Heald,
J.
(Mahoney,
J.
concurring):
—This
is
an
appeal
from
a
decision
of
the
Minister
of
National
Revenue
refusing
the
appellant's
application
for
registration
as
a
"registered
charity”
as
that
expression
is
defined
in
paragraph
110(8)(c)
of
the
Income
Tax
Act.
The
appellant,
constituted
exclusively
for
charitable
purposes,
and
incorporated
under
the
laws
of
Alberta
for
such
purposes,
was
established
by
the
Alberta
Association
for
the
Mentally
Handicapped
(the
Association).
The
appellant
was
to
serve
as
a
fund
raising
vehicle
for
various
registered
charities
carrying
on
programmes
for
the
benefit
of
persons
suffering
from
mental
retardation.
For
that
purpose,
the
appellant
entered
into
a
fund
raising
arrangement
with
Value
Village
Stores
Ltd.
(Value
Village).
Value
Village
was
a
British
Columbia
corporation,
which
also
operated
in
Alberta.
It
was
operated
for
profit
and
was
completely
independent
of
the
appellant.
The
contract
between
the
appellant
and
Value
Village
provided
that:
(a)
used
household
items
were
to
be
solicited
and
collected
by
the
appellant
using
collection
vehicles
leased
by
the
appellant
from
Value
Village;
(b)
the
appellant
was
to
be
reimbursed
by
Value
Village
for
all
expenses
incurred
by
the
appellant
in
the
course
of
its
solicitation
and
collection
activities;
and
(c)
Value
Village
agreed
to
provide
to
the
appellant
minimum
monthly
advances
of
$2,000
in
respect
of
the
sale
of
the
goods
collected
pursuant
to
(a)
supra.
Value
Village
further
agreed
to
contribute
50
per
cent
of
all
retail
sales
in
excess
of
the
guaranteed
monthly
advance
of
$2,000.
The
agreement
between
the
appellant
and
the
Association
was
to
the
effect
that
all
of
the
funds
received
by
the
appellant
from
Value
Village
were
forwarded
to
the
Association
for
its
use
in
charitable
projects.
There
is
no
suggestion
that
this
term
of
the
agreement
was
not
carried
out.
The
appellant
applied
to
the
Minister
of
National
Revenue
for
registration
as
a
"registered
charity"
on
the
basis
that
it
was
a
“public
foundation"
as
that
term
is
defined
in
the
Income
Tax
Act.
This
application
was
refused
because,
in
the
view
of
the
Minister,
the
appellant
was:
(a)
not
operating
exclusively
for
charitable
purposes;
and
(b)
it
was
carrying
on
a
business
other
than
a
"related
business"
as
partially
defined
in
paragraph
149.1
(1)(j)
of
the
Income
Tax
Act.
The
Issues
The
issues
in
this
appeal
are
twofold
and
may
be
shortly
stated:
(a)
whether,
because
of
its
relationship
with
Value
Village,
the
appellant
is
not
operating
exclusively
for
charitable
purposes;
and
(b)
whether
the
appellant
is
carrying
on
a
business
that
is
not
a
"related
business”
within
the
meaning
set
out
in
section
149.1
of
the
Income
Tax
Act.
The
Statutory
Scheme
The
relevant
sections
of
the
Income
Tax
Act
for
the
purposes
of
this
appeal
are:
149.(1)
No
tax
is
payable
under
this
Part
upon
the
taxable
income
of
a
person
for
a
period
when
that
person
was
(f)
"registered
charity"
—
a
registered
charity;
248.(1)
Definitions
—
In
this
Act,
"business"
—
"business"
includes
a
profession,
calling,
trade,
manufacture
or
undertaking
of
any
kind
whatever
and,
except
for
the
purposes
of
paragraph
18(2)(c),
an
adventure
or
concern
in
the
nature
of
trade
but
does
not
include
an
office
or
employment;
"registered
charity"
—
"registered
charity"
has
the
meaning
assigned
by
subsection
110(8)
;
110.(8)
Definitions
—
In
this
section,
(c)
"registered
charity"
—
“registered
charity"
at
any
time
means
(i)
a
charitable
organization,
private
foundation
or
public
foundation,
within
the
meanings
assigned
by
subsection
149.1(1),
that
is
resident
in
Canada
and
was
either
created
or
established
in
Canada,
or
(ii)
a
branch,
section,
parish,
congregation
or
other
division
of
an
organization
or
foundation
described
in
subparagraph
(i),
that
is
resident
in
Canada
and
was
either
created
or
established
in
Canada
and
that
receives
donations
on
its
own
behlaf,
that
has
applied
to
the
Minister
in
prescribed
form
for
registration
and
that
is
at
that
time
registered
as
a
charitable
organization,
private
foundation
or
public
foundation.
