Star Choice Television Network Inc. v. Canada (Commissioner of Customs and Revenue), 2004 FCA 153

                                                                                                                               Date: 20040413

                                                                                                                              Docket: A-67-03

                                                                                                                 Citation: 2004 FCA 153

CORAM:         STRAYER J.A.

SEXTON J.A.

EVANS J.A.

BETWEEN:

                        STAR CHOICE TELEVISION NETWORK INCORPORATED

                                                                                                                                          Appellant

                                                                           and

                            THE COMMISSIONER OF CUSTOMS AND REVENUE

                                                                                                                                     Respondent

Heard at Toronto, Ontario, on Thursday, January 29, 2004

JUDGMENT delivered at Ottawa, Ontario on Tuesday, April 13, 2004

REASONS FOR JUDGMENT BY:                                                                         STRAYER J.A.

CONCURRED IN BY:                                                                                                SEXTON J.A.

DISSENTING REASONS BY:                                                                                     EVANS J.A.

                                                                                                                                  Date: 20040413

                                                                                                                                Docket: A-67-03

                                                                                                                     Citation: 2004 FCA 153

CORAM:        STRAYER J.A.

SEXTON J.A.

EVANS J.A.

BETWEEN:

                         STAR CHOICE TELEVISION NETWORK INCORPORATED

                                                                                                                                            Appellant

                                                                       -and-

                             THE COMMISSIONER OF CUSTOMS AND REVENUE

                                                                                                                                        Respondent

                                                    REASONS FOR JUDGMENT

STRAYER J.A.

INTRODUCTION

[1]                This appeal was consolidated with appeals A-68-03, A-69-03, and A-70-03, all involving identical issues.

[2]                This is an appeal from the Canadian International Trade Tribunal (the "CITT") pursuant to section 68 of the Customs Act (R.S. 1985, c. 1(2^nd supp.) which permits such appeals to this Court "on any question of law". In the decision under appeal the CITT classified integrated receivers/decoders (IRDs) being imported by the appellant as "Reception apparatus for television, Colour, Other". The appellant contends that in doing so the CITT committed a reviewable error.

FACTS

[3]                The appellant markets satellite television reception systems (STRS) which consist of a satellite dish, a low-noise block converter (LNBF) connected to an IRD by coaxial cable, and a remote control. By this means television signals transmitted from earth to a satellite in orbit are re-transmitted to earth and received by the dish antenna which focusses the television signals into a central spot at the LNBF. The LNBF amplifies the signals and converts their frequency from about 12 gigahertz down to about 1 gigahertz. These signals are carried to the IRD by coaxial cable and the IRD selects a channel, converts the signals and decrypts ("unscrambles") them. These signals are then carried by coaxial cable to the television set. The remote control is used to operate the STRS.

[4]                The dispute before the CITT was as into which tariff classification the IRDs should fall. The relevant provisions of the Customs Tariff (S.C. 1997, c. 36) are as follows:

The CITT concluded that an IRD is a "reception apparatus for television" within the meaning of Heading 85.28 and that more particularly under that Heading it falls within tariff item number 8528.12.99 as an "other colour reception apparatus for television".

[5]                The appellant appeals from this decision on the basis that the CITT erred in finding that an IRD is a "reception apparatus for television". Instead it contends that an IRD is either a part suitable for use with a reception apparatus for television within Heading 85.29 or is an incomplete or unfinished television receiver within tariff item number 8528.12.10.

ANALYSIS

                                                         Scope of Appellate Review

[6]                It is important to focus first and foremost on the appellate role of the Court in proceedings such as this, before ruminating at length on the standard of review. As the Supreme Court has frequently affirmed (see Law Society of New Brunswick v. Ryan [2003] 1 S.C.R. 247 at 260, and other cases referred to therein) in order to apply the "pragmatic and functional approach" to determine the standard of review it is necessary first to consider "the presence or absence of a privative clause or statutory right of appeal". Here the right of appeal is limited by section 68 of the Customs Act (supra) to "any question of law". Therefore the standard of review ultimately selected must be understood as relating only to the determination of questions of law and not to the determination of other questions. As stated by the Supreme Court in Canada v. Southam [1997] 1 S.C.R. 748

. . . . Briefly stated, questions of law are questions about what the correct legal test is; questions of fact are questions about what actually took place between the parties; and questions of mixed law and fact are questions about whether the facts satisfy the legal tests. . . .

In my view the appellant here has at times invited us to determine questions of fact or of mixed law and fact.

