Docket: T-1483-16
Citation: 2018 FC 413
[ENGLISH TRANSLATION]
Ottawa, Ontario, April 18, 2018
PRESENT: The Honourable Mr. Justice Bell
| Docket: T-1483-16
|
| BETWEEN:
|
| SERDY VIDEO II INC.
|
| Applicant
|
| and
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| MINISTER OF CANADIAN HERITAGE
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| Respondent
|
JUDGMENT AND REASONS
I.
Nature of the case
[1]
This is an application for judicial review of the decision made on behalf of the Minister of Canadian Heritage [the Minister] and communicated to the applicant, Serdy Vidéo II Inc. [Serdy], in a letter date August 12, 2016 [the Decision]. The Decision revoked the Canadian film or video production certificate [Part A certificate] that was issued on October 30, 2013, by the Minister regarding the production Villas de rêves, a certificate through which this production was recognized as a Canadian film or video production entitled to a tax credit within the meaning of section 125.4 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) [ITA] and section 1106 of the Income Tax Regulations, C.R.C., c. 945 [the Regulations]. The Minister revoked the Partִ A certificate on the ground that Villas de rêves would be “advertising”
, which is an excluded production within the meaning of subparagraph 1106(1)(b)(ix) of the Regulations.
II.
Facts
[2]
In order to promote the creation of Canadian productions and the growth of the Canadian film and video sector, Canada offers tax credits to Canadian producers. The Canadian Film or Video Production Tax Credit [CPTC], which is one of those tax credits, allows productions to obtain a refundable tax credit that corresponds to 25% of the qualified labour expenditure for a qualified production.
[3]
Access to the CPTC is governed by section 125.4 of the ITA and section 1106 of the Regulations. Under subparagraph 125.4(3)(a)(i) of the ITA, a corporation must obtain a Canadian film or video production certificate [certificate] before qualifying for the CPTC. The certificate was issued by the Minister in respect of a production if the production is a “Canadian film or video production”
within the meaning of the Regulations.
[4]
The definition of “Canadian film or video production”
stated in the Regulations specifies that certain types of productions are not Canadian film or video productions. Those excluded productions include in particular productions that are “advertising”
. Excluded productions do not qualify for a certificate and therefore do not have access to the CPTC.
[5]
Section 125.4 of the ITA gives the Minister a decision-making power with respect to issuing certificates and the power to revoke such certificates if it appears that the production in question is not a Canadian film or video production. Therefore, it falls to the Minister to assess the CPTC eligibility criteria. Her determination was made on the basis of information provided by the producer and on the basis of the recommendation from the Canadian Audio-Visual Certification Office [CAVCO], a unit of the Department of Canadian Heritage, which administers the CPTC program in partnership with the Canada Revenue Agency.
[6]
CAVCO’s recommendations are made by officers who are generally the first line of analysis of and communication with producers and whose recommendations are then reviewed by a supervisor. Officers are supported by two committees: the Consultation Committee, which is made up of senior CAVCO analysts and for which the mandate is to assist officers, and the Compliance Committee, which is made up of managers and senior analysts and for which the mandate is to review files.
[7]
To receive the CPTC, producers must file a Canadian film or video production tax credit application with CAVCO in order to receive a Part A certificate and a certificate of completion [Part B certificate] from the Minister. The Part A certificate can be obtained before a production is begun or completed, while the Part B certificate is only issued after it is complete and after the Minister has been able to view it.
[8]
In 2013, Serdy filed a Canadian film or video production tax credit application with CAVCO for the production Villas de rêves in order to obtain a Part A certificate and a certificate of completion [Part B certificate] from the Minister.
[9]
The application described the Villas de rêves production as taking TV viewers to the Caribbean in search of an oasis in order to make their wildest dreams a reality: from Jamaica to Turks and Caicos Islands, passing by Saint Martin, Saint Barthelemy, Anguilla and the British Virgin Islands, TV viewers will discover luxurious villas that are available to rent and will have the impression that they can live like royalty there.
[10]
In October 2013, CAVCO issued a Part A certificate, confirming that the Villas de rêves production is a Canadian production, according to the information submitted, within the meaning of section 125.4 of the ITA and section 1106 of the Regulations. The certificate included a clause that it was granted under a condition precedent that the applicant obtained a Part B certificate.
[11]
On the basis of that Part A certificate, Serdy filmed and produced the Villas de rêves production. Once production was completed, in 2014, Serdy filed a Canadian film or video production tax credit application with CAVCO for the production in order to obtain a Part B certificate. Serdy also sent a DVD copy of the production for viewing by CAVCO.
