Ottawa, Ontario, June 12, 2006
PRESENT: The Honourable Mr. Justice Barnes
BETWEEN:
THE JOHN MCKELLAR CHARITABLE FOUNDATION
Applicant
and
CANADA REVENUE AGENCY
Respondent
[1] The Respondent, Canada Revenue Agency (CRA), brought this motion seeking three forms of relief. It seeks to strike out the underlying application for judicial review in its entirety on the ground that it is devoid of legal merit or, to put it another way, is bereft of any possibility of success. In the alternative, it asks that substantial hearsay exhibits to the Applicant's (McKellar) affidavit material be struck out so that it will know the case it has to meet. In the further alternative to its motion to strike the application, the CRA requests an extension of time to file its own responding affidavits.
[2] The underlying application by McKellar for judicial review is framed as follows:
This is an application for judicial review in respect of an action of the Minister of National Revenue as represented by the Canada Revenue Agency ("CRA") by which the Minister's representative demanded and was provided by the Applicant with various materials identifying unnamed third parties who made donations to the Applicant in 2001 (the "2001 Donor List") without prior judicial authorization contrary to the provisions of subsections 231.2 (2) and (3) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended (the "ITA"), which the Minister's representative then used to correspond with and ultimately reassess all such donors so identified.
[3] The grounds pleaded by McKellar in support of its application include an allegation that the CRA knowingly and improperly obtained and utilized McKellar's donor lists for the purpose of reassessing its donors. Among other forms of relief, McKellar seeks an order quashing previous tax reassessments of its charitable donors and prohibiting the CRA from issuing any subsequent reassessments to those persons.
[4] McKellar initiated an earlier application for judicial review (T-779-05) seeking similar relief against the CRA but with respect to different taxation years. That application has not been resolved.
[5] On this motion the CRA contends that the underlying application for judicial review should be dismissed before it is argued on the merits because it was brought well outside the thirty (30) day period required by Rule 18.1 (2) of the Federal Courts Rules, R.S.C. 1985, c. F-7 and because the delay is otherwise unreasonable and prejudicial.
[6] The CRA also argues that McKellar's claim as framed in its Notice of Application is insufficient and, on that alternative basis, cannot sustain the proceeding.
[7] The CRA says that the authority to dismiss McKellar's application on a preliminary basis is found in Rule 221 (1) (a) on a motion to strike pleadings, in Rule 213 (2) on a defence motion for summary judgment, in the Court's inherent jurisdiction to control its process and in Rule 4 (the so-called "Gap Rule") providing for the application of Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 14.09 where no equivalent rule exists in the Federal Courts Rules.
[8] With respect to the timeliness issue the CRA expresses its position in the following passages from its Brief to the Court:
13. An application for judicial review must be brought within 30 days after the time the decision or order was first communicated "to the party directly affected by it, or within such further time as a judge of the Trial Division may, either before or after the expiration of those thirty days fix or allow". The Foundation was aware of the CRA's investigation of the donors, at the very latest, on or before September 13, 2005, more than four months before commencing the Application contrary to ss.18.1(2), without first obtaining an extension of time.
Federal Courts Act, R.S.C. 1985, c. F-7, as amended, ss.18.1 (2)
14. The Foundation commenced the within application three years after the CRA's decision to request the Receipts, eight months after bringing a similar application with respect to a subsequent decision of the CRA, and more than four months after the latest date it could have become aware of the CRA's decision to investigate donors. The Application has not been brought on a timely basis and should be struck out.
[9] McKellar argues that the 30 day filing requirement for bringing an application for judicial review pursuant to section 18.1 (2) of the Federal Courts Act does not apply to a decision of the sort challenged here because it was not "a decision or an order of a federal board, commission or other tribunal". In that regard, it relies on the authority of Friedman & Friedman Inc. v. Canada(Superintendent of Bankruptcy) [2001] F.C.J. No. 124 and Coffey v. Canada(Minister of Justice), [2005] F.C.J. No. 689, 2005 FC 554.
[10] As a starting point, it is apparent that this Court has been extremely reluctant to entertain preliminary motions to dismiss applications for judicial review. That is so because there are few determinative issues which can be completely isolated from the merits of the underlying application and generally not much judicial economy is achieved by dealing with issues on a preliminary basis. An application for judicial review is, after all, a summary proceeding which is usually resolved on the merits with considerable efficiency and dispatch.
