Date: 20180418

Docket: T-1483-16

Citation: 2018 FC 413

[ENGLISH TRANSLATION]

Ottawa, Ontario, April 18, 2018

PRESENT:  The Honourable Mr. Justice Bell

Docket: T-1483-16

BETWEEN:

SERDY VIDEO II INC.

Applicant

and

MINISTER OF CANADIAN HERITAGE

Respondent

JUDGMENT AND REASONS

I.  Nature of the matter

[1]  This is an application for judicial review of the decision made on behalf of the Minister of Canadian Heritage [Minister] and communicated to the applicant, Serdy Vidéo II Inc. [Serdy], in a letter dated August 12, 2016 [Decision]. The Decision revoked the Canadian film or video production certificate [Part A certificate] that was issued by the Minister on October 30, 2013, for the production Villas de rêves, a certificate through which this production was recognized as a Canadian film or video production entitled to a tax credit within the meaning of section 125.4 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) [ITA] and section 1106 of the Income Tax Regulations, C.R.C., c. 945 [Regulations]. The Minister revoked the Part A certificate on the grounds that Villas de rêves constituted “advertising”, which is an excluded production within the meaning of subparagraph 1106(1)(b)(ix) of the Regulations.

II.  Facts

[2]  In order to promote the creation of Canadian productions and the growth of the Canadian film and video sector, Canada offers tax credits to Canadian producers. One of those tax credits, the Canadian Film or Video Production Tax Credit [CPTC], entitles eligible productions to a refundable tax credit equal to 25% of the qualified labour expenditure.

[3]  Access to the CPTC is governed by section 125.4 of the ITA and section 1106 of the Regulations. Under subparagraph 125.4(3)(a)(i) of the ITA, a corporation must obtain a Canadian film or video production certificate [certificate] in order to qualify for the CPTC. The certificate is issued by the Minister in respect of a production if the production is a “Canadian film or video production” within the meaning of the Regulations.

[4]  The definition of “Canadian film or video production” set out in the Regulations specifies that certain types of productions are not Canadian film or video productions. Those excluded productions include in particular productions that constitute “advertising”. Excluded productions do not qualify for a certificate and, therefore, do not have access to the CPTC.

[5]  Section 125.4 of the ITA gives the Minister the authority to decide whether to issue a certificate and to revoke such certificates if it appears that the production in question is not a Canadian film or video production. Therefore, it falls to the Minister to assess the CPTC eligibility criteria. The Minister bases this decision on information provided by the producer and on the recommendation from the Canadian Audio‑Visual Certification Office [CAVCO], a unit of the Department of Canadian Heritage, which administers the CPTC program in partnership with the Canada Revenue Agency.

[6]  CAVCO’s recommendations are made by officers who are generally the first line of analysis of and communication with producers and whose recommendations are subsequently reviewed by a supervisor. Officers are supported by two committees: the Advisory Committee, which is made up of senior CAVCO analysts and has the mandate to assist the officers, and the Compliance Committee, which is made up of senior analysts and managers and is mandated to review files.

[7]  To receive the CPTC, producers must apply to CAVCO for the Canadian Film or Video Production Tax Credit in order to receive a Part A certificate and a Certificate of Completion [Part B certificate] from the Minister. The Part A certificate can be obtained before a production is begun or completed, while the Part B certificate is issued only after the production is complete and the Minister has been able to view it.

[8]  In 2013, Serdy applied to CAVCO for the Canadian Film or Video Production Tax Credit for the production Villas de rêves in order to obtain a Part A certificate [application].

[9]  The application described the Villas de rêves production as taking television audiences to the Caribbean in search of an oasis in order to make their wildest dreams a reality: from Jamaica to the Turks and Caicos Islands, passing by Saint Martin, Saint‑Barthélemy, Anguilla and the British Virgin Islands, viewers will discover luxurious villas that are available to rent and will have the impression that they can live like royalty there.

