Date: 20011019
Docket: T-1712-00
Neutral citation: 2001 FCT 1139
Between:
CONSTRUCTION & RÉNOVATION M. DUBEAU INC.
Applicant
- and -
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
REASONS FOR ORDER
PINARD J.:
[1] This is an application for judicial review of the decision by Louis Turcotte, chief of appeals for the respondent, dated August 23, 2000, denying the request for cancellation of a penalty imposed on the respondent under subsection 227(9) of the Income Tax Act, R.S.C., 1985 (5th Supp.), c.1 (the Act).
[2] On March 25, 1999, Charles Dubeau, the son of Marc Dubeau, the applicant's representative, was diagnosed with cancer.
[3] On June 30, 1999, two $500,000.00 bonuses were paid by the applicant to Marc Dubeau and his spouse, Linda Dubeau. Because of that transaction, the applicant was required by the Act to remit $259,999.32 for deductions at source ("DAS") to the Minister of National Revenue (the "Minister").
[4] On July 9, 1999, the applicant sent the respondent a cheque for $60,000.00, which was applied to the DAS associated with the bonuses, leaving a balance of $199,999.32 owing for the DAS.
[5] On March 23, 2000, after a long battle with the illness, involving chemotherapy, hospitalization and a bone marrow graft, Charles Dubeau died.
[6] On March 30, 2000, the Minister issued a notice of assessment for the DAS that the applicant had not paid in respect of the 1999 taxation year, claiming the following balance, interest and penalties:
DAS $199,999.32
Interest $ 3,722.08
Penalties $ 19,999.93
Total $223,721.33
[7] On April 19, 2000, the applicant submitted a request for cancellation of the penalty under subsection 220(3.1) of the Act. In support of the request, the applicant's representative, Marc Dubeau, made reference to his prolonged absences from work due to the illness and subsequent death of his son as well as to his own wife's illness.
[8] On May 10, 2000, the respondent concluded that it was inappropriate in the circumstances to cancel the penalty and applicable interest and consequently denied the request for cancellation.
[9] On May 23, 2000, the applicant sent the respondent a cheque for $199,999.32, which was applied to the DAS associated with the bonuses in question.
[10] On June 26, 2000, the applicant submitted a request to the respondent for administrative re-examination of the May 10, 2000, decision. In it, Marc Dubeau stated the same grounds as those set out in his letter of April 19, 2000, and, in addition, referred to his own illness and the fact that he was unaware of the obligation to pay the DAS on the bonuses declared.
[11] On August 23, 2000, the request for the cancellation of the penalty was denied once again; the letter of refusal stated the following reasons:
[TRANSLATION]
. . . I conclude from my assessment that it is inappropriate to cancel the penalty in respect of the failure to pay an amount deducted or withheld in accordance with the Act, within the time allowed, having regard to the circumstances in your case as well as the spirit and intent of the fairness provisions. As stated in Information Circular IC92-2, which was sent to you on May 10, 2000, that penalty does not result from circumstances beyond your control (Number 5) or from actions of the Department (Number 6).
[12] The following provisions of the Act are relevant in this case:
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.
227. (9) Subject to subsection 227(9.5), every person who in a calendar year has failed to remit or pay as and when required by this Act or a regulation an amount deducted or withheld as required by this Act or a regulation or an amount of tax that the person is, by section 116 or by a regulation made under subsection 215(4), required to pay is liable to a penalty of
(a) 10% of that amount; or
(b) where at the time of the failure a penalty under this subsection was payable by the person in respect of an amount that should
227. (9) Sous réserve du paragraphe (9.5), toute personne qui ne remet pas ou ne paye pas au cours d'une année civile, de la manière et dans le délai prévus à la présente loi ou à son règlement, un montant déduit ou retenu conformément à la présente loi ou à son règlement ou un montant d'impôt qu'elle doit payer conformément à l'article 116 ou à une disposition réglementaire prise en application du paragraphe 215(4) est passible d'une pénalité :
a) soit de 10 % sur ce montant;
have been remitted or paid during the year and the failure was made knowingly or under circumstances amounting to gross negligence, 20% of that amount.
b) soit de 20 % du montant qui aurait dû être remis ou payé au cours de l'année si, au moment du défaut, une pénalité en application du présent paragraphe était payable par la personne et si le défaut a été commis sciemment ou dans des circonstances équivalant à faute lourde.
