A-888-80
Renaissance International (Appellant)
v.
Minister of National Revenue (Respondent)
Court of Appeal, Pratte, Heald JJ. and Cowan
D.J.—Toronto, November 16 and 17, 1982.
Income tax — Charitable organizations — Appeal from
decision of Director of Registration Division of Department of
National Revenue proposing to revoke appellant's registration
as charity under s. 168 of Income Tax Act — Director made
decision on basis of information gathered during investigations
of appellant authorized by him — Appellant was neither
advised of investigations nor allowed opportunity to respond to
allegations before Director in advance of decision being made
to send notice of proposed revocation of registration under s.
168(1) — S. 168(2) provides that 30 days after notice mailed
Minister may publish it in Canada Gazette whereupon revoca
tion effective — Whether Director, in exercising authority
under s. 168(1) is required to comply with rules of natural
justice or procedural fairness — Whether, even if there was
breach of natural justice or procedural fairness, effect cured
because appellant had right of appeal under s. 172(3) —
Appeal allowed — 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.
idem; 1977-78, c. I, s. 79), 180 — Income Tax Regulations,
C.R.C., c. 945, s. 900(7)(b) — Federal Court Rule 1102(1).
This is an appeal from the decision of the Director of the
Registration Division of the Department of National Revenue
proposing to revoke the appellant's registration as a charity
under section 168 of the Income Tax Act. The appellant had
been registered as a charitable organization since 1976; how
ever, in 1980, on the basis of information obtained through
investigations authorized by him, the Director made the deci
sion to revoke the registration and sent the appellant a notice of
his intention to do so pursuant to subsection 168(1). The
appellant had not been advised that an investigation was being
carried out nor was it given an opportunity to refute the
allegations before the Director in advance of the decision being
made. The appellant contends that based on this the respondent
breached his duty to comply with the rules of natural justice
and procedural fairness. The respondent argues that there was
no such breach because the giving of the notice of intent to
revoke registration under subsection 168(1) did not constitute a
final determination and that while the charity had a right to be
heard the statute contemplates that it not be heard by the
Minister but by the Court on appeal. Alternatively, it argues
that even if there was failure to comply with the rules of
procedural fairness this irregularity was cured by virtue of the
fact that the appellant had an opportunity to answer the
allegations made before the Court.
Held, the appeal should be allowed. Subsection 168(1)
authorizes the Minister to give notice of intention to revoke the
registration of a charity where that organization ceases to
comply with the requirements of the Act for registration. By
virtue of subsection 168(2) the Minister may make the revoca
tion effective by publishing the notice in the Canada Gazette on
the expiration of 30 days from the day it was mailed. While the
sending of a subsection 168(1) notice is not a final determina
tion it adversely affects the appellant's status and the Director
therefore has a duty to observe the requirements of natural
justice and procedural fairness. Examination of sections 172
and 175 through 180 makes it clear that while appeals from an
assessment or from the Tax Review Board to the Trial Division
are intended to be trials de novo an appeal under section 180 is
an appeal in which the Court must decide, on the basis of a
proper record of the evidence that the tribunal below had
before it when it made its decision, whether the tribunal was
right. In this case the record has a serious defect because it
contains no input from the appellant. It is clear from this that
the requirements of natural justice and procedural fairness have
not been satisfied.
Per Pratte J.: The respondent's argument that by virtue of
the statute, the appellant's right to be heard existed only in
respect of the Court of Appeal and not the Minister, fails.
Normally, an appellant has a right to be treated fairly both by
the tribunal of first instance and by the Appellate Court.
Further, the respondent's argument that any failure to comply
with the rules of procedural fairness is cured by the fact that
the appellant had an opportunity before this Court to answer
the allegations made also fails because within this context the
statute does not provide for an appeal in the nature of a trial de
novo. It rather provides for a normal appeal to a Court which
makes its decision on the basis of the record created in the
inferior Court and which accepts further evidence only on
special grounds. That this is an appeal in the normal sense
becomes further apparent when one contrasts the provisions of
the Income Tax Act applicable to that appeal with those of
section 175 which governs appeals to the Trial Division.
Because the appeal under subsection 172(3) is an ordinary
appeal which the Court would normally decide on the sole basis
of a record constituted by the tribunal of first instance, it
follows 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 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. 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 the notice. Rather they
suggest that the Minister must give persons concerned a reason
able opportunity to answer allegations made against them.
CASES JUDICIALLY CONSIDERED
REFERRED TO:
Re General Accident Assurance Co. of Canada (1926),
58 O.L.R. 470 (C.A.); Board of Education v. Rice and
Others, [1911] A.C. 179 (H.L.); Nicholson v. Haldi-
mand-Norfolk Regional Board of Commissioners of
Police, [1979] 1 S.C.R. 311; 88 D.L.R. (3d) 671; Mar-
tineau v. Matsqui Institution Disciplinary Board (No. 2),
[1980] 1 S.C.R. 602; 106 D.L.R. (3d) 385; Srivastava v.
