92-2 provides information and guidelines and, moreover, paragraph 14, cited above, does not say "shall", but rather "may". Exhibit C to the affidavit of Donald Voth (Applicant's Record, tab 2, pp.13-14) is the letter by which the applicant requested a waiver of interest. Nowhere in that letter did the applicant specifically request that a director of a district office or taxation centre review the situation. The review by Ms. Bemister, the Chief of Appeals, was appropriate. It cannot be implied from the letter by which the applicant requested a waiver of interest that the applicant requested the director of the office of taxation to make the review.
[23] Nothing in the record suggests that the CCRA acted in bad faith. The affidavits of Mr. Asher and Ms. Bemister indicate the steps they took, the factors they considered, and the reasons for the length of time it took for decisions to be made.
[24] With regard to the applicant's submission that nowhere in the affidavits of Mr. Asher and Ms. Bemister can one find a statement that the issue of "undue delay" was considered, I am satisfied that this submission is not valid.
[25] It is correct to say that amongst the factors listed as considered in the Asher affidavit or the Bemister affidavit one cannot find the words that the issue of undue delay was specifically considered.
[26] I am satisfied that the issue of undue delay was implicitly considered for otherwise it would not have been necessary for Ms. Bemister to consider the factor of "complexity of legal issues" which were the subject of the objection and appeal.
[27] Both Mr. Asher and Ms. Bemister, in their affidavits, do state the reasons for the length of time it took for the decision to be made, but failed to state this in the list of factors considered.
[28] I must commend counsel for the applicant in his preparation, presentation and creativeness in the submissions made. Nevertheless, I cannot conclude that in the circumstances of this case, the decision of the Minister to forgive "interest owing" is patently unreasonable.
[29] The application for judicial review is denied with costs in favour of the respondents.
"Max M. Teitelbaum"
J.F.C.C.
Calgary, Alberta
November 13, 2002
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-714-02
STYLE OF CAUSE: METRO-CAN CONSTRUCTION LTD v. HER MAJESTY THE QUEEN ET AL
PLACE OF HEARING: VANCOUVER, B.C.,
DATE OF HEARING: OCTOBER 24, 2002
REASONS FOR ORDER: THE HONOURABLE MR JUSTICE TETIELBAUM
DATED: NOVEMBER 13, 2002
APPEARANCES:
MR. JOEL NITIKMAN FOR APPLICANT
MRS. MARGARET C;ARE FOR RESPONDENT
SOLICITORS OF RECORD:
FRASER MILNER CASGRAIN LLP
VANCOUVER, B.C., FOR APPLICANT
DEPUTY ATTORNEY GENERAL OF CANADA
B.C. REGION FOR RESPONDENT