Longley v. Minister of National Revenue, 99 DTC 5549, [1999] 4 CTC 108 (B.C.S.C.)

Quijano J.:

Introduction

In or about 1984, Blair Longley conceived of a plan whereby taxpayers could receive federal political contribution tax credits for contributions made to a political party which the taxpayer could direct to be paid so as to benefit either the taxpayer or some other individual whom the taxpayer designated. This plan became known as the “Contributor’s Choice Concept” (the “CCC”), or “Longley’s Loophole”. Not surprisingly the scheme was met with some scepticism by potential contributors. As a result Mr. Longley sought to obtain written confirmation from Revenue Canada that the scheme was legal. He pursued Revenue Canada for five years seeking this confirmation.

Mr. Longley says that from 1985 to 1990 Revenue Canada knew that his plan did not offend the provisions of the Income Tax Act but refused to acknowledge this to him in writing. This refusal, he says, caused damage to him and resulted in an enormous benefit to the Federal Government in the form of unclaimed tax credits.

In 1990 Mr. Longley commenced this action seeking damages against Revenue Canada for breach of his ss. 2, 7 and 15 Charter rights or, alternatively, for misfeasance in public office. Mr. Longley also seeks a declaration that s. 245 of the Income Tax Act, the General Anti-Avoidance Rule, offends ss. 2, 7 and 15 of the Charter of Rights and Freedoms and that it is void for vagueness.

Issues

1. Was the “Contributor’s Choice Concept” contrary to the provisions of s. 127 of the Income Tax Act prior to the introduction of s. 245?

2. Did Revenue Canada commit a constitutional tort, the tort of misfeasance in public office, in its dealings with Mr. Longley prior to the introduction of s. 245?

3. Does s. 245 violate ss. 2, 7 or 15 of the Charter of Rights and Freedoms!

4. Was Revenue Canada’s threat to use the provisions of s. 245 to declare the CCC contrary to the object and spirit of the Act a violation of Mr. Longley’s rights under the Charter of Rights and Freedoms!

5. Is s. 245 void for vagueness?

6. What is the measure of damages, if any, to which Mr. Longley is entitled?

Narrative and Findings of Fact

In 1984, Blair Longley launched a series of variations of a scheme involving the exploitation of the federal political contribution tax credit made available in s. 127 of the Income Tax Act. This scheme became known as the “Contributor’s Choice Concept”, or “Longley’s Loophole”.

The essence of the CCC was that the contributor to a federal political party or candidate (the “taxpayer”) could direct how most or all of his or her contribution was to be spent. Whether the money remained with the political party or candidate, or was directed elsewhere, the taxpayer would receive a political contribution receipt for the full amount. This receipt could be filed with the taxpayer’s income tax return and the contributor would receive a tax credit for as much as 75% of the contribution.

Between 1984 and 1988 the plaintiff developed the following variations of the CCC:

I. Hiring Back the Contributor

The taxpayer could direct the registered agent or candidate to use the contribution to hire the taxpayer and pay him to campaign for or against any registered political party or candidate, in any manner selected by the taxpayer.

2. Gifts

The taxpayer could direct his or her money to an individual or non-profit organization subject to certain conditions. The taxpayer would then receive, from the registered agent, a political contribution receipt which could be used to claim a tax credit.

As a result, where the taxpayer directed $100.00 to a non-profit organization that was a registered charity, the taxpayer would not be limited to the lesser deduction allowed under the Income Tax Act for gifts to registered charities, but rather, could claim the $75.00 political contribution tax credit.

3. Payment for Goods and Services

The taxpayer could direct that his contribution be used to purchase goods or services which would benefit the taxpayer or someone nominated by the taxpayer. For example, the taxpayer could direct that his contribution be used to purchase a bicycle (which the plaintiff considered to be a political purpose because of the environmental aspect) for him or herself or some other named individual.

Alternatively, the taxpayer could direct that the contribution be used to pay someone named, including the taxpayer, to do work (the political purpose being job creation). The work could be for the public good or for the benefit of the individual who directed the payment.

In both examples a tax receipt would be issued for the contribution and the taxpayer could claim the political tax credit.

4. The Rhino Bursaries

The taxpayer could direct that the contribution be paid to a college or university to the credit of a named person’s tuition (the political purpose being support for post-secondary education). The named person could be the taxpayer or a relative of the taxpayer or anyone else. The taxpayer would receive a political contribution receipt for the full amount, entitling the taxpayer to claim a tax credit.

5. Canadian Youth Civil Rights Disability Compensation Grants

Under this program, the taxpayer could direct that $100.00 be paid to a particular person under the age of 18 as a grant. Again, the taxpayer could receive a political contribution receipt for that amount and then claim a $75.00 tax credit.

Few contributions utilizing the CCC were ever made. Most of the contributions were made by Mr. Longley either directly or indirectly. Very little of the money contributed was made available for use by the Rhinoceros Party.

It was fundamental to all of the variations of the CCC that the contributor could direct the use to which his or her contribution was to be put. The political purpose of the scheme, according to Mr. Longley, was to increase public participation in the federal political process.

In order for the CCC to work it was necessary that it be promoted by a registered federal political party.

In 1985 Blair Longley became the registered agent in British Columbia for the Rhinoceros Party, a registered federal political party. As the registered agent Mr. Longley had the authority to issue tax receipts for contributions made to the party. While he was the registered agent of the Rhinoceros Party Mr. Longley promoted his Contributor’s Choice Concept. In March 1987, the Rhinoceros Party terminated Mr. Longley’s role as Registered Agent because his promotion of the CCC was inconsistent with the party’s philosophy of anarchy.

In 1988, Mr. Longley set out to establish a new federal party, the Student Party. He obtained the requisite number of founding members and thus qualified as a candidate in the 1988 Federal Election. In order to become a registered federal political party, however, Mr. Longley’s Student Party had to field at least 50 candidates in the 1988 Federal Election. Mr. Longley was unable to find anyone other than himself to run for his party and, as a result, the Student Party lost its bid to become a registered federal political party in Canada.

From 1985 to 1990, Mr. Longley vigorously pursued Revenue Canada seeking written confirmation of what he believed to be true: that the CCC was not contrary to the provisions of the Income Tax Act. Revenue Canada refused to confirm the legality of the scheme but did not take steps to reassess those contributors who had claimed the tax credits although urged by Mr. Longley to do so.

In 1988 Parliament amended the Income Tax Act to add section 245, referred to as the General Anti-Avoidance Rule (“GAAR”). From the time of its proclamation, Revenue Canada relied on s. 245 to support its position that the CCC was contrary to the object and spirit of the Act.

Analysis

I. Did the Contributor’s Choice Concept Violate the Provisions of Section 127 of the Income Tax Act.

In 1991, the defendant brought a motion to dismiss Mr. Longley’s action pursuant to Rule 19(24). Mr. Longley’s claim was dismissed and he appealed. In 1992 the British Columbia Court of Appeal allowed Mr. Longley’s appeal. In Longley v. Minister of National Revenue, [1992] 4 W.W.R. 213 (B.C. C.A.), Hutcheon J.A., for the majority, stated the following at p. 215:

In 1985, Longley, then a registered agent under the Election Act, developed a scheme called Contributors Choice Concept. Under this concept, a person who made a financial contribution to a political party could direct how all or a portion of the contribution would be allocated. Longley would issue an official receipt for the full amount and the contributor would qualify for a federal tax credit under s. 127(3) of the Income Tax Act.

