Date: 20030321
Docket: T-1646-00
OTTAWA, Ontario, this 21st day of March, 2003
PRESENT: THE HONOURABLE MR. JUSTICE MacKAY
BETWEEN:
ARTHUR HEEG
Applicant
- and -
THE ATTORNEY GENERAL OF CANADA
Respondent
UPON application by the applicant for judicial review of, and an order setting aside, the decision made on behalf of the Minister of National Revenue to refuse the applicant's request for cancellation of interest, arrears and penalties in relation to Income Tax assessed, pursuant to section 220(3.1) of the Income Tax Act;
UPON hearing counsel for the application and for the respondent in Regina, on September 26, 2002 when decision was reserved; and upon consideration of submissions then made;
ORDER
IT IS ORDERED THAT the application is dismissed.
(signed) W. Andrew MacKay
_______________________________
JUDGE
Date: 20030321
Docket: T-1646-00
Neutral citation: 2003 FCT 337
BETWEEN:
ARTHUR HEEG
Applicant
- and -
THE ATTORNEY GENERAL OF CANADA
Respondent
The applicant seeks judicial review of and an order setting aside the decision, dated August 4, 2000 by the Director, Regina Tax Services Office, of the Canada Customs and Revenue Agency ("CCRA"). That decision denied Mr. Heeg's request, pursuant to provisions of the fairness guidelines relating to application of the Income Tax Act, for cancellation of instalment interest, arrears interest and late filing penalties assessed in relation to earlier unpaid taxes for the years 1991 to 1998.
Under the Income Tax Act, section 220(3.1) provides discretion in the Minister in regard to penalties or interest assessed, in the following terms:
The Minister may at any time waive or cancel all or any portion of any penalty or any 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.
Background
[1] The applicant was a farmer in Saskatchewan who suffered a massive and debilitating stroke in July 1985. He was unable to continue farming his land for his right side was paralysed, he had great difficulty walking, and he was left with a marked speech impediment. It is said the stroke caused disabling emotional and psychological effects and he became extremely introverted, moody and depressed. He and his wife left the farm and moved to Regina, where his wife opened a business to provide for the family.
[2] Prior to his stroke, Mr. Heeg annually filed his income tax returns. By his affidavit, he indicates that because of deepening depression, he stopped filing his returns in 1990. Thereafter, he had indicated to his wife that the returns had been filed. In fact, it appears returns for the years 1985 to 1987 were filed late, in 1990; returns for 1988 and 1989 were filed in 1991; returns for the years 1990 to 1996 were filed in 1997; and returns for 1997 and 1998 were filed in 1999. In addition to taxes unpaid for the years 1991 to 1999, outstanding penalties and interest assessed by Revenue Canada were approximately $42,200 when he made his application early in the year 2000 that these be cancelled.
[3] The applicant's wife only discovered the outstanding tax liability in 1999 when Mr. Heeg's bank account was made subject to a garnishee order for payment of taxes and arrears. She then discovered that at least in the years 1990 to 1999, Mr. Heeg had spent substantial money gambling at a casino in Regina. Mrs. Heeg then sought medical assessments of her husband. He ceased gambling. He subsequently suffered a further stroke in late 1999 which left him partially paralysed and unable to speak.
[4] On March 1, 2000, the applicant requested cancellation of penalties and interest charges assessed against him, pursuant to section 220 (3.1) of the Act and in accord with the fairness guidelines of the department. On behalf of the Minister, that request was rejected by the Assistant Director of Client Services Division of the Agency in Regina on April 17, 2000. Thereafter, by letter of May 4th, the applicant again requested a review of the application of the fairness guidelines to his situation. On August 4th, the Director, Regina Tax Services Office of CCRA wrote to advise that the request was again denied.
[5] In the refusal letter, while noting Mr. Heeg's past and current medical condition, it is said that all necessary information available was reviewed. However, it was concluded that he had demonstrated he was cognisant in the filing of his income tax returns, in his past dealings with the Department. While demonstrating that he was capable of dealing with tax matters at all times, he had consistently refused to provide complete financial records when requested to do so. It was perceived that he had the ability to clear the debt (he had not made any case or presented evidence of inability to pay the charges). The case did not warrant hardship consideration. Thus, the letter concluded, the case did not warrant cancellation of installment interest, late filing penalties or the arrears of interest assessed.
[6] In written submissions for the applicant it is said that the Director failed to properly consider the medical evidence that was before her and failed to properly apply provisions of section 220(3.1) of the Income Tax Act. When the matter came on for hearing, the first of these issues was the matter on which the applicant's oral submissions were primarily based. It was urged, in particular, that the Director failed to appreciate the report submitted by Dr. Cleland and thus had failed to consider fully the evidence before her.
[7] There was no significant difference between the parties on the appropriate standard of review, that is, that on findings of fact upon which the decision is based, the standard is whether the finding is patently unreasonable. Expressed in another way, the Court on review of the exercise of discretion must be persuaded that the decision maker acted in bad faith or ignored relevant facts or took irrelevant considerations into account, or that there was unfairness in the process. (See: Maple Lodge Farms Ltd. v. Government of Canada (1982) 2 S.C.R. 2; Sharma v. the Minister of National Revenue, [2001] D.T.C. 5360 (F.C.T.D.), Cheng v. Canada [2001] F.C.J. 1532 (T.D.) (QL).)