149.1(1)
Definitions
—
In
this
section,
section
172
and
Part
V,
(a)
"charitable
foundation"
—
"charitable
foundation"
means
a
corporation
or
trust
constituted
and
operated
exclusively
for
charitable
purposes,
no
part
of
the
income
of
which
is
payable
to,
or
is
otherwise
available
for,
the
personal
benefit
of
any
proprietor,
member,
shareholder,
trustee
or
settlor
thereof
and
that
is
not
a
charitable
organization;
[Emphasis
added]
(b)
"charitable
organization"
—
“charitable
organization”
means
an
organization,
whether
or
not
incorporated,
(i)
all
the
resources
of
which
are
devoted
to
charitable
activities
carried
on
by
the
organization
itself,
(ii)
no
part
of
the
income
of
which
is
payable
to,
or
is
otherwise
available
for,
the
personal
benefit
of
any
proprietor,
member,
shareholder,
trustee
or
settlor
thereof,
(iii)
more
than
50%
of
the
directors,
trustees,
officers
or
like
officials
of
which
deal
with
each
other
and
with
each
of
the
other
directors,
trustees,
officers
or
officials
at
arm's
length,
and
(iv)
where
it
has
been
designated
as
a
private
foundation
or
public
foundation
pursuant
to
subsection
110(8.1)
or
(8.2)
or
has
applied
for
registration
under
paragraph
110(8)(c)
after
February
15,
1984,
not
more
than
50%
of
the
capital
of
which
has
been
contributed
or
otherwise
paid
in
to
the
organization
by
one
person
or
members
of
a
group
of
persons
who
do
not
deal
with
each
other
at
arm's
length
and,
for
the
purpose
of
this
subparagraph,
a
reference
to
any
person
or
to
members
of
a
group
does
not
include
a
reference
to
Her
Majesty
in
right
of
Canada
or
a
province,
a
municipality,
another
registered
charity
that
is
not
a
private
foundation,
or
any
club,
society
or
association
described
in
paragraph
149(l)(1);
(f)
"private
foundation"
—
“private
foundation"
means
a
charitable
foundation
that
is
not
a
public
foundation;
(g)
"public
foundation"
—
“public
foundation”
means
a
charitable
foundation
which,
(i)
where
the
foundation
has
been
registered
after
February
15,
1984
or
designated
as
a
private
foundation
or
charitable
organization
pursuant
to
subsection
110(8.1)
or
(8.2),
(A)
more
than
50%
of
the
directors,
trustees,
officers
or
like
officials
deal
with
each
other
and
with
each
of
the
other
directors,
trustees,
officers
or
officials
at
arm's
length,
and
(B)
not
more
than
50%
of
the
capital
contributed
or
otherwise
paid
into
the
foundation
has
been
so
contributed
or
otherwise
paid
in
by
one
person
or
members
of
a
group
of
such
persons
who
do
not
deal
with
each
other
at
arm's
length,
or
(ii)
in
any
other
case,
(A)
more
than
50%
of
the
directors
or
trustees
deal
with
each
other
and
with
each
of
the
other
directors
or
trustees
at
arm's
length,
and
(B)
not
more
than
75%
of
the
capital
contributed
or
otherwise
paid
in
by
one
person
or
by
a
group
of
persons
who
do
not
deal
with
each
other
at
arms'
length
and,
for
the
purpose
of
clause
(i)(B),
a
reference
to
any
person
or
to
members
of
a
group
does
not
include
a
reference
to
Her
Majesty
in
right
of
Canada
or
a
province,
a
municipality,
another
registered
charity
that
is
not
a
private
foundation,
or
any
club,
society
or
association
described
in
paragraph
149(l)(1);
[Emphasis
added.]
