Date: 20021106
Docket: T-900-01
Neutral citation: 2002 FCT 1146
Ottawa, Ontario, November 6, 2002
Present: The Honourable Madam Justice Tremblay-Lamer
BETWEEN:
NATHANIEL SALOMON
Applicant
and
DEPUTY ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR ORDER AND ORDER
[1] This is an application for judicial review to set aside a decision of the Minister of National Revenue denying the applicant's request under subsection 220(3.1) of the Income Tax Act, R.S.C. 1985, c.1 (the "Act") for relief of interest and penalties under what is known as a "fairness package request".
FACTS
[2] The applicant is presently 68 years old. He has worked as a consultant in the real estate field since August 1997. Prior to August 1997, he practised law as an attorney at the Montreal law firm Chait Solomon.
[3] In 1987, the applicant represented a client who came to be charged with fraud in a commercial transaction involving the sale of a restaurant. The applicant was also charged with fraud. Due to the negative publicity surrounding the allegations made against the applicant, he resigned from Chait Salomon in 1995 and pursued his legal career independently. In March of that year, he opened a private legal office.
[4] The applicant was found guilty of fraud on February 18, 1997 and was sentenced to one year in prison on July 3, 1997.
[5] The applicant appealed the verdict and the sentence. On April 20, 2001, the Quebec Court of Appeal confirmed the decision of the Court of Quebec by a majority of 2 to 1.
[6] The applicant further appealed to the Supreme Court of Canada but leave to appeal was dismissed on September 27, 2001. As a result, the applicant was obliged to spend two months, from October 1 to November 30, 2001, in Bordeaux Prison.
[7] In August 1997, further to the decision of the Court of Quebec of February 18, 1997, the applicant was disbarred for a period of five years. On February 12, 2001, the Court of Appeal reversed this judgment and ordered the applicant's reinstatement to the Quebec bar.
[8] As a result of the applicant's three and a half year disbarment, he was forced to abandon his legal practice and pursue work in another field.
[9] Throughout the years at issue and for reasons unrelated to the commercial transaction for which he was criminally charged, the applicant received notices of assessment from both Revenue Canada (now the Canada Customs and Revenue Agency (the "CCRA")) and Revenue Quebec.
[10] On November 22, 1993, the Minister of National Revenue ("MNR") assessed the applicant for an amount of $10,059 regarding the 1992 taxation year.
[11] On February 18, 1994, the MNR reassessed the applicant in respect of taxation years 1989 to 1992 for a principal amount of $69,944, the whole as a result of the applicant's failure to report his total personal income for the years in question. The MNR also applied the penalty for gross negligence, stipulated at subsection 163(2) of the Act, for an amount of $32,771.
[12] The applicant contested these assessments, maintaining that all penalties assessed on the basis of gross negligence were totally unjustified.
[13] On May 17, 1994, the applicant served on the MNR, Notices of Objection to the above reassessments and especially to the penalties. On February 15, 1995, the reassessments were confirmed by the Appeals Division.
[14] On May 9, 1995, the applicant appealed this decision to the Tax Court of Canada.
[15] During the month of August 1997, the parties signed an "amended consent to judgment" which read as follows:
(...)
1. the penalties assessed pursuant to subsection 163(2) of the Income Tax Act in respect to the 1991 and 1992 taxation years be deleted; and,
2. the Appellant is entitled to no further relief.
The appeal with respect to the Appellant's 1989 and 1990 taxation years is dismissed".
Applicant's record at 243 to 245.
[16] Following the judgment rendered by the Tax Court and up to August 23, 1999, the amounts owed by the applicant to the MNR remained for the most part unpaid.
[17] On August 23, 1999, the applicant, through his attorneys, presented to the MNR his first request under subsection 220(3.1) of the Act for a waiver of interest and penalties arising in respect of his tax reassessments, then amounting to $107,286.64.
[18] On April 11, 2000, the MNR refused the applicant's request. The letter sent to the applicant's attorneys stated that:
[...] We believe that the problems your client had the misfortune to go through did not keep him from complying with his every day tasks, jobs and responsibilities, nor should it had kept him from taking reasonable payment arrangements on the outstanding balance of his income taxes, in due time.
