A-207-84
Scarborough Community Legal Services (Appel-
lant)
v.
The Queen (Respondent)
Court of Appeal, Heald, Urie and Marceau JJ.-
Toronto, January 9; Ottawa, February 1, 1985.
Judicial review - Statutory appeals - Income tax
Charities - Appeal from refusal to register appellant as
charity - Material submitted supporting application, and
additional material filed upon request - No further com
munication from Minister until receipt of refusal - Appeal
dismissed - No failure to comply with rules of natural justice
or procedural fairness in not giving appellant notice of case
against it, or not holding hearing - Renaissance International
v. Minister of National Revenue, [19831 1 F.C. 860; (1982), 47
N.R. 1 (C.A.) distinguished - Parliament's will reflected by
legislation not requiring hearing - Other remedies available
to correct improper application of law or to expose further
facts - Income Tax Act, S.C. 1970-71-72, c. 63, ss. 168 (as
am. by S.C. 1976-77, c. 4, s. 87), 172(3) (as am. by S.C.
1977-78, c. 1, s. 79; 1977-78, c. 32, s. 41), (4) (as am. by S.C.
1974-75-76, c. 26, s. 108; 1976-77, c. 4, s. 87; 1977-78, c. 32,
s. 41), 180 (as am. by S.C. 1980-81-82-83, c. 158, s. 58),
244(16).
Income tax - Charities - Appeal from refusal to register
appellant as charity, based on participation in political activi
ties - Appellant, no-share corporation, operating as com-
munity-based legal clinic, participating in rally for Family
Benefit program and involved with Committee to Improve
Scarborough Property Standards By-laws - Appeal dis
missed - "Charitable" not including political activity aimed
at influencing policy-making process - Distinction between
purposes and means not relevant as s. 149.1(1)(b) referring to
activities, not purposes - Distinction between primary and
incidental purposes to be applied in giving effect to s.
149.1(1)(b) - Appellant's sustained efforts to influence poli-
cy-making process constituting essential part of action and not
merely incidental to some of its charitable activities - Income
Tax Act, S.C. 1970-71-72, c. 63, ss. 110(1)(a)(i) (as am. by
S.C. 1976-77, c. 4, s. 87; 1980-81-82-83, c. 140, s. 65), (8)(c)
(as am. by S.C. 1976-77, c. 4, s. 43), 143(1)(f) (as am. by S.C.
1976-77, c. 4, s. 59), 149.1(1)(b) (as enacted by S.C. 1976-77,
c. 4, s. 60).
Charities - Appeal from refusal to register appellant as
charity for tax purposes based on participation in political
activities - Appeal dismissed - Renaissance International v.
Minister of National Revenue, [19831 1 F.C. 860; (1982), 47
N.R. 1 (C.A.) distinguished - No error in holding involvement
in political activities disentitling organization to registration
as charity - Distinctions between purposes and means, and
between incidental and primary purposes discussed - Income
Tax Act, S.C. 1970-71-72, c. 63, ss. 110(1)(a)(i) (as am. by
S.C. 1976-77, c. 4, s. 87; 1980-81-82-83, c. 140, s. 65), (8)(c)
(as am. by S.C. 1976-77, c. 4, s. 43), 143(1)(f) (as am. by S.C.
1976-77, c. 4, s. 59), 149.1(1)(b) (as enacted by S.C. 1976-77,
c. 4, s. 60), 168 (as am. by S.C. 1976-77, c. 4, s. 87), 172(3) (as
am. by S.C. 1977-78, c. 1, s. 79; 1977-78, c. 32, s. 41), (4) (as
am. by S.C. 1974-75-76, c. 26, s. 108; 1976-77, c. 4, s. 87;
1977-78, c. 32, s. 41), 180 (as am. by S.C. 1980-81-82-83, c.
158, s. 58), 244(16).
This is an appeal from the decision of the Minister, refusing
the appellant's application for registration as a charity. The
appellant, a no-share corporation, operates as a community-
based legal clinic. It applied for registration as a charity in
July, 1983 by completing the prescribed form and filing sup
porting documents. The appellant added to the supporting
documentation upon request. The appellant had no further
communication from the Department until it was advised of the
Minister's refusal, which was based on the appellant's partici
pation in political activities, such as a rally relating to the
Family Benefits program and involvement with the Committee
to Improve the Scarborough Property Standards By-laws. The
appellant alleges that the Minister failed to comply with the
rules of natural justice or procedural fairness in coming to a
decision without giving it prior notice of the case against it and
an opportunity to meet that case. It also alleges that the
Minister erred in holding that any involvement in political
activities disentitles an organization to registration as a charity.
The appellant argues that the activities referred to by the
Minister are merely means to achieve objects and, as such, are
irrelevant; even if they have to be considered, they are activities
that constitute partisan advocacy, not political activities; in any
event, be they political activities or not, they are only incidental
to primary purposes.
Held (Heald J. dissenting), the appeal should be dismissed.
Per Marceau J.: There was no obligation on the Minister to
notify the appellant, invite submissions or conduct a hearing
prior to refusing its application for registration as a charity.
The appellant argued that in view of the special system of
appeal provided in section 180 of the Income Tax Act, whereby
an application for registration as a charity may only be
appealed to the Federal Court of Appeal, the decision has to be
taken as a judicial decision subject to the laws of natural
justice. Alternatively, if still an administrative decision, it must
be one which requires the authority to act fairly, which would
require the Minister to give an applicant notice of the case
against it and an opportunity to meet that case, prior to
reaching a conclusion adverse to the applicant. The appellant
relied on Renaissance International v. Minister of National
Revenue, [1983] 1 F.C. 860; (1982), 47 N.R. 1 (C.A.), where
the Minister's decision to revoke the registration as a charity
was set aside.
The Renaissance case does not apply. The gist of the
common reasoning was that the record before the Minister had
a serious defect in that it contained "no input from the appel
lant", a defect that could not be cured by the appeal since
under the provisions of the Act, the Court was expected to
decide on the basis of the record constituted by the court of
first instance. Here the decision to refuse the application was
made solely on the basis of evidence submitted by the applicant.