[12]
In April 2015, the officer responsible for reviewing the file recommended the certification of the Villas de rêves production under Part B. In compliance with standard practice, that decision was reviewed by a supervisor. After viewing the production and reading the officer’s initial recommendation, the supervisor responsible raised some doubts as to the production’s eligibility, given that to him, it appeared to be advertising, a production type that is excluded by the Regulations.
[13]
Between June 17 and July 9, 2015, the members of CAVCO’s Consultative Committee met and confirmed that the production in question was advertising.
[14]
On June 25, 2015, the file was brought to the attention of the Compliance Committee. After viewing the production, committee members confirmed their opinion that the production was advertising and that this production was excluded from CPTC benefits.
[15]
On December 2, 2015, CAVCO sent Serdy a letter titled “Notice of Revocation”,
informing Serdy that its file analysis had revealed that the production Villas de rêves was “advertising”
, which is excluded within the meaning of subparagraph 1106(1)(b)(ix) of the Regulations. In an appendix to the letter, CAVCO noted the problematic aspects of the episodes that were viewed, particularly the presence on the screen of the logos of companies that rented the villas and the level of detail provided by the program’s host regarding the characteristics and services offered with the villas, including comments on reasonable rent prices and the services that are included in the price of rent. In that letter, CAVCO invited Serdy to submit any new information that would be likely to influence the file’s assessment.
[16]
On January 26, 2016, Serdy sent CAVCO a reply to the Notice of Revocation in which it argued that it did not receive any monetary gain from the owners of the villas that were presented in the series and that the on-screen presence of the logos was part of a sponsorship agreement aimed at giving visibility to the rental companies. In exchange, Serdy did not have to pay expenses for the filming sites.
[17]
On February 18, 2016, the members of the Compliance Committee met to assess the file. The Compliance Committee upheld its decision that the production was in an excluded category. Four months later, the Compliance Committee met again and affirmed its position regarding the production’s eligibility. CAVCO’s final recommendation was then sent to the Minister on August 10, 2016, and she agreed with it. As a result, on August 12, 2016, CAVCO sent a letter for and on behalf of the Minister to Serdy titled “Notice of Revocation”
to notify Serdy that the production Villas de rêves was an excluded production within the meaning of subparagraph 1106(1)(b)(ix) of the Regulations and that the Part A certificate for the production was henceforth revoked. It is this Decision that is the subject of this application for judicial review.
III.
Decision
[18]
The Decision claims that Villas de rêves is “advertising”
, which is an excluded production within the meaning of subparagraph 1106(1)(b)(ix) of the Regulations. It claims that each episode of Villas de rêves that was submitted to CAVCO for viewing is composed entirely of video images that promote a particular vacation destination, with everything that the place has to offer vacationers during their stay, and that therefore, the main goal of the production is to promote the goods, services or activities offered by the various tourist destinations. Thus, the production has all the characteristics of an infomercial; the aspects aimed at selling or promoting the services of the seaside resorts forms an almost indistinguishable whole with the production’s information content. To make this finding, the Decision was based on the definition of “advertising”
in the CPTC Program Guidelines, which was published on April 2, 2012, by CAVCO in compliance with subsection 125.4(7) of the ITA [the Guidelines].
[19]
The Decision states the following: [translation] “Thus, any production that, like VILLAS DE RÊVE (I), offers i) a detailed description of the services, activities or products of any supplier whatsoever, ii) a detailed description of the main characteristics of the services, activities or products of the supplier in question, and iii) laudatory comments regarding those services, activities or products of such a supplier, is considered by CAVCO to be ‘advertising’ in nature, a category that is ineligible for CPTC. This description is […] based on the intrinsic characteristics of the production such as they were noted, generally during the viewing of the episodes submitted by the producer”
.
IV.
Relevant provisions
[20]
The relevant provision of the ITA is section 125.4, particularly subsections (1), (3), (6) and (7). The relevant provision of the Regulations is section 1106, particularly subsections (1) and (4). Lastly, the definition of “advertising”
, which is specified on page 56 of the Guidelines, is relevant. Those provisions are listed in Appendix A.
V.
Issues
[21]
As part of this application for judicial review, the parties raised three issues, namely:
What is the applicable standard of review in this case?
Were the requirements of procedural fairness respected?
Was the Minister’s decision reasonable?
VI.
Analysis
A.
