Date: 20000425
Docket: T-384-98
BETWEEN:
1185740 ONTARIO LIMITED
Applicant
- and -
THE MINISTER OF NATIONAL REVENUE, and
THE ATTORNEY GENERAL OF CANADA
Respondents
REASONS FOR ORDER
REED, J.:
[1] This is the judicial review of a decision of the Minister of National Revenue, dated February 5, 1998, amending the applicant"s licence to operate a Duty Free Shop at the Ambassador Bridge in Windsor, Ontario. The amendment was effected by letter from the Deputy Minister of National Revenue, dated February 5, 1998, stating that in accordance with subsection 7(1) of the Duty Free Shop Regulations the applicant"s licence was being modified to prohibit the selling of duty and tax free fuel and that the restriction would come into effect, in accordance with subsection 7(2) of the Regulations , ninety days after the date of the letter.
I note that the letter of February 5, 1998, from the Deputy Minister describes or gives notice of the Minister's decision, it does not purport to be the actual decision. However, both counsel, have treated the February 5, 1998, letter as the decision.
[2] The shop was not selling duty and tax free fuel at the time, but fuel storage tanks and service bays had been installed for the sale of auto fuel. These installations were made, it is alleged, with the knowledge of Revenue Canada officials, who had been advised by at least 1994 that the Canadian Transit Company planned to make these installations. The Canadian Transit Company leases the duty free shop lands, including the duty free shop and the fuel tanks, to the Ambassador Duty Free Management Services, a subsidiary of the Canadian Transit Company. The Ambassador Duty Free Management Services has a contractual relationship with the applicant. The applicant, 1185740 Ontario Limited, came into existence in 1995. Its sole business is acting as a holding company for the licence to operate the duty free shop. The licence to operate the duty free shop was originally held by Dr. Ianni, president of the University of Windsor, in his own name. The intention was to transfer the licence to a corporation, once that entity was incorporated. On September 22, 1998, the licence to Dr. Ianni was cancelled and a licence was issued to the applicant.
[3] The applicant challenges the February 5, 1998, decision on four main grounds: (1) the Minister lacked authority to make the decision in question; (2) the Minister considered irrelevant and extraneous material when making his decision and did not take into account relevant considerations; (3) the Minister breached the rules of natural justice by relying on a report to which the applicant was not given an opportunity to respond; (4) the Minister was estopped from making the decision because officials knew of the plans to build the tanks before construction was commenced, and those involved in the project, at the time, were not told about the policy prohibiting the sale of duty free fuel before the storage tanks were built.
[4] The first ground has two branches. The first is that subsection 7(1) of the Duty Free Shop Regulations, authorizing the Minister to amend licences, is ultra vires the regulation making power granted to the Governor in Council by section 30 of the Customs Act, R.S.C., 1985 (2nd Supp.), c.1.
[5] The regulation making authority set out in section 30 of the Customs Act reads:
30. The Governor in Council may make regulations
(a) prescribing qualifications as to citizenship and residence or any other qualifications that must be met by the operator of a sufferance warehouse or duty free shop;
30. Le gouverneur en conseil peut, par règlement :
a) fixer les conditions, notamment de citoyenneté et de résidence, à remplir par l'exploitant d'un entrepôt d'attente ou d'une boutique hors taxes;
(b) prescribing the terms and conditions on which licences for the operation of sufferance warehouses or duty free shops may be issued under section 24, including the security that may be required of operators of the warehouses or shops, the duration of the licences and the fees or the manner of determining fees, if any, to be paid for the licences;
b) fixer les conditions d'octroi de l'agrément prévu à l'article 24, notamment en ce qui concerne les garanties à souscrire par l'exploitant, la durée de validité de l'agrément et, éventuellement, les frais afférents et leur mode de détermination;
(c) prescribing the circumstances in which licences for the operation of sufferance warehouses or duty free shops may be issued, amended, suspended, renewed, cancelled or reinstated;
c) déterminer les circonstances de l'octroi, de la modification, de la suspension, du renouvellement, de l'annulation ou du rétablissement de l'agrément;
(d) establishing standards for the operation of and the maintenance of the facilities of sufferance warehouses or duty free shops;
. . .
d) fixer les normes applicables à l'exploitation et à l'entretien des installations des entrepôts d'attente ou des boutiques hors taxes;
. . .