(j)
“related
business"
—
“related
business”
in
relation
to
a
charity
includes
a
business
that
is
unrelated
to
the
objects
of
the
charity
if
substantially
all
of
the
people
employed
by
the
charity
in
the
carrying
on
of
that
business
are
not
remunerated
for
such
employment;
[Emphasis
added.]
149.1(2)
Revocation
of
registration
of
charitable
organization
—
The
Minister
may,
in
the
manner
described
in
section
168,
revoke
the
registration
of
a
charitable
organization
for
any
reason
described
in
subsection
(1)
of
that
section
or
where
the
organization
(a)
carries
on
a
business
that
is
not
a
related
business
of
that
charity;
or
(b)
fails
to
expend
in
any
taxation
year,
on
charitable
activities
carried
on
by
it
and
by
way
of
gifts
made
by
it
to
qualified
donees,
amounts
that,
in
the
aggregate,
are
at
least
equal
to
the
amount
that
would
be
determined
for
the
year
under
subparagraph
(1)(e)(i)
in
respect
of
the
organization
if
it
were
a
charitable
foundation.
(3)
Revocation
of
registration
of
public
foundation
—
The
Minister
may,
in
the
manner
described
in
section
168,
revoke
the
registration
of
a
public
foundation
for
any
reason
described
in
subsection
(1)
of
that
section
or
where
the
foundation
(a)
carries
on
a
business
that
is
not
a
related
business
of
that
charity;
(b)
fails
to
expend
in
any
taxation
year,
on
charitable
activities
carried
on
by
it
and
by
way
of
gifts
made
by
it
to
qualified
donees,
amounts
that,
in
the
aggregate,
are
at
least
equal
to
its
disbursement
quota
for
that
year;
(c)
since
June
1,
1950,
acquired
control
of
any
corporation;
(d)
since
June
1,
1950,
incurred
debts,
other
than
debts
for
current
operating
expenses,
debts
incurred
in
connection
with
the
purchase
and
sale
of
investments
and
debts
incurred
in
the
course
of
administering
charitable
activities;
or
(e)
at
any
time
within
the
24
month
period
preceding
the
day
on
which
notice
is
given
to
the
public
foundation
by
the
Minister
pursuant
to
subsection
168(1)
and
at
a
time
when
the
public
foundation
was
a
private
foundation,
took
any
action
or
failed
to
expend
amounts
such
that
the
Minister
was
entitled,
pursuant
to
subsection
(4),
to
revoke
its
registration
as
a
private
foundation.
[Emphasis
added.]
Issue
A
—
Is
the
Appellant
Operating
Exclusively
for
Charitable
Purposes
At
the
outset,
and
in
response
to
a
question
from
the
Court,
counsel
for
the
respondent
agreed
that
the
imposition
of
the
appellant,
a
corporate
entity,
into
the
Association's
fund
raising
activities
is
not
a
factor
in
the
determination
of
the
issues
in
this
appeal.
It
was
her
position
that
although
the
appellant
corporation
was
constituted
exclusively
for
charitable
purposes,
it
is
not
being
operated
exclusively
for
charitable
purposes
as
required
by
paragraph
149.1(1)(a)
supra.
She
submitted
that
since
the
appellant's
sole
activity
is
its
commercial
involvement
with
Value
Village
in
which
it
is
acting
as
a
wholesaler
supplying
goods
to
Value
Village,
it
is
in
fact
carrying
on
a
business
in
the
ordinary
sense.
In
her
view,
such
an
activity
would
be
encompassed
by
the
definition
of
business
contained
in
subsection
248(1)
of
the
Act,
supra.
It
was
her
further
submission
that
since
the
fund
raising
arrangement
with
Value
Village
is
presently
the
appellant's
sole
activity,
it
is
not
operating
in
fulfilment
of
any
of
its
charitable
purposes
as
described
in
its
Memorandum
of
Association
(Case,
pp.
10
and
11).
Dealing
initially
with
her
last
submission
relating
to
lack
of
fulfilment
of
any
of
the
charitable
purposes
enumerated
in
the
Memorandum
of
Association,
I
see
no
merit
in
this
submission.