At p. 216, Hutcheon J.A. set out the essential question to be answered. He said:

The first question that arises is whether the Contributors Choice Concept clearly falls outside the language of s. 127(3). If it does, then Longley cannot claim that any of his rights under the Canadian Charter of Rights and Freedoms have been denied or infringed based on s. 127(3).

.] . Legislative Framework

Subsection 127(3) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), addresses contributions to registered parties and candidates and reads, as it has at all relevant times:

127 (3) There may be deducted from the tax otherwise payable by a taxpayer under this Part for a taxation year in respect of the total of all amounts each of which is an amount contributed by the taxpayer in the year to a registered party or to an officially nominated candidate at an election of a member or members to serve in the House of Commons of Canada (in this section referred to as “‘the total”),

(a) 75% of the total if the total does not exceed $100,

(b) $75 plus 50% of the amount by which the total exceeds $100 if the total exceeds $100 and does not exceed $550, or

(c) the lesser of

(i) $300 plus 33 1/3% of the amount by which the total exceeds $550 if the total exceeds $550, and

(11) $500,

if payment of each amount contributed that is included in the total is proven by filing a receipt with the Minister, signed by a registered agent of the registered party or by the official agent of the officially nominated candidate, as the case may be, that contains prescribed information.

The definition of “amount contributed” as it pertains to ss. 127(3) is set out in ss. 127(4.1) which provides:

127 (4.1) In subsections (3), (3.1) and (3.2), “amount contributed” by a taxpayer means a contribution by the taxpayer to a registered party or an officially nominated candidate in the form of cash or in the form of a negotiable instrument issued by the taxpayer, but does not include:

(a) a contribution made by an official agent of an officially nominated candidate or a registered agent of a registered party (in the agent’s capacity as such official agent or registered agent, as the case may be) to another such official agent or registered agent, as the case may be; or

(b) a contribution in respect of which the taxpayer has received or is entitled to receive a financial benefit of any kind (other than a prescribed financial benefit or a deduction pursuant to subsection (3)) from a government, municipality or other public authority, whether as a grant, subsidy, forgivable loan or deduction from tax or an allowance or otherwise.

2. The Plaintiff's Position

Mr. Longley argues that contributions made in accordance with the CCC are “contributions” within the clear language of ss. 127(3) of the Income Tax Act. The only limitation to the “amount contributed” is found in ss. 127(4.1) and the contributions under the many variations of the CCC, he submits, do not fall within the two exceptions to the definition. It is Mr. Longley’s position that only Parliament, not Revenue Canada, has the authority to determine what constitutes a political contribution. He says that if Parliament meant to limit the availability of the political tax credit it could have done so.

Mr. Longley also argues that the CCC does not contravene the object and spirit of the provisions of s. 127 because the language of the section is clear and unambiguous and nowhere in the Act is there a definition of object and spirit that would affect the interpretation of the section.

Mr. Longley submits that the purpose of the federal political tax credit is to encourage participation in the federal political process. He sees any participation in the political process as “political activity”, and broadly defines “political expression” as using one’s money to support the things one believes in.

His contributors, he argues, choose to express their political views as individuals or in minimal units by making directed contributions rather than in the traditional way, by providing monetary support to a political party which a person believes or hopes will then make appropriate political statements on his or her behalf. He argues that these “minimal units”, or minor political parties, must not be treated differently than established political parties which enjoy the tax credit benefit.

3. The Defendant's Position

Revenue Canada, argues that the CCC transactions do not constitute “contributions” and are, therefore, outside the scope of ss. 127(3) of the Income Tax Act. Revenue Canada also says that the CCC offends the object and spirit of s. 127 because the transactions are not for a “political purpose”, nor are they at arm’s length.

Revenue Canada says that money given pursuant to the CCC does not constitute a “contribution” because the contributor retains control over the funds which then benefit the contributor or a person designated by him or her and do not go to a common fund or purpose or benefit the party or candidate. Revenue Canada takes the position that where the taxpayer does not derive any direct or indirect benefit the taxpayer may direct the party or candidate as to how he or she wishes the money were spent and claim the tax credit on the entire amount contributed. Otherwise, the taxpayer may only claim a tax credit net of any personal benefit.

Revenue Canada says that where the contributor derives a direct or indirect benefit, the “contribution” is not for a “political purpose”. For example, a charitable contribution funnelled through the conduit of a political party, is merely a method to obtain a greater tax savings. Parliament saw fit to provide less tax relief in respect of charitable donations than for political contributions. That intent should be given effect to.

4. Statutory Interpretation and Section 127

In 1985, when Mr. Longley first asked Revenue Canada to confirm that the CCC was not contrary to the Income Tax Act, the most recent authority on the interpretation of taxing statutes was Stubart Investments Ltd. v. R., [1984] 1 S.C.R. 536 (S.C.C.). In that case the court adopted Dreidger’s modern rule of statutory construction. In particular, at p. 578, Mr. Justice Estey adopted the following from Dreidger:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

At p. 570, dealing with the approach be taken to the interpretation of statutory benefit provisions, Estey J. quoted Pratte J. in Produits L.D.G. Products Inc. v. Minister of National Revenue (1976), 76 D.T.C. 6344 (Fed. C.A.), at 6349, as follows:

There is nothing reprehensible in seeking to take advantage of a benefit allowed by the law. If a taxpayer has made an expenditure which, according to the Act, he may deduct when calculating his income, I do not see how the reason which prompted him to act can in itself make this expenditure non-deductible. ...

And at pp. 579-580, Estey J. acknowledged that the formal validity of a transaction may be insufficient where the taxpayer’s conduct defeats the “object and spirit” of the provision.

At p. 580, commenting on allowance or benefit provisions in a statute, Estey J. said that such provisions should be “read in the context of the whole statute, and with the ‘object and spirit’ and purpose of the allowance provision in mind...”.

At p. 570 of Stubart Estey J. quoted the following from R. v. Alberta & Southern Gas Co. (1977), [1978] 1 F.C. 454 (Fed. C.A.), at 462-463:

... a transaction that clearly falls within the object and spirit of [a given section of the Act] cannot be said to unduly or artificially reduce income merely because the taxpayer was influenced in deciding to enter into it by tax considerations.

And at p. 576, Mr. Justice Estey said:

... It seems more appropriate to turn to an interpretation test which would provide a means of applying the Act so as to affect only the conduct of a taxpayer which has the designed effect of defeating the expressed intention of Parliament. In short, the tax statute, by this interpretive technique, is extended to reach conduct of the taxpayer which clearly falls within “the object and spirit” of the taxing provisions. ...

Although the court in Stubart was dealing with a business transaction, I see no significant difference between a bona fide business transaction and a bona fide political contribution in the context of an interpretation of the provisions of s. 127 of the Income Tax Act.

Mr. Justice lacobucci, in Antosko v. Minister of National Revenue, [1994] 2 S.C.R. 312 (S.C.C.), at 325, followed Mr. Justice Estey’s approach to the determination of “object and spirit” in Stubart and said, at p. 328 of Antosko:

... In the absence of evidence that the transaction was a sham or an abuse of the provisions of the Act, it is not the role of the court to determine whether the transaction in question is one which renders the taxpayer deserving of a deduction. If the terms of the section are met, the taxpayer may rely on it, and it is the option of Parliament specifically to preclude further reliance in such situations.

