Date: 20050711
Docket: T-1912-04
Citation: 2005 FC 972
Ottawa, Ontario, this 11th day of July, 2005
Present: THE HONOURABLE MR. JUSTICE SIMON NOËL
BETWEEN:
DEE M. BABIN
(Applicant)
and
CANADA CUSTOMS AND REVENUE AGENCY
(Respondent)
REASONS FOR ORDER AND ORDER
[1] This is an application for judicial review of a decision by the Respondent, the Canada Customs and Revenue Agency ("CCRA" or "Respondent"), dated September 24, 2004, denying the request of the Applicant, Dee M. Babin (Ms. Babin or "Applicant"), to waive the penalties and interest imposed on her 2001 income tax return. The Applicant seeks an order cancelling these penalties and interest.
ISSUE
[2] The question at issue in this case is whether the CCRA properly exercised its discretion in refusing to waive or cancel all or a portion of the penalties and interest payable on Ms. Babin's 2001 income tax return.
CONCLUSION
[3] For the reasons outlined below, I find that the CCRA properly exercised its discretion. There are no grounds upon which this discretionary decision may be overturned, and therefore this application for judicial review is rejected.
BACKGROUND
[4] In February 2002, Ms. Babin went overseas for six (6) months, returning at the end of July 2002. Prior to her departure, she made arrangements with her accountant, Mr. Shiraz Kaba (Mr. Kaba or the "accountant"), to file her 2001 income tax return. In early April 2002, a friend of Ms. Babin's forwarded all of her income tax documents to Mr. Kaba.
[5] In June or July of 2003, Ms. Babin was informed by telephone by CCRA that she owed about $11,000.00 in penalties and interests.
[6] At the end of September 2003, Ms. Babin attended at the offices of the CCRA in Surrey, British Columbia, where she was provided with an explanation of the money owing. She was advised that her 2001 income tax return had been filed late, on May 9, 2002, and so late filing penalties had been assessed. She was also advised that the 2001 income tax return omitted a T-4 and so she was assessed late filing penalties, as well as an omission penalty. Arrears interest was also charged.
[7] By letter dated February 25, 2004, Ms. Babin requested a waiver or cancellation of interest and/or penalties for the 2001 taxation year (the "first Fairness Request").
[8] By letter dated April 23, 2004, CCRA informed Ms. Babin that the first Fairness Request was denied (the "April decision").
[9] By letter dated May 7, 2004, Ms. Babin made a second request for waiver of interest and/or penalties for the 2001 taxation year (the "second Fairness Request").
[10] By letter dated September 24, 2004, the CCRA advised Ms. Babin that her second Fairness Request was denied (the "September decision").
[11] On October 27, 2004, Ms. Babin filed a Notice of Application in the Federal Court with regards to the September decision.
THE CONTESTED DECISION
[12] The September decision confirmed the April decision: That while Fairness Requests may be granted if an individual can demonstrate the penalties and/or interest arose primarily as a result of actions by the CCRA or circumstances beyond the taxpayer's control, no such adjustment would be appropriate in this situation. It is a taxpayer's responsibility to ensure that his or her income tax return is correctly completed and filed when due, which Ms. Babin failed to do.
SUBMISSIONS OF THE PARTY
The Applicant
[13] The Applicant submits two main arguments: first, that the CCRA did not follow its own established procedures in reaching its decision, and second, that the CCRA did not properly consider either the extent to which the penalties and interest were incurred as a result of circumstances beyond Ms. Babin's control or whether Ms. Babin had exercised a reasonable amount of care in the conduct of her affairs; that is to say, that since she had entrusted responsibility for her 2001 income tax return exclusively to her accountant in her absence, she cannot be held further responsible for his failure. She advises that since she was out of the country, the errors made on her 2001 income tax return were matters out of her control, and therefore the CCRA should have exercised its discretion and waived or cancelled the penalties and interest.
The Respondent
[14] The Respondent advises that the discretion given to it pursuant to the so-called fairness provisions of s. 220(3.1) of the Income Tax Act (the "ITA" and the "Fairness Provisions") is very broad, and therefore the Court should be cautious about interfering in the CCRA's decision. There is no evidence that the CCRA made its decision in bad faith, ignored relevant facts, considered irrelevant facts, or decided in a manner otherwise contrary to the law. In the circumstances, it cannot be said that Ms. Babin truly had no control over the situation. Therefore, the decision of the CCRA to refuse the first and second Fairness Requests was not patently unreasonable.
ANALYSIS
Standard of review
[15] Where a body such as the CCRA is given a broad discretion like that accorded by s. 220(3.1) of the ITA, the deference shown to that body should be broad. The reviewing court should consider whether the discretion was "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" (see Re Maple Lodge Farms Ltd. V. Government of Canada, [1982] 2 S.C.R. 2 at 4 ("Maple Lodge Farms"); Barron v. Minister of National Revenue, 97 D.T.C. 5121 (F.C.A.) at 5122 ("Barron")). If these criteria are properly met, the Court should not interfere. The Court may not substitute its opinion simply because it would have come to a different conclusion (Maple Lodge Farms, supra at 4; Barron, supra at 5122).
