Date: 20130611
Docket: A-75-13
Citation: 2013 FCA 154
Present: SHARLOW
J.A.
BETWEEN:
HUMANE SOCIETY OF CANADA FOR THE PROTECTION
OF ANIMALS AND THE ENVIRONMENT
Appellant
and
MINISTER
OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
SHARLOW J.A.
[1]
The
appellant, Humane Society of Canada for the Protection of Animals and the
Environment, has commenced an appeal pursuant to subsection 172(3) of the Income
Tax Act, R.S.C. 1985, c. 1 (5th Supp.). The appeal is from the
confirmation by the Minister of National Revenue of the notice of intention to
revoke the registration of the Society as a “charitable organization” as
defined in the Income Tax Act. The failure of the parties to agree on
the contents of the appeal book has led to the motion now before me. For the
reasons that follow, I will dismiss the motion and order steps to be taken that
I hope will enable the parties to have this matter made ready for a hearing on
the merits within a reasonable time.
The
decision under appeal
[2]
Subsection
168(1) of the Income Tax Act states the grounds upon which the Minister
may revoke the registration of a qualified donee (which, by virtue of a number
of definitions in subsection 149.1(1) of the Income Tax Act, includes a
charitable organization). The parts of subsection 168(1) that are cited in the
confirmation letter read as follows:
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168. (1) The Minister
may, by registered mail, give notice to a person described in any of
paragraphs (a) to (c) of the definition “qualified donee” in
subsection 149.1(1) that the Minister proposes to revoke its registration if
the person
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168. (1) Le
ministre peut, par lettre recommandée, aviser une personne visée à l’un des
alinéas a) à c) de la définition de « donataire
reconnu » au paragraphe 149.1(1) de son intention de révoquer
l’enregistrement si la personne, selon le cas :
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|
…
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[…]
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(b) ceases to
comply with the requirements of this Act for its registration;
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b) cesse de
se conformer aux exigences de la présente loi relatives à son enregistrement;
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|
…
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[…]
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(e) fails to comply
with or contravenes any of sections 230 to 231.5 …
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e) omet de se conformer à l’un des
articles 230 à 231.5 ou y contrevient […]
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[3]
The
Minister’s confirmation is set out in a letter dated January 22, 2013. That
letter reads in part as follows:
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… we confirm the Minister’s
proposal to revoke the registration of the Organization issued under
subsection 168(1) of the Act on the basis that the Organization:
•
Failed
to demonstrate that it devoted all of its resources to charitable activities,
[paragraph 168(1)(b)],
•
Provided
part of its income for the personal benefit of a member of its governing
board [paragraph 168(1)(b)], and
•
Failed
to comply with or contravened any of sections 230 to 231.5 of the Act
[paragraph 168(1)(e)].
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[4]
The
confirmation letter refers to the previous letter from the Minister dated
February 17, 2010, which is the document by which the Society was notified of
the Minister’s intention to revoke its registration as a charitable
organization. That letter in turn referred to prior letters from the Minister
that set out points raised at various times during the period when the Minister
was considering whether the Society’s registration should be revoked.
[5]
From
the material filed by the Minister in response to the Society’s motion, it is
now clear that the reference in the confirmation letter to sections 230 to
231.5 of the Income Tax Act is meant to be a partial paraphrase of
paragraph 168(1)(e) and not a statement that the grounds for the
revocation include everything in sections 230 to 231.5. The Minister has
formally confirmed in this motion that, with respect to the ground of
revocation based on paragraph 168(1)(e), only the statutory obligations
of the Society under paragraph 230(2)(a) are in issue. The appeal of
this matter on the merits, as well as this motion, are limited accordingly.