[7]                The parties agree that on such an appeal from the CITT the standard of review is reasonableness. This indeed has been affirmed by this Court on several occasions. (See, e.g., Canada v. Schrader Automotive Inc. [1999] FCJ No. 331; Rollins Machinery Ltd. v. Canada [1999] FCJ No. 1502; Continuous Colour Coat Ltd. v. Canada [2000] FCJ No. 610; and Wilton Industries Canada Limited v. A.G.C. (2004 FCA 25)). In some of these cases the Court has specifically recognized the expertise of the CITT which extends not only to matters of fact but also to matters of interpretation of the very complex customs tariff and the international and national rules for its interpretation; that is, to matters of law.

[8]                It is to such interpretations of law that this Court has applied the standard of reasonability. As was said in Southam (supra at para. 56):

. . . . An unreasonable decision is one that, in the main, is not supported by any reasons that can stand up to a somewhat probing examination. Accordingly, a court reviewing a conclusion on the reasonableness standard must look to see whether any reason support it. . . .

As was further observed by the Supreme Court recently in Ryan (supra) at para. 48:

. . . a court must not interfere unless the party seeking review has positively shown that the decision was unreasonable . . . .

Therefore we must approach this appeal with considerable deference to the expertise of the tribunal in interpretation of the Customs Tariff.

                                       Has a Reviewable Error of Law Been Identified?

[9]                In my view the appellant has not demonstrated that the CITT decision was unsupported "by any reasons that can stand up to a somewhat probing examination". On the contrary the CITT articulated its reasons in a clear and logical manner and to the extent that it dealt with questions of law (the only matter properly in issue on this appeal) it did so in a way which had a basis in reason.

[10]            The tribunal's core decision, that the IRD is a reception apparatus for television, in part involved the application of a definition from a technical dictionary of the word "reception". That definition defined reception as:

The conversion of modulated electromagnetic waves or electric signals, transmitted through the air or over wires or cables, into the original intelligence, or into desired useful information (as in radar), by means of antennas and electronic equipment. (See CITT decision appeal book 29).

This definition, while having no legal force of itself, was an agreed scientific explanation of the term "reception" as used in Heading 85.28 in the phrase "reception apparatus for television". It provided a rational basis for the tribunal to interpret the law as set out in Heading 85.28 of the Customs Tariff. Applying this definition in determining a question of mixed law and fact the CITT concluded that an IRD receives signals by wire or cable from the LNBF and performs a conversion operation which renders the signals usable by television. The appellant attacks this conclusion, relying mainly on the evidence of its expert witness who, it is said, asserted that there could be no "reception" without a complete conversion of a satellite television signal into the original images suitable for television viewing. As I understand it, it is the position of the appellant that the term "reception apparatus for television" in Heading 85.28 should be equated to the complete satellite television reception system or STRS of which the IRD is only one part. The CITT obviously took the view, however, that nothing in Heading 85.28 legally required that a "reception apparatus for television" be exclusively confined to the reception from satellites of television signals. Nor did the scientific definition quoted above, which was submitted by the appellant, require that interpretation as a matter of law. Thus the tribunal concluded that the IRD receives by coaxial cable television signals transmitted by the LNBF, and this alone suffices to make the IRD a reception apparatus for television. It found this analysis to be consistent with the Explanatory Notes prescribed by the Customs Tariff as aids to interpretation.

[11]            As a result the CITT declined to treat the IRD as "parts" of, or an "incomplete", reception apparatus for television, having found that of itself it constitutes a reception apparatus for television. It therefore logically followed that the IRDs would be classified under tariff item number 8528.12.99 as "other" reception apparatuses for television.

[12]            In my view the far ranging arguments of the appellant have not demonstrated any clear and binding legal authority in contradiction of the conclusions of law of the CITT. Its decision, upon a somewhat probing examination, has been demonstrated as having a solid basis in law. Whether or not it was the inevitable conclusion, it was certainly a permissible one.

[13]            The appeals should therefore be dismissed in this case and in appeals A-68-03, A-69-03 and A-70-03 and a copy of these reasons will be placed on each of those files. The respondent should be awarded one set of costs for these four appeals.

                                                                                                                                 (s) "B.L. Strayer"           

J.A.

I agree

"J. Edgar Sexton" J.A.

EVANS J.A. (dissenting)

[14]            Despite having had the benefit of reading the reasons of my colleague Strayer J.A., I would allow the appeal. In my respectful opinion, the Tribunal erred in law when it classified the subject goods under tariff item No. 8528.12.99 of the Customs Tariff, S.C. 1997, c. 36, as "reception apparatus for television", rather than as "parts" thereof.

[15]            Strayer J.A. is doubtful whether the appellant has raised a question of law that engages the Court's limited appellate jurisdiction conferred by section 68 of the Customs Act, R.S.C.. 1985 (2^nd Supp.), c. 1. I do not share this doubt. It is a question of law whether, in light of the expert evidence and the statutory text, the Tribunal could reasonably conclude that the subject goods fell within the heading, "reception apparatus for television".

