Executive Summary: Key Legal and Evidentiary Issues

• Harinder and Sundeep Toor sought judicial review of two decisions from the Minister of National Revenue dated September 17, 2024, partially denying the waiver or cancellation of interest and late-filing penalties under section 281.1 of the Excise Tax Act.

• Whether the Minister reasonably concluded that the Applicants' financial situation — including a net worth of $651,666.00 and combined monthly incomes of $18,725.00 — did not constitute "financial hardship" warranting relief.

• Adequacy of the COVID-19 pandemic relief already granted (for the period of March 16, 2020, to August 27, 2020) was challenged by the Applicants, who argued that granting them only four months of relief for a pandemic that lasted much longer was unreasonable.

• The Applicants contended it was unfair to accrue interest during the lengthy Tax Court appeal process, despite having been informed by letter dated July 3, 2019, that interest would compound daily regardless of any objection or appeal.

• Procedural fairness concerns raised by the Applicants were found to relate to the first review of their relief requests and were not raised in their notices of application, nor were they the decisions under review in the current proceeding.

• Applying the reasonableness standard from Vavilov, the Court determined the Minister's decisions bore the hallmarks of reasonableness — justification, transparency, and intelligibility — and the Applicants failed to demonstrate sufficiently serious shortcomings or a fatal flaw in the decision-making logic.

Background and facts of the case
Mrs. Sundeep Toor and her spouse, Mr. Harinder Toor, were each assessed under the Excise Tax Act for the periods ending March 31, 2012 and October 31, 2014 in respect of a deemed supply of houses they had built. They objected to the assessments. Once the assessments were confirmed, they appealed to the Tax Court of Canada. These appeals were settled on November 9, 2022. As part of the settlement, the 2012 assessments and their related penalties and interest were vacated. The Applicants received the notices of reassessments on or about February 24, 2023. Soon thereafter, on April 10, 2023, they applied for interest and penalty relief.

The first ministerial review
On March 25, 2024, the Minister rendered a first decision denying the requested relief. The CRA had already granted reliefs on its own initiative for the periods of (1) December 4, 2017, to January 8, 2018, and (2) April 1, 2018, to July 27, 2018, both due to delays in the audit process, and (3) March 16, 2020, to August 27, 2020, to account for delays caused by the COVID-19 pandemic. The Minister found that the Applicants were not otherwise prevented from paying the amount due as a result of actions by the CRA or because of circumstances beyond their control, and that the evidence provided did not support the proposition that relief should be granted based on undue hardship, especially given their sufficient assets and income.

The second ministerial review and the decisions under review
The Applicants requested a second review of their relief requests. A second independent review was conducted in both cases. On September 17, 2024, the Minister denied for the most part the reliefs sought by both Applicants. The Minister did, however, grant a waiver of the interest for the period of April 10, 2023, to February 16, 2024, due to the CRA's delay in processing the first relief requests. These second review decisions are the only ones before the Federal Court in this judicial review.

The Applicants' arguments
The Toors argued that the decisions were not reasonable and were not rendered in a procedurally fair manner. They questioned the conduct of the CRA in the context of the first evaluation of their relief requests, citing no response to their numerous phone messages and inexplicable delays, and their belief that the CRA agent who handled their files, having been promoted, rushed the review of their requests. On the merits, they submitted that the Minister failed to adequately consider their circumstances and meaningfully assess their evidence. In their view, it would be unfair to charge them interest and penalties for the period during which their appeals to the Tax Court of Canada were ongoing, given that they agreed to extensions and delays requested by the CRA's lawyers in the context of the proceedings. They argued that during the pandemic, the Canadian government provided benefits to those in need, and that granting them only four months of relief for a pandemic that lasted much longer was unreasonable. They also claimed that they faced, and still face, financial hardship, noting that they have three children and that during the pandemic, Mr. Toor's work was significantly reduced while his spouse was on maternity leave. They emphasized that they still paid the principal (the taxes owed) in full, using a credit line, and sought relief solely as concerns the interest and penalties. At the hearing, they raised for the first time that the Minister did not consider the fact that interest charges make up a major amount of what is due and are almost equivalent to the capital (the GST) which they had paid using a line of credit that they now also have to pay, with interest.

