1185740 Ontario Ltd. v. Mnr

1185740 Ontario Ltd. v. Mnr Court (s) Database Federal Court of Appeal Decisions Date 2001-06-12 Neutral citation 2001 FCA 193 File numbers A-354-00 Notes Digest Decision Content Date: 20010612 Docket: A-354-00 Neutral citation: 2001 FCA 193 CORAM: DESJARDINS J.A. LINDEN J.A. MALONE J.A. BETWEEN: 1185740 ONTARIO LIMITED Appellant - and - THE MINISTER OF NATIONAL REVENUE and THE ATTORNEY GENERAL OF CANADA Respondents Heard at Ottawa, Ontario, on Tuesday, May 15, 2001. Judgment rendered at Ottawa, Ontario, on Tuesday, June 12, 2001. REASONS FOR JUDGMENT BY: DESJARDINS J.A. CONCURRED IN BY: LINDEN J.A. MALONE J.A. Date: 20010612 Docket: A-354-00 Neutral citation: 2001 FCA 193 CORAM: DESJARDINS J.A. LINDEN J.A. MALONE J.A. BETWEEN: 1185740 ONTARIO LIMITED Appellant - and - THE MINISTER OF NATIONAL REVENUE and THE ATTORNEY GENERAL OF CANADA Respondents REASONS FOR JUDGMENT DESJARDINS J.A. [1] This is an appeal of a judgment of a motions judge ([2000] F.C.J. No. 541 (C.A.) (Q.L.) Reed J.) which dismissed the appellant's application for judicial review of a decision of the Minister of National Revenue (the "Minister") dated February 5, 1998. The Minister restricted the earlier licence granted to the appellant's predecessor, Dr. R.W. Ianni, President of the University of Windsor, to operate a duty-free shop at the Ambassador Bridge in Windsor, Ontario. [2] Issues are raised with regard to the motions judge's judgment concerning the duty of procedural fairness the Minister allegedly owed the appellant in arriving at his decision and with regard to the validity of the statutory provisions on which the Minister's decision was based, namely subsection 7(1) of the Duty Free Shop Regulations (the "Regulations") read together with sections 24 and 30 of the Customs Act (the "Act") (R.S.C. 1985, c. 1 (2nd Supp.)). 1. The Facts [3] The facts are not in dispute. [4] The appellant, which came into existence in 1995, is a holding company for the licence to operate the duty-free shop at the Ambassador Bridge in Windsor, Ontario. The licence was originally issued to Dr. Ianni in his own name on July 6, 1995. The intention was to transfer it to the corporation once it came into existence. A letter to request such transfer was signed by Dr. Ianni on June 7, 1997. On September 22, 1998, the licence issued to Dr. Ianni was cancelled and an amended licence was issued to the appellant. [5] The Ambassador Bridge, which links Canada to the United States across the Detroit River, is owned by an American corporation, namely the Detroit International Bridge Company ("DIBC"). It owns land on both sides of the bridge. Construction of a duty-free shop and of certain fuel tank installations on the Canadian side of the land was undertaken by the Canadian Transit Company ("CTC"), a Canadian corporation that is a wholly owned subsidiary of DIBC. These installations were paid for by CTC who still owns them. CTC leases the duty-free shop lands, including the duty-free shop and the fuel tank installations, to Ambassador Duty Free Management Services ("ADFMS") which is a Canadian corporation, a subsidiary of CTC, which itself, as stated earlier, is a subsidiary of DIBC. While the appellant derives some benefits from the operations of the duty-free shop, the vast majority of the profits from the store go to ADFMS. [6] On May 14, 1994, the Assistant Deputy Minister of National Revenue met with Dr. Dan Stamper, President and Chief Executive Officer of DIBC, Remo Mancini, Chief Executive Officer of CTC, Dr. Ianni and others, to discuss a proposal to build and operate a duty-free shop at the Ambassador Bridge, together with fuel storage tanks and service bays for the sale of auto fuel. By June 1995, the construction was completed. [7] A little more than a year later, in a letter to Dr. Ianni, dated June 16, 1995, a representative of Revenue Canada indicated (Appeal Book at 289): The Department has received enquiries from the business community expressing concern that duty free gasoline will be sold at your planned duty free shop at the Ambassador Bridge. As you know, the current policy of Revenue Canada does not permit the sale of gasoline as a duty and tax free commodity at duty free shops. In this regard, attached for your information is a copy of a letter from the Deputy Minister to the Frontier Duty Free Association outlining the reasons for that decision. I understand from Messrs. Dan Stamper and Remo Mancini, that the University of Windsor and the Canadian Transit Company wish to explore a variety of avenues which might result in the sale of fuel at the Bridge. In this respect, 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. [Emphasis added] [8] Attached was a letter dated October 24, 1994, signed by Pierre Gravelle, Deputy Minister of Revenue Canada, to the President of Frontier Duty Free Association, the trade association of Canadian land border crossing duty-free shops. That letter stressed key public policy issues related to the sale of gasoline as a duty-free commodity at duty-free shops. One such policy issue was the difficulty of ensuring compliance with the law, particularly with regard to "turn around sales". Turn around sales referred to persons purchasing gasoline duty-free and then immediately returning to Canada. Important losses of revenue was another