Minister of Manpower and Immigration, [1973] F.C.
138 (C.A.).
COUNSEL:
O. V. Gray for appellant.
W. Lefebvre for respondent.
SOLICITORS:
McTaggart, Potts, Stone, Winters & Her-
ridge, Toronto, for appellant.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment
delivered orally in English by
PRATTE J.: This is an appeal pursuant to subsec
tion 172(3) of the Income Tax Act, R.S.C. 1952,
c. 148, as am. by S.C. 1970-71-72, c. 63, s. 1, from
the giving by the respondent to the appellant of a
notice under subsection 168(1) to the effect that
the respondent proposed to revoke the appellant's
registration as a registered charity.
The appellant relies on two grounds of appeal:
first, that the respondent followed an incorrect
procedure in making his decision and, second, that
the respondent had no valid reason for revoking
the appellant's registration.
At the outset of the hearing, we decided that we
would first hear the argument of both counsel on
the first ground of appeal. This has now been done.
We will not need to hear, counsel any further
because we have reached the conclusion that the
appeal should be allowed for the reason that the
respondent, before sending the appellant the notice
pursuant to subsection 168(1), did not give it any
opportunity to refute the allegations that were
made against it.
In order to understand the issue, it is necessary
to have in mind the following provisions of the
Income Tax Act [as am. by S.C. 1976-77, c. 4, s.
87; 1977-78, c. 1, s. 791:
168. (1) Where a registered charity or a registered Canadian
amateur athletic association
(a) applies to the Minister in writing for revocation of its
registration,
(b) ceases to comply with the requirements of this Act for its
registration as such,
the Minister may, by registered mail, give notice to the regis
tered charity or registered Canadian amateur athletic associa
tion that he proposes to revoke its registration.
(2) Where the Minister gives notice under subsection (1) to
a registered charity or to a registered Canadian amateur ath
letic association,
(a) if the organization or association has applied to him in
writing for the revocation of its registration, the Minister
shall, forthwith after the mailing of the notice, publish a copy
thereof in the Canada Gazette, and
(b) in any other case, the Minister may, after the expiration
of 30 days from the day of mailing of the notice, or after the
expiration of such extended period from the day of mailing of
the notice as the Federal Court of Appeal or a judge thereof,
upon application made at any time before the determination
of any appeal pursuant to subsection 172(3) from the giving
of the notice, may fix or allow, publish a copy of the notice in
the Canada Gazette,
and upon such publication of a copy of the notice, the registra
tion of the organization or association is revoked.
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 applicant or the charity or association, as the case may be,
in a case described in paragraph (a) ... may, notwithstanding
section 24 of the Federal Court Act, appeal from ... the giving
of such notice to the Federal Court of Appeal.
180. (1) An appeal to the Federal Court of Appeal pursuant
to subsection 172(3) may be instituted by filing a notice of
appeal in the Court within 30 days from
(a) the time the decision of the Minister to refuse the
application for registration or for a certificate of exemption
or to revoke the registration of the profit sharing plan was
served by the Minister by registered mail on the party
instituting the appeal, or
(b) from [sic] the mailing of notice to the registered charity
or registered Canadian amateur athletic association under
subsection 168(1),
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 Review Board nor the Federal Court—
Trial Division has jurisdiction to entertain any proceeding 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.
The appellant was registered as a charitable
organization under the Act when it received a
notice, dated November 21, 1980, that had been
sent by the respondent pursuant to subsection
168(1). The body of that notice read as follows:
Re: Revocation of Registration of a Charity
You are hereby notified that I propose to revoke the registra
tion of Renaissance International as a result of its failure to
comply with the requirements of the Income Tax Act for
registration as a charity inasmuch as it has devoted resources to
activities that are not charitable activities and, after 30 days
from the mailing of this notice, the following will be published
in the Canada Gazette.
DEPARTMENT OF NATIONAL REVENUE, TAXATION
Notice is hereby given pursuant to subsection 168(1) of the
Income Tax Act that I hereby propose to revoke the registra
tion of the charity set forth below and that by virtue of
subsection 168(2) thereof the revocation of the registration
thereof will be effective on the date of publication in the
Canada Gazette.
Name and Address Registration Number
Renaissance International 0463356-47-14
Box 100
Milton, Ontario
L9T 2Y3
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 regis
tration. 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 require
ments of procedural fairness or natural justice.
