Apv Canada Inc. v. Canada (Minister of National Revenue), 2001 FCT 737

Date: 20010703

Docket: 01-T-22

Neutral Citation: 2001 FCT 737

Ottawa, Ontario, this 3^rd day of July 2001

PRESENT: THE HONOURABLE MR. JUSTICE PELLETIER

BETWEEN:

Apv Canada Inc., Armour Valve Limited, Canadian Worcester Controls Ltd., Cooper Oil Tools Division of Cooper Industries (Canada) Inc., Dresser Canada, Inc., Flowserve Inc., GEC Divestment Corporation Limited, General Signal Limited, Keystone Valve Canada Division of Keystone Canada Co., Lunkenheimer Canada Ltd., Neles Controls Ltd., NEO Valve Division of E.M. Plastics, Newmans Valves Ltd. TYCO International of Canada Ltd. Valgro Limited, Weatherford BMW Ltd., and Xomox Canada Ltd.

Applicants

- and -

THE MINISTER OF NATIONAL REVENUE

Respondent

REASONS FOR ORDER AND ORDER

PELLETIER J.

[1]    This is a motion for an order extending the time for commencing an application for judicial review in respect of approximately 1,500 decisions and consolidating the judicial review of those decisions, if leave is granted, into one application. The Court is advised that approximately $2,000,000 is at stake. At the hearing of this matter, the request for consolidation was adjourned pending disposition of the application for extension of time.

[2]    This is a dispute about the operation of the List of Tariff-Free Machinery and Equipment (the "List"), promulgated by the Minister of National Revenue (the "Minister"), pursuant to section 75 of the Customs Tariff Act, R.S.C. 1985, c. 41 (3^rd Supp.), (the "Act") as it read in July 1990. To put the List of Machinery and Equipment into context, the Customs Tariff ("Tariff") provides for the rate of duty to be charged upon certain imported goods. As well as being a revenue item for the government, the effect of the Tariff is to protect Canadian industry and producers from foreign competition. The extent to which this can be done is a matter of international treaties such as the free trade agreement and the General Agreement on Trade and Tariffs. Within those constraints, the Tariff applies to various goods in various amounts as they enter the country.

[3]    However, in the case where the goods in question are not available in Canada, some provision is made for Tariff relief for Canadian importers of those goods. These claims involve Tariff relief for machinery and equipment which would otherwise be subject to tariff under the 8481 category, which deals with valves. The relevant provisions of the Act are the following:

[4]                 It can be seen from this that there are two means by which an importer can obtain tariff relief. If the Minister forms the opinion that the goods in question are not available in Canada, he can place those goods on the List. The process by which the Minister comes to such a conclusion is not before the Court but presumably it involves having the absence of production of such goods brought to his attention by importers of those goods. Since the legislation requires the Minister to have regard to certain factors in forming his opinion, it is a matter of inference that some form of investigation is undertaken to determine the state of production capacity with respect to those goods. If there are Canadian manufacturers of the goods in question, they would undoubtedly bring their point of view to the Minister's attention. At the end of the day, if he is satisfied that there is no Canadian source of the goods in question, the Minister may put the goods on the List. It is to be noted that the words used to describe the goods is a matter entirely within the Minister's discretion.

[5]                 In this case, by publication dated July 21, 1990, the Minister added "rotary valves" to the List, effective January 1, 1988. This period of retroactivity resulted in a burst of refund activity which accounts for a significant number of the 1,500 applications in issue here. The Court is advised that initially, refunds were paid with respect to those claims but as a result of an apparent change in position, subsequent claims were refused so that only 200 or so of the claims have been paid.

[6]                 The reasons given for denying these claims vary somewhat but certain broad themes emerge. A number of claims have been refused on the ground that "rotary valves" refers only to "rotary airlocks". A large number have been refused on the simple ground that "Ball/plug/butterfly valves are not rotary valves". Another reason which is frequently seen is that the request is refused "as a result of further information from the Machinery and Equipment Advisory Board".