The Respondent's position
The Attorney General of Canada submitted that the decisions ought not to be disturbed as they were reasonable, transparent, intelligible, and justified in view of the facts and the law constraining the decision makers. The AGC stressed that section 281.1 of the Excise Tax Act gives the Minister broad discretion to waive or cancel penalties and interest otherwise payable under the Act, and argued that the Minister used their discretion in accordance with the administrative guidelines developed by the CRA to inform and facilitate its exercise. The AGC noted that the Applicants were represented by counsel throughout the appeal process and all the extensions were consented to, so they cannot be attributed to the CRA. The AGC further submitted that the Applicants were informed that interests were compounding daily even if the assessments were objected to or appealed and that, while the appeals settled in November 2022, the Applicants did not make any payment until well after — specifically in April 2024. According to the AGC, the Minister could reasonably conclude that the Applicants' situation did not warrant relief for financial hardship given their ongoing ability to pay, including their net worth in excess of $600,000 and the fact that they continued to pay other creditors for loans, credit cards, vehicle lease payments, and recreation.

The CRA's taxpayer relief guidelines and financial hardship analysis
The Court examined the CRA's Information Circular IC-07-1R1, "Taxpayer Relief Provisions" (August 18, 2017), which outlines the circumstances under which the Minister may grant relief from penalties and interest: (a) extraordinary circumstances, (b) actions of the CRA, and (c) inability to pay or financial hardship. Under the financial hardship provisions, the CRA defines "financial hardship" as the prolonged inability to afford basic necessities such as food, clothing, and shelter and reasonable non-essentials. The CRA's financial review considers income and expenses, assets and liabilities, the ability to borrow funds and sell assets, and actions and efforts to pay amounts owing. For an individual taxpayer, the review also considers the income, expenses, assets, and liabilities of household members. The Minister applied these guidelines and concluded that the Applicants' circumstances did not meet the threshold for financial hardship. The Applicants reported total assets of $2,772,912.50 and liabilities of $2,121,246.50, leaving a net worth of $651,666.00. They had a home equity line of credit of approximately $375,000.00 and combined monthly incomes totalling $18,725.00. While the Applicants declared monthly expenses in excess of their income (at $19,131.00), the decision maker found that some of the expenses resulted from personal choices such as entering into expensive leases for luxury cars in 2023 and 2024. The evidence did not show that the Applicants were unable to afford the basic necessities of life.

The Court's analysis and ruling
The Court applied the reasonableness standard of review as established in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65, under which a decision must bear the hallmarks of reasonableness — justification, transparency, and intelligibility. The Court noted that reasonableness review is a deferential but robust form of review. Justice Ferron stated that while the Court had empathy for the Applicants' situation, their submissions had no merit. The Taxpayer Relief Fact Sheets and the decisions themselves showed that the Minister thoroughly and meaningfully assessed their submissions and evidence. The Court found that the Applicants did not raise any specific errors with the decisions and simply alleged that their financial hardship, the impacts of the COVID-19 pandemic, and the various delays were not meaningfully considered. The Court also recognized that while there were delays during the appeal process, the records showed those delays and time extensions were agreed to by both parties and were considered by the CRA in their analysis. As for procedural fairness, the Court noted that these claims were not mentioned in the Applicants' notices of application, were not truly addressed in their memoranda, and in any event appeared to relate to the first review decisions, which were not before the Court. Ultimately, the Federal Court dismissed the applications for judicial review. The AGC had requested costs in their memorandum but at the hearing left the issue to the Court's discretion, highlighting that the Applicants were very accommodating. The Court was not convinced that costs were justified and declined to award costs against the Applicants, who were self-represented and made very professional, organized, and reasonably concise representations before the Court. No specific monetary amount was ordered in favour of either party, as the judgment solely dismissed the applications for judicial review without costs.