Date: 20251113

Docket: T-619-25

Citation: 2025 FC 1816

Ottawa, Ontario, November 13, 2025

PRESENT: The Honourable Mr. Justice Duchesne

BETWEEN:

BAXTER I.C.I. CORP

Applicant

and

ATTORNEY GENERAL OF CANADA

Respondent

JUDGMENT AND REASONS

[1] The Applicant seeks judicial review of a January 15, 2025, second review decision [the Decision] made by a Canada Revenue Agency [CRA] administrative decision maker [the Decision Maker] on behalf of the Minister of National Revenue [the Minister] to refuse to waive or cancel any part of the penalties and interest that arise from the Applicant’s assessments for the fiscal years ending December 31, 2007 to December 31, 2015, pursuant to subsection 220(3.1) of the Income Tax Act, RSC 1985, c. 1 (5^th Supp) [the ITA].

[2] The Applicant had applied for taxpayer relief through the cancellation or waiver of penalties and interest because of undescribed CRA errors and delay, the COVID-19 pandemic, and its sole director and shareholder’s mental distress. The CRA considered the Applicant’s submissions and documents, as well as statements provided by the Applicant’s solicitor during a telephone discussion regarding the basis of any alleged CRA errors or delay. The Decision Maker rejected the Applicant’s request following their consideration of the information and documents before it.

[3] The Applicant has failed to demonstrate that the Decision is lacking in justification or intelligibility in light of the evidence before the Decision Maker and the applicable law. The Applicant’s main argument is framed as an unreasonableness argument but is more akin to a plea that the Court should reweigh the evidence regarding the Applicant’s director’s mental health challenges and come to more favorable conclusion. That is not this Court’s role on judicial review.

[4] As will be seen in the reasons that follow, the Decision Maker took the Applicant’s director’s mental health challenges into account and found that there was no connection between those mental health challenges and the Applicant’s long standing and persistent failure to comply with its tax obligations. As will also be seen in the reasons that follow, the Applicant failed to provide documentation that would shed light on the effect of the COVID-19 pandemic on its ability to pay its outstanding penalties and arrears despite having the opportunity to do so.

[5] This application is therefore dismissed for the reasons that follow.

I. Preliminary Matter

[6] A few days before this application’s scheduled oral hearing date, the Applicant, with the consent of the Defendant, requested that this proceeding proceed to be heard in writing only based on the written representations filed by the parties with the Court. The Court granted the request. This proceeding is therefore determined on the basis of the records and written representations filed by the parties.

II. Background

[7] The Applicant is a corporation incorporated in January 1998. It is directed by its sole shareholder, director and officer, Mr. John Robert Baxter. At all material times the Applicant’s fiscal year ended on December 31. The Applicant was therefore required to file its corporate income tax returns and pay any balances owing within the time fixed by the ITA.

[8] The Applicant was assessed in respect of unfiled returns for the 2010 to 2012 tax years. The Applicant then filed corporate income tax returns which had large balances owing because they were filed late and without payment in full on the due date.

[9] The Applicant was audited with respect to the same 2010 to 2012 tax years beginning in 2016. These tax years were reassessed on October 20, 2017. The Applicant objected to the reassessments on November 17, 2017. The reassessments were confirmed on April 12, 2019. The Applicant appealed the reassessments to the Tax Court of Canada.

[10] On February 2, 2021, while its appeal to the Tax Court of Canada was pending, the Applicant applied for penalty and interest relief pursuant to subsection 220(3.1) of the ITA in respect of the 2010 and 2011 tax year reassessments on the basis of financial hardship and its inability to pay. The Applicant’s stated reasons for the relief sought were that:

“Baxter I.C.I. Corp (the Company) was reassessed for the 2010 and 2011 taxation years by Notice dated October 20, 2017. The Company was assessed unreported business income and denied claimed business expenses. The Company has appealed these assessment to the Tax Court of Canada. Pending the outcome of those appeals, the Company is also seeking relief from interest and penalties arising from these assessments on the basis of financial hardship and inability to pay. The enormity of the penalties and interest has put a significant strain on Mr. Baxter’s mental health.”