Counsel for the respondent made two answers to
that submission: first, he said that while a regis
tered charity has the right to be heard before its
registration is revoked, the statute contemplates
that the charity will be heard, not by the Minister,
but by this Court on an appeal made pursuant to
subsection 172(3). Second, he argued that, assum
ing that there was a failure by the respondent to
comply with the requirements of procedural fair
ness, that irregularity is cured by the fact that the
appellant will have, in this Court, the opportunity
that was denied to it by the respondent to answer
the allegations made against it.
I have no hesitation in rejecting that last argu
ment. It is only in rare cases, in my view, that the
hearing of an appeal may be held to cure the
failure of a lower tribunal to comply with the
requirements of natural justice and this is not one
of those cases. Normally, it seems to me, an
appellant has the right to be treated fairly both by
the tribunal of first instance and by the Appellate
Court.
I find much more merit in the respondent's first
argument that the various provisions of the Act
manifest the intention of Parliament that a regis
tered charity be given, before the sending of the
notice provided for in subsection 168(1), an oppor
tunity to be heard by this Court rather than by the
Minister. What is important, it seems to me, is not
that the registered charity be heard before the
sending of the notice (which, in my opinion, does
not affect its rights) but that it be heard before the
revocation of its registration. For that reason, I
would have no hesitation to adopt the respondent's
position if the statute provided that, after the
sending of the notice, there could be a hearing de
novo to determine whether the circumstances
really warranted the sending of the notice. How
ever, the statute does not provide for that kind of a
hearing. What it says is that there may be an
appeal to this Court after the notice has been sent.
True, the word "appeal" is rather vague and, as
was pointed out by Jackett C.J. in Srivastava v.
Minister of Manpower and Immigration, [1973]
F.C. 138 (C.A.), at page 148 may, depending on
the context where it is used, refer to an appeal de
novo or to an appeal normally decided on a record
created in the inferior Court. 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 sub
section 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 revoca
tion 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 respondent, the provisions of the
Income Tax Act do not impliedly relieve the Min
ister 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 provisions, 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.
I would, for those reasons, allow the appeal and
set aside the notice given by the respondent to the
appellant on November 21, 1980.
* * *
The following are the reasons for judgment
delivered orally in English by
HEALD J.: I have concluded that the appeal
should be allowed, and the notice sent by E. A.
Chater, Director, Registration Division of the
Department of National Revenue, Taxation,
acting as the Minister's delegate (pursuant to
Income Tax Regulation 900(7)),' dated November
21, 1980, should be set aside on the basis that
there was a duty on the said Director to comply
with the requirements of natural justice or to
accord to the appellant procedural fairness and
that the Director failed to do either in the circum
stances of this case.
The appellant had been registered with the
Department of National Revenue, Taxation, as a
Canadian charitable organization since 1976.
Paragraph 168(1)(b) of the Income Tax Act pro
vides, inter alia:
168. (1) Where a registered charity ...
(b) ceases to comply with the requirements of this Act for its
registration as such,
the Minister may, by registered mail, give notice to the regis
tered charity ... that he proposes to revoke its registration.
Subsection 168(2) provides:
168....
(2) Where the Minister gives notice under subsection (1) to
a registered charity or to a registered Canadian amateur ath
letic association,
(a) if the organization or association has applied to him in
writing for the revocation of its registration, the Minister
shall, forthwith after the mailing of the notice, publish a copy
thereof in the Canada Gazette, and
(b) in any other case, the Minister may, after the expiration
of 30 days from the day of mailing of the notice, or after the
expiration of such extended period from the day of mailing of
the notice as the Federal Court of Appeal or a judge thereof,
upon application made at any time before the determination
of any appeal pursuant to subsection 172(3) from the giving
of the notice, may fix or allow, publish a copy of the notice in
the Canada Gazette,
and upon such publication of a copy of the notice, the registra
tion of the organization or association is revoked.
The relevant portions of subsection 172(3) read as
follows:
172... .
(3) Where the Minister
' The applicable portion of said Income Tax Regulation
900(7) reads as follows [C.R.C., c. 945]:
900. ...
(7) The Director, Registration Division of the Department
of National Revenue, Taxation, may exercise the powers and
perform the duties of the Minister under
(b) subsections 168(1) and (2) ... of the Act;
(a) ... gives notice under subsection 168(1) to such a
charity ... 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 ... the giving of such notice to the Federal Court
of Appeal.
The relevant portions of section 180 of the Income
Tax Act read as follows:
180. (1) An appeal to the Federal Court of Appeal pursuant
to subsection 172(3) may be instituted by filing a notice of
appeal in the Court within 30 days from
(b) from [sic] the mailing of notice to the registered charity
... under subsection 168(1),
... 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 Review Board nor the Federal Court—
Trial Division has jurisdiction to entertain any proceeding 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.