He continued, at p. 330, as follows:

... Where the words of the section are not ambiguous, it is not for this Court to find that the appellants should be disentitled to a deduction because they do not deserve a “windfall”, as the respondent contends. In the absence of a situation of ambiguity, such that the Court must look to the results of a transaction to assist in ascertaining the intent of Parliament, a normative assessment of the consequences of the application of a given provision is within the ambit of the legislature, not the courts. ...

Madam Justice McLachlin also commented on the general principles of statutory interpretation in Opetchesaht Indian Band v. Canada, [1997] 2 S.C.R. 119 (S.C.C.). Although in dissent on the main issue, her remarks with respect to interpretation are apt. At pp. 152-153, she stated:

This court has recently affirmed that the process of statutory interpretation requires that the intention of Parliament be ascertained first by considering the plain meaning of the words used in the statute, and has determined that where “the words used in a statute are clear and unambiguous, no further step is needed to identify the intention of Parliament”. ...

However, s. 12 of the Interpretation Act, R.S.C., 1985, c. l—121, is equally clear that a legislative enactment “shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects”. Thus, it is apparent that a court should only be satisfied with the plain meaning of a statute where that meaning is clear and consistent with a purposive reading of the statute as a whole. Where the plain meaning is ambiguous, unclear or uncertain in scope, more is required.

McLachlin J. then summarized the current rule of statutory interpretation as it was expressed by R. Sullivan at p. 131 of Dreidger on the Construction of Statutes, 3d ed., 1994:

... Courts must interpret legislation “in its total context, having regard to the purpose of the legislation, the consequences of its proposed interpretations, the presumptions and special rules of interpretation, as well as admissible external aids”, in order to further the achievement of the legislative purpose and to attain an outcome that is reasonable and just.

Where there is ambiguity resort may be had to secondary sources to assist in the interpretation. In Ciment Québec Inc. c. St-Basile Sud (Village), [1993] 2 S.C.R. 823 (S.C.C.), Madam Justice L’Heureux-Dubé, writing for the court, said at p. 836: “that [i]n my opinion, when legislation is to be interpreted it is worth beginning by looking, however briefly, at its back- ground.” Madam Justice McLachlin, in Finlay v. Canada (Minister of Finance), [1993] 1 S.C.R. 1080 (S.C.C.), said at pp. 1110-1 111:

Recognizing that reference to legislative debates has sometimes been said to be of limited assistance and that it is the wording of the statute which must prevail … the debates may nevertheless serve to confirm the appropriateness of a particular statutory interpretation. ...

Although there is no apparent ambiguity in the language of s. 127(3) it may, nevertheless be of assistance to consider the background of this section. Upon examination of the House of Commons Debates, it appears that the purpose of subsection 127(3) of the Income Tax Act was to make public the sources of funding of political parties and to encourage more participation of small donors in those parties.

In 1973, the president of the Privy Council, the Honourable Allan MacEachen, appeared before the Standing Committee on Privileges and Elections regarding Bill C-203, the Bill which introduced the federal political tax credit. Mr. MacEachen’s comments are reproduced in Issue 17 of the Minutes of Proceedings and Evidence from Tuesday, November 13, 1973, as follows:

... I take the view that the disposition of the contribution to a registered party, say the chief agent of the registered party, the disposition of those funds is a matter for the chief agent. There is no provision in the bill that would obligate the chief agent to do as anyone asked him, but certainly if a party operated that way and wished to operate that way, there is nothing in this bill to prevent it.

... There is nothing in the law that would prevent the chief agent of a party, your party or mine, listing any person as a registered agent able to collect money for that party. Now it is then up to the registered party to determine how it supports its political activities and we do not determine that in the law.

... we have had discussions with the officials of the Department of National Revenue, they know what is in the bill, they know our intention, and they have not raised any objection. They understand that is the situation.

Revenue Canada, for its part, points to Information Circular 75-2R2, Contributions to a Registered Political Party or to a Candidate at a Federal Election, April 24, 1978, in support of its position that those portions of contributions which benefit the contributor are not to give rise to a tax credit. That document provides as follows:

Where functions such as dinners, balls, concerts, shows or other like events are sponsored by or held by a candidate at an election or by a registered party as part of a fund-raising campaign, and the patrons are notified that the amount they are required to pay covers not only the cost of the function but also a contribution to a candidate at an election or to a registered party, the amount of the contribution is recognized as being the total of the payment of the patron reduced by the greater of:

(a) the fair market value of the right to admission, or

(b) a reasonable part of the total cost of the function or event.

The registered agent or official agent that wishes to issue receipts for income tax purposes for such contributions must be able to substantiate to the Department the basis that has been used to determine the value of the contributions made by patrons. ...

The Information Circular, although not binding on this court, reflects comments made by the Honourable Allan MacEachen to the Standing Committee on Privileges and Elections concerning Bill C-203 as recorded in Issue 25 of the Minutes of Proceedings and Evidence, December 11, 1973:

The tax deduction is applicable to a contribution and if he buys a $100 ticket and gets $20 worth of booze and food, he certainly cannot claim $100 as a contribution. He can claim that portion of the amount which is a gratuitous offering to the party.

Revenue Canada also submits that the CCC is contrary to the provisions of the Act because the transactions are non-arm’s length transactions. Mr. Mohr, on behalf of the Department, wrote the following to the plaintiff on September 25, 1986:

.. where a contributor or his family derives a personal benefit as a condition arising or arising as a result of the contribution to the political party, then the tax deductibility of the payment is not applicable... The Income Tax Act deems that related persons (individuals or corporations) do not deal with each other at “arm’s length. ...

Section 251 of the Income Tax Act defines the term “arm’s length” for the purposes of application within the Act and reads, in part:

251 (1) For the purposes of this Act,

(a) related persons shall be deemed not to deal with each other at arm’s length; and

(b) it is a question of fact whether persons not related to each other were at a particular time dealing with each other at arm’s length.

The plaintiff says that it is irrational to apply s. 251 of the Act to ss. 127(3) because no contributor to a party could be a member of that political party, without the result that his or her tax credit would be disqualified.

The defendant submits that the transaction is not an arm’s length transaction because the party never has control over the money. This position ignores Mr. Longley’s political reality, which is that as long as the contribu- tion is made for some political purpose the party has defined, then the party has had some control over the funds and the fact that the contributor receives the benefit of the contribution is irrelevant.

Since the Income Tax Act approves and encourages many transactions which are not at arm’s length, merely being a non-arm’s length transaction, is insufficient to disqualify the transaction under s. 251. Estey J. recognized this in Stubart Investments Ltd. v. R., supra at 571, where he said:

There are many other examples in the Act of tax reduction devices, most of which, by axiom, are founded upon non-arm’s length relationships. ... Motive would nowhere appear to be a precondition of eligibility.

It is apparent that where the s. 251 definition is intended to be used, the Act expressly provides for its use. It is not a rule of general application throughout the Act. The definition cannot be made and the concept applied in the absence of a relevant charging provision in the Act. Section 127 contains no reference to “arm’s length”. Therefore the concept is not relevant to this application of the provisions of s. 127.