[10]  In October 2013, CAVCO issued a Part A certificate, confirming that the Villas de rêves production is a Canadian production, according to the information submitted, within the meaning of section 125.4 of the ITA and section 1106 of the Regulations. The certificate included a clause to the effect that it was granted under a condition precedent that the applicant obtain a Part B certificate.

[11]  On the basis of that Part A certificate, Serdy filmed and produced the Villas de rêves production. Once production was complete, in 2014, Serdy applied to CAVCO for the Canadian Film or Video Production Tax Credit for the production in order to obtain a Part B certificate. Serdy also sent a DVD copy of the production for CAVCO to view.

[12]  In April 2015, the officer responsible for reviewing the file recommended the certification of the Villas de rêves production under Part B. In compliance with standard practice, that decision was reviewed by a supervisor. After viewing the production and reading the officer’s initial recommendation, the supervisor responsible raised some doubts as to the production’s eligibility, given that he found that it appeared to be advertising, a genre that is excluded by the Regulations.

[13]  Between June 17 and July 9, 2015, the members of CAVCO’s Advisory Committee met and confirmed that the production in question did constitute advertising.

[14]  On June 25, 2015, the file was brought to the attention of the Compliance Committee. After viewing the production, the committee members confirmed their opinion that the production constituted advertising and that it was therefore excluded from the CPTC.

[15]  On December 2, 2015, CAVCO sent Serdy a letter entitled [translation] “Notice of Revocation”, informing Serdy that its review of the file had revealed that the production Villas de rêves was “advertising”, which is excluded within the meaning of subparagraph 1106(1)(b)(ix) of the Regulations. In an appendix to the letter, CAVCO noted the problematic aspects of the episodes it viewed, particularly the presence on the screen of the logos of the companies that rent out the villas and the level of detail provided by the program’s host regarding the features and services offered with the villas, including comments on the reasonable rental prices and the services included in the price. In that letter, CAVCO invited Serdy to submit any new information that could influence the file’s assessment.

[16]  On January 26, 2016, Serdy sent CAVCO a reply to the Notice of Revocation in which it argued that the production company received no monetary gain from the owners of the villas presented in the series and that the on‑screen logos were part of a sponsorship agreement intended to give the rental companies visibility. In exchange, Serdy did not have to pay to use the filming locations.

[17]  On February 18, 2016, the members of the Compliance Committee met to assess the file. The Compliance Committee upheld its decision that the production was in an excluded category. Four months later, the Compliance Committee met again and confirmed its position regarding the production’s eligibility. CAVCO’s final recommendation was subsequently sent to the Minister on August 10, 2016, and she approved it. Consequently, on August 12, 2016, CAVCO sent Serdy a letter for and on behalf of the Minister entitled “Notice of Revocation” to notify Serdy that the production Villas de rêves was an excluded production within the meaning of subparagraph 1106(1)(b)(ix) of the Regulations and that the Part A certificate issued for the production was henceforth revoked. That Decision is the subject of this application for judicial review.

III.  Decision

[18]  The Decision states that Villas de rêves is “advertising”, which is an excluded production within the meaning of subparagraph 1106(1)(b)(ix) of the Regulations. It asserts that each episode of Villas de rêves that had been submitted to CAVCO for viewing is composed entirely of video images that promote a particular vacation destination, with everything that the location has to offer vacationers during their stay, and that the primary objective of the production is therefore to promote the goods, services or activities offered by the various tourist destinations. Thus, the production has all the characteristics of an infomercial; the aspects aimed at selling or promoting the services of the seaside resorts form a whole that is practically indistinguishable from the production’s information content. To make this finding, the Decision was based on the definition of “advertising” in the CPTC Program Guidelines, published by CAVCO on April 2, 2012, in accordance with subsection 125.4(7) of the ITA [Guidelines].

[19]  The Decision states the following: [translation] “Thus, any production that, like VILLAS DE RÊVES, (I) offers i) a detailed description of the services, activities or products of any provider; ii) a detailed description of the main features of the services, activities or products of the provider in question; and iii) laudatory comments regarding those services, activities or products of such a provider, is considered by CAVCO to be a production that constitutes ‘advertising,’ a category that is ineligible for the CPTC. This description is . . . based on the intrinsic characteristics of the production as they were noted, generally during the viewing of the episodes submitted by the producer”.