Applying the criteria set out in Minister of National Reve
nue v. Coopers and Lybrand, [1979] 1 S.C.R. 495, the Minis
ter's function is purely administrative. Requiring a hearing
would go beyond Parliament's will as reflected in the legisla
tion. Justice and equity would not be better served by requiring
a hearing, as an appeal lies to remedy improper application of
the law, and an application may be renewed to expose further
facts.
While an undertaking aimed specifically and directly at
influencing the policy-making process may always be said to be
political, it is hard to envisage how it can qualify as `chari-
table" within the meaning of the Act. There is no definition of
"charitable" in the Act and the common law tests remain
vague, but the meaning of "charitable" cannot be extended so
as to cover a particular activity aimed at influencing the
policy-making process.
A distinction between object and means cannot be so adapted
as to have a role to play in identifying a "charitable organiza
tion" under paragraph 149.1(1)(b). In cases where the distinc
tion between purpose and means was given effect, the question
was whether the organization was established for charitable
purposes only. Under paragraph 149.1(1)(b), the question is
whether the organization is one "whose resources are devoted
exclusively to charitable activities," a difference all the more
striking in that the preceding provision dealing with "charitable
foundation" refers to charitable purposes. The distinction could
be relied on in the cases only with reference to the declared
purposes for which the body had been constituted, qualified to
the effect that means which could be said to be "an end in
themselves" were to be considered "collateral purposes". The
activities of a group cannot be classified on the sole basis of
their more or less close proximity to the general purposes for
which the group was organized.
The distinction between primary and incidental purposes
should be adapted and applied in giving effect to paragraph
149.1(1)(b). An organization should not lose its charitable
status because of exceptional and sporadic activity in which it
may be momentarily involved or because an incidental compo
nent of its activity cannot be seen as a charity. However, the
appellant's sustained efforts to influence the policy-making
process constitute an essential part of its action and are not
only "incidental" to some other of its charitable activities.
Per Urie J.: There is no obligation on the Minister to invite
representations or conduct a hearing before reaching a decision
on the application. It is always a question of construing the
statutory scheme as a whole to see to what degree the legislator
intended the principle of procedural fairness to apply. The
applicant knows the legal requirements for satisfying the Minis
ter that the organization is a charity. Nothing precludes the
applicant from making submissions in support of its applica
tion, or from filing additional material to demonstrate that it is
truly a charity to which registration should be granted.
The Renaissance case is distinguishable on two grounds.
Renaissance had been registered as a charity for some time, so
that revocation of its registration took away other benefits, such
as the ability to financially plan for its charitable activities
which it might lose if donors lost the right to claim deductions
for their donations. Those benefits, as a matter of fairness
ought not to have been terminated without giving the benefici
ary the opportunity to know the reasons for the proposed
revocation. No such rights can have accrued to an applicant for
registration. Also, the decision in the Renaissance case was
made without notice either of the investigations into its activi
ties, their results, nor the basis upon which the Minister
proposed to revoke the registration. Here, the appellant must
have known the statutory requirements for its characterization
as a charity and that its activities must be exclusively chari
table. It knew, or ought to have known, that its involvement in
political advocacy might jeopardize its charitable bona fides so
that it was incumbent on it to satisfy the Minister that the
political activity did not affect its primary charitable function.
Per Heald J. (dissenting): The Minister should have told the
appellant before refusal why its application was being refused
and given it an opportunity to respond. The Renaissance case
applies to this case, notwithstanding that it dealt with a revoca
tion of registration and this case deals with a refusal to register.
Both are appeals brought pursuant to subsection 172(3) of the
Income Tax Act, and section 180 also applies to this appeal.
Accordingly the Minister's decision is a quasi-judicial decision.
An appeal under section 180 is an appeal in which the question
is whether the tribunal below was right on the basis of the
materials which it had before it when it made its decision.
In this case the Minister's decision was made solely on the
basis of evidence submitted by the appellant. However, the
rationale from Renaissance still applies because the Minister
made his decision based on his own appreciation of certain facts
contained in the material submitted by the appellant. That
appreciation was based on his unilateral interpretation of some
of the appellant's activities. Natural justice or the duty to act
fairly would require not necessarily a formal hearing, but
giving the appellant the opportunity to attempt to answer the
Minister's objections. An approach which so limits and con
strains the rules of procedural fairness and natural justice as to
apply them only in cases where adverse material has been filed
is an undue limitation of those concepts.
The appellant was given the right pursuant to the Act to
apply for charitable registration. Rejection of registration has
serious consequences, i.e., it would seriously restrict its fund-
raising capabilities.
CASES JUDICIALLY CONSIDERED
APPLIED:
Minister of National Revenue v. Coopers and Lybrand,
[1979] 1 S.C.R. 495; Attorney General of Canada v.
Inuit Tapirisat of Canada et al., [1980] 2 S.C.R. 735;
revg. (sub nom. Inuit Tapirisat of Canada v. The Right
Honourable Jules Léger), [1979] 1 F.C. 710 (C.A.).
DISTINGUISHED:
Renaissance International v. Minister of National Reve
nue, [1983] 1 F.C. 860; (1982), 47 N.R. 1 (C.A.).
CONSIDERED:
Special Commissioners of Income Tax v. Pemsel, 3 T.C.
53; [1891] A.C. 531; [1891-4] 2 All E.R. Rep. 28 (H.L.);
British Launderers' Research Association v. Borough of
Hendon Rating Authority, [1949] 1 K.B. 462; 1 All E.R.
21 (C.A.).
REFERRED TO:
Guaranty Trust Company of Canada v. Minister of
National Revenue, [1967] S.C.R. 133; McGovern v.
Attorney General, [1981] 3 All E.R. 493 (Ch.D.); Na
tional Anti-Vivisection Society v. Inland Revenue Com
missioners, [1948] A.C. 31 (H.L.); In re Strakosch,
decd. Temperley v. Attorney-General, [1949] Ch. 529
(C.A.); Roll of Voluntary Workers' Trustees v. Inland
Revenue, [1942] S.C. 47; Regional Assessment Commis
sioner et al. v. Caisse populaire de Hearst Ltée, [1983] 1
S.C.R. 57; Furnell v. Whangarei High Schools Board,
[1973] A.C. 660 (P.C.); Nicholson v. Haldimand-Nor-
folk Regional Board of Commissioners of Police, [1979]
1 S.C.R. 311.
COUNSEL:
C. D. Ateah and Elizabeth J. Klassen for
appellant.