(i) regulating the transfer of ownership of goods in duty free shops;
i) régir le transfert de propriété des marchandises placées en boutique hors taxes;
(j) prescribing, with respect to goods, or classes of goods, that are offered for sale in a duty free shop, minimum proportions, by reference to quantity, value or other like standard, that must be of domestic origin;
j) fixer, en termes de quantité, de valeur ou de norme comparable, les proportions minimales de marchandises ou catégories de marchandises offertes en vente dans une boutique hors taxes qui doivent être d'origine nationale;
(k) prescribing restrictions as to the classes of goods that may be received in sufferance warehouses;
k) fixer des restrictions quant à la catégorie de marchandises qui peuvent être reçues dans les entrepôts d'attente;
(l) prescribing circumstances in which goods shall not be received in sufferance warehouses;
l) déterminer les circonstances dans lesquelles des marchandises ne sont pas reçues dans des entrepôts d'attente;
(m) regulating the provision of information by the operator of a duty free shop; and
(n) otherwise regulating the operation of sufferance warehouses or duty free shops. [Underlining added.]
m) régir les renseignements à fournir par les exploitants de boutiques hors taxes;
n) autrement réglementer l'exploitation des entrepôts d'attente ou des boutiques hors taxes. [C'est moi qui souligne.]
[6] Section 7 of the Regulations reads:
7. (1) The Minister may amend a licence only for the following purposes:
(a) subject to subsection (2),
7. (1) Le ministre ne peut modifier l'agrément que pour l'une des raisons suivantes :
a) sous réserve du paragraphe (2),
(i) to change a restriction specified in the licence as to the classes of goods that may be received in the duty free shop, or to specify such a restriction,
(i) préciser une limite quant aux catégories de marchandises qui peuvent être reçues dans la boutique hors taxes ou modifier cette limite,
(ii) to change the circumstances specified in the licence in which goods may be received in the duty free shop, or to specify such circumstances; or
(ii) préciser les circonstances dans lesquelles les marchandises peuvent être reçues dans la boutique hors taxes ou modifier ces circonstances;
(b) to change the name of the licensee, where the name of the licensee is changed.
b) modifier le nom de l'exploitant lorsque ce nom a été changé.
(2) The Minister may amend a licence for the purposes set out in subparagraph (1)(a)(i) or (ii) only where he has given 90 days notice of the proposed amendment. [Underlining added.]
(2) Le ministre ne peut modifier un agrément pour les raisons énoncées aux sous-alinéas (1)a)(i) ou (ii) que s'il a fait part de son intention à l'exploitant en lui donnant un préavis de 90 jours. [C'est moi qui souligne.]
[7] It is argued that the authority granted by subsection 30(c) to make regulations "prescribing the circumstances" in which duty free shop licences may be amended, does not authorize the regulation passed pursuant to this power, regulation 7(1)(a)(i), because amending a licence to specify a "restriction" on the classes of goods that may be received in the duty free shop is not a prescription of the "circumstances" in which licences may be amended.
[8] In my view the words "prescribing the circumstances" when read together with the other regulation making powers set out in section 30, is broad enough to encompass the placing of restrictions on the classes of goods that are received in or sold from a duty free shop. In addition, the words of subsection 30(n), "otherwise regulating the operation of ... a duty free shop", are clearly broad enough to authorize the promulgation of section 7(1)(a)(i) of the Regulations.
[9] Even if the above interpretation is not correct, the Minister's authority to issue and amend licences does not depend solely on section 7 of the Regulations. Such authority is conferred directly by section 24 of the Customs Act. Section 24 reads:
24. (1) Subject to the regulations, the Minister may, where he deems it necessary or desirable to do so, issue to any person
24. (1) Sous réserve des règlements, le ministre peut, à son appréciation, octroyer à toute personne qui remplit les conditions
qualified under the regulations a licence for the operation of any place
réglementaires l'agrément d'exploiter un emplacement :
(a) as a sufferance warehouse for the examination of imported goods that have not been released, or
a) soit comme entrepôt d'attente, en vue de la visite des marchandises importées non dédouanées;
(b) [Repealed, 1995, c. 41, s. 6]
b) [Abrogé, 1995, ch. 41, art. 6]
(c) as a duty free shop for the sale of goods free of duties or taxes levied on goods under the Customs Tariff, the Excise Tax Act (other than section 23.2 of that Act), the Excise Act, the Special Import Measures Act or any other law relating to customs, to persons who are about to leave Canada and may specify in the licence any restriction as to the classes of goods that may be received therein or the circumstances in which goods may be received therein.
c) soit comme boutique hors taxes, en vue de la vente de marchandises, en franchise des droits ou taxes imposés par le Tarif des douanes, la Loi sur la taxe d'accise (sauf l'article 23.2 de cette loi), la Loi sur l'accise, la Loi sur les mesures spéciales d'importation ou tout autre texte de législation douanière, à des personnes sur le point de quitter le Canada. Il peut en outre préciser, dans l'agrément, les limites et les circonstances de réception, dans l'entrepôt ou la boutique, des marchandises selon leur catégorie.