IV.  Relevant provisions

[20]  The relevant provision of the ITA is section 125.4, particularly subsections (1), (3), (6) and (7). The relevant provision of the Regulations is section 1106, particularly subsections (1) and (4). Lastly, the definition of “advertising” provided on page 56 of the Guidelines is relevant. Those provisions are listed in Appendix A.

V.  Issues

[21]  As part of this application for judicial review, the parties raise three issues, namely:

1. What is the applicable standard of review in this case?

2. Were the requirements of procedural fairness met?

3. Is the Minister’s decision reasonable?

VI.  Analysis

A.  Preliminary issue on the admissibility of evidence

[22]  Before analyzing the above-mentioned issues, it is important to consider the respondent’s preliminary motion. The respondent submits that Serdy filed evidence that is inadmissible, since it was not before the Minister when she made the Decision, or is irrelevant and contains opinions or arguments. The respondent is asking the Court to remove that evidence from the record. The disputed evidence includes:

• The affidavit from Maryse Rouillard and its exhibits; and

• Paragraphs 42–45, 50, 55–57 and 59–60 of the affidavit from Sébastien Arsenault, signed on October 20, 2016, as well as the exhibits that support those paragraphs: SA‑13 and SA‑15.

[23]  In the affidavit from Maryse Rouillard and its exhibits, Ms. Rouillard, the president of a production company that is not a party to the case, filed DVDs containing episodes of productions other than that which is the subject of this application, along with copies of exchanges that took place with CAVCO regarding those productions in the context of CPTC applications. At paragraphs 42–45, 50, 55–57 and 59–60 and in exhibits SA‑13 and SA‑15 of Sébastien Arsenault’s affidavit, Mr. Arsenault, the president of Serdy, filed various pieces of evidence concerning the understanding of the nature of the Villas de rêves production and on his understanding of CAVCO’s past practices in other CPTC files, along with a dictionary definition and a public notice from CAVCO that were not before the Minister when she made the Decision.

[24]  It is settled law that an application for judicial review may only proceed on the basis of the evidentiary record that was before the decision‑maker at the time of the decision, subject to some exceptions (Association of Universities and Colleges of Canada v. Canadian Copyright Licensing Agency (Access Copyright), 2012 FCA 22, [2012] F.C.J. No. 93, paragraphs 19–20). It has also been decided that the fate of other productions, along with the producer’s opinion on the similarities between its production and a certified one, could not create legitimate expectations (Canada (Attorney General) v. Zone3‑XXXVI Inc. 2016 FCA 242, [2016] F.C.J. No. 1049 at paragraph 49 [Zone3]). It has also been established that the Court may strike affidavits, or portions of them, where they are abusive or clearly irrelevant or where they contain opinion, argument or legal conclusions (Sharma v. Canadian Pacific Railway, 2016 FC 135, [2016] F.C.J. No. 117 at paragraph 19).

[25]  In applying this case law, I found at the start of the hearing that exhibits MR‑1 and MR‑4 of Ms. Rouillard’s affidavit will be struck from the record. The rest of her affidavit is admissible, since it provides the background of the process for challenging a notice of revocation and of certain circumstances in which the Minister had previously changed a decision. With respect to the affidavit from Sébastien Arsenault, I have struck paragraphs 42, 45, 56 and 60 from the record, since those paragraphs contain an opinion or argument.

B.  Standard of review

[26]  The parties agree on the standards of review that apply in this case. With respect to Serdy’s arguments concerning procedural fairness, they should be reviewed on the correctness standard (Zone3 at paragraph 27).