of these issues, together with the fact that the sales of duty- and tax-free gasoline would have a negative impact on the surrounding communities. In view of this, it was stated that Revenue Canada did not support the sale of gasoline at duty-free shops. [9] The appellant, or rather CTC, not being a member of the Frontier Duty Free Association, in 1994, alleged that it had not been made aware of that government policy before the in-ground storage tanks were built. The motions judge found, at paragraph 26 of her reasons, that the evidence did not support this allegation. [10] On July 6, 1995, a licence to operate the duty-free shop was issued to Dr. Ianni. The shop opened for business on July 10, 1995. [11] In November 1995, a meeting between the parties was convened in Ottawa to discuss the proposal to sell duty- and tax-free fuel. At that meeting, the officials from Revenue Canada explained the three main policy concerns referred to earlier, namely the impact of the sale of duty-free gasoline on local fuel retailers and on government revenues and the difficulties of enforcing the duties. [12] By letter to Dr. Ianni dated March 4, 1996, the Deputy Minister of National Revenue indicated that the Government of Canada did not support the sales of duty- and tax-free gasoline, and confirmed the department's concerns with the proposed initiative. He then stated [Exhibit G, Appeal Book, Tab 4]: I note that a formal proposal will be presented to the Department in the near future. In this regard, I assure you that any proposal submitted to Revenue Canada for the sale of duty and tax free gasoline will be thoroughly reviewed, and no decisions will be made without full consultation with all interested parties. [Emphasis added] [13] CTC commissioned two Reports written by KPMG Consulting to address the government concerns. The initial KPMG Report was presented and discussed with the Deputy Minister of National Revenue on August 27, 1996. A further meeting was held on December 6, 1996, with representatives of Revenue Canada, following which an Enhanced Report was submitted to the government in January 1997. [14] Earlier, on July 22, 1996, Dr. Ianni wrote to the Minister of National Revenue at the time, the Honourable Jane Stewart, requesting a meeting to discuss the proposal to sell duty-free fuel at the Ambassador Bridge. The Minister replied in a letter dated October 18, 1996 (Appeal Book at 156): I have been advised that, as a result of a meeting which took place between you and Mr. Pierre Gravelle, Deputy Minister, on August 27, 1996, it was recommended that you consult with all relevant stakeholders. I will be pleased to meet with you after you have completed your consultations. [Emphasis added] [15] In the meantime, Dr. A.A. Kubursi was retained by the Windsor-Detroit Tunnel Duty Free Shop to review the initial KPMG Report. Dr. Kubursi gave a presentation at a Windsor City Council meeting on January 20, 1997, in opposition to the appellant's initiative to sell duty- and tax-free fuel. Representatives of the appellant were present at the meeting. [16] On November 19, 1997, the management of ADFMS learned from Revenue Canada officials that a decision would be forthcoming with respect to the proposal to sell duty- and tax-free fuel. They expressed concern that the Enhanced KPMG Report had not been dealt with by the Minister. [17] Two memoranda from the Deputy Minister went to the new Minister of National Revenue, the Honourable Herb Dhaliwal. One was dated October 29, 1997, and the second was dated February 2, 1998. The second memorandum made reference to a meeting held on November 15, 1997. The memorandum then summarized the three key concerns that had been raised in discussions with two other interested government departments, namely Industry and Finance. The memorandum indicated that consultations were held between officials and CTC's representatives. It stated that senior government representatives had reviewed the original KPMG Study and its subsequent enhancement and considered "the study flawed and its findings to be unreliable" (Appeal Book at 321). It recommended to the Minister that the licence issued earlier to Dr. Ianni be restricted. The Minister initialled the February 2, 1998, memorandum, indicating that he concurred with the proposed course of action. [18] On September 22, 1998, the licence to Dr. Ianni was cancelled and a licence was issued to the appellant prohibiting the selling of duty- and tax-free fuel. All other duty-free shops across Canada came under the same rule. 2. The judgment below [19] The motions judge was satisfied that subsection 7(1) of the Regulations had been validly adopted under either paragraphs 30(c) or (n) of the Act and that the Minister's authority to issue and amend licences did not depend solely on subsection 7(1) of the Regulations. Such authority to amend the licence, she said, was also conferred directly by section 24 of the Act. Moreover, she found no merit in the appellant's argument that the Minister may have been given authority under subparagraph 7(1)(a)(i) of the Regulations to amend licences to impose restrictions on the classes of goods that may be received in a duty-free shop, but not the classes of goods that may be sold from such a shop. She explained that although the February 5, 1998, letter giving notice