Date: 20010419
Docket: T-1720-99
Neutral citation: 2001 FCT 364
BETWEEN:
THE ESTATE OF EDITH V. MOFFETT & EXECUTRIXES
GAYE E. MOFFETT AND ROSLYN E. BUTLER
Applicants
- and -
MINISTER OF NATIONAL REVENUE.
Respondent
INTRODUCTION
[1] The Estate of Edith V. Moffett and Gaye E. Moffett and Roslyn E. Butler, as Executrixes, (the "Applicants") seek judicial review of the decision made by Canada Customs and Revenue Agency Fairness Unit. That decision, dated September 1, 1999, was a refusal of the Applicants' request for the waiver or cancellation of interest otherwise payable under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the "Act") for the 1989 taxation year.
[2] The Applicants now seek an order reversing the refusal to waive or cancel the interest charges and penalties and eliminating any other related costs.
FACTS
[3] The Applicants are the daughters of the late Edith V. Moffet. They are also the executrixes of her last will and testament, although no formal proof of that fact was tendered. The Applicant Estate filed the income tax return for the 1989 taxation year before April 30, 1990. The Minister of National Revenue (the "Respondent") initially assessed the return on April 18, 1990 and issued a refund of $188.35 to the Estate.
[4] On February 2, 1992, the income tax liability of the Estate was reassessed to include in income for the 1989 taxation year previously undeclared registered retirement savings plan income of $59,665.00. It appears that the existence of this money was unknown to the Executrixes at this time. In any event, the result of the reassessment was that a balance was found owing by the Estate in the amount of $33,657.12, including $16,758.30 in federal income tax, $8,347.90 in Ontario income tax, $7,396.21 in interest arrears and $389.00 in installment interest.
[5] On April 28, 1992, the Applicant Executrixes filed a Notice of Objection to the Minister's re-assessment. This Notice of Objection was withdrawn in November 1992 on the condition that the interest charges would be cancelled. The installment interest and arrears interest were subsequently waived in full, leaving a tax balance owing of $25,523.56 as of May 8, 1993.
[6] There is nothing in the Record to show that the Applicants were ever provided with a written statement as to the amount of their tax liability, counsel for the Respondent advising that it is not the habit of the agency to retain copies of Notices of Assessment which are sent out to taxpayers.
[7] Throughout 1993 there was communication between the Applicants and officials of Canada Customs and Revenue Agency (the "Department") about the outstanding balance. Periodically, the Applicants were cautioned about their potential personal liability under section 159(3) of the Act, arising from the distribution of the Estate without having first obtained a clearance certificate from the Minister. Section 159(3) provides as follows:
| s.159(3) Where a legal representative (other than a trustee in bankruptcy) of a taxpayer distributes to one or more persons property in the possession or control of the legal representative, acting in that capacity, without obtaining a certificate under subsection 159(2) in respect of the amounts referred to in that subsection, the legal representative is personally liable for the payment of those amounts to the extent of the value of the property distributed, and the Minister may at any time assess the legal representative in respect of any amount payable because of this subsection, and the provisions of this Division apply, with any modifications that the circumstances require, to an assessment made under this subsection as though it had been made under section 152. |
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| s.159(3) Le représentant légal (à l'exclusion d'un syndic de faillite) d'un contribuable qui, en cette qualité, répartit entre plusieurs personnes ou attribue à une seule des biens en sa possession ou sous sa garde sans le certificat prévu au paragraphe (2) à l'égard des montants visés à ce paragraphe est personnellement redevable de ces montants, jusqu'à concurrence de la valeur des biens répartis ou attribués; le ministre peut établir à tout moment une cotisation à l'égard du représentant légal relativement à tout montant payable par l'effet du présent paragraphe. Les dispositions de la présente section s'appliquent, avec les modifications nécessaires, aux cotisations établies en vertu du présent paragraphe comme si elles avaient été établies en vertu de l'article 152. |
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[8] Legal warnings were given to the Applicants in March and April 1993. At one point, the Minister agreed to accept the payment of $200.00 per month from each Executrix but no payments were made.
[9] In July 1993, the Applicants met with P. Coffey, a Collections Officer, at which time the total amount claimed was again discussed. The Applicants assert that they were not provided with a firm statement as to the amount owing nor were they advised as to their payment options.
[10] On September 2, 1993, a further meeting took place between the Applicant Executrixes and the Collections Officer. The Respondent says that the purpose of the meeting was to set up a payment arrangement for satisfaction of the Estate's tax liability. The Applicants claim that they requested a statement of what was owing. The Department never provided the statement.