. . .
(2) The Minister may, subject to the regulations, amend, suspend, renew, cancel or reinstate a licence issued under subsection (1). [Underlining added.]
. . .
(2) Le ministre peut, sous réserve des règlements, modifier, suspendre, renouveler, annuler ou rétablir un agrément octroyé en vertu du paragraphe (1). [C'est moi qui souligne.]
Therefore, section 7(1)(a)(i) of the Regulations cannot be said to be ultra vives.
[10] The second branch of the applicant's first argument is that the Minister is given authority to amend licences to impose restrictions on the classes of goods that may be received in a duty free shop, not on the classes of goods that may be sold from such a shop.
[11] The February 5, 1998, letter giving notice of the Minister"s decision states: the "Minister ... has decided to exercise his discretion to specify a restriction on the sale ..."; "consequently ... your duty free shop licence is being modified to specify a restriction on the sale ..."; "All other terms and conditions of your licence set out in the Minister's letter of September 22, 1997, remain in effect." The September 22, 1997, letter was not made part of the record, so the actual terms in which restrictions were specified are not in evidence.
[12] Even if the February 5, 1998, letter should have been phrased to read "your duty free shop licence is being modified to specify a restriction on the classes of goods that may be received and the sale of duty and tax free fuel will therefore be prohibited", there would be no point in setting aside the decision described in the letter merely to require such rephrasing. Even if the February 5 phasing was to be considered an error, I would find it to be an inconsequential error. See, Schaaf v. Minister of Employment and Immigration, [1984] 2 F.C. 334 (F.C.A.); Canadian Cable Television Association v. American College Sports Collective of Canada Inc., [1991] 3 F.C. 626 (F.C.A.). I am not prepared to quash the Minister's decision on the basis of an inconsequential error.
[13] I turn then to the argument that the Minister took into account irrelevant considerations and ignored relevant considerations. This is based on allegations that the Minister fettered his discretion by blindly following the existing government policy, which had existed since at least 1985, of not allowing the sale of duty and tax free fuel, and that the Minister did not give actual consideration to material provided by the applicant (the KPMG reports).
[14] In June of 1995, an official of Revenue Canada wrote to Dr. Ianni stating that it was Revenue Canada's understanding that the University of Windsor and the Canadian Transit Company wished "to explore a variety of avenues which might result in the sale of fuel at the Bridge." The letter stated "it would be helpful to hear from you in writing, bearing in mind the firmly established policy reflected in the letter from the Deputy Minister ...". The letter was copied to Messrs. Stamper & Mancini. Mr. Stamper was president of Canadian Transit Company; he had been employed with the Canadian Transit Company for twelve years. He was also president of Ambassador Duty Free Management Services for approximately twelve months, ending July 1996. Mr. Mancini was the Chief Executive Officer of Canadian Transit Company and was liaison for Ambassador Duty Free Management Services. He had been employed by Canadian Transit Company for four years and three months.
[15] The letter, to which reference is made in the June 1995 letter, was from the Deputy Minister of Revenue to a Mr. Amos, the President of the Frontier Duty Free Association, and is dated October 24, 1994. It states that Revenue Canada had undertaken consultations with six federal departments and agencies having an interest in the matter, such as the International Boundary Commission, in order that the proposals "could be given the fullest possible consideration". The letter identified three issues that were of concern to government departments: the lack of capacity to ensure compliance (to prevent Canadians from purchasing gasoline and then immediately returning to Canada); the attendant loss of tax revenue; the effect the sale of duty and tax free fuel would have on other domestic gas retailers in the surrounding area.
[16] In November 1995, a meeting was held with Revenue Canada officials. Messrs. Mancini, Stamper, Dr. Ianni, and Charles James were in attendance. Officials again reiterated the three concerns set out in the June 1995 letter. Subsequent to that meeting KPMG was retained to prepare a study of the proposal. The report that was prepared was submitted to Revenue Canada in June 1996 and was discussed at a meeting with Revenue Canada officials in August 1996. At the August 1996 meeting, it was made clear to Messrs. Stamper and Mancini that the study was inadequate.
