Maple Lodge Farms Ltd. v. Minister of National Revenue, [1997] 2 CTC 241, [1997] DTC 5226

Jerome A.CJ.:

This is an application by Maple Lodge Farms Ltd. for an order extending the time to commence a judicial review application under section 18 of the Federal Court Act.

The applicant is primarily in the business of purchasing live chickens from a large number of registered chicken producers in Ontario, each of which holds a production quota issued by the Ontario Chicken Producers’ Marketing Board (the “Board”). Under the supply management system administered by the Board, Maple Lodge is required to make its purchases of live chickens from Board-registered chicken producers. Through 1991 to 1995, the applicant made regular purchases from over five hundred suppliers in Ontario. It paid the suppliers by cheque, cash, or in some instances, through a combination of both cash and cheque, depending upon the requirements of the supplier.

On July 12, 1996, the applicant was served by Revenue Canada with a Requirement to Provide Documents. The Requirement provides, inter alia, as follows:

For purposes related to the administration or enforcement of the Income Tax Act, pursuant to the provisions of Paragraph 231.2(l)(b) of the said Act, I require from you within thirty (30 days) from the date of delivery of this registered notice, provision of the documents for the calendar years, 1991, 1992, 1993, 1994 and 1995 as follows:

(1) the record of payments, in currency, to chicken producers and/or Suppliers, listed on the summary attached to this requirements, or their officers, agents, or managers;

(2) the request for payment vouchers or other documents in support of the payments referred to in Paragraph (1) above.

Attached to the Requirement was a schedule entitled “Summary of Producers” which identified some five hundred individuals, partnerships or corporations representing most, if not all of the suppliers who provided chickens to Maple Lodge between 1991 and 1995.

The applicant was concerned over the nature of the information sought by Revenue Canada and the effect it would have on business relations with its suppliers. In addition, it was concerned that the Requirement would compel Maple Lodge to expend an inordinate amount of time and effort to locate, assemble and collate the documents sought. The company advised its corporate solicitor, Mr. Ron Folkes, to negotiate with Revenue Canada in an effort to limit the scope of its enquiry and to limit the impact that the assembly and production of the requested documentation would have on the applicant’s day-to-day operations. Through July, August and September of 1996, Mr. Folkes had a number of conversations and exchanges of correspondence with Mr. Goodbrand of the Special Investigations Branch, Kitchener District Office of Revenue Canada.

On October 7, 1996, a meeting was held in Mr. Folkes office to discuss the Requirement. Revenue Canada was represented by Mr. Goodbrand and Mr. Gary Hambly who explained that while there was no specific audit ongoing of any of the applicant’s suppliers, Revenue Canada sought Maple Lodge’s original books, receipts and vouchers in the event it might reveal information that could result in prosecution of any producers. The applicant reiterated all of its concerns during the course of the meeting. Mr. Goodbrand and Mr. Hambly were asked to review the matter with their superiors to see if there was another method or compromise through which Revenue Canada’s objectives could be achieved, without intruding on the affairs of the applicant and jeopardizing its business relationship with its suppliers through forced compliance with the Requirement.

On October 9 and 17, 1996, Mr. Folkes had further telephone conversations with Mr. Goodbrand, who achieved that Revenue was not prepared to compromise its position although it would approach the Board to request that it distribute another letter, indicating that chicken processors were being compelled by Revenue Canada to disclose all payments made to chicken producers. This would only be done, however, if Maple Lodge first complied fully with the Requirement. By letter dated October 22, 1996, the applicant advised Revenue Canada that this proposal was not acceptable.

On November 8, 1996, the applicant attempted to file an Originating Notice of Motion in this Court seeking judicial review of the Minister’s issuance of the Requirement to Provide Documents under paragraph 231.2(1)(b) of the Income Tax Act. However, because the Requirement was dated July 9, 1996, Maple Lodge was advised it would have to first seek an Order granting an extension of time for the filing of its Application for Judicial Review.

The principles which apply to cases of this nature have been set out by the Federal Court of Appeal in Grewal v. Canada (Minister of Employment & Immigration), [1985] 2 F.C. 263 (Fed. C.A.). In that case, the Court held that there is no need for an applicant who is seeking an extension of time to demonstrate “special” reasons. Rather, consideration should be given to the reasons for the delay and whether the applicant has an arguable case. Most significantly, however, is whether the interests of justice will best be served by granting the extension. As stated in Gerwal at p. 272:

The underlying consideration, however, which as it seems to me, must be borne in mind in dealing with any application of this kind, is whether, in the circumstances presented, to do justice between the parties calls for the grant of the extension.

The extension is appropriate here. Maple Lodge has an arguable case and the respondent would not be prejudiced if the Court were to grant the remedy sought. The Minister’s main argument is that the applicant is unable to demonstrate any justifiable reason for the delay and has not shown a continuing intention to bring an application for judicial review. But it was always clear that Maple Lodge did not agree with, and was not prepared to acquiesce to, the department’s Requirement of July 9, 1996. It gave explicit instructions to its corporate solicitor to negotiate with Revenue Canada in order to limit the scope and effect of the Requirement. Thereafter, the parties corresponded by telephone and through letters and finally held a meeting in order to reach some alternative solution. When negotiations proved unsuccessful Maple Lodge brought, or attempted to bring, its application for judicial review.

For these reasons, the application is allowed. The applicant is to have thirty days from the date of this order to file an Originating Notice of Motion seeking judicial review of the respondent’s Requirement dated July 9, 1996, which was issued pursuant to paragraph 231.2(l)(b) of the Income Tax Act. On consent of the parties, I have also amended the style of cause by deleting Her Majesty the Queen In Right of Canada as a respondent to this action.

Application granted.