[11] Further contact was made with Ms. Moffett on January 10, 1995 by A. McGuire, another Collections Officer, who informed Ms. Moffett about the potential personal liability to the Executrixes under section 159 of the Act. The Respondent claims that at this time, Ms. Moffett confirmed that the Estate's assets had been distributed prior to obtaining a certificate. Again, the Applicants say that the Collections Officer was unable to tell them the amount of the outstanding balance and could not provide a statement or the tax file. The Applicants say that they repeated their offer to pay $200.00 per month but this was not accepted and the prospect of legal action was raised.
[12] There was a further meeting between the Collections Officer and Ms. Moffett on January 24, 1995 when potential liability under the Act was again discussed. It appears that Ms. Moffett agreed at this time that the balance claimed by the Minister was correct.
[13] Both parties are in agreement that on June 12, 1995 a legal warning was issued to the Applicants together with a letter explaining the effect of a section 159 assessment under the Act. The Applicants claim that this is the first time they were given a dollar figure for the amount claimed.
[14] Both parties agree that on October 7, 1998, a Statement of Account was sent to the Applicant showing a balance owing of $45,869.98. The Applicants were then assessed pursuant to section 159 of the Act in the amount of $45,960.45 and were sent a Notice of Re-assessment dated October 15, 1998. The Applicants say that they attempted to contact the Department at this time but that their telephone calls and voicemail messages were not returned.
[15] On January 28, 1999, the Respondent claims that Ms. Moffett called the Collections Officer and again disputed the balance owing on the account although she had previously agreed to it on January 24, 1995.
[16] On or about January 29, 1999, both parties agree that a garnishee was approved and implemented to collected from the Applicants the amount of the Estate's unpaid income taxes. The Applicants claim that bank accounts and assets were frozen with no notice to them until several days later.
[17] On February 4, 1999, the Applicants submitted a proposal to pay down their tax liabilities subject to obtaining relief from the interest charged.
[18] On March 24, 1999, the Applicants applied to the Fairness Committee for the cancellation of interest charges that had been accruing on the Estate's account and their basis for seeking such relief was alleged "departmental error/delay".
[19] In a letter dated June 17, 1999 J.C. Meyers, Unit Head of the Fairness Unit, denied the Applicants' request, on the basis that they had not shown that the interest charges had accrued as a result of departmental error or delay.
[20] The Applicants appealed this decision on August 11, 1999. On September 1, 1999, Mr. Ken Malhotra, Chief of Appeals of the Ottawa Tax Services Office, Canada Customs and Revenue Agency, denied the request for a waiver of the interest charges.
[21] In his decision, Mr. Malhotra acknowledged that there had been some communication over the years between the Applicants and officials of the Department. However, he concluded that no relief was available on the basis of "departmental error/delay" as the Applicants had failed to discharge the onus on them of establishing that non-payment of the outstanding taxes was due primarily to actions of the Department. He further noted that the Applicants had failed to provide a Statement of Financial Income, which would relate to the factor of inability to pay the taxes, or to provide an "income and expense statement" for completion by the Applicant within thirty days of the date of his letter. Finally, he concluded by advising the Applicants that they could seek judicial review of the decision which had been rendered.
ISSUE
[22] Only one issue arises from this application and that is whether the Respondent correctly interpreted and applied the discretion granted by subsection 220(3.1) of the Act in the decision to deny the Applicants' request for waiver or cancellation of interest otherwise payable for the 1989 taxation year.
APPLICANTS' SUBMISSIONS
[23] The Applicants submit that processing delays by the Respondent resulted in the passage of an unreasonable period of time before they were informed that an amount was owing. The Applicants argue that they did not receive "official notice" of the balance claimed until June 15, 1998, some nine years after the death of their mother. They claim that during the course of discussions with the Department officials in 1993 the lack of information and production of incomplete records resulted in disagreement as to the actual balance outstanding.
RESPONDENT'S SUBMISSIONS
[24] The Respondent submits the only question to be determined by the Court is whether the Minister discharged her duty to act fairly in exercising her discretion pursuant to section 230(3.1) of the Act. The Respondent also argues that the Applicants were granted ample opportunity to make submissions, that the decision-maker considered all the relevant facts and that there was no breach of good faith in reaching the decision.
ANALYSIS
[25] This application for judicial review arises from a decision made pursuant to section 220(3.1) of the Act. That section 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. |
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[26] In Kaiser v. The Minister of National Revenue (1995), 93 F.T.R. 66 (F.C.T.D.), Mr. Justice Rouleau of this Court commented on the purpose of section 220(3.1) at page 68 as follows:
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 Information Circular 92-2.
[27] It is clear that section 220(3.1) of the Act confers a discretion, not an obligation, on the Minister in respect of cancellation of interest charges. The question then becomes whether this discretion has been properly exercised by the Minister or, in this case, by his statutory delegate.