[11] The Applicant wrote to the CRA throughout 2022 to request the removal of penalties and interest on its account back to 2007 and referenced Mr. Baxter’s mental health challenges as part of the reason for its failure to comply with its tax obligations. The mental health challenges referred to had been driven by the existence of Mr. Baxter’s personal tax liabilities, the Applicant’s tax liabilities, various pieces of litigation, and by Mr. Baxter’s separation and divorce proceedings.

[12] The 2010 and 2011 tax year reassessment appeals were eventually resolved by way of a consent judgment issued by Mr. Justice Smith of the Tax Court of Canada on October 6, 2021, that ordered that the reassessments for those tax years be referred back to the Minister for reconsideration and reassessment. The applicable notices of reassessment were issued on March 18, 2022, and resulted in credits for the Applicant and a reduction of the tax balances owed by Mr. Baxter personally. The Applicant nevertheless continued to have large balances owing to CRA.

[13] By letter dated December 1, 2022, in connection with the Applicant’s relief request, the CRA requested the Applicant’s profit and loss statements and balance sheets for its last two taxation years.

[14] The Applicant responded to the CRA on May 2, 2022, by providing a summary narrative of the events that had affected Mr. Baxter’s mental health and purportedly led to the Applicant’s tax delinquency. The Applicant did not provide the profit and loss statements requested by the CRA.

[15] On February 23, 2023, the CRA communicated its decision to the Applicant that it was denying its request for tax relief for the 2010 to 2012 tax years. The CRA communicated as follows in its decision:

“It is the taxpayer's responsibility to have a system in place lo ensure returns and payments are made correctly and on time. A reasonable amount of care is required from a taxpayer to ensure proper reporting and remitting procedures are followed and that all statutory obligations are met.

While I empathize with the fact that the circumstances described have affected your mental health, in circumstances such as this, directors are expected to make alternate arrangements to avoid, or at least minimize, delays in reporting. This may include, among other measures, engaging the service of a tax or financial professional lo ensure that returns are filed and payments are made by the due dates.

Financial hardship for a corporate taxpayer refers to situations where the continuity of business operations and the continued employment of a firm's employees are jeopardized. When reviewing a taxpayer relief request under financial hardship/inability to pay, the taxpayers financial situation is taken into consideration along with the compliance history. Overall, it was noted that you have knowingly allowed a balance to exist and did not act quickly to remedy the delay. Additionally, my review found that you have not exercised reasonable care in conducting your affairs and there was no evidence of bona fide effort to resolve your non-compliance or to discharge your arrears balance.”

[16] The Applicant filed a second review request for taxpayer relief on March 8, 2023. The Applicant cited CRA error or delay, natural or human-made disasters and mental distress as the reasons for its request. In that box of the request form in which it was required to state the reasons why it disagreed with the previous decision, the Applicant wrote:

“The decision on the first review failed to properly consider the mental health of the taxpayer’s sole shareholder. The review also drew erroneous conclusions from the taxpayer’s payment of an outstanding balance. It failed to consider the taxpayer’s ability to pay and the impacts of the COVID-19 pandemic.”

[17] The Applicant provided a very general financial summary of its financial situation on September 23, 2023 that was limited to its assets, charges and property taxes owing, an Ontario Municipal Property Assessment Corporation real estate value assessment, and a psychologist’s report with respect to the mental health stressors that Mr. Baxter had self-reported to him and had said began in 2009 and had impacted his ability to effectively manage his work. The Applicant also submitted that delinquency in its tax returns coincided in 2009 with Mr. Baxter’s family matters and divorce proceedings that ended in 2015, litigation with its director’s former employer between 2009 and 2014, and additional challenges with municipal authorities and title insurance that also led to litigation in the same timeframe.

[18] On October 24, 2024, the Applicant, through Mr. Baxter, entered into a payment arrangement with the CRA by which the Applicant agreed to make monthly payments of $12,000 until the outstanding balance owing to CRA was paid in full.