Paragraph 230(2)(a) requires a registered charity to keep records and
books of account containing:
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(a)
information in such form as will enable the Minister to determine whether
there are any grounds for the revocation of its registration under this Act …
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a) des renseignements
sous une forme qui permet au ministre de déterminer s’il existe des motifs
d’annulation de l’enregistrement de l’organisme ou de l’association en vertu
de la présente loi […]
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[6]
Given the
generality of paragraph 230(2)(a), it is necessary to discern from the
confirmation letter and the letters mentioned above what deficiencies in the
Society’s books and records were relied upon by the Minister to justify the
revocation of the Society’s registration. At this stage it appears to me that
the Minister’s reliance on paragraph 230(2)(a) is aptly reflected in the
following statement in paragraph 8 of the Minister’s submissions in response to
this motion (respondent’s motion record, page 4):
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The
appellant was repeatedly advised that its books and records failed to
separate out amounts paid in respect of Mr. O’Sullivan’s personal
expenditures and charitable expenditures and failed to break down
expenditures directly related to charitable activities.
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[7]
The
Society is concerned that it might be surprised, when the Minister’s memorandum
of fact and law is filed, to learn that the Minister’s reliance on paragraph
230(2)(a) is based on different grounds than is now apparent. By that
time, the contents of the appeal book will have been settled by agreement or
court order.
[8]
At
the hearing of this motion, the Minister was not willing to confirm that the
decision to confirm the revocation, in so far as it is based on paragraph
230(2)(a), is necessarily as limited as the statement quoted above might
suggest. Although I have been referred to nothing in the material now before me
that suggests that the Minister is relying on any other deficiency in the books
and records, and my own review of the material reveals nothing more, I cannot
assume that I have been provided with a complete record of all correspondence
that passed between the Society and the Minister in relation to this matter.
[9]
If
the Minister’s memorandum of fact and law sets out an allegation of a
deficiency in the books and records of the Society that is not fairly
encompassed by the statement quoted above, it will be open to the Society to
seek an interlocutory order which, depending on the circumstances, may include
any or all of the following: an order granting leave to file a reply
memorandum, an order granting leave to file a supplementary appeal book, and an
order granting leave to present evidence on appeal.
[10]
It
will also be open to the Society to argue at the hearing of this appeal on the
merits that the Minister cannot rely on any alleged deficiencies in the
Society’s books and records that are not part of the reasons for the Minister’s
decision to confirm the revocation. In that regard, the Society is entitled to
assume that the Minister’s reasons can be found in the confirmation letter,
read in the context of the prior correspondence to which the confirmation
letter refers expressly or implicitly.
[11]
I
turn now to the orders sought by the Society in this motion.
Preliminary
comments on the motion
[12]
As
indicated above, the preparation of this appeal for hearing has been stalled by
the inability of the parties to agree on the contents of the appeal book. The
failure to agree should have led the Society to move under Rule
343(3) of the Federal Courts Rules, SOR/98-106, for an order determining
the contents of the appeal book.
[13]
The
Society is aware of Rule 343(3), but says that it cannot determine what documents
it will need to be in the appeal book because the Minister has failed to
provide it with information it requires to make that determination. Therefore,
the Society is seeking an order that the Court:
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…
assist the parties in determining the content of the appeal book pursuant to
Rule 343(3) of the Federal Courts Rules as follows:
a.
By
ordering that the [Minister] provide full particulars of the allegation, in
the notice of confirmation dated 22 January 2013, that the [Society] failed
to comply with or contravened any of sections 230 to 231.5 of the Income
Tax Act, in order that the [Society] may determine which of its documents
are required for inclusion in the appeal book to dispose of those issues in
this appeal; and
b. By ordering that the
[Minister] cause the tribunal to certify, pursuant to Rules 317(1) and
318(1)(a), those materials which were before the Tax and Charities Appeals
Directorate when it considered whether to confirm the Minister’s proposal to
revoke the [Society’s] registration issued under subsection 168(1) of the Income
Tax Act, in order that the parties may determine which of the
[Minister’s] documents are required for inclusion in the appeal book to
dispose of the issues in this appeal.