[8] By her affidavit, the Director who made the decision reviewed the background of the case including the applicant's first and second requests under the fairness provisions, and set out the medical reports that were before her from those submissions. Among these was the report of Dr. John Cleland, clinical psychologist, which included results of testing Mr. Heeg's level of intellectual functioning in January 2000 (the date of the test) and compared this with Dr. Cleland's estimate of his similar level before his stroke in 1985. In the doctor's view, there was a very significant decrease in his level of intellectual functioning over that period, and in his capacity to function independently. Dr. Cleland estimated that at one time intellectually he would have been in the top 7 to 8% percent of the population but by 2000 he was functioning in the lower 20%, with a drop in estimated I.Q. of 124 in 1985 to only 84 in 2000.
[9] That report by Dr. Cleland, and the attention given to it by the Director, are the principle concerns of the applicant. In the course of cross-examination of the decision matter on her affidavit, questions were asked and answers given as follows:
123 Q Did you, in terms of the medical evidence that was supplied to you and in particular the report of Dr. Cleland, who is the clinical psychologist, you're familiar with that report -
A Yes
124 Q - that's attached to your Affidavit? Did you have any other person and, in particular, any medical doctors go over the medical reports and give you an opinion as to -
A No.
125 Q - their view?
A No.
126 Q Now, obviously you read all of the medical material that you had. In Dr. Cleland's report - and if you want to refer to it, you can, it's your Exhibit "F" - Dr. Cleland appears to have conducted some tests on the intellect and intelligence of Mr. Heeg; is that correct?
A It seems to be, yes.
127 Q Did you note the comment that he viewed his intellectual capacity at about an IQ of 84 percent?
A I read that, yes.
128 Q What did that say to you in terms of capacity? Did that mean anything to you?
A Not a lot, no.
129 Q If it didn't mean a lot, did you take any steps to investigate it, what that meant?
A In terms of from the medical side of things, no, because what I did was I read that, but then I also read the reports of individuals who had dealt with Mr. Heeg, and the way he conducted himself seemed to be not any different than any other client who have conducted himself.
130 Q So your conclusion was, on the evidence that was in front of you, that he was functioning in a normal range and obviously able to handle his Income Tax affairs; is that the conclusion you came to?
A I guess the difficulty that I had is that this review was done in 2000, and the Returns that were subject to this review had all been filed in 1997, so it was difficult for me to conclude, on the basis of this review in 2000, how he may have been behaving today or at that time versus three years prior. So I didn't really know what relevance the 2000 review had on how he behaved earlier.
131 Q Well, I understand that you have to - obviously it would have been preferable if after 1985 he'd had the same tests administered, that might have told us a little bit more, but certainly the conclusion was, from Dr. Cleland's point of view, that he was operating in dull normal range at about 84 rather than 124 that he estimated his intelligence at previously?
A In 2000?
132 Q Yes. So certainly you had the information that he was - at least somebody was saying that he had some intellectual problems?
A At that point, yes.
133 Q Now, it's clear that the stoke in 1985 was an event that was beyond the control of Mr. Heeg?
A Yes.
134 Q Obviously it's a medical condition -
A Yes
135 Q Not his fault he got the stroke?
A No, absolutely.
[10] There were before the director other reports of medical doctors, and the record of the applicant's dealing with the Department. For example, his 1995 and 1996 income tax returns were prepared and filed by him in 1997 and there was no indication from him at that time, or on earlier occasions when he dealt with departmental officers, that he was not capable of handling income tax matters. Further, there was among the reports before the Director, one from Dr. Ooi, Mr. Heeg's family physician, which noted that in 1993 the functioning of the applicant was entirely appropriate in light of his condition and subsequent follow up appointments only revealed ulcer problems and high blood pressure. Only in August 1999 was a decrease in the applicant's mental capacity noticed. There were also other reports of doctors, not based on examination or treatment of Mr. Heeg in the early to mid-1990's, but rather on reports of Mrs. Heeg's recollections in 1999 or 2000 about her husband's condition some years before.
[11] In the circumstances, there was evidence before the Director that would support the conclusion she reached. That evidence was in the report of Dr. Ooi, and in the reports of Mr. Heeg's dealings with the department earlier in the 1990's. I am not persuaded that the Director ignored the report of Dr. Cleland. Her affidavit states it was one of the items submitted with his first fairness request which she had reviewed. She may not have fully understood the implications of an estimated significant decrease in the applicant's IQ which Dr. Cleland provided, but she did take into account that his estimate was made in the year 2000 and there was no actual assessment of his condition made in the years in question before that. In my opinion, the officer's decision cannot be characterized as patently unreasonable.
[12] For these reasons, this application for judicial review is dismissed by separate order.
(signed) W. Andrew MacKay
________________________________
JUDGE
OTTAWA, Ontario
March 21, 2003
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1646-00
STYLE OF CAUSE: Arthur Heeg v. Attorney General of Canada
PLACE OF HEARING: REGINA, SASKATCHEWAN
DATE OF HEARING: September 26, 2002
REASONS FOR ORDER OF the Honourable Mr. Justice MacKay
APPEARANCES:
Mr. David Birchard and Mr. Fran Huck FOR APPLICANT
Ms. Angela Evans FOR RESPONDENT
SOLICITORS OF RECORD:
OGILVIE & COMPANY FOR APPLICANT
Regina, Saskatchewan
MORRIS ROSENBERG FOR RESPONDENT
Deputy Attorney General of Canada