[19] The CRA conducted its second request review and rejected the Applicant’s relief request through the Decision.

III. The Issues

[20] The issues to be determined are whether the Decision is unreasonable in its consideration of the Applicant’s director’s mental health challenges, or in its consideration of the impact of the COVID-19 pandemic on the Applicant’s ability to pay.

IV. The Standard of Review

[21] The parties submit that the standard of review is reasonableness as discussed in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 [Vavilov]. The Court agrees with the parties that reasonableness is the correct standard of review.

[22] Reasonableness is a deferential standard of review (Vavilov at paras 12-13). The reviewing court must determine whether the decision under review, including both its rationale and outcome, is transparent, intelligible, and justified (Vavilov at para 15). A reasonable decision is one that is based on an internally coherent and rational chain of analysis and that is justified in relation to the facts and law that constrain the decision maker (Vavilov at para 85). Whether a decision is reasonable depends on the relevant administrative setting, the record before the decision maker, and the impact of the decision on those affected by its consequences (Vavilov at paras 88-90, 94, 133-135).

[23] For a decision to be unreasonable, the applicant must establish that the decision contains flaws that are sufficiently central or significant (Vavilov at para 100). Not all errors or concerns about a decision will warrant intervention. A reviewing court must refrain from reweighing evidence before the decision maker, and it should not interfere with factual findings absent exceptional circumstances (Vavilov at para 125). Flaws or shortcomings must be more than superficial or peripheral to the merits of the decision, or a “minor misstep” (Vavilov at para 100). Reasonableness review is not a “line-by-line treasure hunt for error” (Vavilov, at para 102).

[24] Finally, it is not the Court’s function on judicial review to reweigh or second-guess the evidence that was led before the Decision Maker. The administrative decision maker alone considers the evidence, decides on issues of admissibility and weight, assesses whether inferences may be drawn, and makes a decision. The reviewing court can interfere only where the decision maker has committed fundamental errors in fact-finding that undermine the acceptability of the decision under review (Doyle v. Canada (Attorney General), 2021 FCA 237, at para 3).

V. The Applicable Legal Constraints

[25] Subsection 220(3.1) of the ITA empowers the CRA with the discretion to cancel all or part of certain penalties and interest, applicable to the 10 calendar years immediately preceding the year of the first request as follows:

 

[26] While there appears to be guidelines and information circulars that may apply within the CRA to guide a CRA administrative decision maker in its consideration of a request for relief pursuant to subsection 220(3.1) of the ITA, no such guidelines or information circulars have been produced in the record before the Court. It follows that potentially applicable CRA guidelines and/or information circulars, if any, will not be considered as they have not been submitted for the Court’s consideration.

VI. Arguments and Analysis

A. Mr. Baxter’s mental health challenges

[27] The Applicant argues that the Decision is unreasonable in its finding that the Applicant’s sole shareholder’s mental health challenges are not sufficiently connected with the Applicant’s non-compliance with its obligations pursuant to the ITA.

[28] The Applicant develops its argument by relying on the CRA’s findings in Mr. Baxter’s personal tax matters. The Applicant argues that the CRA’s finding is contrary to its determination in Mr. Baxter’s personal request for relief which was granted. The Applicant argues that the absence of a sufficient connection between Mr. Baxter’s mental health challenges and his failure to comply with his obligation pursuant to the ITA was not relied upon by the CRA to deny Mr. Baxter’s personal request for relief.

[29] The Applicant also argues that the Decision Maker ignored evidence on the record of the direct impact of Mr. Baxter’s mental health challenges and financial circumstances on his ability to manage its tax obligations. The Applicant specifically highlights its submissions to the CRA that:

• a)Mr. Baxter failed to submit returns since 2009 due to mental health struggles;

• b)his ability to afford accountants and conduct his financial and tax reporting obligations became unmanageable; and,

• c)his involvement in litigation, personal obligations to pay his former spouse, and the personal loss of his family put an enormous burden on Mr. Baxter’s ability to function.