The notice of intention to revoke the appellant's
registration as a registered charity was sent to the
appellant by registered letter dated November 21,
1980 (A.B., p. 85). In my opinion, the Director
made two decisions in that letter. The first decision
was a determination that the appellant had ceased
to comply with the registration requirements of the
Income Tax Act. The second decision made by
him was to exercise the power conferred on the
Minister pursuant to subsection 168 (1) to give
notice to the appellant that he proposed to revoke
the appellant's charitable registration pursuant to
the provisions of subsection 168(2).
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
assessment 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. The evidence is
clear here that prior to making the two decisions
referred to in his letter of November 21, 1980, the
Director failed to observe the requirements of
natural justice and of procedural fairness in that
he reached a decision adverse to the rights of the
appellant without first giving the appellant prior
notice of the case against it and an opportunity to
meet that case 2 . The evidence is that in February
of 1980, the Director's attention was directed to a
publication in The Globe and Mail of Toronto
which tended to cast some doubt on the right of
the appellant to have continued its charitable
registration. As a result, he asked his staff to
further investigate the matter. This investigation
was carried on for some two months, then seem
ingly suspended until November of 1980, when,
after receiving a further publication of the appel
lant's and an anonymous newspaper article from
The Toronto Sun and after several discussions
with his staff members, the Director made the
decisions referred to supra which he communicat
ed to the appellant by the letter of November 21,
1980. These decisions were made without any
notice being given to the appellant of the investiga
tions preceding the decisions nor of the allegations
upon which the Director proposed to make his
decisions nor was the appellant given any opportu
nity to challenge those allegations or to be heard
by the Director in response thereto.
2 See for example: Re General Accident Assurance Co. of
Canada (1926), 58 O.L.R. 470 (C.A.) at p. 481; Board of
Education v. Rice and Others, [1911] A.C. 179 (H.L.) at p.
182 (per Lord Loreburn L.C.); Nicholson v. Haldimand-Nor-
folk Regional Board of Commissioners of Police, [ 1979] 1
S.C.R. 311 [at pp. 324-328]; 88 D.L.R. (3d) 671 at pp. 680,
681 and 682; Martineau v. Matsqui Institution Disciplinary
Board (No. 2), [1980] 1 S.C.R. 602 [at pp. 622-624]; 106
D.L.R. (3d) 385 at pp. 405 and 406.
It is said, however, by the respondent that since
the Income Tax Act itself has provided the appel
lant and others in a similar position an opportunity
to be heard in circumstances where the rights of
those parties are, in some way, adversely affected,
the legislation should not be supplemented where,
as here, Parliament has addressed itself to this
question. In the respondent's view, the sending of
the notice under subsection 168(1) is not a final
determination of the appellant's status as a regis
tered charity. It is merely a proposal to revoke
registration and thus has no effect until the Minis
ter or his delegate, pursuant to subsection 168(2)
publishes the notice in the Canada Gazette, which
publication has the effect of revoking the chari
table registration. I do not subscribe to that view
of the matter. While the sending of the subsection
168(1) notice is not a final determination of the
appellant's status as a registered charity, it most
certainly adversely affects that status because,
firstly, it is a firm and unequivocal decision that
the appellant no longer fulfills the registration
requirements and is therefore no longer entitled to
be a registered charity and, secondly, it puts the
appellant on notice that at the expiration of 30
days from the mailing of the notice, it will be
published in the Canada Gazette which publica
tion, pursuant to subsection 168(2), revokes the
appellant's registration. If the appellant had not
availed itself of the provisions for appeal to this
Court or if that appeal were unsuccessful, the
publication in the Canada Gazette and the result
ant revocation of registration would follow in due
course and without any further possibility of
recourse or participation by the appellant'. I am,
accordingly, persuaded that the appellant's rights
are seriously and adversely affected by these "deci-
sions" 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
3 Particularly germane to the prejudicial nature of these
proceedings are the provisions of subsections 149.1(16) and
(17) of the Income Tax Act. Both of these subsections make
reference to the day on which the notice of the Minister's
intention to revoke is mailed. Both subsections are stringent
and capable of affecting the appellant's rights in a material
way.
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. In this case, the record of the material
before the Director is incomplete since, admitted
ly, it does not contain all of the material that was
before the Director. Furthermore, the record of the
material before the Director has an even more
serious defect—that is—it is a unilateral record
since it contained no input from the appellant.
Such a circumstance fails, in my view, to satisfy
either the requirements of natural justice or the
duty to act fairly 4 .
For these reasons, I would allow the appeal and
set aside the notice dated November 21, 1980.
COWAN D.J. concurred.
4 For a similar view see Re General Accident Assurance Co.
of Canada, supra at p. 481 per Masten J.A.
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.