Wilfrid Lefebvre, Q.C. and Bonnie F. Moon
for respondent.
SOLICITORS:
Scarborough Community Legal Services,
Scarborough, Ontario, for appellant.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment
rendered in English by
HEALD J. (dissenting): I have had the advan
tage of reading in draft the reasons for judgment
proposed by my brother, Marceau J. herein. The
facts, the relevant statutory provisions and the
grounds of appeal are accurately set out therein
and need not be repeated.
I agree with Mr. Justice Marceau that while
both grounds of appeal asserted by the appellant
are supportive of the appeal, they are not of the
same type and do not give rise to the same remedy.
I also agree that first ground of appeal (which he
characterizes as the procedural issue) would, if
successful, only lead to a referral back of the
matter to the Minister with directions as to the
proper procedural steps to be followed before
coming to a conclusion, while the other ground of
appeal may force the Court to take a position as to
the substance of that conclusion. I also agree that
the second ground of appeal need only be
addressed if the first one proves to be ill founded.
Mr. Justice Marceau concludes that the proce
dural issue raised by the appellant is ill founded
and, thus, proceeds to a consideration of the
second issue. Because I have concluded that there
is merit in the procedural issue and that the appeal
should be allowed, and the matter referred back to
the Minister with directions, it is not necessary for
me to enter into a consideration of the second issue
raised by the appellant. I will, therefore, in these
reasons, confine myself to the procedural issue.
Contrary to the view expressed by my brother
Marceau, I have the opinion that the decision of
this Court in the case of Renaissance International
v. Minister of National Revenue, [1983] 1 F.C.
860; (1982), 47 N.R. 1 (C.A.) does have applica
tion in the case at bar. It is true that in the
Renaissance case, the appeal to the Court was
from the Minister's notice of revocation of the
charitable registration of Renaissance under sub
section 168(1) of the Income Tax Act [S.C. 1970-
71-72, c. 63 (as am. by S.C. 1976-77, c. 4, s. 87)]
whereas in this case, the appeal is from a refusal
by the Minister to register the appellant as a
registered charity. However, it si also accurate to
observe that both appeals are brought pursuant to
subsection 172(3) [as am. by S.C. 1977-78, c. 1, s.
79; 1977-78, c. 32 s. 41] of the Income Tax Act,
the relevant portion of which reads:
172....
(3) Where the Minister
(a) refuses to register an applicant for registration as a
registered charity or registered Canadian amateur athletic
association, or gives notice under subsection 168(1) to such a
charity or association that he proposes to revoke its
registration,
... the charity ... in a case described in paragraph (a) ...
may, notwithstanding section 24 of the Federal Court Act,
appeal from such decision or from the giving of such notice to
the Federal Court of Appeal.
Likewise, in my view, section 180 [as am. by S.C.
1980-81-82-83, c. 158, s. 58] of the Income Tax
Act applies to the present appeal. The relevant
portion thereof reads as follows:
180. (1) An appeal to the Federal Court of Appeal pursuant
to subsection 172(3) may be instituted by filing ... in the
Court within 30 days from
(a) the time the decision of the Minister to refuse the
application for registration ... was served by the Minister by
registered mail on the party instituting the appeal, or
as the case may be, or within such further time as the Court of
Appeal or a judge thereof may, either before or after the expiry
of those 30 days, fix or allow.
(2) Neither the Tax Court of Canada nor the Federal
Court—Trial Division has jurisdiction to entertain any pro
ceeding in respect of a decision of the Minister from which an
appeal may be instituted under this section.
(3) An appeal to the Federal Court of Appeal instituted
under this section shall be heard and determined in a summary
way.
Accordingly, I think that my observations at
pages 868 — 869 F.C.; at page 3 N.R. of the
Renaissance case apply to the instant case. The
passage I am referring to reads as follows:
In my view, both of those decisions are, in all likelihood,
quasi-judicial decisions notwithstanding that the statutory
scheme as set out supra does not specifically provide for
participation by the party affected in the adjudicative process.
This view is strengthened by the fact that the statute provides
for an appeal to this Court, an appeal similar to appeals to this
Court from the Trial Division. A perusal of sections 172 and
175 to 180 inclusive of the Income Tax Act makes it clear, in
my view, that whereas the so-called "appeals" from an assess
ment directly to the Trial Division or from the Tax Review
Board to the Trial Division are intended to be trials de novo, an
appeal under section 180 to this Court is an appeal in the
normal sense, that is, an appeal in which the question is
whether or not the tribunal below was right on the basis of the
materials which it had before it when it made its decision.
I so conclude because I think that reasoning
applies in this case as well since the right of appeal
herein is also found in subsection 172(3). There
fore the provisions of section 180 apply to this
appeal as well. Accordingly, and for the reasons
expressed in Renaissance supra, I think that the
Minister's decision in the case at bar is a quasi-
judicial decision. At pages 870-871 F.C.; at page 4
N.R. of the Renaissance reasons, I said:
I am, accordingly, persuaded that the appellant's rights are
seriously and adversely affected by these "decisions" so as to
impose upon the Director the duty to observe the requirements
of natural justice, or at the very least, the duty to accord
procedural fairness to the appellant. The provision for an
appeal to this Court requires that appeal to be an appeal in the
strict and traditional sense since it is not an appeal by way of a
rehearing or trial de novo. Therefore, the appeal should be on a
proper record of the evidence adduced before the Director
which persuaded him to make the decisions herein impugned.
My reasons were concurred in by Cowan D.J.