Preliminary issue on the admissibility of evidence
[22]
Before analyzing the abovementioned questions, it is important to consider the respondent’s preliminary motion. It claims that Serdy filed evidence that is inadmissible, since it was not before the Minister at the time that it made the Decision or is not relevant and reinforces opinions or arguments. She asks the Court to set aside this evidence on record. The disputed evidence includes:
The affidavit from Maryse Rouillard and its exhibits; and
Paragraphs 42–45, 50, 55–57 and 59-60 from the affidavit of Sébastien Arsenault, signed on October 20, 2016, as well as the exhibits that support those paragraphs: SA-13 and SA-15.
[23]
In the affidavit from Maryse Rouillard and its exhibits, Ms. Rouillard, the president of a production corporation that is not a party on record, filed DVDs with episodes from productions aside from what is the subject of this application, along with copies of exchanges that took place with CAVCO regarding those productions as part of CPTC applications. At paragraphs 42–45, 50, 55–57 and 59–60 and in exhibits SA-13 and SA-15 of the affidavit from Sébastien Arsenault, Mr. Arsenault, the president of Serdy, filed various items of evidence dealing with the understanding of the nature of the Villas de rêves production and on his understanding of past CAVCO practices in other CPTC files, along with a dictionary definition and a public notice from CAVCO that was not before the Minister when she made the Decision.
[24]
It is settled case law that an application for judicial review can only proceed on the basis of the evidentiary record that the decision-maker had at the time of the Decision, subject to some exceptions (Association of Universities and Colleges of Canada v. Canadian Copyright Licensing Agency, 2012 FCA 22, [2012] F.C.J. No. 93, paras 19–20). In addition, it was decided that the fate of other productions, along with the producer’s opinion of the similarities between his production and a certified one, could not create legitimate expectations (Canada (Attorney General) v. Zone3-XXXVI Inc. 2016 FCA 242, [2016] F.C.J. No. 1049 at para 49 [Zone3]). It was also decided that the Court may strike affidavits, or portions of them, when they are abusive or clearly irrelevant, where they contain opinion, argument or legal conclusions (Sharma v. Canadian Pacific Railway, 2016 FC 135, [2016] F.C.J. No. 117 at para 19).
[25]
In applying this case law, I found at the start of the hearing that exhibits MR-1 and MR-4 of Ms. Rouillard’s affidavit would be stricken from the record. The rest of her affidavit is admissible, since it gives the story of the process of challenging a notice of revocation and of certain circumstances in which the Minister had, in the past, changed her mind. With respect to the affidavit from Sebastien Arsenault, I have set aside paragraphs 42, 45, 56 and 60 from the record, since those paragraphs contain opinion or argument.
B.
The standard of review
[26]
The parties agree on the applicable standards of review in this case. With respect to Serdy’s arguments regarding procedural fairness, they should be analyzed based on correctness (Zone3 at para 27).
[27]
As for the Minister’s Decision regarding the issuing of the film or video production certificate, it must be reviewed using the reasonableness standard of review (Zone3 at para 26). Those decisions raise mixed questions of fact and of law. The role of the reviewing judge, therefore, is to assess the justification of the decision and its transparency and intelligibility, and to ensure that the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law (Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 at para 47).
C.
Were the requirements of procedural fairness respected?
[28]
In Zone3, the Federal Court of Appeal established that a decision by the Minister regarding the issuing of a film or video production certificate is purely administrative in nature and has none of the characteristics of a quasi-judicial procedure (Zone3 at para 44). In addition, the interest at issue is purely an economic one (Zone3 at para 44). For those reasons, the Court found that the requirements of procedural fairness are minimal; the only obligation to fairness that falls to the Minister in the context of a CPTC application is to send a notice of denial and to allow the opportunity to provide additional information that might change the assessment of the application (Zone3 at para 46). Those requirements were satisfied.
[29]
As previously mentioned, CAVCO sent Serdy a letter titled “Notice of Revocation”
on December 2, 2015. That letter informed Serdy that the analysis of its file had revealed that the production Villas de rêves was “advertising”
, which is excluded within the meaning of subparagraph 1106(1)(b)(ix) of the Regulations. In an appendix to the letter, CAVCO very specifically listed the problematic aspects of the episodes that were viewed. CAVCO invited Serdy to submit any new information likely to influence the assessment of the file. Their reply was sent to CAVCO on January 26, 2016, and was considered by the members of the Compliance Committee during two meetings, on February 18, 2016 and June 29, 2016.