To determine whether there has been a “contribution” it is necessary to have regard to the provisions of the Canada Elections Act which establish what constitutes, in law, a “registered party”. That Act sets out the duties, obligations and rights or privileges of a “registered agent” of that party. These definitions from the Canada Elections Act are incorporated, by reference, into s. 127 of the Income Tax Act. Once money is given by a taxpayer to a registered agent recognized by the Chief Electoral Officer, by the definitions in the Canada Elections Act, that amounts to a “political contribution.”

The defendant’s position that the money given pursuant to the CCC is not a contribution is premised on the traditional political party organization and focus. It does not acknowledge that there can be alternative ways of providing for political expression through registered political parties.

It is apparent from the provisions of the Canada Elections Act that registered federal political parties or registered federal political candidates are to be free to use the money contributed to them in whatever way they wish provided only that the use to which the funds are put is not illegal.

It is also apparent that the CCC did not contravene the clear wording of ss. 127(3) of the Income Tax Act and that the arm’s length considerations were not intended to apply to the federal political tax credit.

One objective of s. 127 is to increase individual participation in the federal election process by providing an incentive to individuals to contribute to federal political parties. There is nothing in the language of the relevant section or the Income Tax Act as a whole which could properly be interpreted as prohibiting such a result.

Asa consequence, I have concluded that prior to the enactment of s. 245 of the Act, the Contributor’s Choice Concept did not violate the provisions of s. 127 of the Income Tax Act.

II. Did the Actions of Revenue Canada and its Employees Constitute Misfeasance in Public Office, or, a Constitutional Tort?

Narrative and Findings of Fact

Correspondence History

Between 1984 and 1990, Mr. Longley engaged in frequent and lengthy correspondence with officials at Elections Canada and Revenue Canada, the purpose of which was to describe the CCC variations to those officials and obtain written confirmation from them that the CCC was not contrary to the provisions of the Canada Elections Act or the Income Tax Act.

It was the plaintiff’s desire to use the anticipated acknowledgement from Revenue Canada to encourage members of the public to participate in the federal political process by contributing to political parties, in particular the Rhinoceros Party.

By early 1985 Elections Canada had confirmed that the scheme did not offend the provisions of the Canada Elections Act.

In a letter to the defendant dated May 2, 1985, Mr. Longley asked Revenue Canada to advise him in writing whether his scheme was contrary to the Income Tax Act. After receiving this request, Gordon Murray, Chief of the Charitable and Non-Profit Organizations Section, sought legal advice from the Department of Justice. Alexander Davidson, counsel with the Department of Justice, responded with the following advice in a memo dated June 26, 1985:

Suggestions

In our view Mr. Longley should not be given an official supportive letter to assist him in his fund-raising. While we do not label this plan as a tax evasion scheme on the present information, the plan does seem to have abusive elements.

... lt is open to you to maintain that there is no contribution when a person pays money to an entity on condition that it use the money to employ him, although we have in the past opined that the presence of consideration does not preclude characterization as a charitable gift. The matter has not yet been judicially set- tied in this context, and so in an abusive situation you might consider using that argument, although we do not think that it is the better view of the law. As well, there may be an implication from paragraph 127(4.1 )(b) that only the receipt of the particular types of financial benefits therein outlined preclude characterization as a contribution, and this weakens your position. Finally, there is the argument that the object or spirit of the provision would be offended by a scheme such as that being proposed.

Accordingly, we are not aware of any provision in the Income Tax Act which would stop this scheme. The Chief Electoral Officer of Canada has concluded that the modes of expenditure of political parties are not regulated in any relevant way, and so we recommend that thought be given to determining whether remedial legislation is needed. ...

After receiving several more requests from Mr. Longley, Mr. Read, the then Director of the Registration Division at Revenue Canada’s head office in Ottawa, replied in a letter dated September 19, 1985. In that letter, he stated the Department’s position as follows:

... There is no contribution at law where a person pays money to an entity on condition, whether expressed or implied, that the entity must use the money to employ him, or on condition that it return the money to him at a specified or unspecified time.

It is also our opinion that a scheme like the one proposed offends the object and spirit of subsections 127(3) and 127(3.1), and subsection 239(1) of the Income Tax Act could in certain circumstances such as those referred to in the first paragraph of page 8 of your letter of April 13, 1985, apply where a payment to a contributor is in respect of a bill or invoice which is false or deceptive.

Mr. Longley continued to press his position to Revenue Canada by letter. Mr. Read again responded on October 21, 1985, and advised:

... It follows from the comments in our earlier letter that where adequate services are performed and the payment for them does not confer a direct or indirect benefit on a contributor as discussed in our earlier letter, and they are brought into the income of the recipient, then a valid receipt may be issued. ... It is also our view that a contributor or a contributor who is a member of the party may, when making his contribution to a registered party or officially nominated candidate at an election, suggest that his contribution be used for a particular political purpose which that party is promoting.

In late 1985, when his schemes became the target of negative comments made by various elected student officials at the University of British Columbia, the plaintiff again wrote to Mr. Read seeking confirmation that his schemes did not contravene the provisions of the Income Tax Act.

Revenue Canada responded by letter dated March 19, 1986, in which Mr. Mohr, Director General of the Registration Directorate advised the plaintiff as follows:

... if a contributor suggests that his contribution be paid to a college or university for his benefit or for the benefit of another, it does not appear in either situation that the contribution is being applied directly by the party to further its own political purposes or even that the party controls the use of the funds. Rather, the party is acting as an agent with the contributions being funnelled to other organizations to support an individual’s educational aspirations.

The Act requires that to be eligible a contribution must be to a political party - the thrust of the solicitations must be for contributions to the party. Thus, if you conduct a “Rhino Bursary” program, it will be necessary to demonstrate that the granting of bursaries is a direct method of achieving one of the political purposes of the Rhinoceros Party. Because there is such an obvious personal benefit to the contributor, I believe you would have difficulty satisfying this requirement.

On April 15, 1986, Mr. Mohr sent a memo describing Mr. Longley’s scheme to the Director General of the Audit Programs Directorate and to Legislative and Inter-Governmental Affairs, with copies to the Director General Compliance Research and Investigations Directorate and the Director General Legislative Affairs Directorate. He wrote:

... AS you will note, the legal advisor for the Commissioner of Canada Elections does not believe there is anything in the Canada Elections Act which would prevent Mr. Longley from implementing his program.

It also appears that there is nothing in the Income Tax Act which directly prohibits Mr. Longley (Rhinoceros Party) from issuing receipts to “contributors” and, on their direction, using the money for the benefit of the donor or persons not dealing at arm’s length with the donor.

... there is an apparent flaw in the wording of either or both the Income Tax Act and the Canada Elections Act which could lead to wide-spread abuse. It would seem that we are not in a strong position to discourage political parties from promoting such programs to solicit contributions.

Mr. Mohr then wrote Mr. Longley on August 26, 1986, and stated:

... It is the opinion of the Department and confirmed by our legal advisors that if a contribution is made on the condition that the contributor or his family will receive all or a portion of the contribution back in the form of a bursary, the taxdeductible portion of the payment is the difference between the total contribution and the amount received as a bursary.

The only support for this statement came in a telephone conversation Mr. Mohr had had with John Bentley of Legal Services who said that he “felt” that such an arrangement would result in only the net amount of the contribution being deductible. There is no evidence that the previous opinion from Mr. Davidson had changed.

