A taxpayer submits a fairness request to the CRA, and the request is rejected by the first officer to review it on the ground that it did not show inability to pay. The taxpayer agrees with the officer: the taxpayer did fail to show inability to pay because the taxpayer never raised the issue! The taxpayer, however, did mention CRA delay as a ground for relief, but that point is not addressed by the officer. The taxpayer sends the request back to the CRA for another review. A recent case — Dort (Estate) v. Canada (Minister of National Revenue), 2005 FC 1201 —- suggests that this other review should be regarded as a “first look” by the CRA and that, if the CRA rejects the request, the taxpayer is entitled to a second review.
Administratively, the CRA permits a taxpayer whose first fairness request is rejected to apply for a review of the decision. The Dort Estate applied for fairness in respect of a debt that had been owing to the CRA for a significant period of time. The grounds for the request were “delay in processing the amount of interest owing, financial hardship and mental distress.” The evidence showed that, during the first-level review, the Minister considered the last two grounds but not the first. The Minister tried to argue that an unsigned letter purporting to come from T.A. Wright, dealt with the delay issue at the first level, but the evidence showed that Wright never considered the issue or even signed the letter.
The second-level review considered all three issues, but the taxpayer took the position that it was entitled to another review on the delay issue because it had not been properly considered at the first level. The Court agreed:
[15] It is not necessary for the Court to form an opinion as to whether it would be appropriate to waive interest because of delays. Mr. Gibson’s decision in this regard is fatally flawed because it does not accord with Mrs. Dort’s legitimate expectations, and, in part, was based on an incomplete record.
[16] The fact of the matter is that, as has been admitted in this Court, the initial decision of J.F. Lee was limited to financial hardship and mental distress. The delay-in-processing issue was covered in April 2002 by the Department which sent the Estate’s solicitors a “duplicate” unsigned copy of a letter dated 22 October 2001, purportedly issued by T.A. Wright, Assistant Director, Client Service Division. That letter denied the application as regards the delay in processing. However, that letter had never been reviewed by Mr. Wright or put to him for his signature. Thus, there was no first level decision for Mr. Gibson to review.
[17] Mrs. Dort legitimately expected that there would be both a first level and second level decision. Judicial review would only be necessary if she were not successful at the second level. The principle of legitimate expectations is part of procedural fairness. See Mount Sinai Hospital Centre v. Quebec (Minister of Health and Social Services), 2001 SCC 41 (CanLII), [2001] 2 S.C.R. 281 per Binnie J. at para. 35.
For good measure, the Court went on to find that the second-level review of the delay issue was not reasonable. The Court also held that the second-level review with respect to the other issues raised by the Estate was reasonable. As a result, the Court ordered the CRA to conduct “the second level review contemplated by the Guidelines [found in Information Circular IC-92-2] […] [but] that review need only be limited to the issue of delays in processing.”