[11] The leading authority dealing with this type of motion is David Bull Laboratories Canada Inc. v. Pharmacia Inc. [1995] 1 F.C. 588, [1994] F.C.J. No. 1629 (F.C.A.) and it provides an answer to many of the issues raised here by the CRA.
[12] The David Bull decision indicates that the Federal Courts Rules dealing with motions for summary judgment and for striking out pleadings do not apply to applications for judicial review. Those rules relate to actions and the usual means for dealing with applications that have no merit "is to appear and argue at the hearing of the motion itself": see David Bull, above, at paragraph 10.
[13] I do accept, however, that this Court does have an inherent jurisdiction to control its own process, including the authority to strike out applications for judicial review in limited circumstances. That point is made in the David Bull decision where it was said that such cases will be "very exceptional" and do not include arguments about "the adequacy of the allegations in the notice of motion". This latter ruling disposes of the CRA's contention that McKellar's Notice of Application in this proceeding is insufficiently framed to support the proceeding: also see David Bull, above, at paragraph 15.
[14] I do not accept the CRA's argument that McKellar's general delay in proceeding with its application can be the basis for a summary dismissal of its application. That is a question which is inherently bound up with issues of relative prejudice to the parties (and possibly to the affected donors) and should be argued on the merits of the application. Although there is ample authority that delay can be a basis for denying prerogative relief, it is not appropriate to deal with that issue in isolation to the many other considerations which bear on the granting of such relief. This point is addressed by Justice Andrew MacKay in Vancouver Island Peace Society v. Canada [1994] 1 F.C. 102, [1993] F.C.J. No. 601 in the following passage at paragraphs 23-24:
Often the considerations affecting the exercise of discretion will require an appreciation of the circumstances in which the motion arises and of the relief sought. Frequently that appreciation is only fully provided by presentation of the applicant's case based on the originating motion and supporting affidavits. Particularly where the preliminary motion to strike if filed, but not yet heard, just before the commencement of a special hearing scheduled to consider the originating motion, it may be more expeditious, and of assistance to the Court's appreciation of the case for judicial review, to have the applicant's case fully presented. Here the respondents urge that it would be more expeditious if the preliminary motion to strike be granted, for the Court could then avoid argument on the merits of the application for judicial review. For the applicants, however, it is urged that response to the matters raised in the preliminary motion to strike requires dealing with many of the matters that would otherwise be presented in relation to the merits of the originating motion.
In the circumstances of this application, and in light of the timing of the respondents' preliminary motion, I was not persuaded that the Court should exercise discretion to strike the originating motion.
[15] The question of McKellar's alleged failure to comply with the 30 day filing requirement
set by section 18.1 (2) of the Federal Courts Act is more problematic. I do not agree with McKellar's counsel that the within application for judicial review falls outside of the parameters of this section. Although it is not entirely clear from the Notice of Application what CRA decision is being challenged, the definition of federal board, commission or other tribunal found in section 2 of the Federal Courts Act is broad enough to encompass the process challenged by McKellar. It is obvious to me that section 18.1 applies to the underlying application for judicial review. The authorities relied upon by McKellar are distinguishable and I do not find them to be applicable here. Furthermore, in the closely comparable case of Redeemer Foundation v. Canada(Minister of National Revenue), [2005] F.C.J. No. 1064, 2005 FCA 233 (F.C.A.) the applicant initiated its application for judicial review out of time but succeeded in obtaining an extension of time. The Federal Court of Appeal upheld that decision and made no mention that section 18.1 (2) did not apply to the proceeding.
[16] The question remains as to whether I should dismiss the underlying application because of the ostensible failure by McKellar to comply with the 30 day filing requirement or to obtain an extension pursuant to section 18.1 (2). On this issue, I am assisted by the thoughtful decision by Madam Justice Eleanor Dawson in Hamilton-Wentworth (Regional Municipality) v. Canada(Minister of the Environment), [2000] F.C.J. No. 440. There Madam Justice Dawson carefully considered the David Bull decision in the context of the same filing deadline applicable to this case and held at paragraphs 39 and 40:
I note that even in actions where, as the Court of Appeal noted in David Bull Laboratories, supra, striking out is much more feasible, a limitation defence is not sufficient ground to strike out a statement of claim, but rather is a defence to be raised in a statement of defence. By analogy, where a proceeding is commenced by application, any issue of application of a time bar ought, in the usual case, to be argued at the hearing of the application, and not on a motion to strike.