[16]            It is agreed on all sides that, unreasonableness simpliciter is the standard for determining whether the Tribunal committed an error of law in interpreting the relevant provisions of the Customs Tariff or in applying them to the facts before it. In addition to the various descriptions of this standard contained in Strayer J.A.'s reasons, I would note that, in Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748 at para. 60, Iacobucci J. regarded "clearly wrong" as synonymous with "unreasonableness simpliciter".

[17]            Iacobucci J. has made two other observations about the standard of unreasonableness simpliciter that are apposite here. First, he acknowledged in Southam (at para. 57) that a decision may be unreasonable, even "if it takes some significant searching or testing to find the defect". Second, in Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247, 2003 SCC 20">2003 SCC 20, at para. 49, he counselled reviewing courts to "stay close to the reasons given by the tribunal and 'look to see' whether any of those reasons adequately support the decision".

[18]            After subjecting the Tribunal's decision to "a somewhat probing examination" (Southam at para. 56) and asking "whether the reasons, taken as a whole, are tenable as support for the decision" (Ryan at para. 56), I have concluded that the Tribunal's decision is clearly wrong and must therefore be set aside as erroneous in law.

[19]            The Tribunal apparently accepted the accuracy and relevance of the uncontradicted expert evidence of Star Choice's witness, Russell Wells, on the functioning of the STRS and its components, and on the processes of transmission and reception in satellite television communication from a technical perspective. However, in my respectful opinion, the Tribunal misapprehended this evidence.

[20]            In particular, the Tribunal inferred from Mr. Wells's testimony that the IRD was reception apparatus for television because the television signal passes along a coaxial cable from the LNBF to the IRD, which completes the processing of the signal so that it can be converted by a television set back to the original images and sound. In effect, the Tribunal ignored the bulk of Mr. Wells's evidence and seized on answers that he gave in cross-examination: namely that, the IRD receives the partially converted signal which passes to it from the LNBF. The Tribunal was clearly wrong when it reasoned from this evidence that the LNBF "transmitted" the signal and that the IRD was a "reception" apparatus, rather than an integral part of a reception system,

[21]            The basis of the Tribunal's decision is captured in the following extracts from its reasons:

.. the goods in issue constitute reception apparatus for television. The expert witness acknowledged that the IRD receives television signals. The Tribunal's view is also supported by the following definition of reception provided to the Tribunal by the appellant:

The conversion of modulated electromagnetic waves or electric signals, transmitted through the air or over wires or cables, into the original intelligence, or into desired useful information (as in radar), by means of antennas and electronic equipment.

Indeed, the IRD converts, by means of electronic equipment, modulated electric signals transmitted over wires into signals that can be displayed on a television set.

... While it is true that the IRD cannot receive satellite signals transmitted by a satellite without the dish antenna and the LNBF, the IRD can receive television signals transmitted by the LNBF. This suffices for the IRD to constitute a reception apparatus for television. [emphasis added throughout]

[22]            Although I am conscious of the limitations of common sense as a guide to the determination of largely technical questions, the Tribunal's conclusion that both the complete STRS and one of its components constitute "reception apparatus for television" appears somewhat surprising. The only commercial function of an IRD is as part of a STRS. To classify what is commonly regarded as a part in the same Customs Tariff item as the whole is, to say the least, far from intuitive.

[23]            The Tribunal made no express ruling on whether the word "reception" should be given its technical meaning. However, I infer from its reasons that it was of the view that the meaning of the term "reception apparatus for television" in the Customs Tariff should be informed by what those conversant with the technical aspects of television communication understand by the term "reception", and its corollary, "transmission". Counsel for the Attorney General did not argue that the Tribunal was entitled to make its decision on the basis that "reception" in the Customs Tariff item, "reception apparatus for television", has a meaning other than the one specific to television communication.

[24]            The Tribunal implicitly agreed that the technical meaning of "reception" is relevant to determining whether the IRD is a "reception apparatus for television". It relied upon the evidence of Mr. Wells, an expert in satellite, cable and broadcast communications, and found support for its conclusion in the following definition of "reception" provided by S.B. Parker, ed., McGraw-Hill Dictionary of Scientific and Technical Terms, 3^rd ed. (New York: McGraw-Hill, 1984):

The conversion of modulated electromagnetic waves or electrical signals, transmitted through the air or over wires or cables, into the original intelligence ... by means of antennas and electronic equipment.

[25]            The Tribunal purported to approach the classification of the subject goods on the basis of their technical function. Nonetheless, it inferred that "transmission" and "reception", in the technical television communication sense, had occurred from the fact that the signal was, in a non-technical sense, transmitted along the cable and received by the IRD. This was a flaw in its reasoning or a misapprehension of the evidence. I turn now to consider Mr. Wells's evidence.