[7]                 The applicants' position is that regardless of the reason given for the refusal, it is wrong because the trade literature shows without equivocation that ball, plug, and butterfly valves are all rotary valves. It they are rotary valves, then the Minister must refund the duty paid. The nature of the List is that entries are to be understood in the ordinary sense of the words used.

[8]                 The issue in this application is the granting of an extension of time for the bringing of the applications for judicial review. Section 18.1(2) of the Federal Court Act, R.S.C. 1985, c. F-7, stipulates that applications for judicial review shall be brought within 30 days of the date the decision was first communicated to the party directly affected thereby "... or within such further time as a judge of the Trial Division may, either before or after the expiration of those thirty days, fix or allow".^[1]

[9]                 The principles upon which a court is to exercise its discretion in dealing with an application for extension of time were set out in Canada (Attorney General) v. Hennelly, [1999] F.C.J. No. 846 (F.C.A.), (1999), 244 N.R. 399, where the following appears:

The proper test is whether the applicant has demonstrated

     1. a continuing intention to pursue his or her application;

     2. that the application has some merit;

     3. that no prejudice to the respondent arises from the delay; and

     4. that a reasonable explanation for the delay exists.

[10]            This analysis is tempered by the balancing of the factors according to the particulars of the situation:

It seems to me that, in order to properly evaluate the situation and draw a valid conclusion, a balancing of the various factors involved is essential. For example, a compelling explanation for the delay may lead to a positive response even if the case against the judgment appears weak, and equally a strong case may counterbalance a less satisfactory justification for the delay.

Grewal v. Canada (Minister of Employment and Immigration), [1985] 2 F.C. 263, (1985), 63 N.R. 106, per Marceau J.A.

[11]            The applicants' position is that the application has merit, there is evidence of a continuing intention on the part of the applicants to pursue their remedies, the delay in bringing the application is explained and there is no prejudice to the respondent in the event that leave is granted. The respondent attacks the motion on two grounds, the fact that there is no evidence of a continuing intention to commence an application for judicial review and that there is no proof of absence of prejudice to the respondent.

[12]            With respect to the last point, counsel relies upon the decision of Giles A.S.P. in Valyenegro v. Canada (Secretary of State), [1994] F.C.J. No. 1917, (1994), 88 F.T.R. 196, in which the learned Associate Senior Prothonotary held that "where there is delay, prejudice must be assumed to exist unless there is some evidence that it does not". The difficulty with this proposition is that it requires an applicant to lead evidence about a subject uniquely within the knowledge of the respondent, prejudice which it may suffer in the event that leave is granted. Furthermore, in such a situation, an applicant is apparently asked to prove a negative, that is, to lead evidence that there will be no prejudice. In practical terms, the most an applicant can usually do is to assert that the respondent will suffer no prejudice. The respondent is the one who knows if its documents or its witnesses have disappeared. The bare denial of prejudice does nothing more than call on the respondent to put forward its evidence of prejudice. It is only then that the applicant can lead evidence to minimize or contradict the respondent's claim of prejudice. In this case, the applicant has done all it can do, insofar as its original motion is concerned.

[13]            Turning to the respondent's first point, counsel confirmed that the basis of the position being taken by her client was that the test in Hennelly required proof of a continuing intention to bring an application for judicial review, as opposed to a continuing intention to pursue one's legal remedies in whatever form of action was appropriate. The applicants point to their commencement of their actions for unjust enrichment as evidence of their continuing intention to assert their rights. The respondent gainsays this by pointing out that no application for judicial review was sought to be commenced until 2001 in spite of the fact that the dispute over these refunds has been ongoing since the early 1990's. I believe that the respondent's view of the test is too narrow. Where the applicants must show a continuing intention to pursue their legal remedies, it is sufficient to show that the applicants have taken steps to protect their rights without necessarily having to show that a particular type of proceeding was undertaken. It may be that in certain contexts, the only possible proceeding would be an application for judicial review, but that does not mean that in all cases the test is the intention to pursue judicial review.

[14]            A considerable portion of the applicants' submissions was directed to the issue of the merits of the application. For the purposes of this application, all that is required is to determine whether the applicants have a case with some prospect of success. The place to start is the standard of review.