In response to further requests from Mr. Longley, Mr. Mohr wrote to him again on September 25, 1986. This time he said:

… The Income Tax Act deems that related persons (individuals or corporations) do not deal with each other at “arms length”. Therefore, in a situation, as described by you, the contributor and recipient of the bursary would not deal with each other at ‘arms length. This invalidates the tax deductibility of the contribution which, under your “contributor’s choice” concept, would have flowed through the ‘party’ to fund the bursary. I am enclosing a copy of Section 251 of the Income Tax Act which explains the meaning of “arms length”.

Mr. Davidson, in reply to a request for further legal advice from Mr. G.J. Murray, A/Director Charities Division, said the following in a memo dated October 28, 1986:

The department of Finance has been informed of your Department’s concerns for at least one year, and has simply indicated concern in a non-committal way.

Given (1) the fact that no legislative clarification seems to be imminent, (2) the abusive nature of the arrangements which Mr. Longley keeps proposing, (3) his admission that these arrangements are being carried out at present, and (4) the fact that the meaning of “contribution” has not been judicially analyzed in the context of section 127, then your proposal to reassess contributors can be understood as an attempt to obtain needed judicial guidance by way of a test case. You may well lose, for reasons outlined in earlier memoranda and discussions, but at least there would be something solid in the way of guidance.

Accordingly, while I do not consider your chance of success to be great, you may consider the matter to be of sufficient importance that you nevertheless wish to proceed by reassessing contributors where their family members have received bursaries.

Let me note in closing that this problem has been considered by the Department of Finance, by senior Revenue officials (the Policy Committee?), by tax avoidance officials, and by ruling officers. If any of these people have suggested grounds on which your position can be supported, I would be pleased to consider them.

It is clear from this memo that Mr. Davidson was aware of no legal basis for the position that Revenue Canada was taking with Mr. Longley.

During November and December of 1986, Mr. Longley continued to press Revenue Canada for a written acknowledgment that his Rhino Bursaries would not contravene the provisions of the Act. Revenue Canada did not reply to Mr. Longley, but it was dealing with the issues internally. In an undated memo from Mr. Perry Anglin, the Assistant Deputy Minister to H.G. Rogers, Deputy Minister, Mr. Rogers was advised of the legal opinion of June 26, 1985, and he was advised of the steps that had been taken up to the end of 1986.

Mr. Rogers, in turn, informed Mr. Elmer McKay, the Minister of National Revenue, of the Rhino Bursary matter by a memo sent in January 1987. Mr. Rogers also briefly told Mr. McKay about the steps taken by the Department to deal with it. In that memo, Mr. Rogers stated that the “scheme may be technically correct” but that there was agreement “that it did not conform to the object and spirit of Section 127 of the Act and should not be officially endorsed.”

Mr. Anglin wrote to Mr. Longley on March 2, 1987. In that letter, Mr. Anglin said:

1 understand that it is your position that in the absence of a definition of “political activity” in the Income Tax Act or the Canada Elections Act, a contributor may direct a political party to use a contribution for a specified activity and providing that activity itself is not an illegal act it then becomes the party’s political purpose.

This Department has been advised that the arrangements described above do not appear to conform with the object and spirit of Section 127 of the Income Tax Act. At the same time, I am not aware of any jurisprudence that directly indicates how the courts would view the arrangements, taking into account the object and spirit of the Act, the scheme of the Act, and the wording of its provisions. Therefore, I am unable to advise you on how a court might determine the law if a claim for a tax credit in respect of a contribution under the above arrangements were considered by a court.

I regret, therefore, that Revenue Canada, Taxation, is not in a position to supply you with the statement you request, and can not endorse the arrangements described above.

You may wish to consider seeking legal advice on the arrangements. We would be very pleased to consider any further submissions based upon legal opinions.

In his evidence at trial Mr. Anglin said he had received the legal advice from a Mr. McNab in a telephone conversation. There was nothing to confirm that advice in writing and Mr. McNab was not called to give evidence. Taking into account the previous advice received from Mr. Davidson and the fact that there was no evidence to confirm receipt of Mr. McNab’s advice, I draw an adverse inference and conclude that no such advice was obtained.

In August, 1988, Mr. R.M. Beith, Acting Assistant Deputy Minister, Legislative and Inter-Governmental Affairs, wrote to Mr. Longley and ad- vised him that on June 30, 1988, Bill C-139 was introduced into the House of Commons. He went on to say:

... It includes the new general anti-avoidance rule. ... The rule will apply to transactions entered into on or after the date on which the Bill receives Royal Assent. Although it is not possible to predict how new legislation will be interpreted by the courts, the Department will apply the anti-avoidance rule to arrangements which it considers to be contrary to the object and spirit of the provisions of the Income Tax Act.

Analysis

Within this factual context, it is now necessary to analyze the issues.

Misfeasance in Public Office, Pre-GAAR

Although the court did not use the terminology, the leading Canadian authority on the tort of misfeasance in public office is Roncarelli v. Duplessis (1959), 16 D.L.R. (2d) 689 (S.C.C.). In Roncarelli the plaintiff had his liquor licence cancelled because he had provided bail to a number of Jehovah’s Witnesses who had been arrested as part of a program of persecution of Jehovah’s Witnesses. At p. 705 of his reasons, Rand J. said:

… A decision to deny or cancel such a privilege lies within the “discretion” of the Commission; but that means that decision is to be based upon a weighing of considerations pertinent to the object of the administration.

In public regulation of this sort there is no such thing as absolute and untrammelled “discretion”, that is that action can be taken on any ground or for any reason that can be suggested to the mind of the administrator; no legislative Act can, without express language, be taken to contemplate an unlimited arbitrary power, exercisable for any purpose, however capricious or irrelevant, regardless of the nature or purpose of the statute.

... “Discretion” necessarily implies good faith in discharging public duty;. …

He continued at p. 707, and stated:

“Good faith” in this context, ... means carrying out the statute according to its intent and purpose; it means good faith in acting with a rational appreciation of that intent and purpose and not with an improper intent and alien purpose; it does not mean for the purposes of punishing a person for exercising an unchallengeable right; it does not mean arbitrarily and illegally attempting to divest a citizen of an incident of his civil status.

The court held that such conduct was actionable and awarded damages to the plaintiff.

The English Court of Appeal considered the tort of misfeasance in public office in Bourgoin SA v. Ministry of Agriculture, Fisheries & Food, [1985] 3 All E.R. 585 (Eng. Q.B.), and adopted a broader test: The court confirmed that malice was not a necessary element of the tort. Mann J., of the Queen’s Bench, whose decision was affirmed by the Court of Appeal, concluded at p. 602 as follows:

I do not read any of the decisions to which I have referred as precluding the commission of the tort of misfeasance in public office where the officer actually knew that he had no power to do that which he did, and that his act would injure the plaintiff as subsequently it does. I read the judgment in Dunlop v. Woollahra Municipal Council, [1981] 1 All E.R. 1202, [1982] AC 158 in the sense that malice and knowledge are alternatives. ... There is no sensible distinction between the case where an officer performs an act which he has no power to perform with the object of injuring A (which the defendant accepts is actionable at the instance of A) and the case where an officer performs an act which he knows he has no power to perform with the object of conferring a benefit on B but which has foreseeable and actual consequence of injury of A (which the defendant denies is actionable at the instance of A). In my judgment each case is actionable at the instance of A. ...