[28] Disagreement by a taxpayer with the Minister's decision does not mean that the Minister's decision will be reversed.
[29] The scope of judicial review in relation to a discretionary Ministerial decision is limited to reviewing whether the Minister has properly exercised his discretion, with regard for relevant considerations and without regard to extraneous factors. The standard of review of discretionary decisions in the context of section 220(3.1) of the Act was addressed in Kaiser, supra, as follows at page 68:
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. (Emphasis in original.)
[30] The discretion conferred on the Minister by section 220(3.1) is a discretion which is to be exercised in accordance with the guidelines published by the Respondent. Those guidelines, found in Information Circular 92-2, are publicly available and would have been known to the Applicants.
[31] The following factors, set out at paragraph 10 of the Information Circular , are to be considered by the Department in assessing a request for exercise of the discretion:
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 interest has accrued;
c) whether or not the taxpayer 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 is subject to hardship that affects their ability to pay assessed amounts;
and
e) whether or not the taxpayer has acted quickly to remedy any delay or omission.
[32] Further, on February 20, 1992 the Applicants had received a re-assessment from the Minister outlining the income tax liability of the Estate in the amount of $33,657.12, including $16,758.30 in federal income tax, $8,347.90 in Ontario income tax, $7,396.21 in interest arrears and $389.00 in installment interest. By letter dated October 29, 1992, the Applicants were advised that the installment interest in the amount of $389.60 had been cancelled and in another letter bearing the same date, the Applicants were advised that the arrears interest for the period April 30, 1991 up to September 30, 1992 had been cancelled.
[33] This leads, inevitably, to the conclusion that the Applicants were aware of the income tax liability as of September 30, 1990. A reasonable person would be led to conclude that the amount owing at this date was $25,106.20, that is the total of the amounts assessed for federal income tax and Ontario income tax.
[34] Nevertheless, the Applicants made no attempt to repay or to formally contest this amount, other than the intermittent communications with the Department, which I referred to above. It appears that no real effort was made to pay the tax liability until the Department itself had taken the extreme step of attaching the assets of the Applicants.
[35] Furthermore, it is noteworthy that at no time did the Applicants provide a statement of their income and expenses. In the absence of this information, it is impossible for the Court to comment on how this information may have affected the decision made by the Minister's delegate.
[36] While it appears that there was some laxness on the part of the Department in producing records in order to fully respond to the concerns raised by the Applicant, it is also apparent that the guidelines formulated for the exercise of discretion pursuant to section 220(3.1) contemplate that departmental delay or error may be a factor in the exercise of that discretion.
[37] The decision of Mr. Malhotra states that he considered this element but concluded, after reviewing all the information and the submissions, that departmental delay/error was not the primary cause of the Applicants' alleged lack of information about the amount of the tax liability.
[38] I refer again to Kaiser, supra, where the Court says at page 69:
Absent bad faith on the part of the Minister, a breach of the principles of natural justice or consideration of extraneous or irrelevant factors, there is nothing to warrant the Court's interference with the exercise of his discretion.
ORDER
[39] In the result, there is no basis on the record to justify interference with the decision reached by the Minister's delegate. The application for judicial review is dismissed, with no order as to costs.
"E. Heneghan"
Toronto, Ontario
April 19, 2001
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
COURT NO: T-1720-99
STYLE OF CAUSE: THE ESTATE OF EDITH V. MOFFETT & EXECUTRIXES GAYE E. MOFFETT AND ROSLYN E. BUTLER
Applicants
- and -
MINISTER OF NATIONAL REVENUE.
Respondent
DATE OF HEARING: MONDAY, JANUARY 8, 2001
PLACE OF HEARING: OTTAWA, ONTARIO
REASONS FOR ORDER
AND ORDER BY: HENEGHAN J.
DATED: THURSDAY, APRIL 19, 2001
APPEARANCES BY: Ms. Gaye E. Moffett, and
Ms. Roslyn Butler
For the Applicants, on their own behalf
Ms. Anne-Marie Lévesque
For the Respondent
SOLICITORS OF RECORD: Gaye E. Moffett
Roslyn E. Butler
c/o 6 Royal Hunt Court
Ottawa, Ontario
K1V 9M1
For the Applicants, on their own behalf
Morris Rosenberg
Deputy Attorney General of Canada
For the Respondent
FEDERAL COURT OF CANADA
Date: 20010419
Docket: T-1720-99
Between:
THE ESTATE OF EDITH V. MOFFETT & EXECUTRIXES GAYE E. MOFFETT AND ROSLYN E. BUTLER
Applicants
- and -
MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
AND ORDER