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It’s a whole new ball game for charities at the FCA

administrative law

Canadians are well used to attending at various tribunals, boards, and panels. The assumption is that the decision makers at these bodies are subject to certain rules to ensure that they operate fairly and come to decisions that are applied legally. Parliament and the various provincial legislatures have set up these quasi-courts to take advantage of the specialized experience they ostensibly wield in their various areas. So, one would expect that a member of the International Trade Tribunal has a background in that subject matter, or that something similar is true of the Immigration and Refugee Board. The traditional oversight role of the Courts is then somewhat constrained by the fact that judges likely do not have the same specialized training as the adjudicators on these panels and so a whole body of administrative law has grown up to provide guidance to the Courts to ensure that quasi-judicial bodies operate according to the law, but that judges do not undermine the reason we have experienced people applying their expertise on specialized bodies.

The difficulty has been knowing where to draw the line. Put in the same terms as the Courts look at it, how much deference should the Courts show in reviewing the decisions of these (ostensibly) lower bodies. In some cases the legislature answers by making it clear in the law that sets up the tribunal, but in most other cases the law is silent and the matter is left to the courts to decide. Every little while (last time was ten years ago) the Supreme Court weighs in to provide guidance. The latest attempt is in a pair of decisions called Vavilov[1] and Bell[2] (of these Vavilov is the leading case).

In a tax context most decisions of the CRA are appealed to the Tax Court of Canada, and so these recent decisions do not broadly apply. Nevertheless, the Courts recent redraft will apply to decisions that go straight to the Federal Court and bypass the Tax Court. This would include judicial review of the CRA’s refusal to reassess a return, allow interest relief, or when it issues a jeopardy order. But clearly, the most dominant area relates to the CRA’s decisions relating to charity revocations and refusals to register charities.

Until Vavilov, decisions of the Federal Courts reviewed CRA decisions to determine if the final result was amongst a range of reasonable options the CRA could conclude. Given the wide range of possibilities, and the CRA’s avoidance of capriciousness (usually), it was almost a foregone conclusion that the decision would be in the range of reasonable. The only viable road to attacking a decision of the Minister was if there was some element of procedural unfairness. The new system though looks at judicial review of lower decisions in a new lens, which may put decisions of the CRA outside the old assessment of decisions as being reasonable.

The first question to be decided is whether or not to apply the reasonableness standard. While the Court holds that there is a presumption of applying the reasonableness standard whenever a court reviews administrative decision, this presumption can be rebutted in two cases.

“The first is where the legislature has indicated that it intends a different standard or set of standards to apply. This will be the case where the legislature explicitly prescribes the applicable standard of review. It will also be the case where the legislature has provided a statutory appeal mechanism from an administrative decision to a court, thereby signalling the legislature’s intent that appellate standards apply when a court reviews the decision.”

As a result of the Vavilov decision, it seems that there are now two standards for decisions made by the CRA. For strictly tax matters, for which the Income Tax Act does not prescribe an appeal to the Tax Court, the avenue of appeal is still to the Federal Court which must apply the reasonableness standard. But the situation is different for appeals of revocation and refusals to register a charity.

In these cases subsection 172(3) of the Act specifically states that a prospective new or revoked charity may ‘appeal’ from the Minister’s decision to the Federal Court of Appeal. In Vavilov the Court specifically made clear that if the legislature provides for a statutory appeal mechanism then one has rebutted the presumption that the reasonableness test applies and the matter is decided as any other appeal.

For the charity world, the implications of this are immense. Since Dunsmuir no charity has won a single case before the Federal Court of Appeal on a revocation. In all of these cases the decisions were decided on the basis of the reasonableness standard. As long as the CRA’s actions fell somewhere in the range of ‘good enough’ to ‘not wrong’ the CRA could justify its actions as reasonable. And indeed, given the basis for review one would hope that our national tax collector would not lose many decisions. But the clear problem is that the decision does not be correct, right, or fair – just reasonable.

It is important to note that the previous basis for the reasonableness standard was that deference should be given to experts that sit on specialized tribunals and understand their specific area of jurisdiction. Unfortunately, that standard was extended to the charity area as well, and indeed some of the judgements of the Federal Court of Appeal over the past few years note that while the matter is framed as an ‘appeal’ it is really a judicial review[3]. However, the CRA decisions over charitable registration are really matters of law and the application of that law to fact. They are not specialized in the same way the IRB may need to know the conditions in an individual’s home country, or the Labour Relations Board may need to understand the issues facing unions. Arguably, the presumption that the reasonableness standard applied to charities was always wrong.