of the Minister's decision stated that "... your duty free shop licence is being modified to specify a restriction on the sale..." it was an inconsequential error to refer to the sale of duty- and tax-free fuel instead of the receipt of such classes of goods in the duty-free shop. [20] She rejected the appellant's allegation that the Minister had fettered his discretion by blindly following the existing government policy without giving actual consideration to the KPMG Report. She concluded from the evidence that there had been extensive consultations between the parties. The government concerns had been explained. The appellant had had the opportunity to respond. She cited Attorney General of Canada v. Inuit Tapirisat, ([1980] 2 S.C.R. 735 at 753) and The Queen v. Harrison, ([1977] 1 S.C.R. 238 at 245), for the proposition that the Minister was entitled to rely on his officials for advice and guidance before reaching a decision. 3. Analysis [21] The appellant's submission is twofold. [22] Firstly, the appellant claims there was no statutory authority for the Minister to decide as he did, since neither the Regulations nor the Act allow him to amend a licence in the manner in which he did. [23] The motions judge's analysis of the Act and Regulations is a complete answer to the appellant's first allegation. Her reasoning can be found at paragraphs 4 to 12 of the reported decision, where she has also reproduced the provisions of the Act and Regulations which are relevant to the issue raised. I have nothing to add to her consideration of the matter. [24] Secondly, the appellant claims that the motions judge erred in not recognizing that there was a breach of the duty of procedural fairness and that the doctrine of reasonable expectation applied. (See Bendahmane v. Canada (Minister of Employment and Immigration), [1989] 3 F.C. 16 (C.A.); Pulp, Paper and Woodworkers of Canada, Local 8 v. Canada (Minister of Agriculture, Pesticides Directorate), [1994] F.C.J. No. 1067, (1994), 174 N.R. 37 for a discussion of the doctrine of reasonable expectation.) Its representatives, it says, were promised "full consultation" by the Deputy Minister, Pierre Gravelle, in his letter of March 4, 1996. The Minister Jane Stewart indicated later, in her letter dated October 18, 1996, that she would meet with the appellant's representatives after they had completed their consultations. Yet, the appellant asserts, these promises were not fulfilled. [25] Related to this second issue is the appellant's submission that the motions judge erred in law and made a palpable and overriding error, which affected her assessment of the evidence, in finding that knowledge on the part of the appellant of Dr. Kubursi's appearance at a Windsor City Council meeting in opposition to the appellant's proposal constituted knowledge on its part of the existence of the Kubursi Report. She also erred, says the appellant, in drawing a negative inference from the fact that Professor Charles James, the affiant for the appellant, refused to undertake to ask KPMG if they had had a copy of the Kubursi Report prior to the Minister's decision. [26] The appellant's argument on the duty of procedural fairness requires a determination of the content of the duty. [27] In Baker v. Canada, ([1999] 2 S.C.R. 817 at 837ff.), L'Heureux-Dubé J. sets out the factors affecting the content of the duty of procedural fairness in the following manner: Although the duty of fairness is flexible and variable, and depends on an appreciation of the context of the particular statute and the rights affected, it is helpful to review the criteria that should be used in determining what procedural rights the duty of fairness requires in a given set of circumstances. I emphasize that underlying all these factors is the notion that the purpose of the participatory rights contained within the duty of procedural fairness is to ensure that administrative decisions are made using a fair and open procedure, appropriate to the decision being made and its statutory, institutional, and social context, with an opportunity for those affected by the decision to put forward their views and evidence fully and have them considered by the decision-maker. Several factorshave been recognized in the jurisprudence as relevant to determining what is required by the common law duty of procedural fairness in a given set of circumstances. One important consideration is the nature of the decision being made and the process followed in making it. In Knight, supra, at p. 683, it was held that "the closeness of the administrative process to the judicial process should indicate how much of those governing principles should be imported into the realm of administrative decision making". The more the process provided for, the function of the tribunal, the nature of the decision-making body, and the determinations that must be made to reach a decision resemble judicial decision making, the more likely it is that procedural protections closer to the trial model will be required by the duty of fairness. [...] A second factor is the nature of the statutory scheme and the "terms of the statute pursuant to which the body operates": Old St. Boniface, supra, at p. 1191. The role of the particular decision within the statutory scheme and other surrounding indications in the statute help