Subparagraphs
2(a)
to
(h)
of
the
Memorandum
set
out
objects,
all
of
which,
inter
alia,
relate
to
the
welfare
of
persons
suffering
from
mental
retardation
and
other
developmental
handicaps
and
the
welfare
of
their
families
as
well.
Subparagraph
2(j)(i)
empowers
the
appellant
".
.
.to
raise
funds
for
the
purpose
of
carrying
out
the
objects
of
the
company
in
a
manner
not
inconsistent
with
the
objects
of
the
company."
The
raising
of
funds
permitted
pursuant
to
subparagraph
2(j)(i)
is
just
as
much
an
object
of
the
appellant
as
any
of
the
other
objects
enumerated
in
paragraph
2.
As
noted
supra,
all
moneys
collected
were
given
to
charitable
organizations
as
set
out
in
the
objects
of
the
appellant.
Accordingly,
I
conclude
that
the
appellant's
charitable
purposes
as
described
in
the
Memorandum
of
Association
were
being
fulfilled.
Turning
now
to
the
submission
that
the
appellant
is
carrying
on
a
business
as
defined
in
subsection
248(1)
of
the
Act
because
of
its
commercial
involvement
with
Value
Village,
I
do
not
think
that
the
association
of
a
charitable
organization
with
a
commercial
enterprise
necessarily
impresses
that
charitable
organization
with
the
characteristics
of
a
“business”
within
the
definition
set
out
in
subsection
248(1),
supra.
Where,
as
in
this
case,
the
involvement
of
the
charitable
organization
with
a
commercial
enterprise
is
not
an
end
or
purpose
in
itself
but
is
merely
a
means
to
the
fulfilment
of
the
purposes
of
the
charitable
organization
which
are
exclusively
charitable,
that
involvement
will
not
result
in
the
charitable
organization
losing
its
exemption.*
In
that
case,
Lord
Denning
goes
on
to
point
out,
however,
that
if
such
an
"incidental"
purpose
ceases
to
be
a
means
to
an
end
and
becomes
an
end
in
itself,
it
becomes
an
additional
or
collateral
purpose
of
the
organization,
thereby
transforming
it
into
an
organization
which
is
no
longer
exclusively
charitable.
Such
a
circumstance
would
cause
it
to
lose
its
exemption.
In
my
view,
such
a
change
has
not
occurred
in
the
case
at
bar
so
as
to
make
the
appellant
an
organization
having
a
number
of
purposes,
some
charitable
and
some
non-charitable.
Counsel
for
the
respondent
cited
the
decision
of
this
Court
in
Hutterian
Brethren
Church
of
Wilson
v.
The
Queen.t
The
facts
in
that
case
present
a
classic
example
of
an
organization
with
mixed
objects,
some
charitable
and
some
non-charitable
since
there
that
appellant
was,
inter
alia,
in
the
business
of
farming
for
a
profit.
That,
however,
is
not
the
situation
in
the
particular
circumstances
of
this
case.
The
sole
purpose
of
the
appellant,
at
all
times,
has
been
and
is
to
raise
money
for
the
benefit
of
persons
(and
their
families)
suffering
from
mental
retardation.
The
means
chosen
to
raise
such
moneys,
i.e.,
the
solicitation
for
and
collection
of
used
goods
is,
in
reality,
simply
a
conversion
of
goods
into
money
and
does
not
itself
change
the
nature
of
the
appellant’s
operation
in
any
way.:l=
For
these
reasons
I
have
concluded
that,
in
the
somewhat
unusual
circumstances
here
present
where
all
of
the
moneys
received
are
dedicated
to
the
charitable
purposes
for
which
the
appellant
was
incorporated
and
where
the
business
aspect
of
the
operation
is
merely
incidental
to
the
attainment
of
its
charitable
objects,
the
appellant
can,
indeed,
be
said
to
be
operating
exclusively
for
charitable
purposes.
Issue
B
-
Is
the
Appellant
Carrying
on
a
Business
that
is
not
a
"Related
Business"
Business”
Since
I
have
concluded
that
the
appellant
is
operating
exclusively
for
charitable
purposes,
it
would
appear
that
it
meets
the
definition
of
charitable
foundation
as
set
out
in
paragraph
149.1(1)(a)
of
the
Act.