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[14]
I
will refer to paragraph (a) of the notice of motion as the “motion for
particulars” and paragraph (b) as the “motion for certification”. I will
discuss them separately.
Motion
for particulars
[15]
The
Society’s motion for particulars is based on its allegation that the Minister
has not clearly identified the information that the Society is alleged to have
failed to keep, and has not explained why the purported failure justifies the
revocation of its registration as a charity (Prescient Foundation v.
Minister of National Revenue, 2013 FCA 120, paragraph 47). The position of the
Society is that Rule 343(3) is not yet in play because the Minister’s reasons
do not disclose the case it has to meet, and therefore it cannot determine what
it requires in the appeal book.
[16]
What
the Society has phrased as a motion for particulars is in reality a motion for
an order requiring the Minister to give further, better or more detailed
reasons for the revocation decision. In my view, the Minister’s reasons must
stand or fall as they are. If, when considered against the relevant evidence,
they fail to disclose a reasonable basis for the revocation of the Society’s
registration, the remedy is to set the decision aside after the hearing on the
merits.
[17]
By
the combined operation of subsection 172(3) and section 180 of the Income
Tax Act, an appeal of the Minister’s decision to revoke the registration of
a charity is an appeal in the traditional sense: Renaissance International
v. Minister of National Revenue, [1983] 1 F.C. 860 (F.C.A.). It is an
appellate review of a decision based on the record that was before the decision
maker. It is not a trial de novo or other similar proceeding that is
grounded in pleadings in respect of which a motion for particulars might be
appropriate. For that reason, the motion for particulars will be dismissed.
Motion
for a certificate as to what documents were before the Minister
[18]
In
the second part of the motion, the Society is seeking an order requiring the
Minister to certify which documents were before the “tribunal” (the Minister)
when the confirmation decision was made. That motion is based on Rules 317(1)
and 318(1)(a) which apply to appeals by virtue of Rule 350. Rules 317(1) and
318(1)(a) read as follows:
317. (1) A party may
request material relevant to an application that is in the possession of a
tribunal whose order is the subject of the application and not in the
possession of the party by serving on the tribunal and filing a written
request, identifying the material requested.
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317. (1) Toute partie peut
demander la transmission des documents ou des éléments matériels pertinents
quant à la demande, qu’elle n’a pas mais qui sont en la possession de
l’office fédéral dont l’ordonnance fait l’objet de la demande, en signifiant
à l’office une requête à cet effet puis en la déposant. La requête précise
les documents ou les éléments matériels demandés.
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[…]
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[…]
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318. (1) Within 20 days
after service of a request under rule 317, the tribunal shall transmit
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318. (1) Dans les 20 jours
suivant la signification de la demande de transmission visée à la règle 317,
l’office fédéral transmet :
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(a) a certified copy of
the requested material to the Registry and to the party making the request
[…].
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a) au greffe et à la partie qui
en a fait la demande une copie certifiée conforme des documents en cause […].
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[19]
These
rules do not require a specific certification as to what material was before
the Minister when the decision under appeal was made. Therefore, this part of
the motion will be dismissed.
Going forward
[20]
This
appeal is procedurally stalled because the time spent on the motions now before
me has caused the Society to miss the time limit for filing the agreement as to
the contents of the appeal book or seeking an order to determine its contents.
There is no motion before me to extend that time limit. However, the order
disposing of this motion will set a new deadline on my own motion, with
consequential directions.
[21]
In
this Court, an appeal is based on a record consisting of the documents referred
to in Rule 344. Broadly speaking, the record should include all documentary
evidence that the parties agree (or that the Court determines on a Rule 343(3)
motion) may assist the Court in determining the issues raised in the appeal,
provided the documentary evidence was before the Minister when the decision was
made, or leave to present it as evidence on appeal is granted under Rule 351.
[22]
The
task of the parties, in attempting to agree on the contents of the appeal book,
is to consider what documents should be included in the appeal book, and to
confer with each other as to their respective conclusions on that point.