Applicant's record at 17.
[19] On May 12, 2000, the applicant, through his attorneys, asked the MNR for a review of the decision rendered on April 11, 2000. The request for review was based on the premise that in light of the criminal procedures taken against the applicant and his disbarment as a member of the Quebec Bar, the applicant was in no position emotionally and mentally to manage his affairs and comply with the Tax Act in the same manner that would have been expected in different circumstances.
[20] By letter dated April 26, 2001, the Minister's delegate (the "Minister") decided not to waive the interest nor the penalties.
ANALYSIS
[21] The present case involves a determination of whether the Minister exercised his statutory discretion in a fair and reasonable manner when he denied the applicant's request for relief of interest and penalties under a "fairness package request".
[22] As regards to the applicable standard of review of a decision taken by the MNR under subsection 220(3.1) of the Act, this Court in Cheng v. Canada, [2001] F.C.J. No. 1532, has reiterated that when reviewing a discretionary decision, a considerable degree of deference is required, and the standard of review is that of patent unreasonableness.
[23] The principles governing the fairness package provisions were enunciated in Kaiser v. MNR, [1995] F.C.J. No. 349. In that case, the Court stated at para. 8:
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 in Information Circular 92-2.
[24] Furthermore, in Robin Towers v. Canada, [1993] F.C.J. No. 1221, the Court held at para. 11:
No particular duty of fairness is prescribed for the Minister under the Act [ITA]. However, Information Circular 92-2 provides the following guidelines:
5. Penalties and interest may be waived or cancelled in whole or in part where they result in circumstances beyond a tax payer's control
6. Cancelling or waiving interest or penalties may also be appropriate if the interest or penalty arose primarily because of actions of the Department.
7. It may be appropriate, in circumstances where there is an inability to pay amounts owing, to consider waiving or canceling interest in all or in part to facilitate collection.
[25] The applicant submits that the Minister did not exercise his statutory discretion provided by subsection 220(3.1) of the Act in a fair and reasonable manner, in that he did not seriously and objectively consider all the documents and submissions provided by the applicant.
[26] Between January 9 and April 19, 2001, various letters were exchanged and meetings were held between the applicant's attorneys and the CCRA, all aimed at explaining the impact of the applicant's disbarment and criminal conviction on his daily living and responsibilities.
[27] On April 25, 2001, the applicant's attorneys sent the CCRA a letter by telecopier which contained additional information regarding the decision of the Quebec Court of Appeal that was rendered on April 20, 2001 and the decision of the Bar to hold a disciplinary hearing. The cover page of the fax indicated that the following documents would be sent to the Minister by mail:
1. a decision of the Quebec court of Appeal dated April 20, 2001, confirming a decision of the Court of Quebec which found the applicant guilty of fraud and sentenced him to 1 year in prison.
2. a notice of hearing before the "petition committee" of the Quebec's bar, dated April 18, 2001.
3. A handwritten note written by the applicant to his criminal lawyer in which he describes his current state of health.
Applicant's record at 58.
[28] Notwithstanding the receipt of the April 25, 2001 correspondence indicating that additional documents were forthcoming, the Minister rendered his decision, refusing the applicant's request for review on April 26, 2001.
[29] The applicant argues that it was unreasonable for the Minister to render his decision before receiving these documents.
[30] Conversely, the respondent argues that it was reasonable for the Minister to make his decision prior to the receipt of these documents, as the letter contained sufficient information regarding the content of the Quebec Court of Appeal's decision and the Notice of Hearing. I agree with the respondent.
[31] The information contained in the letter was sufficient and it was not necessary for the Minister to have received copies of those documents to make his decision. The letter indicated that the Quebec Court of Appeal had confirmed the Court of Quebec's decision and that and there would be a notice of hearing before the "petition committee" of the Quebec bar. In my view, the actual receipt of these documents would not have provided the Minister with any additional information to make his decision. The relevant information that the Minister would use in deciding whether to grant the applicant's request was already contained in the letter.