determine the content of the duty of fairness owed when a particular administrative decision is made. Greater procedural protections, for example, will be required when no appeal procedure is provided within the statute, or when the decision is determinative of the issue and further requests cannot be submitted: see D.J.M. Brown and J.M. Evans, Judicial Review of Administrative Action in Canada (loose-leaf), at pp. 7-66 to 7-67. A third factorin determining the nature and extent of the duty of fairness owed is the importance of the decision to the individual or individuals affected. The more important the decision is to the lives of those affected and the greater its impact on that person or those persons, the more stringent the procedural protections that will be mandated. [...] [...] Fourth, the legitimate expectations of the person challenging the decision may also determine what procedures the duty of fairness requires in given circumstances. Our Court has held that, in Canada, this doctrine is part of the doctrine of fairness or natural justice, and that it does not create substantive rights: Old St. Boniface, supra, at p. 1204; Reference re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525, at p. 557. As applied in Canada, if a legitimate expectation is found to exist, this will affect the content of the duty of fairness owed to the individual or individuals affected by the decision. If the claimant has a legitimate expectation that a certain procedure will be followed, this procedure will be required by the duty of fairness. [...] Fifth, the analysis of what procedures the duty of fairness requires should also take into account and respect the choices of procedure made by the agency itself, particularly when the statute leaves to the decision-maker the ability to choose its own procedures, or when the agency has an expertise in determining what procedures are appropriate in the circumstances: Brown and Evans, supra, at pp. 7-66 to 7-70. While this, of course, is not determinative, important weight must be given to the choice of procedures made by the agency itself and its institutional constraints: IWA v. Consolidated-Bathurst Packaging Ltd., [1990] 1 S.C.R. 282, per Gonthier J. I should note that this list of factors is not exhaustive. These principles all help a court determine whether the procedures that were followed respected the duty of fairness. Other factors may also be important, particularly when considering aspects of the duty of fairness unrelated to participatory rights. The values underlying the duty of procedural fairness relate to the principle that the individual or individuals affected should have the opportunity to present their case fully and fairly, and have decisions affecting their rights, interests, or privileges made using a fair, impartial, and open process, appropriate to the statutory, institutional, and social context of the decision. [Emphasis added] [28] When applied to the instant situation, the majority of the factors identified in Baker v. Canada, which affect the content of the duty of procedural fairness, militate heavily in favour of relaxed requirements under the duty. The decision in question was a policy decision which involved the exercise of considerable discretion and the consideration of multiple factors. The decision making process did not resemble a judicial proceeding--it was merely a consultative process in which the Minister invited the appellant to submit materials documenting its views on the proposed initiative. The effect of the decision on the lives of those with an interest was purely economic, namely the loss of an additional source of income and, therefore, of moderate importance. The consultative process chosen by the Minister, whereby he indicated that he would accept and consider any submissions from the appellant, was generous. The appellant was not limited in its ability to present documentation to the Minister's office. Its submissions were considered by Revenue Canada in making its determination on the proposal. The appellant was permitted to meet with senior Revenue Canada officials to discuss its proposed initiative, and was well aware of the issues of concern identified by the Minister regarding the proposal. The Minister had promised that no decisions would be made "without full consultation with all interested parties". There is simply no basis for the assertion that the appellant had a reasonable expectation of receiving copies of all documents generated during the study of its proposal. [29] The consultation process was extensive as evidenced from the two memoranda the Minister received. The first, dated October 20, 1997, advised the Minister of the ongoing discussions concerning the appellant's proposal and provided him with a recommended course of action. It noted the three key concerns that were at the basis of the government policy and the various meetings held between government officials and the appellant's representatives. It referred to the Windsor City Council's opposition to the proposal on January 20, 1997, by a vote of six against and four in favour. It mentioned the opposition of the mayors of Windsor, Sarnia and Sault St-Marie and of the Member of Parliament for Sarnia-Lambton. It indicated that an evaluation prepared by Dr. Kubursi of McMaster University