[16] Therefore the standard of review on this application for judicial review is that of reasonableness (Lanno v. Canada (Customs and Revenue Agency), 2005 FCA 153 at para. 7; Hillier v. Canada (Attorney General) (2001), 273 N.R. 245, [2001] 3 C.T.C. 157, 2001 D.T.C. 5399 (F.C.A.).
The CCRA's decision
[17] As stated above, the CCRA denied Ms. Babin's first and second Fairness Requests since it found that the penalties and/or interests did not arise because of circumstances beyond control. The onus was on Ms. Babin to ensure her 2001 income tax return was correct and filed on time, both of which she failed to do.
[18] The Information Circular 92-2, Guidelines for the Cancellation and Waiver of Interest and Penalties (the "Guidelines"), was issued to provide a guide for the CCRA when attempting to exercise its discretion as to the cancellation or waiver of all or part of interest and penalties payable by a taxpayer. The relevant section in this case is s. 5, which states:
Guidelines and examples of circumstances where cancelling or waiving interest or penalties may be warranted
Penalties and interest may be waived or cancelled in whole or in part where they result in circumstances beyond a taxpayer's ... control. For example, one of the following extraordinary circumstances may have prevented a taxpayer, a taxpayer's agent, the executor of an estate, or an employer from making a payment when due, or otherwise complying with the Income Tax Act:
(a) natural or human-made disasters such as, flood or fire;
(b) civil disturbances or disruptions in services such as, a postal strike;
(c) a serious illness or accident; or
(d) serious emotional or mental distress such as, death in the immediate family.
[19] The factual situation here presented does not fit within the parameters of "extraordinary circumstances" referred to in the Guidelines. It is obvious from the plain language used and examples given in the Guidelines as cited above that "circumstances beyond a taxpayer's ... control" do not envisage the simple absence of the taxpayer from the country at the time her tax return was due, even where she may have appointed a third party to complete and file the return in her absence. In such a circumstance, the taxpayer is nonetheless directly responsible for the actions of those persons appointed to take care of her financial matters. This responsibility may be as simple as telephoning the person to ensure the return has been filed or, upon her return to the country, ensuring the return was filed without problems. Ms. Babin did neither of these things, and I believe it was reasonable of the CCRA to deem that her situation was not the result of circumstances beyond her control.
[20] Lack of control is an essential element of Section 5 of the Guidelines. The facts of this case show that the Applicant was able to maintain control of her file while travelling, as well as upon her return to Canada. As CCRA personnel responsible for reviewing the first and second Fairness Requests point out, approximately four months elapsed between her return from abroad in July 2002 and the date upon which the CCRA first began reassessing her 2001 income tax return in December 2002. Having delegated the responsibility to file her return within the specific time period with all the documents necessary to her accountant, is not an extraordinary circumstance upon which Ms. Babin may rely. A good portion of Canadian taxpayers do this even when they are not outside the country. Such a situation does not relieve the taxpayer from his or her responsibility under the Act. He or she still maintains ultimate control of the tax return.
[21] While Ms. Babin's situation is certainly unfortunate, it is simply not within the scope of the CCRA to waive or cancel the penalties and interest that were assessed against her 2001 income tax return. It was Ms. Babin's responsibility to ensure, in some way, that her accountant Mr. Kaba had properly filed her return as agreed. She did not do so. If the Applicant's version of events with Mr. Kaba is true, his actions and attitude are somewhat troubling, and perhaps further recourse can be sought against him directly; however, this aspect of the claim is separate from the CCRA's involvement. There is no suggestion that the CCRA acted in bad faith. Nor did the CCRA consider any irrelevant facts or ignore any relevant ones. The reviews of both the first and second Fairness Requests show that the CCRA personnel responsible for Ms. Babin's file were aware that she was out of the country at the time her 2001 income tax return was prepared and filed. The decision of the CCRA was not contrary to law and was not unreasonable in any way. Therefore this application for judicial review shall be dismissed.
[22] The factual situation of this case, however, does not justify that costs should be against the Applicant. Therefore, no costs shall be awarded.
ORDER
THIS COURT ORDERS THAT :
This application for judicial review is dismissed, without costs.
"Simon Noël" Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1912-04
STYLE OF CAUSE: DEE M. BABIN v. CANADA CUSTOMS AND REVENUE AGENCY
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: July 6, 2005
REASONS FOR JUDGMENT: NOËL, J.S.
DATED: July 11th, 2005
APPEARANCES:
Mr. James Vilvang Q.C. For Applicant
Mr. Gavin Larid For Respondent
SOLICITORS OF RECORD:
Richards Buell Sutton For Applicant
Vancouver, British Columbia
Morris Rosenberg For Respondent
Deputy Attorney General of Canada