[32] With regard to the note describing his mental state, I am of the view that it was reasonable for the Minister to make his decision prior to the receipt of this note. The letter indicated that the note described the applicant's current state of health. However, there was nothing in the letter which referred to the applicant's specific state of health of any given year between 1997 and 2000, the period in which his criminal conviction and disbarment took place. If these events deteriorated the applicant's health to the point that he was no longer able to "comply with his everyday tasks, jobs and responsibilities", then medical evidence proving this allegation should have been submitted.
[33] The applicant argues that the purpose of the note was to initiate discussions with the Minister concerning his mental state. The reason why there was no formal medical document attached to the letter dated April 25, 2001, was because the parties had not yet reached this stage of discussion.
[34] I cannot agree with this submission. This court has held that the burden to provide all relevant information to the MNR lies on the applicants that prevail themselves of the fairness package provisions (Young v. Her Majesty the Queen, [1997] F.C.J. No. 1680). If the applicant's health was an important factor in his case, medical documents should have been submitted, regardless of whether the parties had reached this stage of discussion.
[35] Further, I agree with the respondent that the letters from the applicant's attorneys dated April 19, 2001, and April 25, 2001, suggest that they had finished their submissions, and that there would be no additional information of significance forthcoming.
[36] In the letter dated April 19, 2001, the applicant's attorneys requested that one last point be considered by the Minister:
Toutefois, et le réalisant en arrivant au bureau, le soussigné a oublié de vous mentionner un dernier point qui pourra faire l'objet d'une considération à l'égard de la décision que vous vous apprêtez à rendre.
(...)
Encore une fois, votre coopération étant appréciée, nous demeurons.
Applicant's record at 57.
[37] In the letter dated April 25, 2001, the applicant's attorneys stated at the end of the letter that the Minister had all the necessary information to make his decision:
En espérant que ces éléments compléteront votre dossier, nous demeurons.
Applicant's record at 59.
[38] Based on these two letters, it cannot be said that it was the intention of the applicant's attorneys to submit additional information, or to initiate further discussions with the Minister regarding the applicant's health.
[39] In conclusion, the Minister made his decision based on a report that had been prepared at his request by Mrs. Diane Bertrand. This report stated that:
i. At all material times and notwithstanding his difficulties and misfortunes, the applicant pursued his occupation related to the field of real estate; he also conducted his businesses and asserted his rights, especially as regards to the Income Tax Act. These facts illustrate that the applicant was still in the state of mind to comply with the applicable provisions in the ITA.
ii. The applicant's financial situation and his assets were more than sufficient, at least to allow reasonable payments arrangements of the sums due to the MNR.
Applicant's Record at 90.
[40] In my opinion, the evidence submitted by the applicant does not contradict this finding of facts. There is no basis to support any allegations that the Minister failed to properly consider all of the information submitted by the applicant, along with other information that was in his possession, before arriving at his decision.
[41] For these reasons, this application for judicial review is dismissed.
ORDER
THIS COURT ORDERS THAT the application for judicial review is dismissed.
"Danièle Tremblay-Lamer"
J.F.C.C.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-900-01
STYLE OF CAUSE: NATHANIEL SALOMON
Applicant
- and -
DEPUTY ATTORNEY GENERAL
OF CANADA
Respondent
PLACE OF HEARING: Montreal (Quebec)
DATE OF HEARING: October 29, 2002
REASONS FOR ORDER
AND ORDER OF THE HONOURABLE MADAM JUSTICE TREMBLAY-LAMER
DATED: November 6, 2002
APPEARANCES:
Mr. Christopher R. Mostovac FOR APPLICANT
Mr. Pierre Lamothe FOR RESPONDENT
SOLICITORS OF RECORD:
Ravinsky Ryan, Attorneys
Place du Canada
1200-1010 de La Gauchetière West
Montreal (Quebec)
H3B 2P9 FOR APPLICANT
Department of Justice
Guy-Favreau Complex
200 René-Lévesque Boulevard West
East Tower, 9th Floor
Montreal (Quebec)
H2Z 1X4 FOR RESPONDENT