In this light it is interesting to note the criticism of Justices Abella and Karakatsanis. In their joint judgement they wrote:

Rather than confirming a meaningful presumption of deference for administrative decision‑makers, the majority strips away deference from hundreds of administrative actors, based on a formalistic approach that ignores the legislature’s intention to leave certain legal and policy questions to administrative decision‑makers. The majority’s presumption of reasonableness review rests on a totally new understanding of legislative intent and the rule of law and prohibits any consideration of well‑established foundations for deference.

The majority of the Court dismisses this criticism as a gross exaggeration, and that would indeed seem to be the case. But at least with respect to charity appeals we can all be thankful that the majority did exactly what the minority criticized them for doing.

It remains possible that the Federal Court of Appeal will not read Vavilov and ss. 172(3) in the same way and still apply a reasonableness test which, based on our read of Vavilov means that not much will change – except for one important factor. The majority went out of its way to indicate that part of applying the reasonableness standard involves showing that the CRA is applying the law consistently. This is particularly true where the punishment is harsh.

Therefore, whether a particular decision is consistent with the administrative body’s past decisions is also a constraint that the reviewing court should consider when determining whether an administrative decision is reasonable. Finally, individuals are entitled to greater procedural protection when the decision in question involves the potential for significant personal impact or harm. Where the impact of a decision on an individual’s rights and interests is severe, the reasons provided to that individual must reflect the stakes. The principle of responsive justification means that if a decision has particularly harsh consequences for the affected individual, the decision maker must explain why its decision best reflects the legislature’s intention.

So, even if the FCA were to apply a reasonableness standard this analysis would be a huge step to understanding the CRA’s decisions to apply revocation rather than intermediate sanctions. Readers will remember that the Voluntary Sector Initiative of the late 90’s resulted in the legislation of punishments that did not involve deregistration. Unfortunately, the CRA consistently prefers to simply revoke an organization’s charitable status rather than apply them. Part of the reason may have been the fact that appeals from the imposition of such sanctions go to the Tax Court where there is a typical appeal mechanism for the testing of evidence and the Court does not need to apply the reasonableness standard. The fact that cases should now be harder for the CRA to win at the FCA might mean we see more intermediate sanctions, and it will certainly mean deeper analysis of CRA decisions.

The one structural difficulty with Vavilov is that a typical appeal of a decision involves the ability to question and prove the veracity of evidence used by the CRA. Lower level courts are used to this and have processes in place to determine the facts. Higher level courts, such as the Federal Court of Appeal, usually only hear appeals that relate to questions of law. Applying the new standard, the Federal Court of Appeal may well need to find a way to accommodate a more typical appeal and find a way to test the ‘evidence’ cited by the CRA to determine its accuracy.

Many in the sector have, for many years, advocated that appeals from decisions to revoke and refusals to register be heard by the Tax Court for this exact reason. They are simply better suited for testing the facts. Unfortunately, for whatever reason, these pleas have not been heard by Parliament, now though, for strictly practical reasons, they may have no choice but to make changes. All around, Vavilov will have positive implications for the charity sector.

[1] Vavilov, 2019 SCC 65

[2] 2019 SCC 66

[3] See for example Many Mansions Spiritiual Centre Inc. (2019 FCA 189) at paragraph 3:

Although this proceeding is characterized as an appeal, the Minister’s decision is subject to review on administrative law principles. The Minister’s conclusions on questions of fact or mixed fact and law, with respect to both whether grounds for revocation are established, and whether revocation is an appropriate sanction, are reviewable for reasonableness: see Opportunities for the Disabled Foundation v. Canada (National Revenue)2016 FCA 94 (CanLII) at para. 33, 2016 D.T.C. 5043. As a result, they will be upheld unless they are shown not to be justified, transparent and intelligible, or not to fall within a range of possible, acceptable outcomes defensible in fact and law: Dunsmuir v. New Brunswick2008 SCC 9 (CanLII) at para. 47, [2008] 1 S.C.R. 190. In a fact-based case like this, the threshold is high.

By Adam Aptowitzer

Adam Aptowitzer is the managing partner at Drache Aptowitzer LLP. He practices in the area of Charity Law and Tax Litigation. He can be reached at

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Drache Aptowitzer LLP

Tax and Charity Lawyers at Drache Aptowitzer LLP
Drache Aptowitzer LLP is one of Canada’s foremost experts in the law related to charities and non-profit organizations. Their team of bloggers is led by Adam Aptowitzer LLB. He is a lawyer practicing in the areas of charity and tax law. He is a member of both the bars of Alberta and Ontario. He has been speaking and writing on the topic of charity law for several years and been published in numerous publications including the Canadian Taxpayer, the Canadian Fundraiser and the Not-for-Profit News and has been cited as an expert in many publications including the National Post.Read more here
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