Date:
20081222
Docket: A-196-08
Citation: 2008 FCA 414
Present: RYER
J.A.
BETWEEN:
MILLENNIUM CHARITABLE
FOUNDATION
Applicant
and
MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR ORDER
[1]
On April
2, 2008, the Minister of National Revenue (the “Minister”) gave notice (the
“Notice of Intent to Revoke”) to the Millennium Charitable Foundation (the
“Foundation”), pursuant to subsection 168(1) of the Income Tax Act,
R.S.C. 1985, c. 1 (5th Supp.) (the “ITA”), that the Minister intends
to revoke the registration of the Foundation as a registered charity, within
the meaning of subsection 248(1) of the ITA (a “registered charity”). In
response, the Foundation applied to this Court, pursuant to paragraph 168(2)(b)
of the ITA, for an order prohibiting the Minister from publishing the Notice of
Intent to Revoke in the Canada Gazette until the rights of objection and
appeal of the Foundation under the ITA have been fully exercised and exhausted.
On June 30, 2008, the Foundation filed a notice of objection to the Notice of
Intent to Revoke, pursuant to subsection 168(4) of the ITA (the “Notice of
Objection”).
BACKGROUND
[2]
The
Foundation was registered as a registered charity in 2000 but did not become
active until 2003.
[3]
The record
indicates that, with one minor exception, almost all of the amounts received by
the Foundation as donations during the period from 2003 to the end of 2007
arose out of two tax shelter gifting programs: the Insured Giving Program by Insured
Donations Inc. and the Global Learning Gifting Initiative by Global Learning
Group Inc. Tax shelter identification numbers were provided to persons who made
contributions to the Foundation under these programs. The record also indicates
that, with one minor exception, all of the donations that have been made by the
Foundation were made to the entities that were participants in the two tax
shelter gifting programs.
[4]
The
affidavit of Mr. Thomas A. Koger, the former executive director of, and
consultant to, the Foundation states:
34. Given
the issue CRA raised regarding receipting tax shelter donations, the Foundation
voluntarily ceased receiving donations from donors participating in tax shelter
programs in January 2008. The foundation will not use tax shelters to
fundraise, pay a tax shelter developer, knowingly gift to another charity
receipting tax shelter gifts or issue receipts for gifts from donors
participating in tax shelter programs pending the final determination of this
issue on the merits in the revocation objection and appeal.
35. The
Foundation is not able to commit to any future fundraising action given that it
is faced with possible revocation.
The record also indicates that the sole employee of the
Foundation, Mr. Koger, has stepped down from his position as executive director
of the Foundation and is providing consulting services to the Foundation,
presumably on an “as needed” basis. This evidence indicates that for all
practical purposes, the Foundation has ceased to carry on any activities.
THE APPLICATION
[5]
The
jurisprudence in this Court affirms the tripartite test in RJR-MacDonald
Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, as the
framework within which applications pursuant to paragraph 168(2)(b) of
the ITA should be considered (see International Charity Association Network
v. The Minister of National Revenue, 2008 FCA 114, and Choson Kallah
Fund of Toronto v. Canada (National Revenue), 2008 FCA 311). Under this
test, a registered charity that brings an application pursuant to that
provision must demonstrate that there is a serious issue to be tried, it will
suffer irreparable harm if the requested order is not granted, and the balance
of convenience favours granting the order.
[6]
In
paragraph 8 of its memorandum of fact and law, the Foundation states:
8. This
Application should be determined in accordance with the RJR – MacDonald
Inc. principles for interlocutory injunctions, whether:
(a) there
is a serious issue to be determined;
(b) failure
to grant the order is likely to cause irreparable harm; and
(c) the
balance of convenience favours retaining the status quo until the court has disposed
of the legal issue.
[Emphasis
added.]
[7]
Notwithstanding
this clear assertion, at the hearing, counsel for the Foundation argued that
the application should not be determined under the framework of the tripartite
test in RJR-MacDonald.
[8]
Counsel
for the Foundation urged the Court to characterize the Foundation’s application
as a request for an extension of time to pursue its objection and appeal
against the Notice of Intent to Revoke, arguing that granting such an extension
of time would be a “reasonable exercise of the Court’s discretion” under
paragraph 168(2)(b) of the ITA.