[15]            The applicants' position is that the standard of review is correctness, primarily because the question of the meaning of "rotary valves" is a question of law. However, in Pezim v. British Columbia (Superintendent of Brokers), [1994] 2 S.C.R. 557, (1994), 168 N.R. 321 and again in Canada (Director of Investigation and Research) v. Southam Inc. (1997), 144 D.L.R. (4^th) 1, (1996), 209 N.R. 20, the Supreme Court of Canada found that deference could be afforded to a specialist tribunal on a question of law, providing the question was not one which was required to be answered correctly. The status of such questions was discussed in Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982, (1998), 226 N.R. 201, where Bastarache J. put the issue in these terms:

[para28] ... To this extent, it is still appropriate and helpful to speak of "jurisdictional questions" which must be answered correctly by the tribunal in order to be acting intra vires. But it should be understood that a question which "goes to jurisdiction" is simply descriptive of a provision for which the proper standard of review is correctness, based upon the outcome of the pragmatic and functional analysis. In other words, "jurisdictional error"is simply an error on an issue with respect to which, according to the outcome of the pragmatic and functional analysis, the tribunal must make a correct interpretation and to which no deference will be shown.

[16]            The factors to be considered in a pragmatic and functional analysis of the decisions in question here would involve consideration of the following issues:

1-       Presence of a privative clause: there is no privative clause in the Customs Tariff Act which would shield decisions of the Minister from judicial oversight. It is conceded by all that there is no appeal from such decisions but they are subject to judicial review. While the presence of a privative clause is an indicator of greater deference, the absence of a privative clause does not necessarily imply a lower degree of deference. The absence of a right of appeal and the availability of judicial review would suggest a middle standard of review.

2-       Relative and absolute expertise: expertise is the single most important determinant of the degree of deference to be afforded to a decision-maker.

[para35]      In short, a decision which involves in some degree the application of a highly specialized expertise will militate in favour of a high degree of deference, and towards a standard of review at the patent unreasonableness end of the spectrum.

Pushpanathan, supra

In this case, the question "Is a ball/plug/buttefly valve a rotary valve?" is, in one aspect, a question of law with respect to which the tribunal would have no greater expertise than the Court. But the question is not posed in the abstract. It is posed in the context of the administration of the Tariff, of which the List is a part. The Minister's particular expertise must be taken to be in relation to the administration of the Tariff. The impact of these decisions in relation to the overall objective of the Tariff is a matter in which the Minister would have a greater relative expertise than the Court. Some deference should be shown with respect to the Minister's expertise.

3-       The purpose of the Act:

[para. 36] ... Where the purposes of the statute and of the decision-maker are conceived not primarily in terms of establishing rights as between parties, or as entitlements, but rather as a delicate balancing between different constituencies, then the appropriateness of court supervision diminishes.

Pushpanathan, supra

The act in question in these proceedings, the Customs Tariff Act is a complex mix of policy considerations, combining as it does, the protection of Canadian industries and the desire to keep Canadian industries competitive where components cannot be found from Canadian production as well as compliance with Canada's treaty obligations. The Minister must balance the requirements of importers as well as those of manufacturers. The balancing of these interests is a matter best left to the Minister.

4-       The nature of the question: the question in issue is a question of mixed fact and law. The question of what industry understands by "rotary valve" is a question of fact. The meaning of the same phrase in the context of the List is a question of law. A mixed question of fact and law falling squarely within a tribunal's area of competence is entitled to more deference that would a pure question of law.

[17]            Having regard to all of these factors, I am of the view that the decision of the Minister in relation to the claims for refunds is a question which is entitled to a certain amount of deference. It is not necessary for me to decide the extent of the deference required because as long as the test is not correctness, the strength of the applicants' case is significantly reduced in the sense that the applicants must show not only that the Minister is wrong, but that he is sufficiently wrong to justify the Court's intervention.