That is not to say that in no case could an application be struck for being commenced out of time, but it would, in my view, be only in an exceptional case.
I agree with Justice Dawson and I do not see anything about the circumstances of this case which would render it exceptional or justify a departure from the usual approach.
[17] I am also not unmindful that the problem of a missed filing deadline is curable by a motion for an extension that can be brought after the deadline has passed. This motion by the CRA, if allowed, would foreclose that opportunity by McKellar to seek an extension. In Vancouver Island Peace Society, above, at paragraph 24 Justice MacKay alluded to the possibility of a preliminary dismissal of an application where there existed a procedural irregularity which could not be corrected. The inference which I take from that remark is that a procedural irregularity which may be corrected is not sufficient to support the preliminary dismissal of an application.
[18] In short, this is not a problem which should be resolved on the basis of which party gets to the Court first with its argument. Instead, it is a problem that should be resolved at the time of the hearing of the application on the merits. In the absence of a motion by McKellar at that time for an extension of time it obviously runs the risk that its application for judicial review will be dismissed on that basis.
[19] In the result I would dismiss the CRA's motion for a preliminary dismissal of this proceeding.
[20] The CRA's secondary application concerns the content of McKellar's supporting affidavits and, in particular, the extensive utilization of exhibits which, to the deponents, constitute hearsay. While I agree that there is not an absolute bar to the use of hearsay evidence in affidavits, it should not be in substitution for the fulsome exposure of relevant personal evidence. Where a fact can be made out by first hand evidence from a deponent it should be. Here McKellar appears to have attached the entire evidentiary record from its collateral application for judicial review to its deponent's affidavits. Much of that material is in the form of transcripts of cross-examination evidence from CRA witnesses. Some of that material is likely relevant and arguably admissible but it is doubtful that all of the material would meet the requirements for admissibility. McKellar has also included legal argument as an exhibit to one of the affidavits and clearly there was no basis for doing so.
[21] While it is generally desirable to leave issues of relevance and admissibility to the judge hearing the application, here the CRA complains that it does not know the case it has to meet and cannot properly frame its own response. Because of the large volume of material filed, there does appears to be some merit to this submission and I will direct McKellar to refile its affidavit materials strictly limited to evidence that its relevant to the issues arising in the proceeding. I do not intend to interfere with the ultimate authority of the hearing judge to resolve issues of admissibility of hearsay evidence. However, McKellar runs the risk of losing such evidence if it uses it inappropriately or in substitution for evidence that is within the personal knowledge of its deponents. I will also order the removal of all legal arguments from McKellar's affidavits. McKellar shall refile its revised affidavits within 14 days of this Order, and the CRA shall then have 30 days to file its own affidavits in response. To the extent that McKellar files an amended affidavit in compliance with this direction, the corresponding affidavit shall then be removed from the Court file.
[22] Because there has been divided success on this motion and because the issues raised by the CRA with respect to delay have not been determined, I will order that the costs of this motion be costs in the cause.
ORDER
THIS COURT ORDERS that the Respondent's application to dismiss the within proceeding is dismissed.
THIS COURT FURTHER ORDERS that the Applicant re-file revised affidavits in support of its application with supporting exhibits to be strictly limited to evidence that is relevant to the issues arising in this proceeding. The Applicant shall re-file its revised affidavits within 14 days of this Order and the Respondent shall have 30 days thereafter to file its own affidavits in response. To the extent that the Applicant files an amended affidavit in compliance with this Order the corresponding affidavit presently filed with the Court shall be removed from the Court file.
THIS COURT FURTHER ORDERS that the costs of this motion shall be costs in the cause.
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-365-06
STYLE OF CAUSE: The John McKellar Charitable Foundation v. Canada Revenue Agency
APPEARANCES:
|
William I. Innes Alexandria M. Tomasovic
|
|
| Peter A. Vita Q.C. Aleksandrs Zemdegs |
SOLICITORS OF RECORD:
| Fraser Milner Casgrain LLP Barristers and Solicitors Toronto, Ontario
|
|
| JOHN H. SIMS, Q.C. Deputy Attorney General of Canada Toronto, Ontario
|