Likewise,
it
appears
to
meet
the
definition
of
“public
foundation"
set
out
in
paragraph
149.1(1)(g)
of
the
Act.
Thus,
prima
facie,
it
would
appear
to
be
entitled
to
registration
as
a
public
foundation.
However,
paragraph
149.1(3)(a)
provides
for
de-registration
of
a
public
foundation
where
it
carries
on
a
business
that
is
not
a
related
business
of
that
foundation.
In
the
view
of
the
respondent,
the
appellant
carries
on
a
business
that
is
unrelated
to
its
charitable
objectives.
As
noted
earlier
herein,
the
respondent
has
the
view
that
because
of
the
contractual
relationship
between
the
appellant
and
Value
Village,
the
appellant
is
carrying
on
a
business
in
the
ordinary
sense
of
the
word
and
as
defined
in
subsection
248(1).
The
retail/wholesale
relationship
anticipates
profits
and
has
in
fact
produced
profits
for
the
appellant.
Pursuant
to
the
terms
of
the
agreement
with
Value
Village,
the
appellant
assumes
commercial
risks
and
obligations
as
set
out
in
the
agreement.
In
the
view
of
the
respondent,
the
major
focus
for
the
appellant
must
be
its
commercial
operations.
Finally,
the
respondent
refers
to
the
definition
of
"related
business"
as
set
out
in
paragraph
149.1(l)(j).
Her
submission
is
that
since
"substantially
all”
of
the
employees
of
the
appellant
who
are
engaged
in
carrying
out
the
appellant's
obligations
under
the
contract
with
Value
Village
are
paid
by
the
appellant,
the
condition
set
out
in
paragraph
149.1(j)
has
not
been
satisfied.
It
is
the
respondent's
further
submission
that
the
appellant's
commercial
operation
is
not
converted
into
a
"related
business”
simply
because
the
funds
generated
by
its
commercial
activities
are
dedicated
solely
to
charitable
purposes.
In
her
submission,
the
fund
raising
activities
of
the
appellant
are
incidental
to
its
business
activities
and
not
the
reverse.
In
view
of
my
conclusion
under
Issue
A,
supra,
that
the
business
aspect
of
the
appellant's
operation
was
merely
incidental
to
the
attainment
of
its
charitable
objects,
I
doubt
that
the
appellant
can
be
said
to
be
carrying
on
business
as
that
term
is
generally
understood.
However,
the
definition
of
"business"
in
subsection
248(1)
is
very
wide.
Since
that
definition
includes
an
"undertaking"
and
since
normal
dictionary
definitions
of
"undertaking"
include
an
"enterprise"
which,
by
normal
definition
includes
"a
firm
or
business”
an
argument
can
be
made
that
the
appellant
was
here
engaged
in
an
undertaking
or
business.
However,
such
a
finding
is
not
necessary
or
decisive
in
the
circumstances
at
bar
because
the
real
issue
here
is
whether
the
appellant's
activity,
assuming
it
to
be
a
“business”
is
a
"related
business".
A
useful
approach
to
the
problem
of
defining
a
"related
business"
is
to
be
found
in
the
work
by
Arthur
B.C.
Drache
entitled
Canadian
Tax
Treatment
of
Charities
and
Charitable
Donations,
Second
Edition,
1980.
Mr.
Drache,
at
page
12,
quotes
from
the
Budget
Speech
of
May
25,
1976,
when
the
charities
amendments
were
being
introduced
in
Parliament.
On
that
occasion
the
Minister
of
Finance
said:
Under
the
present
rules,
technically
no
charity
can
carry
on
a
business.
Nonetheless,
many
charities
do
indeed
carry
on
worthwhile
fund-raising
activities
which
might
be
construed
as
business
activities.
I
see
no
reason
to
alter
this
situation
as
it
exists
in
practice.
On
the
contrary,
I
want
to
bring
the
law
into
conformity
with
the
current
standards
of
the
community.
[Emphasis
added.]
When
these
provisions
were
being
considered
in
Committee
in
the
House
of
Commons,
the
Minister
gave
as
an
example
of
a
related
business
the
operation
of
a
cafeteria
on
the
premises
of
an
art
gallery
or
a
hospital.