[13] A taxpayer on whom the Minister imposed a penalty or interest under subsection 227(9) of the Act can therefore request the cancellation of those charges pursuant to subsection 220(3.1). On that point, the policy entitled "Application of the Fairness Provisions to Interest and Penalty," March 1996, referred to in the affidavit of Louis Turcotte, section chief, Canada Customs and Revenue Agency, provides that the relief sought may be granted in extraordinary circumstances. That policy describes the spirit and intent of the fairness provisions as follows:
The fairness provisions were designed to permit the Department to
assist clients in resolving problems that arose through no fault of
their own and to allow for a common sense approach in dealing with
those who because of personal misfortune or circumstances beyond their
control are unable to meet the Department's guidelines or comply with
the legislation it administers.
[14] In that policy, examples of cases where the cancellation of penalties and interest could be justified are provided, including "a serious emotional or mental distress such as, death in the immediate family." In that case, the policy suggests that in addition to determining whether the person had sole authority to remit amounts owing on behalf of the corporation, the Minister must consider:
(a) Relationship of parties involved.
(b) Date of death.
(c) Date(s) and nature of illness or accident.
(d) Explanation as to how the event prevented compliance.
(e) Explanation as to whether other business obligations were impaired.
[15] Information Circular IC92-2, entitled "Guidelines for the cancellation and waiver of interest and penalties," provides that in the course of his analysis, the Minister will consider the following points, among others:
(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 or employer 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 or employer has acted quickly to remedy any delay or omission.
[16] In his affidavit, Mr. Turcotte sets out the following reasons to substantiate his refusal of the applicant's request for cancellation:
[TRANSLATION]
(11) I believe that the penalty should not be cancelled since the applicant did not prove that its failure to pay the outstanding DAS was closely connected to the painful ordeal that its representative went through;
(12) The fact is that at all material times, the applicant continued to carry on its operations and never failed to make the regular monthly DAS;
(13) Only the DAS subsequent to the declaration of the two $500,000.00 bonuses were not paid;
(14) Moreover, since a partial payment of $60,000.00 was received on July 9, 1999, in connection with the outstanding DAS, which payment was accompanied by a letter from the company's accountant, it appears that the applicant was not incapable of handling the management of its operations, as set out in that letter attached hereto as Exhibit 6 to my affidavit;
[17] The letter in question, dated July 9, 1999, reads in part as follows:
[TRANSLATION]
This letter is to inform you that the tax payable for the above-mentioned period is $272,057.16. We have made a total remittance of $77,670.59 on an outstanding total of $277,670.59. As soon as possible, we will send you the balance due. . . .
[18] In its letter to the respondent dated June 26, 2000, the applicant attempts to explain the earlier comments:
[TRANSLATION]
Would I have had to make no payment for several months in order for you to agree to accept my request for cancellation of the penalty? Even though I missed my payment for one month, the fact remains that my abilities as manager were severely impaired in 1999 and that this payment related to an extraordinary event that I was unable to manage and to understand.
Furthermore, even though we filed a return and remittance form for deductions at source in due form for June 1999 for the total amount, and the enclosed payment was short by about $200,000, we never received a phone call or notice from your Department for the outstanding balance. This would probably have given me a shake and we could have discussed the situation and remedied it.
[19] The "Application of the Fairness Provisions to Interest and Penalty" policy states that the relief sought can only be granted when the following two conditions are both met:
(i) the extraordinary circumstances can be verified or substantiated and;
(ii) it is reasonable to conclude that the delay in complying with the law could not be avoided by the client's representative or firm because of the extraordinary circumstances.
[20] This case in fact involves the second condition, namely whether it is reasonable to conclude that, in the particular circumstances, Marc Dubeau could not avoid the delay in remitting the DAS. Mr. Dubeau claims that he literally abandoned his business during his son's illness. The letter of July 9, 1999, however, makes it obvious that Mr. Dubeau knew he still owed close to $200,000.00 in DAS to the Minister. Mr. Dubeau was even able to make partial payment of the amount owing on that date. It is also important to point out that Mr. Dubeau was able to continue to meet his tax obligations in connection with the regular monthly DAS. Moreover, the evidence reveals that he met his tax obligations in the past, that he paid the balance of the DAS within two months following his son's death, and that no one at his office was authorized to act on his behalf in his absence in financial matters.