[17] Following the August 1996 meeting, KPMG was asked to prepare a further report ("the enhanced report"). The enhanced report was submitted to Revenue Canada in January, 1997. The original KPMG report and the enhanced report together with other materials that Revenue Canada had received were the subject of a memorandum written for the Deputy Minister, dated October 20, 1997. That memorandum discussed the original KPMG report, and the enhanced report. It reads in part:
. . .
| On August 27, 1996, Mr. Gravelle [Deputy Minister of Revenue Canada] met with the CTC to discuss the KPMG study. Mr. Gravelle recommended that they consult with all key stakeholders, such as the cities of Windsor and Detroit, local retailers and the Province of Ontario, prior to meeting with the Departments of Finance and Industry. |
| Mr. Gravelle also undertook to have Revenue Canada officials continue discussions with the CTC regarding traffic flow and compliance issues which are key obstacles, from a departmental perspective, to the sale of duty and tax free fuel at the border. |
| Reaction to the proposal |
| Reaction to the proposal has been highly charged and has resulted in conflicting views among local Windsor business and political communities at all levels: |
| " The mayors of Windsor, Sarnia and Sault Ste-Marie as well as Mr. R. Gallaway, M.P. for Sarnia-Lambton, have made it clear that they do not support the sale of duty and tax free fuel at the Ambassador Bridge Duty Free Shop; |
| " A motion to have the City of Windsor endorse the sale of duty and tax free fuel at the Ambassador Bridge duty free shop was rejected by the Windsor City Council on January 20, 1997 (six votes against four votes in favour); |
| " The Windsor-Detroit Tunnel Duty Free Shop operator believes that the KPMG study is flawed and that the sale of duty and tax free fuel at the Ambassador Bridge would have a serious negative impact on the Windsor area. In order to add substance to his position, he provided the Department with a formal evaluation of the KPMG study; |
| " The evaluation, which was prepared by Professor A.A. Kibursi [sic] of McMaster University, concludes that the KPMG study cannot be used as an adequate basis for making a favourable decision on selling duty and tax free fuel facility at the Ambassador Bridge; |
| . . . |
| " They had submitted an enhancement to the original KPMG study that they believed would eliminate the possible negative impact of such a facility on the Windsor area. |
| Specifically, the original study assumed that duty and tax free fuel would be sold at 15 per cent below Detroit area prices. The enhancement calls for fuel to be sold at prices that are comparable with those in the Detroit area. Their rationale is that this will remove the incentive for travellers to divert their purchases from local Canadian retailers to the facility on the Bridge. |
| . . . |
| On February 7, 1997, Mr. Allan J. Cocksedge, Assistant Deputy Minister, Customs Border Services and Trade Administration, met with Mr. D. Drummond, Assistant Deputy Minister, Tax Policy, Department of Finance, and a senior representative of the Department of Industry, to discuss the proposal in question. |
| Based on their review of the original KPMG study and subsequent enhancement, all parties considered the study flawed and its findings to be unreliable. Furthermore, nothing in their proposal suggests that the key problems surrounding the negative impact on local retailers, loss of revenue and enforcement concerns have been mitigated in many way. Consequently, they formally reaffirmed, in writing, their opposition to the sale of duty and tax free fuel. |
| . . . |
[18] On November 19, 1997, at a meeting of the Frontier Duty Free Association, the management of the Ambassador Duty Free Management Services learned from Revenue Canada officials that a decision by the Minister with respect to its proposal should be forthcoming within the next four weeks. Both the October 20, 1997, memorandum, and a further memorandum of February 2, 1998, were sent to the Minister on the latter date. These were the only documents before him when he made his decision. The February 2, 1998, memorandum referred to a February 7, 1997, review of the KPMG reports by the Assistant Deputy Minister of Revenue Canada, Customs and Administration Branch, the Assistant Deputy Minister of Finance, Tax Policy, and a senior representative of the Department of Industry. The memorandum stated that all parties considered the KPMG reports to be inadequate:
| Based on their view of the original KPMG study and subsequent enhancement, all parties considered the study flawed and its findings to be unreliable. Furthermore, nothing in their proposal suggests that the key problems surrounding the negative impact on local retailers, loss of revenue and enforcement concerns have been mitigated in any way. Consequently, they formally reaffirmed, in writing, their opposition to the sale of duty and tax free fuel. |
[19] The key policy concerns, motivating the position that was recommended, continued to be: problems of enforcement; possible loss of tax revenue; possible impact on local fuel retailers. The Minister initialled the February 2nd memorandum indicating that he agreed with the course of action officials were proposing, i.e., specific amendments to all duty free shop licences to preclude the sale of tax and duty free fuel.