Mr. Justice Pratte, the other member of the panel
in Renaissance wrote reasons concurring in the
result. At page 864 F.C.; at page 6 N.R. of the
report he said:
It is common ground that, before receiving that notice, the
appellant had not been made aware either of the allegations
retained against it or of the intention of the respondent to
revoke its registration. It is for that reason that, in support of
its appeal under subsection 172(3), it submitted that the
respondent failed to comply with the requirements of proce
dural fairness or natural justice.
and again at pages 865-866 F.C.; at page 7 N.R.:
However, in this instance, the right of appeal created by
subsection 172(3) is a right of appeal to a Court which, it is
well known, normally decides appeals on a record created in the
inferior Court and accepts to receive further evidence only "on
special grounds" (see Rule 1102(1) [of the Federal Court
Rules]). Moreover, when the provisions of the Income Tax Act
applicable to that appeal are contrasted with those of section
175 governing the appeals to the Trial Division, it becomes
apparent that it was not intended that the appeal to this Court
be an appeal de novo like the appeal in the Trial Division. I
therefore conclude that the appeal created by subsection 172(3)
is what I would call an ordinary appeal which the Court
normally decides on the sole basis of a record constituted by the
tribunal of first instance. It follows, in my view, that the
decision of the Minister to send a notice of revocation under
subsection 168(1) must be arrived at in a manner enabling the
Minister to create a record sufficiently complete to be used by
this Court in deciding the appeal. This presupposes, in my view,
that the Minister must follow a procedure enabling him to
constitute a record reflecting not only his point of view but also
that of the organization concerned.
For those reasons, I have concluded after much hesitation
that, contrary to what was argued by counsel for the respond
ent, the provisions of the Income Tax Act do not impliedly
relieve the Minister from the duty to comply with the rules of
natural justice and procedural fairness before sending a notice
pursuant to subsection 168(1). On the contrary, those provi
sions, as I read them, rather suggest that the Minister, before
sending the notice, must first give to the person or persons
concerned a reasonable opportunity to answer the allegations
made against them.
It is noted from the above quotations from the
reasons of Pratte J. that he was of the view that it
was incumbent on the Minister to "follow a proce
dure enabling him to constitute a record reflecting
not only his point of view but also that of the
organization concerned" and that "the Minister,
before sending the notice, must first give to the
person or persons concerned a reasonable opportu
nity to answer the allegations made against them."
I agree with Mr. Justice Marceau that there is a
factual difference between the Renaissance case
and the case at bar, namely—in the case at bar the
Minister's decision to refuse registration was made
solely on the evidence submitted by the appellant
itself. However, in my view, the rationale of
Renaissance still applies because the Minister
made his decision based on his own appreciation of
certain facts contained in the material submitted
by the appellant. That appreciation was based on
his unilateral interpretation of some of the appel
lant's activities as revealed in the appellant's
annual report without first contacting the appel
lant to advise it of that interpretation before refus-
ing the application. I do not contend that the
statutory scheme requires a formal hearing before
the decision to refuse was made. However, I do
think natural justice or the duty to act fairly would
require, perhaps, a telephone call or a letter to the
appellant advising of the Minister's difficulties or
problems with the application, thus giving the
appellant the opportunity to, at least, attempt to
answer the Minister's objections. This would have
resulted in a record reflecting the point of view of
both the Minister and the organization concerned.
Such a procedure would have given the appellant a
reasonable opportunity to answer the allegations
made against registration.
I think an approach which so limits and con
strains the rules of procedural fairness and natural
justice as to apply them only in cases where
adverse material has been filed, is an undue limita
tion of those concepts. In this case, the Minister
formed a view on the basis of the material submit
ted. He made his decision to refuse registration
based on that view without giving any indication to
the appellant of the basis for that view. Surely the
appellant should have been given an opportunity to
advance possible reasons to the Minister as to why
his preliminary view was not correct before the
Minister's decision to refuse was made. In the case
of Furnell v. Whangarei High Schools Board
([1973] A.C. 660 (P.C.)), Lord Morris of
Borth-Y-Gest, speaking for the majority, said, at
page 679 that "Natural justice is but fairness writ
large and juridically. It has been described as 'fair
play in action'." In the Nicholson case (Nicholson
v. Haldimand-Norfolk Regional Board of Com
missioners of Police, [1979] 1 S.C.R. 311) Chief
Justice Laskin, speaking for the majority of the
Supreme Court of Canada, said, at page 328:
The present case is one where the consequences to the appellant
are serious indeed in respect of his wish to continue in a public
office, and yet the respondent Board has thought it fit and has
asserted a legal right to dispense with his services without any
indication to him of why he was deemed unsuitable to continue
to hold it.
In my opinion, the appellant should have been told why his
services were no longer required and given an opportunity,
whether orally or in writing as the Board might determine, to
respond. The Board itself, I would think, would wish to be
certain that it had not made a mistake in some fact or
circumstance which it deemed relevant to its determination.
Once it had the appellant's response, it would be for the Board
to decide on what action to take, without its decision being
reviewable elsewhere, always premising good faith.
I think those comments apply to the case at bar.
This appellant was given the right, pursuant to the
Income Tax Act to apply for charitable registra
tion under that Act. Given compliance with the
applicable provisions thereof, it had the right to
receive registration. Rejection of registration has
for it, very serious consequences—for example—
rejection would very seriously restrict its fund-rais
ing capabilities. As in Nicholson, I think this
appellant should have been told, before refusal,
why its application was being refused and given an
opportunity to respond. I think the Minister was in
a position similar to that of the Board in Nichol-
son, namely, he would wish to be certain that he
"had not made a mistake in some fact or circum
stance" which was relevant to his decision.
For these reasons I would allow the appeal, set
aside the Minister's decision herein and refer the
matter back to the Minister for reconsideration
after advising the appellant of his objections to the
application and after affording to the appellant a
reasonable opportunity to answer those objections.
* * *
The following are the reasons for judgment
rendered in English by
URIE J.: I have had the advantage of reading
the reasons for judgment of both Heald J. and
Marceau J. It is with some regret that I have
concluded that I cannot agree with Mr. Justice
Heald on the "procedural issue" and, thus, with
his proposed disposition of the appeal. On the
other hand, while I agree with the conclusion
reached by Mr. Justice Marceau on the "procedu-
ral issue", I arrive at the same conclusion by a
different approach so that I must briefly set forth
the reasoning whereby I come to that conclusion.
Counsel for the respondent placed great empha
sis on the fact that when an organization seeks to
be registered as a charity under the Income Tax
Act, it is seeking a privilege which is available only
to those who meet the strict requirements of the
statute relating to their qualifications as charities.
Among those requirements are the procedural ones
prescribed in accordance with the statute for satis
fying the Minister of National Revenue that all of
the purported charity's resources "are devoted to
charitable activities...." The application is
required to be in a prescribed form and to be
supported by documents the nature of which is
also prescribed, although there is no limitation on
an applicant providing other supporting material.