[21] In all of this context, despite all of the sympathy aroused by the misfortunes of Marc Dubeau and his family, the strict standard of judicial review that was confirmed in Baker v. Canada (M.C.I.), [1999] 2 R.C.S. 817, prevents me from intervening. In that case, Madam Justice L'Heureux-Dubé wrote, in paragraph 53, at page 853:
Administrative law has traditionally approached the review of decisions classified as discretionary separately from those seen as involving the interpretation of rules of law. The rule has been that decisions classified as discretionary may only be reviewed on limited grounds such as the bad faith of decision-makers, the exercise of discretion for an improper purpose, and the use of irrelevant considerations: see, for example, Maple Lodge Farms Ltd. v. Government of Canada, [1982] 2 S.C.R. 2, at pp. 7-8; Shell Canada Products Ltd. v. Vancouver (City), [1994] 1 S.C.R. 231. A general doctrine of "unreasonableness" has also sometimes been applied to discretionary decisions: Associated Provincial Picture Houses, Ltd. v. Wednesbury Corporation, [1948] 1 K.B. 223 (C.A.). In my opinion, these doctrines incorporate two central ideas -- that discretionary decisions, like all other administrative decisions, must be made within the bounds of the jurisdiction conferred by the statute, but that considerable deference will be given to decision-makers by courts in reviewing the exercise of that discretion and determining the scope of the decision-maker's jurisdiction. These doctrines recognize that it is the intention of a legislature, when using statutory language that confers broad choices on administrative agencies, that courts should not lightly interfere with such decisions, and should give considerable respect to decision-makers when reviewing the manner in which discretion was exercised. . . .
(Emphasis added)
[22] In this case, the good faith of the decision-maker is definitely not in question. Nor was it established that the decision-maker exercised his discretion for an improper purpose or used irrelevant considerations. The decision-maker properly considered the extraordinary circumstances brought to his attention by Marc Dubeau, for the applicant, and simply determined, in light of the applicable guidelines and fairness provisions, that the applicant's failure to comply with the Act was not attributable to the extraordinary circumstances cited. This is also a case in which procedural fairness was properly observed: it is not contested that the applicant took several opportunities to present all of its arguments in a timely manner, before the decision it complains of was finally rendered.
[23] The question is not whether I would have placed different weight on the extraordinary circumstances at issue, but again, quite simply, as the Supreme Court of Canada held in Baker, supra, whether the discretion was exercised in good faith, for a proper purpose, on the basis of relevant considerations and in compliance with procedural fairness. In Maple Lodge Farms Ltd., referred to in Baker, supra, Mr. Justice McIntyre wrote, similarly, at pages 7
and 8:
. . .It is, as well, a clearly-established rule that the 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 added)
[24] For all of these reasons, therefore, I am not satisfied that the intervention of this Court is justified. The application for judicial review is accordingly dismissed, with costs.
YVON PINARD
JUDGE
OTTAWA, ONTARIO
October 19, 2001
Certified true translation
Sophie Debbané, LL.B.
Date: 20011019
Docket: T-1712-00
Ottawa, Ontario, the 19th day of October 2001
Present: the Honourable Mr. Justice Pinard
Between:
CONSTRUCTION & RÉNOVATION M. DUBEAU INC.
Applicant
- and -
CANADA CUSTOMS AND REVENUE AGENCY
Respondent
ORDER
The application for judicial review is dismissed, with costs.
YVON PINARD
JUDGE
Certified true translation
Sophie Debbané, LL.B.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE NO.: T-1712-00
STYLE OF CAUSE: Construction & Rénovation M. Dubeau Inc.
- and-
Canada Customs and Revenue Agency
PLACE OF HEARING: Québec, Quebec
DATE OF HEARING: September 14, 2001
REASONS for order of Pinard J.
DATED: October 19, 2001
APPEARANCES:
Louis Sirois FOR THE APPLICANT
Nadine Dupuis FOR THE RESPONDENT
SOLICITORS OF RECORD:
Gosselin, Daigle, Sirois et Associés
Québec, Quebec FOR THE APPLICANT
Morris Rosenberg
Deputy Attorney General
of Canada FOR THE RESPONDENT