[30] The Applicant continues by arguing that there is no evidence on the record of the Applicant’s tax compliance issues in earlier years, and that, if there was, they were never put to the Applicant as a factor, suggesting that the Applicant did not know the case it had to meet. The Court observes that this argument was not raised as a specified ground of judicial review that complies with the requirements of Rule 301(e) of the Federal Courts Rules in the Applicant’s application for judicial review and is therefore not properly before the Court for determination.

[31] The Applicant further argues that the years which led to the outstanding debt and associated interest were the 2010 and 2011 tax years and that the Applicant’s evidence was that these years clearly relate to Mr. Baxter’s mental health struggles. The Applicant argues that it was unreasonable for the CRA to find that there was not sufficient correlation to earlier years of non-compliance, which were never raised and for which no evidence has been provided.

[32] The Applicant submits that Mr. Baxter’s mental health and personal struggles should have received the same treatment as they had in Mr. Baxter’s personal requests for relief pursuant to subsection 220(3.1) of the ITA with the result that the Applicant’s second review request should have been granted on the basis of Mr. Baxter’s mental distress.

[33] The Applicant’s arguments must all be rejected.

[34] Mr. Baxter’s individual and personal second review relief decision as produced in the record does not set out any reason for which the CRA granted his relief request. Mr. Baxter’s second review request for taxpayer relief reflects that he sought relief on the basis of CRA error, CRA delay, financial hardship, an inability to pay, a natural or human-made disaster, and emotional or mental distress. Mr. Baxter also stated in his second review relief request that the reasons why he disagreed with the negative first review decision was that the CRA had failed to properly consider his mental health challenges, his ability to pay, and the impacts of the COVIC-19 pandemic. The second review decision produced only sets out that the second review administrative decision maker, “completed a second independent review of the facts and circumstances of this case and approved your request”.

[35] The Court observes that the administrative decision maker who granted Mr. Baxter’s personal second review relief request is the same Decision Maker who refused the Applicant’s second review relief request.

[36] While the Applicant is factually correct in arguing that Mr. Baxter’s mental health challenges were not relied upon by the CRA to reject his second review request for relief, it is equally factually correct to observe that the CRA did not grant Mr. Baxter’s second review relief request because of his self-reported mental health challenges. To argue as the Applicant does that Mr. Baxter’s mental health challenges were considered in a contrary manner by the CRA in the Applicant’s request for relief is therefore speculative and without factual foundation. The Applicant’s first argument must therefore be rejected.

[37] The Decision Maker thoughtfully considered the submissions and evidence filed by the Applicant with respect to Mr. Baxter’s mental health struggles in support of its requests for relief. This is evident from the Decision and from the Taxpayer Relief Sheet produced by both parties from the certified tribunal record.

[38] The Taxpayer Relief Sheet sets out the Decision Maker’s lengthier and more detailed consideration of each of the Applicant’s arguments, information and submitted documents in addition to other factors such as the Applicants’ current and past history of compliance, whether the Applicant knowingly allowed a balance to exist upon which interest accrued, whether the Applicant exercised reasonable care in conducting their affairs, whether the Applicant acted quickly to remedy any delay or omission in its tax affairs, whether there were circumstances beyond the Applicant’s control that prevented it from meeting its tax obligations, whether the dates and requests generally correspond with the events for which the request is made, and others.

[39] The Decision Marker considered Mr. Baxter’s separation from his spouse in the spring of 2004 that led to a divorce in 2015 as well as its impacts on his abilities as the Applicant’s sole director. The Decision Maker also considered Mr. Baxter’s involvement in litigation with his former employer between 2008 and 2013, and its effect on him by making his life miserable and facing the possibility of bankruptcy. The Decision Maker also considered Mr. Baxter’s involvement in litigation with municipal authorities and title authorities and the end of that litigation due to mounting legal costs.

[40] The Decision Maker went further and considered that by the fall of 2014, with the exception of the judgment of divorce outstanding, Mr. Baxter slowly improved the Applicant’s accounting and caused late tax returns to be filed. The Decision Maker then considered that the Applicant was audited, that Mr. Baxter was allocated additional tax liabilities as a result, and that he was engaged in more litigation, this time with the CRA. The CRA considered that Mr. Baxter fell in a serious inability to function during this time period.