[9]
Counsel
for the Foundation urged the Court to consider the arguments in its memorandum
of fact and law, as to why the requisite elements of the tripartite test were
met, to be alternative arguments in the event that the Court did not accept its
new “extension of time” argument.
[10]
In its
Notice of Application, dated May 1, 2008, the Foundation did not request an
“extension of time”. In paragraph 2(a) of that document, the Foundation
requested:
An order prohibiting
the Respondent from publishing in the Canada Gazette any notice of revocation
of the charitable registration of the Millennium Charitable Foundation (the
“Foundation”) until the Foundation’s rights of objection and appeal under the Income
Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (“ITA”), have been exercised
and all appeal processes are concluded.
Additionally, in paragraph 3(d) of the
Notice of Application, the Foundation stated as a supporting ground:
(d) the
Foundation has requested that the CRA postpone publication of the revocation
notice in the Canada Gazette until the Foundation’s rights of objection
and appeal have been exercised and the appeal process concluded.
[11]
Counsel
for the Crown did not consent to this new argument by the Foundation and
reaffirmed her position that the application before this Court should be
considered in the context of the tripartite test in RJR-MacDonald.
[12]
While I am
inclined to the view that this new argument should not have been raised at the
hearing, I will nonetheless consider it.
[13]
I am
unpersuaded that this argument has merit and counsel for the Foundation offered
no jurisprudence to support it. In my view, an application under paragraph
168(2)(b) of the ITA is not an application for an “extension of time”
within which to pursue objection and appeal rights. In the circumstances under
consideration, it is obvious that the Foundation is pursuing its rights in this
regard and needs no “extension of time” to do so because there is no legal
impediment that prevents it from doing so.
[14]
The
application made by the Foundation plainly states that the Foundation is
requesting an order to prohibit the Minister from taking an action that the
Minister is entitled to take, namely, publication of the Notice of Intent to
Revoke in the Canada Gazette after the expiration of 30 days from the
day of mailing of such notice. The effect of such publication will be to revoke
the registration of the Foundation as a registered charity. However, the
revocation of the present status of the Foundation as a registered charity does
not provide any legal impediment to the exercise by the Foundation of its objection
and appeal rights in respect of the Notice of Intent to Revoke.
[15]
Based on
the existing record, I am satisfied that the Foundation’s application must be
assessed in the context of the tripartite test in RJR-MacDonald.
Serious Issue
[16]
The Crown
has not contested the serious issue to be tried element of the test and I am
persuaded that the low threshold with respect to this element has been met.
Irreparable Harm
[17]
The
irreparable harm element of the tripartite test was described by Sopinka and
Cory JJ. at page 341 of RJR-MacDonald, as follows:
At this stage
the only issue to be decided is whether a refusal to grant relief could so
adversely affect the applicants’ own interests that the harm could not be
remedied if the eventual decision on the merits does not accord with the result
of the interlocutory application.
“Irreparable”
refers to the nature of the harm suffered rather than its magnitude. It is harm
which either cannot be quantified in monetary terms or which cannot be cured,
usually because one party cannot collect damages from the other. Examples of
the former include instances where one party will be put out of business by the
court’s decision (R.L. Crain Inc. v. Hendry (1988), 48 D.L.R. (4th) 228
(Sask. Q.B.)); where one party will suffer permanent market loss or irrevocable
damage to its business reputation (American Cyanamid, supra); or where a
permanent loss of natural resources will be the result when a challenged
activity is not enjoined (MacMillan Bloedel Ltd. v. Mullin, [1985] 3
W.W.R. 577 (B.C.C.A.)). The fact that one party may be impecunious does not
automatically determine the application in favour of the other party who will
not ultimately be able to collect damages, although it may be a relevant
consideration (Hubbard v. Pitt, [1976] Q.B. 142 (C.A.)).
[18]
This Court
has described the requirements that must be met to establish irreparable harm.
In Haché v. Canada, 2006 FCA 424, Desjardins J.A. stated, at paragraph
11:
The moving
parties must demonstrate, on a balance of probabilities, that the harm that
they would suffer is irreparable: Halford v. Seed Hawk Inc., 2006 FCA
167 at paragraph 12. Mere assertions do not suffice. Irreparable harm cannot be
inferred. It must be established by clear and compelling evidence: A.