He
said
that
"the
basic
principle
is
that
the
activity
should
be
related
to
those
of
the
charity
and
it
should
not
become
the
vehicle
of
a
substantial
commercial
business.”
After
noting
a
“paucity
of
case
law"
on
this
subject,
Mr.
Drache
(pages
12-13)
suggests
four
different
criteria
for
deciding
this
issue:
1.
the
degree
of
relationship
of
the
activity
to
the
charity;
2.
profit
motive;
3.
the
extent
to
which
the
business
operation
competes
with
other
businessmen;
and
4.
the
length
of
time
the
operation
has
been
carried
on
by
the
charity.
Mr.
Drache
concludes
by
suggesting
that
”.
.
.meeting
one
or
more
of
these
tests
will
probably
ensure
that
the
business
activity
will
be
acceptable
from
the
point
of
view
of
Revenue
Canada."
While
it
must
be
understood
that
Mr.
Drache's
approach
in
this
article
is
more
pragmatic
than
jurisprudential,
the
tests
suggested
by
him
strike
me
as
being
in
accordance
with
the
statutory
scheme
as
well.
In
my
view,
the
factual
situation
at
bar
satisfies
the
first
test,
supra,
because
the
commercial
operation
at
bar
is
exclusively
related
to
charitable
purposes
since
all
moneys
collected
are
so
allocated.
Accordingly,
the
commercial
activity
has
a
very
close
connection
with
the
charity.
Likewise,
the
second
test
is
met
since
there
is
no
profit
motive
in
the
appellant's
operation.
All
moneys
received
are
remitted
to
the
Association
(including
the
moneys
reimbursed
to
it
for
its
solicitation
and
collection
activities).
In
so
far
as
the
third
test
is
concerned,
there
is
a
lack
of
evidence
on
this
issue.
Accordingly,
it
is
not
possible
to
make
any
finding
in
this
regard.
Likewise,
the
fourth
test
has
no
application
here
since
the
appellant
has
only
been
in
existence
since
1985.
Based
then
on
Mr.
Drache's
suggested
tests,
I
conclude
that
the
appellant
would
satisfy
those
tests
in
so
far
as
the
circumstances
of
this
case
are
concerned.
Dealing
with
the
submission
by
the
respondent
in
respect
of
paragraph
149.1
(l)(j),
I
do
not
think
the
extended
definition
of
"related
business"
as
set
out
therein
has
any
application
to
these
facts
because
it
operates
only
in
respect
of
”.
.
.a
business
that
is
unrelated
to
the
objects
of
the
charity.
.
.”.
Since
I
have
concluded
that
the
appellant's
"business"
here
is
closely
associated
with
and
related
to
the
objects
of
the
charity,
it
is
unnecessary
to
consider
the
application
of
paragraph
149.1
(l)(j).
If
the
operation
of
a
cafeteria
on
the
premises
of
an
art
gallery
or
the
operation
of
a
parking
lot
adjacent
to
and
on
premises
owned
by
a
hospital,
for
example,
can
be
said
to
be
related
businesses
even
though
the
cafeteria
and
the
parking
lot
may
be
operated
by
concessionaires
for
profit,
then
surely
an
activity
such
as
that
of
this
appellant
must
be
in
the
same
category.
This
type
of
activity,
so
long
as
it
does
not
become
”.
.
.the
vehicle
of
a
substantial
commercial
business”
is
of
the
kind
clearly
envisaged
by
the
charities
amendments
as
being
included
in
the
expression
"related
business
of
that
charity”.
Such
an
interpretation
is
consistent
with
the
clear
intention
of
Parliament
to
recognize
the
contemporary
reality
in
so
far
as
the
fund-raising
activities
of
modern
charitable
organizations
are
concerned.
Accordingly,
and
for
all
of
the
above
reasons,
I
would
allow
the
appeal,
set
aside
the
decision
of
the
Minister
and
refer
the
matter
back
to
the
Minister
with
the
direction
that
the
appellant
be
granted
registration
as
a
registered
charity.
Since
the
appellant
did
not
ask
for
costs,
and
since
no
special
reasons
were
advanced
in
support
of
an
award
of
costs,
I
would
make
no
order
in
respect
thereof.
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