Date: 20090915
Docket: A-214-08
Citation: 2009 FCA 265
PRESENT: RYER
J.A.
BETWEEN:
HOLY ALPHA AND OMEGA CHURCH OF TORONTO
Applicant
and
ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR ORDER
BACKGROUND
[1]
A notice
(the “Notice of Intent to Revoke”) dated April 10, 2008, was given by the
Minister of National Revenue (the “Minister”) to Holy Alpha and Omega Church of
Toronto (the “Charity”) pursuant to subsection 168(1) of the Income Tax Act,
R.S.C. 1985, c. 1 (5th Supp.) (the “ITA”), stating the Minister’s
intention to revoke the registration of the Charity as a registered charity,
within the meaning of subsection 248(1) of the ITA (a “registered charity”).
[2]
The
Charity applied to this Court, pursuant to paragraph 168(2)(b) of the
ITA, for an order extending the 30-day period referred to in that provision and
therefore prohibiting the Minister from publishing the Notice of Intent to
Revoke in the Canada Gazette until the Charity’s rights of objection and
appeal in respect of the proposed revocation of its status as a registered
charity have been exhausted.
[3]
The Notice
of Intent to Revoke arose out of an audit of the Charity in respect of its 2003
and 2004 taxation years that was conducted by the Canada Revenue Agency (the
“CRA”). The audit was undertaken because the CRA had a concern that the
Charity’s donation receipts had been sold by income tax preparers to taxpayers
who would then be in a position to claim income deductions or credits in
respect of donations to the Charity that were never made.
[4]
As a
result of the audit, the CRA wrote a so-called administrative fairness letter
to the Charity on November 27, 2007. That letter informed the Charity of a
number of concerns that the audit had revealed and invited the Charity to make
representations as to why its registered charity status should not be revoked.
[5]
The
contraventions of the charitable registration requirements under the ITA that
were alleged by the CRA in the administrative fairness letter may be summarized
as follows:
a) Keeping
of books and records: In 2003 approximately $678,858 of $742,553, and in
2004 approximately $1,619,011 of $1,696,069, in total expenditures by the
Charity had not been substantiated with supporting documentation of any kind.
The lack of documentation made it impossible for the CRA to confirm the
charitable nature of the Charity’s expenditures. Similarly, significant
portions of the revenue reported by the Charity had not been deposited into its
bank account.
b) Disbursement
quotas: The lack of documentation of expenditures made it impossible for
the CRA to determine whether the Charity had expended its required disbursement
quota in respect of its charitable activities.
c) Direction
and control over resources: In 2003 and 2004, cash was transferred in a
series of personal deliveries in the sums of $223,520 and $557,776 respectively.
Additionally, merchandise valued at $153,296 and $324,952 was shipped in
container shipments in each of the years audited. However, no agency agreements
or reporting documentation were available with respect to these transfers and
shipments. As such, it was impossible for the CRA to establish whether the
funds and shipped goods were subject to control and direction by the Charity and
whether they were used for charitable purposes.
d) Official
donations receipts: The official donation receipts issued for the gifts in
kind received by the applicant lacked basic information related to the gift
made. Further, there were instances of missing and unaccounted official
donation receipts, including a block of approximately 2,500 receipts.
e) Board
of directors: Two of the four members of the Charity’s board of directors did
not appear to deal with each other at arm’s length, which violated the
requirement that more than 50% of the directors must deal at arm’s length.
[6]
The CRA
agreed to allow the Charity until mid-February of 2008 to respond to the administrative
fairness letter but the Charity failed to meet that deadline, apparently because
of difficulties it had in obtaining professional assistance.
[7]
In early
March of 2008, an advisor retained by the Charity wrote to the CRA describing
the progress that the Charity was making with respect to the concerns expressed
by the CRA in the administrative fairness letter. However, that correspondence
did not satisfy the CRA.
[8]
The Notice
of Intent to Revoke was issued on April 10, 2008. In it, the Minister stated an
intention to revoke the registration of the Charity as a registered charity for
the reasons described in the administrative fairness letter.
[9]
The
issuance of the Notice of Intent to Revoke caused the commencement of a 90 day
period within which the Charity was entitled to file a notice of objection to
the Notice of Intent to Revoke, in accordance with subsection 168(4) of the
ITA.
[10]
On May 8,
2008, the Charity filed the application that is before this Court. However, the
Charity missed the mid-July, 2008 deadline with respect to the filing of a
notice of objection.
[11]
On
September 22, 2008, the Charity attempted to late-file a notice of objection,
requesting the consent of the Minister to do so. Initially, the Minister
refused to accept the notice of objection but that is apparently no longer the
case and the notice of objection is before the Appeals Branch of the Charities
Directorate.
THE APPLICATION
[12]
The
parties have stipulated that this application should be considered in light to
the tripartite test in RJR-MacDonald Inc. v. Canada (Attorney General),
[1994] 1 S.C.R. 311 and, consistent with recent jurisprudence in this Court, I
am prepared to proceed on that basis (see International Charity Association
Network v. Canada (National Revenue), 2008 FCA 114 and Choson
Kallah Fund of Toronto v. Canada (National Revenue), 2008 FCA 311).
[13]
To obtain
an order under paragraph 168(2)(b) of the ITA on the basis of the RJR-MacDonald
text, the Charity must establish that there is a serious issue to be tried, it
will suffer irreparable harm if the order is not granted and the balance of
convenience favours granting the order.