concluded that the KPMG Study could not be used as an adequate basis for permitting the sale of duty- and tax-free fuel at the Ambassador Bridge. It informed the Minister that his predecessor, the Honourable Jane Stewart, had had meetings with Members of the House and with one Cabinet Minister, and that two Members of the House were in favour while two, including the Cabinet Minister, were against the proposal. It further indicated that on February 7, 1997, the Assistant Deputy Minister, Customs Border Services and Trade Administration, met with the Assistant Deputy Minister, Tax Policy Department of Finance, and a representative of the Department of Industry to discuss the proposal in question. They considered the KPMG Study and its subsequent enhancement "flawed and its findings unreliable". It was their view that nothing in the two studies suggested that the key government concerns had been mitigated in any way. Consequently, they reaffirmed in writing their opposition to the proposal. The second memorandum, dated February 2, 1998, concurred with by the Minister, was largely to the same effect, except that it was in a shorter form. [30] The motions judge found that the appellant should have known of Dr. Kubursi's concern with the proposal, at least as early as Dr. Kubursi's appearance at the Windsor City Council meeting on January 20, 1997. Contrary to the appellant's claim, however, she did not find that the appellant knew of the existence of the Report (appellant's Memorandum of Fact and Law, para. 45). [31] She drew a negative inference from the statement of the appellant's affiant, Professor James, that (Appeal Book at 172): [...] [u]ntil receiving a copy of the Kubursi report by letter from counsel for the Minister of National Revenue, dated March 31, 1998, neither the Applicant nor any individual associated with the initiative to sell duty and tax free fuel at the Duty Free Shop had obtained a copy of the report. [32] Professor James explained in his cross-examination that when he referred to "any individual associated with the initiative to sell duty and tax free fuel", he did not intend to include KPMG (Appeal Book at 246). He recognized, however, earlier in his cross-examination (Appeal Book at 191ff.) that Messrs. Dan Stamper and Pierre Richard, Professor Ed Ratushny and Dr. R.W. Ianni had had more involvement with Revenue Canada than him and that "there may well be others involved in the KPMG Report who had detailed discussions". (Appeal Book at 192). [33] The motions judge held that, because Professor James stated that KPMG had had more dealings with Revenue Canada than he had had with respect to the proposal, the best evidence had not been put forward by the appellant in support of the statement that "no one associated with the initiative to sell duty- and tax-free fuel had a copy of the [Kubursi] Report". (Paragraph 24 of her reasons). [34] The motions judge misquoted Professor James in stating that he agreed that KPMG had had more dealing with Revenue Canada than he (paragraph 24 of her reasons). Professor James only said that there were people that had more contact with Revenue Canada than him and that "there may well be others involved in the KPMG Report who had detailed discussions" (Emphasis added - Appeal Book at 192). However, Professor James' statement remained broad and imprecise with regard to KPMG's possible knowledge of the Kubursi Report prior to the Minister's decision. It was, on this account, open to her to draw the negative inference at issue. [35] The Kubursi Report was but one of the considerations brought to the attention of the Minister. Others were the key policy concerns expressed by the government over the years, their review by government departments, the division among the Minister's political colleagues and the opposition of the Windsor City Council and of a number of mayors. The promise by the Minister had been that any proposal submitted by the appellant would be thoroughly reviewed and that no decisions would be made "without full consultation with all interested parties". The appellant was not placed at a disadvantage to those opposed to the proposal. It had the opportunity to communicate with Revenue Canada to debate the opposing views since the government's central concerns were made public. It could, for instance, have written to the government to make its views known on the concerns expressed by the Windsor City Council's members or by Dr. Kubursi, or by others. No promises were made that the letters or documents from one interested party would be given to the other interested parties for them to comment on before a decision would be made, or that the KPMG Reports, or any other reports, would be distributed to all interested parties. It is doubtful that the Honourable Jane Stewart could, by her letter of October 18, 1998, bind her colleague, the Honourable Herb Dhaliwal, into the consultation process described in her letter. [36] The decision taken was ultimately one of a highly discretionary nature involving multiple considerations and far reaching consequences. It was open to the motions judge to conclude that there had been no breach of the duty of procedural fairness in the circumstances. [37] I would dismiss this appeal with costs. "Alice Desjardins" J.A. "I agree A.M. Linden J.A." "I agree B. Malone J.A."