[26]            Mr. Wells described transmission as occurring when the signal acquired from the broadcaster by Star Choice is sent by a transmitter to Star Choice's satellite and when the satellite sends the signal back to earth. He did not describe the passage of the partially converted signal along the coaxial cable linking the LNBF to the IRD as "transmission".

[27]            In my opinion, it was not open to the Tribunal on the evidence before it to conclude that the fact that the signal passed through the LNBF, albeit in a modified form that enabled it to travel further, meant that it was "transmitted" over cable by the LNBF. In my view, it is plain from Mr. Wells's evidence that the words in the technical dictionary's generic definition of "reception" relevant to satellite television are "the conversion of modulated electromagnetic waves ... transmitted through the air". Signals are no longer being transmitted once the process of reception is underway in the reception apparatus. Accordingly, the Tribunal was clearly wrong in concluding that the dictionary definition supported its view that the IRD was "reception apparatus for television".

[28]            While it is true that Mr. Wells said in cross-examination that the IRD "received" a signal from the LNBF, he did not say that the IRD was therefore a reception apparatus. Indeed, he had explained very clearly in his evidence that, from a technical perspective, "reception" in the context of television communication is the process of intercepting a signal transmitted through the air by a satellite and processing it so that the data can be seen and heard on a television set.

[29]            The STRS is a reception apparatus for television because it has all the components required for performing this function. Individually, the dish antenna, LNBF, IRD and the remote control are not reception apparatus, because each can perform only some of the functions necessary for reconverting the signal transmitted from the satellite into a form that enables the data to be viewed and heard on a television set. Hence, the components of the STRS, including the IRD, are known in the communications industry as parts of an STRS, not television reception apparatus.

[30]            Despite this evidence, the Tribunal found that the IRD was a "reception apparatus for television", on the basis of Mr. Wells's agreeing with the suggestion made by counsel in cross-examination that the IRD "received" the signal as it passed along the cable from the LNBF. Counsel was using the word "received" in a non-technical sense, and not its television communication sense. Mr. Wells most certainly did not say that, because the IRD "received" this signal it therefore performed the function of "reception", or is a "reception" apparatus, as this term is understood by technicians and engineers in television communication. To repeat, the uncontradicted evidence was that, like each of the other components of the STRS, the IRD performed only some of the functions of the reception process.

[31]            Hence, in concluding that the fact that the IRD "can receive television signals transmitted by the LNBF ... suffices for the IRD to constitute a reception apparatus for television", the Tribunal so seriously misunderstood the evidence as to render its decision unreasonable and therefore erroneous in law.

[32]            The Tribunal stated that its conclusion was consistent with the Explanatory Notes to heading 85.28. While the Notes are not part of the statutory text, the Tribunal must have regard to them. This means that, absent some good reason, a Note should be followed. However, counsel for Star Choice submits that Note 4 to heading 85.28 should not be understood to apply to the IRDs in issue here.

[33]            Mr. Wells testified that the receivers of satellite television broadcasts referred to in Note 4 are the old analogue receivers; because they had no decoders, they were useful only for receiving free satellite signals. In these circumstances, the Note, which provides no rationale for the classification opinion, cannot be regarded as providing clear guidance on the proper classification of IRDs so as to affect the interpretation of the Customs Tariff in this case.

[34]            For these reasons, I would have allowed the appeal with costs, set aside the Tribunal's decision, and rendered the decision that the Tribunal should have rendered: that is, Star Choice's appeal from the Commissioner of the Canada Customs and Revenue Agency is allowed on the basis that the subject goods cannot be classified as "reception apparatus for television" under tariff item No. 8528.12.99.

                                                                              (s) "John M. Evans"          

J.A.

                          FEDERAL COURT OF APPEAL

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKETS:                                         A-67-03

A-68-03

A-69-03

A-70-03

STYLE OF CAUSE:               Star Choice Television Network Incorporated v. Commissioner of Customs and Revenue

PLACE OF HEARING:                     Toronto, Ontario

DATE OF HEARING:                       January 29, 2004

REASONS FOR JUDGMENT:                                STRAYER J.A.

CONCURRED IN BY:                                                SEXTON J.A.

DISSENTING REASONS BY:                                     EVANS J.A.

DATED:                                              April 13, 2004

APPEARANCES:

Mr. Dennis Wyslobicky

Ms. Wendy Brousseau                                   FOR THE APPELLANT

Mr. Derek Rasmussen                                 FOR THE RESPONDENT

SOLICITORS OF RECORD:

Milar Wyslobicky Kreklewetz LLP

Toronto, Ontario                                            FOR THE APPELLANT

Mr. Morris Rosenberg

Deputy Attorney General of Canada

Ottawa, Ontario                                          FOR THE RESPONDENT