This wider view of the law has gained some support in the Canadian courts. For example, Cullen J. in Chhabra v. R. (1989), 89 D.T.C. 5310 (Fed. T.D.) at 5314, stated:

... The categories of acts which give rise to liability for this tort are generally considered to be where the administrative act is unlawful because it is actuated by malice and where the authority knows that it does not possess the power which it is purported to exercise. ... Therefore the plaintiff must show that the persons involved were acting with malice or intent to injure, or that they were acting without authority.

Wetstin J., in Francoeur v. R. (1994), 78 F.T.R. 109 (Fed. T.D.), explained the tort and its elements at paragraphs 52-54, as follows:

… There are two possible grounds upon which to found liability. First, if one can show that the public officer acted with malice or an intent to injure, then the act of the public officer which is purported to be undertaken pursuant to a power conferred by statute becomes unlawful and the plaintiff who suffers damages as a direct result of that act will be entitled to damages. Secondly, if one can show that the statutory actor or public officer knowingly undertook an action for which he or she had no authority in law, and he or she could foresee that their action could cause harm to the plaintiff, then the tort will [sic] established; see Bourgoin S.A. and Others v. Ministry of Agriculture Fisheries and Food, [1985] 3 All E.R. 585 (C.A.). It is important to note that in many cases the facts will be such that these two categories of cases will overlap.

Underlying both categories of cases giving rise to the tort of abuse of power or misfeasance in public office is the element of intent. ... Therefore, the tort of abuse of authority must be described as intentional and it is incumbent upon the plaintiff to establish this element either in the form of malice or action knowingly taken without authority.

In addition, both the categories identified by Cullen J. in Chabra [sic], supra, demand some form of unlawful action. Such unlawful action may arise either when a statutory actor purposefully exercises a power which they do not possess with the foreseeable result of injury to the plaintiff, or when a statutory actor exercises a discretion or power under a statute with malice, thereby rendering the action unlawful.

It is clear that the first branch of the test for misfeasance in public office has been accepted by Canadian courts. The second branch has not been adopted unequivocally. In fact, the British Columbia Court of Appeal expressly left the question open in Stenner v. British Columbia (Securities Commission) (1996), 141 D.L.R. (4th) 122 (B.C. C.A.). At page 128, Newbury J.A. said:

... As will be seen below, I am of the view that the case at bar can be decided largely on the basis of the good faith defence and that it will not be necessary for us to decide whether the definition of abuse of power advanced by Mr. Breivik should be adopted in this province.

Newbury J.A. went on at the same page to say:

For purposes of this judgment, however, I will assume without deciding that the formulation advanced in cases such as Farrington is correct, so that “If a public officer does an act which, to his knowledge, amounts to an abuse of his office, and he thereby causes damage to another person, then an action in tort for misfeasance in a public office will lie against him at the suit of that person” (supra, at 293).

Notwithstanding the express reservation by the Court of Appeal, Skipp J. approved the broader test in Ichi Canada Ltd. v. Palmquist (February 11, 1997), Doc. Vancouver C861019 (B.C. S.C.). At paragraph 19, Skipp J. stated:

I adopt and accept as a correct exposition of the law a passage from the written submission of the defendants as follows:

Accordingly, it is submitted that in order to establish the tort of misfeasance of a public office, it is necessary to establish either

1) that the public officer acted with malice or intent to injure, or

2) that the public officer took an action which he or she had no authority in law, [sic] knew that he or she had no authority in law, and could foresee that this action would cause harm to the plaintiff.

Given its acceptance by this court and the Manitoba Court of Appeal in Gerrard v. Manitoba (1992), 98 D.L.R. (4th) 167 (Man. C.A.), at 172, I find that the appropriate test is the broader, two-branch test advocated by the English Court of Appeal in Bourgoin, supra.

I have no hesitation in finding that throughout most of the period from 1985 to the introduction of Bill C-139 in 1988, the advice given to Mr. Longley by Revenue Canada as to the legality of the CCC was known to the representatives of Revenue Canada to be untrue: It was intentionally misleading.

Mr. Longley, on several occasions, advised Revenue Canada that he was suffering damage and would continue to do so as a result of their reluctance, and ultimately their refusal, to confirm the legal validity of the CCC. Although there is some ambiguity with respect to the motive behind Revenue Canada’s refusal to acknowledge to Mr. Longley that his plan did not contravene the provisions of the Act, I conclude from all of the evidence, that there were three main reasons for the refusal:

1. Revenue Canada officials did not agree with Mr. Longley’s definition of “political purpose”;

2. Revenue Canada did not want to be seen as endorsing, or condoning, the scheme by confirming that it was not contrary to the Act; and

3. Revenue Canada hoped that if they did not confirm the legality of the scheme, Mr. Longley would not be able to attract many contributors and, in the meantime, Parliament would be able to correct what the officials at Revenue Canada considered to be a “flaw in the wording” of both the Income Tax Act and the Canada Elections Act.

In spite of the documentary evidence to which I referred earlier under the heading “Correspondence”, Mr. Read, Mr. Mohr and Mr. Anglin each testified that they had an honestly held belief that the opinions they gave were correct and that they were not the result of any political bias. I conclude that Revenue Canada’s response was not honest. There is no evidence that the Department had legal advice that the scheme violated the provisions of s. 127 or that it offended the object and spirit of s. 127. The Department did have legal advice to suggest that Mr. Longley was on good ground, but the Department nevertheless advised Mr. Longley that they had no such advice and suggested, somewhat insincerely, that if he were to obtain legal advice on the point they would be pleased to consider it.

From all of the material to which I have referred, I conclude that up to the time of the proclamation of s. 245 of the Income Tax Act, Revenue Canada’s response to Mr. Longley’s requests amounted to misfeasance in public office.

Constitutional Torts Pre- and Post-GAAR

Pre-GAAR

Mr. Longley claims that by taking the position that the CCC was contrary to the provisions of the Income Tax Act, both before the GAAR and after, Revenue Canada violated his rights under ss. 2, 7 and 15 of the Charter of Rights and Freedoms. He also argues that the GAAR is void for vagueness, or, alternatively, unconstitutional on its face, and therefore of no force or effect.

Dealing firstly with the claim that the GAAR is unconstitutional on its face, in Eldridge v. British Columbia (Attorney General), [1997] 3 S.C.R. 624 (S.C.C.), La Forest J., writing for the court, made the following comments at p. 644:

... There are two ways ... in which [the Charter can apply]. First, legislation may be found to be unconstitutional on its face because it violates a Charter right and is not saved by s. I. In such cases, the legislation will be invalid and the Court compelled to declare it of no force or effect pursuant to s. 52(1) of the Constitution Act, 1982. Secondly, the Charter may be infringed, not by the legislation itself, but by the actions of a delegated decision-maker in applying it. In such cases, the legislation remains valid, but a remedy for the unconstitutional action may be sought pursuant to s. 24(1) of the Charter.

I am unable to conclude that the application of the provisions of the GAAR would prima facie lead to a Charter violation in every case. It is, in my view, likely that there will be circumstances where the GAAR operates within the Charter. Therefore I decline to declare that the GAAR is of no force or effect.

That leaves the question as to whether Revenue Canada violated Mr. Longley’s Charter rights before or after the GAAR.

That such a result is possible is acknowledged by Lamer J. in Slaight Communications Inc. v. Davidson, [1989] 1 S.C.R. 1038 (S.C.C.), where he said, at p. 1078:

... an adjudicator exercising delegated powers does not have the power to make an order that would result in an infringement of the Charter, and he exceeds his jurisdiction if he does so. ...