The legislative framework within which the
privilege extended to registered charities to receive
gifts without being liable to pay income tax there
on and for the donors to such registered charities
to be entitled to claim deductions for such gifts in
the computation of their taxable income, is found
in the following subsections of the Act:
110. (1) For the purpose of computing the taxable income of
a taxpayer for a taxation year, there may be deducted from his
income for the year such of the following amounts as are
applicable:
(a) the aggregate of gifts made by the taxpayer in the year
(and in the five immediately preceding taxation years to the
extent of the amount thereof that was not deductible in
computing the taxable income of the taxpayer for any
preceding taxation year) to
(i) registered charities
(8) In this section,
(c) "registered charity" means
(i) a charitable organization or charitable foundation,
within the meanings assigned by subsection 149.1(1), that
is resident in Canada and was either created or established
in Canada, or
(ii) a branch, section, parish, congregation or other divi
sion of an organization described in subparagraph (i) that
receives donations on its own behalf,
that has applied to the Minister in prescribed form for registra
tion, that has been registered and whose registration has not
been revoked under subsection 168(2).
149. (1) No tax is payable under this Part upon the taxable
income of a person for a period when that person was
(/) a registered charity;
149.1 (1) In this section,
(b) "charitable organization" means an organization, wheth
er or not incorporated, all the resources of which are devoted
to charitable activities carried on by the organization itself
and no part of the income of which is payable to, or is
otherwise available for, the personal benefit of any proprie
tor, member, shareholder, trustee or settlor thereof;
(d) "charity" means a charitable organization or charitable
foundation;
Section 168 provides for the circumstances in
which the registration of the charity may be
revoked. As pointed out by Marceau J., subsec
tions 172(3) and (4) relate, inter alia, to the
refusal of registration and the deemed refusal to
register certain charities. Subsection 244(16) pro
vides the authority for deeming prescribed forms
to be prescribed by the Minister and only he being
permitted to call such forms into question. No
issue is taken with the form used in this case and it
is common ground that the material filed in sup
port of the appellant's application for registration
complied with the requirements of the prescribed
form. Neither was it contested that the appellant
could have, had it wished to do so, filed other
explanatory material relating to its activities and
the means it employed to carry out its corporate
objects. As a matter of fact, the appellant com
plied with the request of the Minister of the filing
of additional material after the original application
had been submitted.
The sole issue then is whether, bearing in mind
the legislative framework within which the privi
lege extended to charities and to donors to them
exists, was the Minister in breach of the principles
of natural justice or of the rules of procedural
fairness in failing to give to the appellant the
opportunity to make submissions with respect to
the grounds upon which he proposed to refuse the
appellant's application for registration as a
charity?
As was said by Le Damn J. in this Court in Inuit
Tapirisat of Canada v. The Right Honourable
Jules Léger, [1979] 1 F.C. 710 (C.A.), at page
715:
Whether the procedural duty of fairness is to be regarded as
something different from natural justice or merely an aspect of
it, the majority opinion in the Nicholson case seems clearly to
indicate that its application is not to depend on the distinction
between judicial or quasi-judicial and administrative functions.
At page 717 he also had this to say:
Procedural fairness, like natural justice, is a common law
requirement that is applied as a matter of statutory interpreta
tion. In the absence of express procedural provisions it must be
found to be impliedly required by the statute. It is necessary to
consider the legislative context of the power as a whole. What is
really in issue is what it is appropriate to require of a particular
authority in the way of procedure, given the nature of the
authority, the nature of the power exercised by it, and the
consequences of the power for the individuals affected. The
requirements of fairness must be balanced by the needs of the
administrative process in question.
While the judgment of this Court in that case
was reversed by the Supreme Court of Canada,
neither of the foregoing statements was disavowed
and both seem to reflect the current thinking in
this country on the two doctrines.
In the Supreme Court of Canada on the appeal,
there styled Attorney General of Canada v. Inuit
Tapirisat of Canada et al., [1980] 2 S.C.R. 735,
Estey J. had this to say at page 755 about finding
a statutory basis for a requirement of procedural
fairness:
While it is true that a duty to observe procedural fairness, as
expressed in the maxim audi alteram partem, need not be
express (Alliance des Professeurs Catholiques de Montréal v.
Commission des Relations Ouvrières de la Province de
Québec), it will not be implied in every case. It is always a
question of construing the statutory scheme as a whole in order
to see to what degree, if any, the legislator intended the
principle to apply.
Applying that principle to the statutory scheme
for the registration of charities, I am unable to
find either as a matter of natural justice or of
procedural fairness, an obligation on the Minister
to invite representations or conduct a hearing
before reaching a decision on the application. The
prescribed material must, of course, support the
application. The contents of that material, both
that which is helpful and that which is damaging,
is, of course, known to the applicant as are the
legal requirements for satisfying the Minister that
the organization is in law a charity. Nothing that I
have found in the statute precludes an applicant
from making submissions in support of its applica
tion, or to explain deficiencies or defects therein or
from filing additional supporting material to
demonstrate that it is truly a "charity" to which
registration should be granted. Whether it chooses
either to do so or not, the Minister, relying on
what is before him, must decide whether registra
tion should be granted or not. The failure to call
for representations cannot, therefore, in the statu
tory context of an application for registration,
vitiate his decision, as I see it.
Nor do I believe that this Court's decision in the
Renaissance case, [1983] 1 F.C. 860 (C.A.) 1
affects this conclucion since I believe it to be
distinguishable on at least two grounds. First, and
most importantly, as I see it, in that case Renais
sance had been for some time registered as a
charity so that the revocation of its registration
took away from it an important privilege which it,
and donors to it, had had for some time. From the
fact of that registration there flowed other benefits
to the organization such as, for example, the abili
ty to indulge in financial planning for its chari
table activities which it might well lose in part if
donors to it lost the right to claim deductions for
their donations. Those benefits, as a matter of
fairness, ought not to have been terminated with
out giving the beneficiary of them at least the
opportunity to know the reasons for the proposed
revocation and to make representations with
' Compare Minister of Manpower and Immigration v. Har-
dayal, [1978] 1 S.C.R. 470, at page 478 where the revocation
of a Ministerial permit under the Immigration Act [R.S.C.