Serious Issue
[14]
The Crown
has chosen not to contest this element of the RJR-MacDonald test.
Irreparable Harm
[15]
The
establishment of the irreparable harm element of the RJR-MacDonald test
requires evidence of harm of a type or nature that cannot be quantified in
monetary terms or cannot be cured. In that case, the applicant challenged the
constitutional validity of legislation that regulated its ability to advertise
its products for sale and alleged in its application that its business
interests were damaged by that legislation.
[16]
Where the
application under consideration is made pursuant to paragraph 168(2)(b)
of the ITA, the establishment of this element of the test is complicated by the
fact that as a registered charity, the applicant’s essential purpose is to
acquire property and then give it away. In contrast, a business organization is
typically motivated by the desire to earn and, at least to some extent,
accumulate profits.
[17]
It
follows, in my view, that where the applicant is a registered charity, a
somewhat broader view of the requirements of the second element of the RJR-MacDonald
test is warranted. More particularly, it is appropriate to consider whether
irreparable harm would be suffered by persons or organizations that are dependent
upon the applicant and that would suffer if the applicant were to reduce its
donations to them as a result of the loss of its status as a registered
charity. A similar approach was adopted by Chief Justice Rip of the Tax Court
of Canada in International Charity Association Network v. Her Majesty the
Queen, 2008 TCC 3, a case in which the RJR-MacDonald test was
applied in relation to an application, pursuant to subsection 188.2(4) of the
ITA, for a postponement of a one-year suspension by the Minister of the
authority of a registered charity to issue official tax receipts for donations.
[18]
In Choson
Kallah, I held that the irreparable harm element of the test had not been established
because there was no evidence of any such harm to the applicant or to any
specific person or organization that was demonstrably dependent upon the
applicant. More particularly, I held that the possibility that the applicant
would receive fewer donations if it were unable to provide income tax receipts
to the donees was not, in and of itself, sufficient to establish that the
irreparable harm element of the test was met.
[19]
At the
hearing, counsel for the Charity urged me to reconsider this latter finding on
the basis that there was uncertainty as to the Charity’s ability to recover
damages for lost donations in the event that a revocation of its status as a
registered charity should be rescinded as a consequence of a hearing of the
merits of the revocation. In my view, this contention cannot be accepted.
[20]
Any concern
about possible uncertainty with respect to the Charity’s ability to recover
damages for lost donations arising out of a revocation of its charitable status
before there has been a determination of the merits of the revocation
presupposes the Charity can establish that it has suffered harm as a result of
the lost donations.
[21]
In my
view, the receipt of a diminished amount of donations would simply mean that
the Charity would have less money to give away or to meet any obligations that
it may have. I fail to see how the Charity could be harmed simply because it may
have less money to give away. However, harm could be demonstrated if there was
evidence that specific obligations of the Charity would go unfulfilled because
of a shortfall in donations. In the present circumstances, the Charity has
provided no evidence of any such obligations. Indeed, the record does not
appear to contain any financial statements that would portray the financial
circumstances of the Charity insofar as those circumstances may be relevant to
the proposed revocation of its status as a registered charity.
[22]
Finally,
the argument that the receipt of diminished donations necessarily establishes
the irreparable harm element of the RJR-MacDonald test would effectively
eliminate that element of the test in relation to each and every application
made pursuant to paragraph 168(2)(b) of the ITA. In my view, that result
would be unacceptable.
[23]
The
Charity also argued that the proposed revocation would cause irreparable harm
to its reputation, although counsel for the Charity conceded at the hearing that
the Charity had not put forward, and the record does not contain, any evidence
of any reputational harm that would result from such a revocation.
[24]
Counsel
for the Charity argued that reputational damage might arise if the CRA were to
publicly state that the Charity had been involved in sales of its official
donations receipts prior to the outcome of the hearing on the merits. In
response to this concern, counsel for the Crown undertook to provide and, in
fact, provided an undertaking, the form of which was reviewed by the Charity, to
the effect that no such public statement would be made.
[25]
Apart from
the foregoing contentions, the Charity made no additional arguments that the
Charity itself would suffer irreparable harm if the requested order is not
granted. Nonetheless, the record contains evidence that Holy Alpha Academy (the “Academy”) in Ghana has received significant donations from
the Charity. According to the affidavit of Mr. James Wells of the CRA, cash and
goods and merchandise of approximately $376,816 in 2003 and $882,728 in 2004
were delivered by the Charity to the Academy in Ghana. The record further indicates that for
the 2003/2004 and 2004/2005 years of the Academy, donations from the Charity
made up a large percentage of the total donations received by the Academy (see
applicant’s record at pages 70 and 71). This evidence points to a significant
degree of dependence by the Academy on the Charity in those years. However, the
record contains no evidence from the Academy or the Charity indicating the
reasons for that degree of dependence in those particular years and whether
that degree of dependence would likely continue in subsequent years.
Accordingly, in the absence of such evidence, I am unpersuaded that the
Academy, as an agency potentially dependent upon the Charity, will suffer
irreparable harm if the requested order is not granted. It follows that the
Charity has not established the second element of the RJR-MacDonald test.
Balance of Convenience
[26]
Because
the Charity failed to establish the irreparable harm element of the RJR-MacDonald
test, it is unnecessary for me to consider this element of the test.
DISPOSITION
[27]
For the
foregoing reasons, the application will be dismissed with costs.
“C.
Michael Ryer”
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