[23]
Typically,
the first step is for the appellant to determine what documents it considers
should be included in the appeal book. The appellant then informs the
respondent of its determination. The respondent may agree, or object to the
inclusion of one or more documents, or propose the inclusion of additional
documents. The parties are expected to attempt to resolve any differences but
if they cannot, the appellant must seek an order under Rule 343(3) determining
the contents of the appeal book. That generally requires submissions by both
parties, based on affidavit evidence, as to which documents should be included
or excluded, as the case may be.
[24]
In
this case, it appears to be common ground that the documents
covered by the Rule 318 certificates dated March 13 and 15, 2013 are part of
the record (to the extent they are relevant to the specific issues under
appeal). I assume that the parties should have no difficulty in identifying
which of those documents should be included in the appeal book. However, it
appears that there
may be some difficulty with respect to certain other documents. I will address
that difficulty now.
[25]
There
are many documents – referred to as the “Teachman Documents” – that are said to
be the source documents from which the Society’s own auditor, Mr. Teachman,
prepared the Society’s annual audit for the year 2006. The audit by the Canada
Revenue Agency covered the same period, and led to the revocation proceedings
that are the subject of this appeal. According to the Society, the Teachman
Documents were made available to the Canada Revenue Agency auditor.
[26]
The
auditor deposes that she was given access to 6 boxes of documents at the office
of Mr. Teachman, which she reviewed. She had a number of concerns about the
documents, which she lists in her affidavit. Because of the volume of
documents, she did not copy them all, but she scanned and retained copies of
what she considered to be a representative sample. It was initially her conclusion
that the books and records of the Society were deficient “in that there was no
separation of personal expenditures and charitable expenditures, and there was
no breakdown of expenditures directly related to charitable expenditures”
(paragraph 9 of her affidavit, page 14 of the respondent’s motion record).
[27]
Thus,
it appears that of the documents reviewed by the auditor at the office of Mr.
Teachman, at least the documents that she copied are likely to be relevant to
the issue of the sufficiency of the Society’s books and records. It is
reasonable to infer that within the 6 boxes of documents that were made
available to the auditor, there may be some other documents that were not
copies but could be relevant to that issue, including some that may be capable
of casting doubt on the Minister’s conclusion that the books and records were
deficient.
[28]
It
may not be possible to determine with certainty which of the Teachman Documents
were made available to the auditor. However, where certainty is not possible,
presumptions and reasonable inferences must suffice. Since the evidence
indicates that the auditor was given access to a large volume of documents for
2006, and the decision to limit the copying of documents was made by the
Minister, any reasonable doubt as to which documents the auditor saw, or to
which documents she was given access, should be resolved in favour of the
Society.
[29]
Counsel
for the Minister agreed at the hearing that it would be reasonable to infer
that the auditor was given access to any of the Teachman Documents that appear
to be books and records of the Society. Such documents would prima facie
be relevant if they would assist the Court in understanding how the books and
records would inform an auditor as to the relationship between particular
expenditures and the charitable activities of the Society.
[30]
In
my view, the Society is also entitled to the benefit of a presumption that any
document that it made available to the auditor or any other Canada Revenue
Agency official during the audit, or during the revocation and confirmation
process, were or should have been before the Minister at the relevant time.
Thus, any Teachman Document that is now identified as relevant to the issues
raised in this appeal should be included in the appeal book, whether or not it
can be established with certainty that a copy of the document was retained by
an official of the Canada Revenue Agency.
[31]
With
these guidelines in mind, it is to be hoped that the parties will be able to
agree on the contents of the appeal book within the deadlines I will stipulate.
Conclusion
[32]
For
these reasons, the motion will be dismissed. At the hearing of this motion,
both parties requested costs. I am not persuaded that an order for costs is
appropriate at this stage. Costs of this motion will be costs in the cause.
“K. Sharlow”
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