1970, c. I-2] was held to be an administrative act, not a judicial
or quasi-judicial one, but one in which the Minister is required
to act fairly.
respect thereto. Clearly, no such rights can have
accrued to an applicant for registration. The
second distinguishing feature in the case at bar
arises from the first. The decision by the Minister
in Renaissance was taken without notice being
given to the charity either of the investigations into
its activities, their results nor of the basis upon
which the Minister proposed to revoke the regis
tration. Here, on the other hand, while the precise
ground of refusal was not known to the appellant,
it must be taken to have been aware that to qualify
as a charity it must meet the statutory and
common law requirements for its characterization
as such and, in particular, that its activities must
be exclusively charitable. It knew, or ought to have
known, that its involvement in political advocacy
might cast a doubt as to its charitable bona fides
so that it was incumbent on it to satisfy the
Minister that the political activity did not affect its
primary charitable function.
For all of the foregoing reasons, I am of the
opinion that the appellant's argument on the pro
cedural aspect of its appeal must fail.
It is unnecessary for me to comment on the
substantive issue since I am substantially in agree
ment with what my brother Marceau J. has said. I,
too, would dismiss the appeal on its merits.
Since the appellant has not succeeded on either
of its bases for the appeal, I would dismiss it with
costs.
* * *
The following are the reasons for judgment
rendered in English by
MARCEAU J.: This is an appeal from a decision
of the Minister of National Revenue denying the
appellant's application to be registered as a "chari-
ty" pursuant to the Income Tax Act, R.S.C. 1952,
c. 148 (as amended by S.C. 1970-71-72, c. 63;
1974-75-76, c. 26; 1976-77, c. 4; 1977-78, c. 1;
1977-78, c. 32).
Under the Income Tax Act, charitable organiza
tions registered as "charity" (paragraph
110(8)(c)) are given very special status: not only
are they exempted from tax, like all other non
profit organizations (paragraph 149(1)(J)), but
specially all donations made to them are deduct
ible by donors in computing their own taxable
incomes (paragraph 110(1)(a)(i)). There is how
ever only one short paragraph of the Act that
purports to define a "charitable organization":
149.1 (1) In this section,
(b) "charitable organization" means an organization, wheth
er or not incorporated, all the resources of which are devoted
to charitable activities carried on by the organization itself
and no part of the income of which is payable to, or is
otherwise available for, the personal benefit of any proprie
tor, member, shareholder, trustee or settlor thereof;
and the sole provisions dealing directly with the
procedure relating to registration are to be found
in subsections 172(3) and (4):
172....
(3) Where the Minister
(a) refuses to register an applicant for registration as a
registered charity or registered Canadian amateur athletic
association, or gives notice under subsection 168(1) to such a
charity or association that he proposes to revoke its
registration,
(b) refuses to accept for registration for the purposes of this
Act any retirement savings plan,
(c) refuses to accept for registration for the purposes of this
Act any profit sharing plan or revokes the registration of
such a plan,
(d) refuses to issue a certificate of exemption under subsec
tion 212(14),
(e) refuses to accept for registration for the purposes of this
Act any education savings plan or revokes the registration of
any such plan,
(f) refuses to accept for registration for the purposes of this
Act any home ownership savings plan or revokes the registra
tion of any such plan, or
(g) refuses to accept for registration for the purposes of this
Act any retirement income fund or revokes the registration of
any such fund,
the applicant or the charity or association, as the case may be,
in a case described in paragraph (a), the applicant in a case
described in paragraph (b), (d), (e), (f) or (g) or a trustee
under the plan or an employer of employees who are beneficiar
ies under the plan, in a case described in paragraph (c), may,
notwithstanding section 24 of the Federal Court Act, appeal
from such decision or from the giving of such notice to the
Federal Court of Appeal.
(4) For the purposes of subsection (3), the Minister shall be
deemed to have refused
(a) to register an applicant for registration as a registered
charity or registered Canadian amateur athletic association,
(b) to accept for registration for the purposes of this Act any
retirement savings plan or profit sharing plan,
(c) to issue a certificate of exemption under subsection
212(14),
(d) to accept for registration for the purposes of this Act any
education savings plan,
(e) to accept for registration for the purposes of this Act any
home ownership savings plan, or
(/) to accept for registration for the purposes of this Act any
retirement income fund,
where he has not notified the applicant for registration or for
the certificate, as the case may be, of his disposition of the
application within 180 days after the filing of the application
with him, and, in any such case, an appeal from such refusal to
the Federal Court of Appeal pursuant to subsection (3) may,
notwithstanding anything in subsection 180(1), be instituted
under section 180 at any time by filing a notice of appeal in the
Court.
It will have been noted that the exact meaning
of the phrase "all the resources of which are
devoted to charitable activities" in the definition of
paragraph 149.1(1)(b) is nowhere given and the
manner in which an application for registration
will have to be presented to and disposed of by the
Minister is not expressly determined. Such legisla
tive laconism was bound to raise problems as it
was obviously leaving many questions unanswered.
Surprisingly, it does not appear that this Court has
yet been called upon to take position on any of
these questions, despite the fact that, as we have
been told, more than forty-five hundred applica
tions for registration are made each year, and close
to twenty percent of them are refused. This case,
so far as I know, is the first one to come before this
Court requiring the disposition of some of the most
basic of those unanswered questions.
The facts can hardly be more straightforward.
The appellant was incorporated as a no-share cor
poration in September 1982 under the Ontario
Corporations Act [R.S.O. 1980, c. 95], to operate
as a community-based legal clinic within the
meaning of the Ontario Legal Aid Act, R.S.O.
1980, c. 234. The objects for which it was incorpo
rated were:
To establish, maintain and operate a community clinic within
and for the benefit of the Scarborough community in the
Borough of Scarborough in the Municipality of Metropolitan
Toronto, in the Province of Ontario, and in connection with this
and subject to the applicable laws of Ontario from time to time,
to provide advice, assistance, representation, education and
research to both individuals and groups, and to organize, carry
on and participate in such other activities as may from time to
time seem expedient for the benefit of the Scarborough
community.