[30]
Although I have found that the Minister satisfied the requirements of procedural fairness, I will respond to Serdy’s claims. Serdy claims that it had a legitimate expectation that its production would be certified due to the issuing of a Part A certificate and the fate of other productions. However, the granting of a Part A certificate does not in any way guarantee the granting of a Part B certificate. In fact, a Part A certificate includes an explicitly stated condition that requires the production to obtain a Part B certificate before its completion. Claiming that Serdy had legitimate expectations due to the granting of a Part A certificate would entirely invalidate the need for this second step after viewing the production. With respect to the “legitimate expectations”
based on the fate of other productions, the Federal Court of Appeal clearly denounced this argument (Canada (Attorney General) v. Zone3-XXXVI Inc., 2016 FCA 242, [2016] F.C.J. No. 1049 at para 49 [Zone3]).
[31]
Whatever the case may be, the doctrine of legitimate expectations does not in any way entitle a particular decision, since it is linked to the decision-making process and not the decision itself (Zone3 at para 45). It is used to determine what procedures are required by the duty to procedural fairness and not what decision should be rendered (Baker v. Canada (Minister of Immigration and Citizenship), [1999] 2 S.C.R. 817, 174 D.L.R. (4th) 193 at para 26).
[32]
Lastly, Serdy claims that its right to procedural fairness was violated because CAVCO deviated from past practices regarding its interpretation of the word “advertising”
, doing so without any justification and without communication with members of the industry. Serdy appears to take to the wording of the Decision’s text to say that CAVCO changed its interpretation of the word “advertising”
. With respect, CAVCO simply replied to Serdy’s prior claims by using the same words as Serdy in its claims. Despite the words that were used, the Decision is based on the definition of “advertising”
that is stated by the Guidelines. There was no amendment of the criteria without notifying the members of the industry.
[33]
In summary, the minimal requirements for procedural fairness that fall to the Minister in the context of a CPTC application were satisfied. There is no need to allow the application for judicial review on the ground of a breach of the duty to procedural fairness.
D.
Was the Minister’s decision reasonable?
[34]
As detailed in the Notice of Revocation and the Decision, each episode of Villas de rêves that was submitted to CAVCO for viewing is composed entirely of video images that promote vacation destinations, with everything that those locations have to offer vacationers during their stay. Those video images include the on-screen presence of the logos of companies that rent the villas to offer said companies visibility, in accordance with a sponsorship agreement. The video images are combined with the narration of a host who describes the villas down to their most minute details in a laudatory manner, going as far as commenting on a reasonable rental price, along with the services included in the price of rent (housekeeping, option for a private chef, etc.). Therefore, I am of the view that it would be reasonable to find that the production is “advertising”
that offers entertainment or information combined with the promotion of goods or services in an almost indistinguishable manner.
[35]
Serdy claims that the Decision is unreasonable, since the interpretation of “advertising”
that was used in the Decision is incompatible with the current meaning of the term, and therefore with the ITA and the Regulations. As it appears in the ITA and the Regulations, it is up to the Minister on whom Parliament has conferred the role of defining the concepts that are important to the definition of a Canadian film or video production in the Guidelines. The Minister therefore acted lawfully by using the definition stated in the Guidelines in order to determine whether it was a Canadian film or video production; this is not incompatible with the ITA or the Regulations. However, I am not satisfied that the adopted interpretation is incompatible with the current meaning of the term. Particularly regarding the Larousse dictionary definition cited by the respondent (using the French equivalent “publicité”), some definitions are compatible with the interpretation of “advertising”
that was used in the Decision.
[36]
Moreover, the interpretation of the concept of “advertising”
falls to the Minister’s expertise. Therefore, it is not up to the Court to interfere to have a different interpretation used (Council of Canadians with Disabilities v. VIA Rail Canada Inc., 2007 SCC 15, [2007] 1 S.C.R. 650 at para 104; Zone3 at para 38).
[37]
In light of the foregoing and after watching episodes of Villas de rêves myself before the hearing, I concur with the respondent that it is clear that the Decision is reasonable. There is a rational basis for the Decision in which Villas de rêves is “advertising”
, which is excluded under the ITA and the Regulations. In fact, even under the definition of “advertising”
proposed by Serdy, particularly [translation] “the presence of a sponsor whom the advertising benefits and who pays for said advertising”
, its production would be excluded. Serdy admitted to having a sponsorship agreement with certain renters and their logos benefited from the visibility given to them by the production. The Decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law. There is no need to allow the application for judicial review.
VII.
Conclusion
[38]
For all these reasons, the application for judicial review is dismissed with costs of $5,000.00, fees and disbursements included, payable by the applicant in favour of the respondent.
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