[41] The Decision Maker also considered the statement from the World Health Organisation that financial stress is one of the leading contributors to mental stress, as well as the letters from Mr. Baxter’s psychologist that reflected Mr. Baxter’s self-reported stressors as well as the time of their self-reported onset.

[42] The Taxpayer Relief worksheet reflects that the Decision Maker noted that even if Mr. Baxter’s medical issues were confirmed, they would not completely absolve him as a director from meeting tax obligations. The Decision Maker noted that to the extent that any situation is ongoing, a director has a responsibility to make alternate arrangements regardless of whether the situation is a single chronic medical condition or a series of health issues occurring over time.

[43] The Decision Maker noted that the Applicant’s non-compliance issues pre-dated 2009 and Mr. Baxter’s report of the onset of his mental health challenges: between December 31, 2003 and December 31, 2015, the Applicant filed tax returns late for 10 of the 12 years considered, the late filing ranged between 169 days late to 1811 days late, taxes were paid late for 2 tax years, the late payments ranged between 566 and 1036 days late. The Decision Maker noted that the Applicant had not filed tax returns between 2016 and 2023 but had made 38 payments toward the balance owing between August 2009 and November 10, 2024.

[44] After considering this evidence, the Decision Maker came to a determination on the relief request based on Mr. Baxter’s mental health challenges as follows:

“While I acknowledge that collectively, the above noted events could have impacted the director’s mental health, and that financial stress is most likely a big source of mental distress for anybody, the CRA will generally only recommend relief of penalties and/or interest in the event that a connection can be made between the health issues and the non-compliance. The CRA will also evaluate if preventive and/or alternate measures were taken lo prevent or minimize the delays in complying. A review of this corporation's corporate account shows a history of non-compliance going back to at least 1998, as all the corporate returns, except for the returns with fiscal years ending December 31, 2008, December 31, 2009, and December 31, 2015, were not received by their respective due dates. In addition, none of the amounts owing were paid in full by their respective due dates. In this case, I do not find that it would be reasonable to approve relief of penalties and interest as our records clearly shows that there were compliance issues prior to the start of the circumstances described in this relief request, hence, prior to the director's mental health issues, and are still going on as of the date of this review. Therefore, no connection can be made. Furthermore, nothing was found to support that preventive and/or alternate measures were taken to prevent or minimize delays in complying. It is also to be noted that the director continued to work and make decisions in the function of operating a business such as buying a building, which is comparable in complexity as taking care of tax obligations.”

[45] The Decision Maker refused the request relief based on Mr. Baxter’s mental health challenges because the Applicant had not shown a connection between Mr. Baxter’s mental health challenges and its non-compliance with its tax obligations because its failure to comply with its tax obligations began prior to the represented onset of its Mr. Baxter’s mental health struggles and after the personal stressors such as the instances of litigation he had referred to had ended.

[46] This factual conclusion was a factual conclusion that was open to the Decision Maker based on the record that was before it and is before the Court. The conclusion reached by the Decision Maker is justified by the facts, and is based on an internally coherent and rational chain of analysis. The Applicant has not established that the Decision is unreasonable in its consideration of Mr. Baxter’s mental health issues.

B. The impact of the COVID-19 pandemic

[47] The Applicant argues that the Decision Maker did not consider the impact of the COVID-19 pandemic on the Applicant’s ability to pay despite writing in the Decision that they would. This, argues the Applicant, makes the Decision unreasonable.

[48] This argument has no basis in fact and must be rejected.

[49] The Decision Maker considered the potential impact of the COVID-19 pandemic on the Applicant in the Decision, in part, as follows:

“It was also requested that we review this relief request due to the COVID-19 pandemic and its effects on the corporation. The fiscal years included in this request are fiscal years ending December 31, 2008, and December 31, 2010 to December 31, 2015. COVID-19 was declared as a pandemic in March 2020. The due dates of the returns and payments of tax owing, for the fiscal years requested, were from the last day of February 2009 to June 30, 2016; hence, a long time prior to the start of the COVID-19 pandemic. Therefore, no connection could be made between the non-compliance for the years requested and the COVID-19. However, it could be argued that it could have affected the corporation’s financial situation; therefore, this will be taken into consideration when reviewing his corporation’s ability to pay.”