[20] It is clear from the above that the Minister did not fetter his discretion by blindly following the existing government policy. There was an extensive consultation process with the applicant, and other interested parties; senior officials in the Department of Revenue and other departments met with the applicants repeatedly. The applicant was made aware, through various meetings and correspondence, of the government's policy concerns and was given the opportunity to respond to them.
[21] The Minister was entitled to rely on the memoranda that was prepared for his review, which contained a summary of the reports. As noted by the Supreme Court of Canada in Attorney General of Canada v. Inuit Tapirsat of Canada et al., [1980] 2 S.C.R. 735 at 753, "... the Executive Branch cannot be deprived of the right to resort to its staff, to departmental personnel concerned with the subject matter, and above all to the comments and advice of ministerial members of the Council ...". Also in the decision of R. v. Harrison, [1977] 1 S.C.R. 238, at page 245, the Supreme Court of Canada held that:
| ... where the exercise of a discretionary power is entrusted to a Minister of the Crown it may be presumed that the acts will be performed, not by the Minister in person, but by responsible officials in his department ... the tasks of a Minister of the Crown in modern times are so many and varied that it is unreasonable to expect them to be performed personally. It is to be supposed that the Minister will select deputies and departmental officials of experience and competence, and that such appointees, for whose conduct the Minister is accountable to the Legislature, will act on behalf of the Minister, within the bounds of their respective grants of authority, in the discharge of ministerial responsibilities. Any other approach would but lead to administrative chaos and inefficiency. ... |
[22] The nature of the decision being made, in this case, a policy decision applicable to all duty free shops, is a circumstance that leads to a conclusion that the Minister is not himself required to read every piece of paper verbatim. The summaries of the KPMG reports prepared for the Minister have not been shown to be inaccurate. There was no breach of natural justice by the procedure that was followed.
[23] The applicant's third argument is that the Minister relied upon the Kubursi report, which contains an evaluation of KPMG's report, without giving the applicant notice of the former report's existence, or a chance to comment thereon. The applicant should have known of Dr. Kubursi's concerns, at least as early as January 20, 1997, as a result of his appearance at a Windsor City Council meeting. At that time, Dr. Kubursi made submissions in opposition to the applicant's proposal to sell duty and tax free fuel, and expressed concerns with respect to several assumptions made in the initial KPMG report.
[24] While the applicant asserts in its submissions, that "no one associated with the initiative to sell duty and tax free fuel had a copy of the [Kubursi] report", the applicant refused to undertake to ask KPMG if it had a copy of this report. Professor James, the affiant for the applicant, agreed that KPMG had had more dealings with Revenue Canada than he had had with respect to the applicant's proposal. This raises a presumption the best evidence was not put forward and a negative inference should be drawn with respect to the applicant's assertion.
[25] Also, I agree with counsel for the respondent's submission that the applicant need not be given a copy of every piece of paper that was presented to the Minister's officials, providing the applicant is made aware of the concerns contained therein.
[26] I turn then to the allegations that the Minister should be estopped because the applicant (or rather the Canadian Transit Company) was not made aware of the government's policy of not allowing the sale of duty and tax free fuel at duty free establishments before the in-ground storage tanks were built. The evidence before me does not support this allegation. The government's policy had been in existence since 1985. The construction of the duty free shop in question took place in 1995. The construction was done by the Canadian Transit Company. Professor James, the affiant put forward by the applicant, acknowledged that he had no knowledge as to whether or not the Canadian Transit Company knew about the government policy concerns when it ordered the construction of the fuel tanks. Professor James identified Messrs. Stamper and Mancini as being individuals who had more direct dealings with Revenue Canada than he did with respect to the proposed initiative. However, the applicant refused to make enquiries of Messrs. Stamper and Mancini as to whether or not they knew of Revenue Canada's policy with respect to the sale of duty and tax free fuel prior to when Canadian Transit Company installed the fuel tanks.
[27] The applicant has not proven its allegation that Revenue Canada officials stood by and watched the construction of the storage tanks without informing those concerned of the government's policy. I need address none of the other arguments made by the respondent with respect to this allegation.
[28] For the reasons given I must dismiss this application.
Judge
OTTAWA, ONTARIO
April 25, 2000