[18]            On the merits themselves, I am satisfied that the term "rotary valves" as used in the industry would generally be understood to refer to "ball, plug and butterfly" valves which, it appears, are the types of valves for which claims have been made by the applicants. However, given that the Minister must satisfy himself that there is a lack of availability of the goods before they can be placed on the list, the question which arises is whether the words used on the list are subject to the qualification that they are not available from production in Canada. Mr. Barr argues eloquently that this is contrary to the practice in the field which is designed to expedite the handling of such claims by providing a measure of certainty and predictability to the identification of duty free goods. The necessity of an enquiry into the availability from production in Canada of every rotary valve imported into Canada is hardly an efficiency enhancing measure. Furthermore, an examination of the list shows generic terms used side by side with very specific descriptions of particular machinery and equipment which suggests that the Minister is capable of being precise when it suits him. On balance, I believe that a judge hearing the applications for judicial review could find that the Minister's position, while wrong, was not such as to require intervention. To the extent that a decision as to granting leave requires a consideration of the merits, I find that while the applicants have a case which is not doomed to failure, nor is it one whose success is to be taken for granted.

[19]            The next issue is whether the facts disclose a continuing intention on the part of the applicants to pursue their legal remedies. The latter point to their involvement in an earlier case in this Court, Cameron Iron Works Ltd v. Canada, (Docket No. T-2240-93) as evidence of their intention to pursue their remedies. The evidence on this point is contained in the following paragraphs from the Affidavit of Douglas Bowering:

32.         By September of 1993 I had come to the conclusion that some form of legal action might be necessary to resolve these matters but there were still about 400 applications in respect of which no decision had yet been rendered.

33.         As the issues and types of goods were the same among all the Applicants, we decided that we could proceed with a single case that would represent all of the Applicants. We chose Cameron Iron Works Ltd. (herein referred to as "Cameron") as the importer who would launch the action. Cameron was part of the original group of Applicants contacted by CAS following th introduction of the Rotary Valve amendments in 1990. It had imported goods of the same type as those of the Applicants and had also attempted (unsuccessfully) to obtain refunds using the 8053 and 8099 eligibility codes on the same basis as the Applicants.

34.         The Cameron matter was commenced as Federal Court action T-2340-93 [sic] on September 15, 1993. It was styled as an action for unjust enrichment to cover all of Cameron's refund applications that had been rejected to that point in time. Other applications were later added by consent as the Cameron case proceeded.

...

39.         Discoveries were completed in the Cameron case by July 1998 and a pretrial conference was scheduled for November 1998. Based on the evidence at that point it looked likely that Cameron would be settled before trial which would limit its usefulness as a precedent for the Applicant's cases. Therefore, in August 1998 prior to the pretrial conference, Cameron submitted a written offer to settle which contained a demand that the Crown admit that the term Rotary Valve as it appeared in the Minister's List included ball valves. Exhibit 10 is a copy of that settlement offer as submitted except that the cash payment amount has been deleted as being irrelevant to this application. This demand for an admission was inserted on my instructions for the express purpose of obtaining a precedent that could be used in the Applicants' cases.

40.         The Cameron pretrial conference was held in November as scheduled. It was adjourned to a date in December 1998 to allow the parties to consider further material. A settlement was reached in the Cameron case in January of 1999 without any admission from the Crown.

41.         During the course of these conferences I asked whether the Respondent's officials would consider broadening the discussions to include the claims of these Applicants. This request was denied.

[20]            The Second Supplementary Affidavit of Douglas Bowering, sworn April 25, 2001, includes a number of letters from representatives of the various applicants confirming their availability to assist in the prosecution of the Cameron case by providing witnesses and expertise.

[21]            It was only in February and March 1999, following the settlement of the Cameron case, that the applicants each launched their own actions for unjust enrichment. This led to a joint motion to determine certain questions of law in which a decision was rendered on February 8, 2001. As a result of that decision, which was adverse to the interests of the applicants, this motion was launched on March 1, 2001.                  .