As a legal clinic, the appellant is funded by the
Ontario Legal Aid Plan (Ontario Legal Aid Regu
lations, R.R.O. 1980, Reg. 575, Part X), but its
directors would like to look to sources other than
the Plan for additional funds to carry on its activi
ties. If registered as a charitable organization, it
would, of course, be in a far better position to
solicit gifts. On July 13, 1983, the appellant
applied for registration as a "charity" by complet
ing the form prescribed by the Minister for that
purpose (form T-2050) and filing it with the
Department together with some governing docu
ments, namely its Annual Report, dated Septem-
ber 23, 1982, and a certified copy of its Letters
Patent. By letter dated August 9, 1983, the appel
lant was requested to add to the supportive docu
mentation attached to its application a copy of its
by-laws, a request it complied with, but it received
no other communication from the Department
until it was advised of the Minister's refusal by a
letter dated January 3, 1984 which read, in part,
as follows:
We have examined the application for registration as a charity
under the Income Tax Act submitted by the Scarborough
Community Legal Services.
We regret to advise you that the application cannot be granted.
Upon reading the Legal Service's Annual Report, it is our view
that your organization has participated and intends to continue
its participation in activities which are political. By way of
example, we refer to your participation in a rally at Queen's
Park with respect to the Family Benefits program, and the
involvement with the Committee to Improve the Scarborough
Property Standards By-laws.
The Political character of the cited activities denies the Scar-
borough Community Legal Services standing as a charity
within the meaning of the Income Tax Act. It may be that your
organization qualifies for tax-exempt status as a non-profit
organization under the Income Tax Act, paragraph 149(1)(l).
We regret that our response to the application of the Scarbor-
ough Community Legal Services could not be more favourable.
We can advise you that the Income Tax Act, paragraph 172(3)
provides an appeal from our decision.
In support of its appeal to this Court pursuant to
paragraph 172(3)(a), the appellant puts forward
two grounds. The first one is that the Minister has
failed to comply with the rules of natural justice or
procedural fairness in coming to a decision without
giving it prior notice of the case against it and an
opportunity to meet that case. The second one is
that the Minister has erred in holding that any
involvement in political activities disentitles an
organization to registration as a "charity" under
the Income Tax Act. A preliminary remark comes
to mind. While both grounds are supportive of the
appeal in that they both can lead to the setting
aside of the impugned decision, they obviously are
not both of the same type and cannot give rise to
the same remedy. The first one may only lead to a
referral back of the matter to the Minister with
instructions as to the proper procedural steps to be
followed before coming to a conclusion, while the
other may force the Court to take a position as to
the substance of that conclusion. It is clear, in
those circumstances, that the second ground will
have to be considered and disposed of only if the
first one proves to be ill founded.
1. The Procedural Issue
As noted above, a decision by the Minister to
refuse an application for registration as a "chari-
ty" may only be appealed to this Court (subsection
172(3) supra), the Tax Review Board and the
Federal Court, Trial Division being both denied
jurisdiction (section 180). The appellant's argu
ment on the procedural issue is that, in view of the
special system of appeal to which it is subjected,
the decision has to be taken as a judicial decision
subject to the laws of natural justice or, in the
alternative, if still an administrative decision, one
which requires the authority to act fairly, with the
result that the Minister cannot reach a conclusion
adverse to the applicant without first giving it
prior notice of the case against it and an opportu
nity to meet that case. And the appellant, in
support of its argument, refers to the decision of
this Court in Renaissance International v. Minis
ter of National Revenue, [1983] 1 F.C. 860;
(1982), 47 N.R. 1 (C.A.).
This Renaissance case was concerned with the
revocation of an organization's registration as a
charity under section 168 of the Act. The Minis
ter, through his Director of the Registration Divi
sion, had made the decision to revoke the registra
tion on the basis of information obtained through
investigations authorized by him, after having
been given notice of some disqualifying activities
in which the organization had apparently become
involved. The organization, however, had not been
advised that an inquiry was being carried out, nor
had it been given an opportunity to refute the
allegations. The Court was unanimous in setting
aside the decision. Both Mr. Justice Heald, writing
for himself and Mr. Justice Cowan D.J., and Mr.
Justice Pratte spoke in general terms of a failure
by the Director to observe the requirements of
natural justice and procedural fairness. But, the
gist of their common reasoning, as I understand it,
was that the record before the Minister had a most
serious defect in so far as, on the facts, it contained
"no input from the appellant", a defect that could
not be cured by the appeal since, under the provi
sions of the Act applicable to it, it was clear that
the Court was expected to decide as it does nor
mally, that is to say, on the sole basis of the record
constituted by the court of first instance.
It does not appear to me that this Renaissance
decision has application in the present case. While
a decision to revoke a previously recognized special
status on the ground of unacceptable conduct has
the effect of a penal conviction and the function of
making it may probably be said to be quasi-judi
cial, it being similar to that of a judge presiding
over a penal tribunal, a decision to deny an appli
cant the right to be given special status on the
facts and evidence submitted by him, lacks the
basic characteristics of an adjudication inter
partes by a court of law. Moreover and most
importantly, the decision to refuse the application
in the present case was not made on the basis of
information obtained without the interested party's
participation; it was made solely on the evidence
submitted by the applicant itself.
The function of the Minister in dealing with an
application for registration as a "charity" under
the Income Tax Act is, in my view, a strictly
administrative function, and in spite of the fact
that it involves the application of substantive rules
and not the implementation of social and economic
policy, on the basis of the basic criteria formulated
by Mr. Justice Dickson (as he then was) in the
leading case of Minister of National Revenue v.
Coopers and Lybrand, [1979] 1 S.C.R. 495, it
does not appear to me to be one subject, in its
exercise, to judicial or quasi-judicial process. I am
unable to accept the appellant's suggestion that
procedural fairness would call for a hearing of
some sort before a contrary decision is reached by
the Minister (or his duly authorized representa
tive). Not only do I think that a requirement of
that kind would go beyond Parliament's will as
reflected in the legislation, I fail to see how such a
hearing could better achieve justice and equity. If
the decision is wrong because the law was improp
erly applied to the facts or because improper
qualification was attributed to those facts, the
appeal will remedy the situation; and if the deci
sion is wrong because of a failure by the applicant
to give all the facts or to expose them correctly,
there is nothing to prevent him from renewing his
application.