Section 2 of the Charter

Mr. Longley says that Revenue Canada violated his s. 2(b) and (d) Charter rights before and after the GAAR by using its authority to administer the Income Tax Act in such a way as to deny to him and to his potential contributors, their right to receive the federal political tax credit as an ad- junct of the expression of their political views, thereby interfering with their freedom of expression and freedom of association.

In Stasiuk v. Minister of National Revenue, [1986] 2 C.T.C. 346 (Fed. T.D.), Ms. Stasiuk spent $4,800 of her own funds to publicize her political views and then sought to deduct the amount from her income for tax purposes. It was held that the expenditure was not eligible as a tax credit under s. 127(3) because it lacked the formal validity required by that section. The fact that the tax credit was not available to her did not interfere with Ms. Stasiuk’s ability to freely express her political views.

Similarly here, neither Mr. Longley nor any of his potential contributors were deprived of their right to express their political views as a result of the position taken by Revenue Canada. It was still open to them to direct funds in whatever legal way they wished for the purpose of making a political statement. The only consequence of the position taken by Revenue Canada was that the incentive for them to participate in the scheme was adversely affected.

The actions of Revenue Canada did not prevent Mr. Longley or his potential contributors from expressing their political beliefs or from associating themselves with whatever political group or party they might wish. I conclude, therefore, that the threat to withhold the political tax credit did not interfere with Mr. Longley’s s. 2 Charter rights of freedom of expression and association.

Section 7 of the Charter

Mr. Longley complains that because the tax credits claimed by the contributors were not disallowed by the tax department he was denied the opportunity to obtain a ruling from the courts as to the validity or otherwise of the CCC. This, he says, violated his rights, under s. 7 of the Charter, to a fair trial within a reasonable time after the defendant had alleged in writing that the plaintiff’s scheme was contrary to the law and indirectly threatened to find the issuance of tax receipts for CCC contributions was fraudulent by referring him to the provisions of s. 238 of the Act.

Section 7 of the Charter provides:

Everyone has the right to life, liberty and security of the person and the right not be deprived thereof except in accordance with the principles of fundamental justice.

Mr. Longley says that once the defendant impliedly threatened to find that the issuance of receipts was fraudulent he then had a constitutionally guaranteed right to be given the opportunity in a court of law to prove that the scheme was not contrary to the law within a reasonable time.

In order to successfully establish a s. 7 Charter violation, Mr. Longley must demonstrate that his right to life, liberty or security of the person has been breached in a manner inconsistent with the principles of fundamental justice. He must first demonstrate that the ability to issue tax receipts for political contributions is a “liberty” within the meaning of s. 7 of the Charter.

The scheme under the Act which provides for the issuance of receipts for income tax deductions for donations to political parties is entirely statutory. The rights to issue receipts and claim deductions are benefits conferred by the Act. They are not pre-existing “natural” rights or liberties, but are purely economic in nature. In À. v. Videoflicks Ltd., [1986] 2 S.C.R. 713 (S.C.C.), at 785-786 the court accepted that “liberty” in s. 7 does not generally protect property interests, such as the right to contract or ownership of property. The only exception to this proposition appears to be where the economic interests are so fused with non-economic liberties, such as the right to carry out one’s chosen profession, that they are incidentally protected: See Wilson v. British Columbia (Medical Services Commission) (1988), 30 B.C.L.R. (2d) I (B.C. C.A.).

The question is whether Mr. Longley’s rights to utilize the CCC and to obtain the tax credit for contributions made through it are purely economic or whether, as Mr. Longley argues, they are political rights with economic aspects and as a result become fundamental liberty interests which are protected by the provisions of s. 7.

As to the argument that Mr. Longley was deprived of the right to have the issue of the legality of the CCC determined in a court of law within a reasonable period of time, there is no evidence that Mr. Longley was prevented from commencing an action for a determination of the issue from the time he considered that he had suffered damage as a result of Revenue Canada’s actions. Revenue Canada was not obliged to commence an action nor was it necessary to Mr. Longley’s ability to commence and maintain an action that revenue Canada re-assess one or more of the contributors.

As to whether s. 7 apples at all, I am mindful of what has been said by Professor Peter Hogg, in the 3rd edition of his text Constitutional Law of Canada (Toronto: Carswell, 1992), where at pp. 1028-1029, he stated:

“Liberty” does not include freedom of conscience and religion, freedom of expression, freedom of assembly, freedom of association, the right to vote and be a candidate for election, or the right to travel. These rights are all guaranteed elsewhere in the Charter of Rights, and should be excluded from s. 7.

Mr. Longley argues that Professor Hogg is wrong in the circumstances of the case at bar, since the facts in this case happen to simultaneously raise both issues together. I do not agree. Although in the circumstances of some other case there may be justification for applying section 7 to such issues, in the circumstances of this case there is not. The rights Mr. Longley says have been violated are clearly covered by ss. 2 and 15 of the Charter.

Section 15(1) Charter

Mr. Longley argues that because Revenue Canada threatened to apply s. 251 of the Act and s. 245 of the Act to the CCC arrangements, he was treated unequally before the law, in violation of s. 15(1) of the Charter. He says that is so because the threat to use those sections was not made against any of the other political parties or candidates.

There is no evidence that there were any other political parties or candidates who were promoting the same or a similar fund-raising scheme. As Sopinka J. said in Eaton v. Brant (County) Board of Education (1996), [1997] 1 S.C.R. 241 (S.C.C.) at p. 270:

... before a violation of s. 15 can be found, the claimant must establish that the impugned provision creates a distinction on a prohibited or analogous ground which withholds an advantage or benefit from, or imposes a disadvantage or burden on, the claimant.

In R. v. Swain, [1991] 1 S.C.R. 933 (S.C.C.), Lamer C.J. set out the fundamental approach to s. 15(1) at p. 992 as follows:

... The court must first determine whether the claimant has shown that one of the four basic equality rights has been denied (i.e., equality before the law, equality under the law, equal protection of the law and equal benefit of the law). This inquiry will focus largely on whether the law has drawn a distinction (intentionally or otherwise) between the claimant and others, based on personal characteristics. Next, the court must determine whether the denial can be said to result in “discrimination”. This second inquiry will focus largely on whether the differential treatment has the effect of imposing a burden, obligation or disadvantage not imposed upon others or of withholding or limiting access to opportunities, benefits and advantages available to others.

It is apparent from these two decisions that s. 15(1) of the Charter is intended to apply to individuals or groups of individuals having certain personal characteristics and not to companies or, by analogy, political parties. On that basis s. 15 would not apply in any event and the claim for compensation pursuant to s. 24 of the Charter would fail.

If I am wrong in that analysis, I am nevertheless of the view that the plaintiff fails under the second inquiry because there was no differential treatment established. This is because there is no evidence that any other candidate or political party, raising funds using a similar scheme, was not threatened with the imposition of s. 251 or s. 245.

Post-GAAR

On September 13, 1988, s. 245 of the Income Tax Act, the General AntiAvoidance Rule (“GAAR”), was proclaimed. Prior to proclamation, Revenue Canada had advised Mr. Longley that the section was before the House and had implied that when the rule became law it was Revenue Canada’s intention to rely on it to find the CCC in violation of the object and spirit of the Income Tax Act.