Lassonde Inc. v. Island Oasis Canada Inc., [2001] 2 F.C. 568 at paragraph
20.
[19]
The
Foundation argues that it will suffer irreparable harm because the revocation
of its status as a registered charity will harm its reputation. The Foundation
asserts, in paragraph 14 of its memorandum of fact and law, that “its
reputation as a legitimate charity in good standing with all governmental
authorities is essential to its attracting and retaining donors in the long
term”.
[20]
While
reputational damage may constitute irreparable harm, in the present
circumstances, the evidence falls short of establishing that the Foundation has
a reputation with any donor group or community other than those persons who
have participated in the two tax shelter gifting programs named above. The
Foundation has no “track record” of any charitable activities outside of its
participation in those programs. Moreover, the affidavit evidence of Mr. Koger
that is referred to above can be reasonably taken as indicating that the
Foundation has essentially ceased its fundraising operations, at least until
its challenge to the Notice of Intent to Revoke has concluded.
[21]
The
Foundation, in essence, asks me to infer that the revocation of its charitable
registration will damage its reputation because the inability to issue income
tax receipts for donations after such a revocation will no doubt lead to its
receiving fewer donations. While that may well be the case, the evidence
indicates that apart from its participation in the tax shelter gifting
programs, with one minor exception, the Foundation did not receive any
donations at all. It follows, in my view, that the reputation of the Foundation
is that of a charity that participates in tax shelter gifting programs. If the
Foundation is successful on the merits of its challenge to the Notice of Intent
to Revoke and is able to participate in tax shelter gifting programs in the
future, in all likelihood, donors who participated with the Foundation in the
tax shelter gifting programs would be willing to participate with the Foundation
in future programs of that type, assuming that such donors are satisfied that
they will obtain the tax benefits associated with participating in those types
of programs. Accordingly, I am not persuaded that any reputational damage that
may be suffered by the Foundation as a consequence of a revocation of its
status as a registered charity will constitute irreparable harm to it.
[22]
The
Foundation also argues that its financial position is such that if the
revocation of its status as a registered charity is not prohibited, it may not
be able to finance the cost of prosecuting its challenge to the Notice of
Intent to Revoke. The Foundation contends that this problem is exacerbated by
virtue of its potential obligation to dissipate its assets by way of donations
or pay the so-called “revocation tax” under Part V of the ITA if the revocation
takes place.
[23]
In my
view, this concern is speculative. In paragraph 16 of its memorandum of fact
and law, the Foundation states:
16. If the
stay [sic] is published, the Foundation may be financially unable to
have the revocation [sic] heard on the merits because all of its remaining
funds may become payable to the Minister before the appeal is heard.
[Emphasis added.]
Indeed, there may be any number of ways in which the Foundation’s
future litigation costs could be financed. For example, additional donations
might be received, existing funding (which is in the range of $0.5 million to
$1.7 million) might be utilized to prepay such costs or the Crown might apply
its “administrative policy” of extending the deadline for payment of any Part V
tax assessed against the Foundation until all rights of objection and appeal
against the proposed revocation have been exhausted. Suffice it to say that the
present uncertainty with respect to the financing of the Foundation’s future
litigation costs falls well short of the clear and compelling evidence that is
required to establish that the Foundation will suffer irreparable harm if its
status as a registered charity is revoked.
[24]
Subsequent
to the hearing, counsel for the Foundation wrote to the Registrar of the Court
submitting additional written arguments for the Court’s consideration. Counsel
for the Crown objected to the additional written submissions, correctly stating
that the Court had not requested them. I agree with counsel for the Crown that
the post-hearing submissions are improper and accordingly, those submissions
will not be considered.
[25]
For these
reasons, I conclude that the Foundation has failed to demonstrate, on a balance
of probabilities, that it will suffer irreparable harm if the requested order
is not granted. As a result of the Foundation’s failure to establish this
element of the RJR-MacDonald test, the application must be dismissed.
Balance of Convenience
[26]
The
failure of the Foundation to establish the irreparable harm element of the
tripartite test makes it unnecessary for me to consider the balance of
convenience element of the test.
DISPOSITION
[27]
For the
foregoing reasons, I am of the view that all of the elements of the RJR-MacDonald
test have not been established and, therefore, the application should be
dismissed with costs.
“C.
Michael Ryer”
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