[22]            It is clear that once the Cameron case was disposed of, the applicants acted promptly to commence their own actions for unjust enrichment. When those failed, they acted promptly once again to make this motion for an extension of time. The question which remains is how to characterize the position of the applicants in relation to the Cameron case. If one were to treat the Cameron case as a test case, it would be reasonable for the applicants to await the outcome of that case. However, for it to be a test case, it would have to have been structured to resolve some or all of the outstanding issues. I take it from paragraph 41 of the Affidavit of Douglas Bowering that the respondent never agreed that the result in Cameron would be determinative of the result in the other cases. Furthermore, it seems curious that a test case would be settled without resolving the issues which the case was to test. Counsel advised in response to questions from the bench that Cameron settled because an appropriate offer was made which Cameron accepted, as it could, because there was no agreement between the applicants as to the conduct of the Cameron case. In other words, the Cameron case was undertaken by Cameron for the benefit of Cameron but in the expectation that a positive ruling could have value as a precedent for the other applicants.

[23]            The question which this raises is whether in the interval between the rejection of their claims for refunds and the settlement of the Cameron case, the applicants had a continuing intention to pursue their legal remedies or whether they were content to simply observe the proceedings and consider whether, when the outcome was known, it would be worth their while to take some form of action against the Minister.

[24]            In my view, the sequence of events is more consistent with watching and waiting than it is with a fixed intention on the part of the applicants to press their case. I come to this conclusion for the following reasons. In the absence of some agreement as to the effect of the Cameron case on the other claims, the applicants could not know that Cameron would advance their cause or protect their interests. This was confirmed when Cameron settled without any concession on the part of the respondent that its position in Cameron applied to any other case. The inability of the other applicants to push Cameron forward to a judicial determination means that Cameron had the sole carriage of the action, which was undertaken for its benefit and, given the result, presumably at its expense.

[25]            Given the absence of any commitment that the result in Cameron would govern their cases, one would have thought that prudence dictated that some proceeding be taken to protect the applicants' individual positions. The failure to do so suggests a lack of commitment to the pursuit of the claim. The fact of filing individual claims following the settlement of Cameron suggests a revived interest in the refund claims arising from the fact of payment by the respondent to dispose of Cameron's claim. The overall impression is that the applicants were content to adopt a wait and see attitude, with a view to assessing the prospects for recovery on the basis of Cameron's case, before making a commitment to proceed. In that regard, I regard as significant the absence of an affidavit from any of the applicants confirming their continuing intention to pursue their legal remedies. As a result, I conclude that while there was a continuing interest in the possibility of recovery, there was no ongoing intention on the part of the applicants to pursue their legal remedies in any event.

[26]            Finally, one considers the issue of prejudice to the respondent. The respondent advances a claim of prejudice on the basis that some of the pertinent records may have been destroyed as part of the agency's records retention and destruction policy. As a result, the Minister might not be able to produce the materials which were before the decision makers at the time of refusing the claim for a refund. The applicants urge the Court not to reward a self-induced prejudice in the sense that it was hardly a secret that these claims were contentious so that it was incumbent upon the respondent to see to it that the documents were protected. I am not sympathetic to the respondent's argument with respect to record destruction. This a matter entirely within the respondent's control and one over which some supervision ought to have been exercised. On the other hand, eight years is a long time. The longer the delay, the easier it is to establish the fact of prejudice but self-induced prejudice does not meet that test.

[27]            In the end result, I find that in the absence of evidence of a continuing intention to pursue their remedies, the applicants have not satisfied me that leave to commence their applications for judicial review ought to be granted. The merits of the case are not such that they are sufficient to overcome the deficiencies in the proof of continuing intention. One of the principles which underlies the administration of the justice system is that at some point things must have an end. This is usually applied in the context of appeals, but it also applies in the context of commencement of actions. This is the purpose of limitation periods such as the thirty day period found in section 18.1 of the Federal Court Act, R.S.C. 1985, c. F-7. While it is not impossible to conceive of a situation in which such leave would be granted, it would take cogent evidence of an injustice to justify extending a thirty-day period to cover decisions made eight years ago. The evidence in this case falls short of that standard. There will be an order dismissing the motion with costs to the respondent.

ORDER

For the reasons set out above, it is hereby ordered that:

1-       The Motion for an extension of time to commence an application for judicial review in respect of each of the decisions set out in Exhibit 3 to the Affidavit of Douglas Bowering is dismissed;

2-       The request for an order consolidating the applications is adjourned sine die; and

3-       The respondent shall have his costs to be assessed.

      "J.D. Denis Pelletier"         

Judge