Mr. Longley says that the threat by Revenue Canada to use the GAAR to prevent him and his potential contributors from utilizing the CCC was a violation of ss. 2(b), 2(d), 7 and 15 of the Charter of Rights and Freedoms. For the same reasons given in relation to the pre-GAAR Charter issues, I find this threat did not violate any of Mr. Longley’s Charter rights.

Void for Vagueness

Mr. Longley seeks a declaration that the GAAR is void for vagueness on the basis that it delegates to the Minister of National Revenue the power to determine that a matter is contrary to the object and spirit of the Act in the absence of a statutory definition of the object and spirit of the Act.

It appears from the cases that if the provision of the act in question is clear and unambiguous then GAAR will not be applied. It also appears that only a transaction whose primary purpose is tax avoidance will be subject to the GAAR.

Therefore if the primary purpose of the transaction is, as here, to make a political statement through the auspices of a registered Federal political candidate or registered Federal political party, then GAAR should not be applied because the primary purpose of the transaction is not tax avoidance.

It is clear that although the courts have interpreted the GAAR as being of very limited application, they have not had difficulty in understanding and interpreting the GAAR within the context in which it has been an issue. I cannot, therefore, find that the GAAR is void for vagueness.

GAAR and Misfeasance in Public Office

Because I have determined that there was no Charter violation it is necessary to determine whether, by threatening to use the GAAR to find that the CCC violated the object and spirit of the Act, the Department was, as it had been prior to the GAAR, acting in misfeasance of public office.

The determination of this question will, for the reasons set out in the earlier section, depend on whether the representatives of the Department had an honest belief that the GAAR could properly be applied to schemes such as the Contributor’s Choice Concept.

To decide this question it is necessary to consider what the Department knew about the intended scope of the GAAR at the time that it threatened to apply the GAAR to the CCC.

The burden is on Mr. Longley to establish that the Department knew or had reason to believe that the GAAR would not be properly applicable to the Federal political tax credit. Unlike the evidence of the Department’s knowledge prior to the implementation of the GAAR, there is no such evidence after the GAAR came into force and effect. Therefore Mr. Longley has not established that the Department, by threatening to apply the GAAR to the CCC, acted in misfeasance of public office, notwithstanding that it now appears, from the subsequent evolution of the case law, that the GAAR could not be successfully applied to disallow political tax credits claimed as a result of contributions made to registered political parties or candidates.

Defamation

Mr. Longley claims against Revenue Canada for defamation. He says that he was defamed by the advice given him from Revenue Canada which he was “obligated to publish” to his potential contributors. No authority has been provided supporting the claim that self-publication of a defamatory statement can give rise to a cause of action against the party who made the statement by way of a private communication to the complainant. I am of the view that without publication of the allegedly defamatory material by the defendant there can be no defamation.

In any event, I do not find anything in the communications from Revenue Canada that is defamatory. The statements contained in those letters which the plaintiff feels defamed him were that the scheme was contrary to the Income Tax Act. I do not see those statements as potentially defamatory of the plaintiff personally: See Taylor-Wright v. CHBC-TV (February 5, 1999), Doc. Kelowna 36564 (B.C. S.C.), where Drossos J. stated, at para. 26, that the words complained of must be spoken “of and concerning the plaintiff.”

Damages

Mr. Longley seeks damages for loss of reputation, exemplary damages, punitive damages and aggravated damages. It is unclear whether he has acknowledged that aggravated damages include punitive damages: See Vorvis v. Insurance Corp. of British Columbia (1984), 53 B.C.L.R. 63 (B.C. C.A.). In his claim for exemplary damages Mr. Longley argues that the proper measure of exemplary damages is the projected benefit to the defendant of its wrongful acts.

Having found no Charter violations, the issue of damages under s. 24(2) of the Charter need not be dealt with. However, whether the damages are calculated as actual and exemplary or punitive damages or as damages under s. 24(2) of the Charter would not make any significant difference to the quantum since the bulk of the damages will be punitive or exemplary.

Actual Damages

The onus is on Mr. Longley to provide evidence of the damage he suffered. To that extent there is evidence that over the course of the time that he was the Registered Agent for the Rhinoceros Party in British Columbia the level of contributions to the party through the vehicle of the CCC appears to have dropped from little to none. As well there is the evidence of newspaper articles from which it appears that Mr. Longley did suffer some damage to his political reputation as a result of the position taken by Revenue Canada. I am also of the view that as a result of the refusal of Revenue Canada to acknowledge that the scheme did not contravene provisions of the Act Mr. Longley lost the opportunity to enhance his political reputation.

There is no persuasive evidence before me with respect to a reasonable award of damages for this loss. Taking into account that Mr. Longley ran as a candidate in the 1988 Federal election as the only member of the Student Party, and was unable to attract any other individuals to run as candidates for that party, it does appear that the position taken by Revenue Canada at that time to apply the G AAR to the CCC, may have had a negative impact on Mr. Longley’s political aspirations. However, there is no evidence from any source to confirm that, and the burden is on Mr. Longley to establish on a balance of probabilities, that the position taken by Revenue Canada did adversely affect his candidacy and his efforts at establishing a new party.

1 am satisfied that the potential for loss and damage was foreseeable: It had been brought to Revenue Canada’s attention by Mr. Longley on several occasions. Accordingly, Mr. Longley is entitled to damages for loss of reputation.

i have concluded that an appropriate award of damages under this head is $5,000.

Punitive or Exemplary Damages

Revenue Canada dealt dishonestly with Mr. Longley. It is apparent that Revenue Canada was aware from early on that Mr. Longley’s scheme did not appear to be contrary to the provisions of s. 127(3) of the Act. Nevertheless, they set out to discourage him and his potential contributors by refusing to confirm that fact and, ultimately, to mislead him with respect to the legal strength of the Department’s position. The Department acted without regard for its obligation to deal fairly and openly with all taxpayers and to administer the Act in accordance with the law.

Mr. Longley is seeking exemplary damages. Mr. Longley’s calculation of the benefit to the defendant in taking the position it did with respect to the Contributor’s Choice Concept assumes that, had it been acknowledged that the CCC did not contravene the provisions of the Income Tax Act, the bulk of Canadian voters would have taken advantage of the scheme. Mr. Longley says that enormous amounts of money were saved by the government over the 12 years from 1985 to 1997.

While it may be that theoretically the government could have benefited in the many, many millions of dollars from discouraging taxpayers from taking advantage of the federal political tax credits through the use of the CCC, there is no evidence before me from which I can conclude that there would have been much general interest amongst taxpayers in making contributions through Mr. Longley’s CCC in order to obtain the tax advantage resulting from the scheme. Accordingly, in my view, if I were to calculate or estimate the financial benefit to Revenue Canada of obstructing the implementation of the scheme, the award would almost certainly be very low.

I am of the view that the award in this case ought to be one which reflects the Court’s displeasure with the abuse by Revenue Canada of its position.

In the circumstances of this case I have concluded that the appropriate award of punitive damages, intended to dissuade Revenue Canada from acting again in such a high handed, arrogant and dishonest way, is $50,000.

All other daims not otherwise dealt with in these reasons are dismissed.

I find this matter to have been of enormous complexity and importance. Mr. Longley was successful overall and although he was unsuccessful on his Charter arguments, they were prima facie supported by the evidence, notwithstanding that ultimately I have determined that there is no maintainable claim. Mr. Longley will have his costs, from the order of 1997, at Scale 5.

Action allowed.