[50] The Decision Maker noted in the Decision that the CRA had requested financial documentation from the Applicant in connection with the assessment of the Applicant’s financial situation and ability to pay and that the Applicant had not provided all of the information requested.

[51] The Taxpayer Relief Fact Sheet and the July 5, 2023, request for documentation delivered to Mr. Baxter for himself personally and as the director of the Applicant sets out that the Decision Maker had attempted to contact Mr. Baxter and left a message for him to contact them. Mr. Baxter then submitted limited financial information to support the Applicant’s request for relief, but that information did not contain documentation or information that reflected the impact of the COVID-19 pandemic on the Applicant’s financial situation or ability to pay. More specifically, Mr. Baxter and the Applicant failed to deliver profit and loss statements and balance sheets for the 2020, 2021 and 2022 pandemic tax years that might have reflected an impact on the Applicant’s financial situation and correlative ability to pay despite being asked for them by the CRA.

[52] Considering the factual record, the Decision Maker’s analysis as set out in the Taxpayer Relief Fact Sheet, the Decision Maker’s discussion and reasoning of the impact of the COVID-19 pandemic on the Applicant’s ability to pay and the Applicant’s failure to produce documentation to support its contention that the COVID-19 pandemic had an impact on its ability to pay, it is apparent that the Decision is justified and is based on coherent and rational reasoning. The Applicant has not established that the Decision is unreasonable in its consideration of the impact of the COVID-19 pandemic on the Applicant’s ability to pay.

VII. Conclusions and Costs

[53] The Applicant has not established that the Decision is unreasonable. There is no basis for the Court to interfere with the Decision Maker’s reasonable Decision.

[54] The Applicant’s application for judicial review is therefore dismissed.

[55] The Respondent seeks its costs of this proceeding. The Court strongly encourages the parties to confer and attempt to agree on the costs of this proceeding prior to November 21, 2025. If the parties agree on costs by then, they may deliver a letter on consent to my attention that sets out their agreement as to costs. If the Court considers such costs appropriate, a subsequent order as to costs consistent with the agreement will be issued.

[56] In the event that the parties do not agree on costs, then the Respondent shall have until November 25, 2025, to serve and file its costs submissions that do not exceed three pages, double-spaced, exclusive of schedules, appendices, and authorities. The Applicant will then have until December 5, 2025, to serve and file its costs submissions, also limited to three pages, double-spaced, exclusive of schedules, appendices, and authorities.

[57] If no agreement as to costs is filed by November 21, 2025, and no costs submissions are served and filed by November 25, 2025, then no costs will be awarded to any party.

 

JUDGMENT in T-619-25

THIS COURT’S JUDGMENT is that:

1. The Applicant’s application for judicial review is dismissed.

2. Costs of this proceeding are reserved to be determined following the parties’ submissions on costs in accordance with the directions as to costs set out above.

“Benoit M. Duchesne”

FEDERAL COURT

SOLICITORS OF RECORD

DOCKET:	T-619-25
STYLE OF CAUSE:	BAXTER I.C.I. CORP. v. ATTORNEY GENERAL OF CANADA
JUDGMENT AND REASONS:	duchesne, j.
DATED:	november 13, 2025

MOTION IN WRITING CONSIDERED IN OTTAWA, ONTARIO PURSUANT TO RULE 369 OF THE FEDERAL COURT RULES

WRITTEN SUBMISSIONS BY:

Melanie Petrunia	For The Applicant
Sophia Trinacty	For The Respondent

SOLICITORS OF RECORD:

Petrunia Law Halifax, Nova-Scotia	For The Applicant
Attorney General of Canada Halifax, Nova-Scotia	For The Respondent