My view is that there was no obligation on the
part of the Minister to notify the appellant and
invite submissions or to conduct a hearing prior to
refusing its application for registration as a chari
ty. The appellant therefore fails on its first ground
of attack, and that being so, it is necessary to
consider and dispose of the other issue raised by
the appeal.
2. The Substantive Issue
The passages of the letter of refusal reproduced
above made it clear that, in the opinion of the
Minister, the appellant was not a charitable organ
ization within the meaning of the Act because it
had participated in and intended to continue its
participation in "activities which are political",
such as taking part (as it had done the year
before) in a rally at Queen's Park to protest
against a proposal by the Government to bring
changes to the Family Benefits program, or being
involved (as it still was) with the Committee to
Improve the Scarborough Property Standards
By-laws. In the appellant's submission, this reason,
which provided the sole basis for the denial of its
application, is invalid because it is wrong in law. A
three-tier argument is advanced: the activities
referred to by the Minister are merely means to
achieve objects and, as such, are irrelevant; even if
they have to be considered, they are activities that
constitute partisian advocacy, not political activi
ties; in any event, be they political activities or not,
they are only incidental to primary purposes.
It might as well be said right away that I fail to
appreciate the accuracy or at least the pertinence,
in the present context, of the suggested distinction
between "partisan advocacy" and "political activi
ty". It seems to me that while an undertaking
aimed specifically and directly at influencing the
policy-making process may always be said to be
political, it is hard to envisage how it can qualify
as "charitable" within the meaning of the Act. It
is true that the word charitable is not defined in
the Act. It is also true that the common law tests
to identify charities as set out in the leading
English case of Special Commissioners of Income
Tax v. Pemsel, 3 T.C. 53; [1891] A.C. 531;
[1891-4] 2 All E.R. Rep. 28 (H.L.) (i.e., relief of
poverty, advancement of religion, advancement of
education, other purposes of a charitable nature
beneficial to the community as a whole), which
tests have been accepted in this country (see:
Guaranty Trust Company of Canada v. Minister
of National Revenue, [1967] S.C.R. 133) and are
now applied in practice (see: Information Circular
77.14 issued by the Department), remain quite
vague. But, having said that, I do not think that
the meaning of the word charitable can ever be so
extended as to cover a particular activity aimed, as
I said, specifically and directly at influencing the
policy-making process, whatever be the conditions
or the context in which it is carried out.
The appellant is able to advance an argument
with much more substance by relying on a distinc
tion between purposes or objects and means and,
alternatively, on a further distinction between pri
mary and incidental purposes. Indeed, the first
distinction has been developed and relied on in
many cases concerned with the identification of
charitable trusts, bodies or associations, in fact
mainly in England (see for instance: McGovern v.
Attorney General, [1981] 3 All E.R. 493 (Ch.D.);
National Anti-Vivisection Society v. Inland Reve
nue Commissioners, [1948] A.C. 31 (H.L.); In re
Strakosch, decd. Temperley v. Attorney-General,
[1949] Ch. 529 (C.A.); Roll of Voluntary Work
ers' Trustees v. Inland Revenue, [1942] S.C. 47)
but also in Canada, namely in the Guaranty Trust
Company case (supra). And the second distinc
tion, of course, is the foundation for the "prepon-
derant purpose test" widely applied in the jurispru
dence of the provinces and recently adopted by the
Supreme Court (in Regional Assessment Com
missioner et al. v. Caisse populaire de Hearst
Ltée, [1983] 1 S.C.R. 57) to determine whether a
person or corporation is "carrying on a business"
within the meaning of provincial business assess
ment statutes. I am of the opinion, however, that
these distinctions do not help the appellant's posi
tion in the circumstances of this case.
It ought to be noted first that, in all those cases
where the distinction between purpose and means
was given effect to, the question before the Court
was whether a certain trust, body or association
could be said to have been established or organized
"for charitable purposes only". Under paragraph
149.1(1) (b) of the Income Tax Act, the question
to be determined is different since it is whether the
organization is one "whose resources are devoted
exclusively to charitable activities", a difference
all the more striking in that, in the immediately
preceding provision of the Act dealing with "chari-
table foundation", the other type of "charity", the
reference is to "a corporation or trust constituted
and operated exclusively for charitable purposes".
It ought to be noted, as well that the distinction is
in itself quite a relative one, it being consistent
with human behavior that the object a person has
in view today is often simply a means for him to
achieve a further object tomorrow. The distinction
could be relied on in those cases referred to above
only with reference to the declared purposes for
which the trust or the body had been constituted or
was operated and even then, not without the
important qualification set out by Lord Denning in
the British Launderers' Research Association v.
Borough of Hendon Rating Authority, [1949] 1
K.B. 462, at page 467; 1 All E.R. 21 (C.A.), at
page 23 and adopted by Ritchie J. in the Guaranty
Trust Company case (supra), to the effect that
means which could be said to be "an end in
themselves" were to be considered "collateral pur
poses". In any event, I do not see how such a
distinction between object and means can be so
adapted as to have a role to play in identifying a
"charitable organization" under paragraph
149.1(1)(b) of the Act. It seems to me that the
activities of a group can hardly be rationally clas
sified on the sole basis of their more or less close
proximity to the general purposes for which the
group was organized.
The other distinction relied on by the appellant
in the alternative, the distinction between primary
and incidental purposes, is a much more funda
mental and objective one, and I would readily
concede that it should be adapted and applied in
giving effect to paragraph 149.1(1)(b) of the Act.
I would feel that an organization should not lose
its status as a charitable organization because of
some quite exceptional and sporadic activity in
which it may be momentarily involved, and, above
all, I do not think that an activity would be
deprived of its charitable nature only because one
of its components or some incidental or subservient
portion thereof cannot, when considered in isola-
tion, be seen as a charity. It is clear, however, that
the appellant's sustained efforts to influence the
policy-making process constitute an essential part
of its action and are not only "incidental" to some
other of its charitable activities.
I wish I could have found otherwise, but I do not
think that the appellant's contentions with respect
to the substantive issue are valid. It does not
appear to me that the Minister was wrong in
coming to the conclusion that the appellant did not
satisfy the requirements of the Act to be registered
as a "charity".
My overall conclusion, therefore, is that the
appeal should be dismissed. with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.