[27]  As for the Minister’s Decision as to whether to issue a film or video production certificate, it must be reviewed under the reasonableness standard (Zone3 at paragraph 26). These decisions raise questions of mixed fact and of law. The role of the reviewing judge is therefore to assess the justification of the decision, the transparency and the intelligibility of the decision‑making process, and to ensure that the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law (Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 at paragraph 47).

C.  Were the requirements of procedural fairness met?

[28]  In Zone3, the Federal Court of Appeal established that a decision by the Minister as to whether to issue a film or video production certificate is purely administrative in nature and has none of the characteristics of a quasi‑judicial procedure (Zone3 at paragraph 44). Furthermore, it established that the interest at issue is purely an economic one (Zone3 at paragraph 44). For those reasons, the Court found that the requirements of procedural fairness are minimal; the only duty of fairness that falls to the Minister in the context of a CPTC application is to send a notice of denial and to allow the opportunity to provide additional information that might change the assessment of the application (Zone3 at paragraph 46). Those requirements were satisfied.

[29]  As previously mentioned, CAVCO sent Serdy a letter entitled [translation] “Notice of Revocation” on December 2, 2015. That letter informed Serdy that the review of its file had revealed that the production Villas de rêves was “advertising”, which is excluded within the meaning of subparagraph 1106(1)(b)(ix) of the Regulations. In an appendix to the letter, CAVCO very specifically listed the problematic aspects of the episodes that were viewed. CAVCO invited Serdy to submit any new information that could influence the file’s assessment. Serdy’s reply was sent to CAVCO on January 26, 2016, and was considered by the members of the Compliance Committee during two meetings, on February 18, 2016, and on June 29, 2016.

[30]  Although I have found that the Minister satisfied the requirements of procedural fairness, I will respond to Serdy’s submissions. Serdy alleges that it had a legitimate expectation that its production would be certified based on having been issued a Part A certificate and on the fate of other productions. However, issuing a Part A certificate does not in any way guarantee that a Part B certificate will be issued. In fact, the Part A certificate contains an explicitly stated condition precedent that requires the production to obtain a Part B certificate after its completion. Alleging that Serdy had legitimate expectations as a result of having received a Part A certificate would entirely invalidate the need for this second step after viewing the production. With respect to the “legitimate expectations” based on the fate of other productions, the Federal Court of Appeal clearly rejected that argument (Canada (Attorney General) v. Zone3‑XXXVI Inc., 2016 FCA 242, [2016] F.C.J. No. 1049 at paragraph 49 [Zone3]).

[31]  Whatever the case may be, the doctrine of legitimate expectations does not in any way give rise to a particular decision, since it concerns the decision‑making process and not the decision itself (Zone3 at paragraph 45). It is used to determine what procedures are required by the duty of procedural fairness and not what decision should be rendered (Baker v. Canada (Minister of Immigration and Citizenship), [1999] 2 S.C.R. 817, 174 D.L.R. (4th) 193 at paragraph 26).

[32]  Lastly, Serdy submits that its right to procedural fairness was violated because CAVCO deviated from its past practices regarding its interpretation of the word “advertising” without any justification and without communication with members of the industry. Serdy appears to take the wording of the Decision to mean that CAVCO changed its interpretation of the word “advertising”. With respect, CAVCO simply replied to Serdy’s prior submissions by using the same words as Serdy did in its submissions. Despite the words that were used, the Decision is based on the definition of “advertising” that is provided in the Guidelines. There was no change to the criteria without notifying the members of the industry.

[33]  In summary, the minimal requirements of procedural fairness that fall to the Minister in the context of a CPTC application were satisfied. There is no need to allow the application for judicial review on the grounds of a breach of the duty of procedural fairness.

D.  Is the Minister’s decision reasonable?

[34]  As detailed in the Notice of Revocation, as well as in the Decision, each episode of Villas de rêves that had been submitted to CAVCO for viewing is composed entirely of video images that promote vacation destinations, with everything that the locations have to offer vacationers during their stay. Those video images include the on‑screen presence of the logos of the companies that rent the villas to offer them visibility, in accordance with a sponsorship agreement. The video images are combined with the narration of a host who describes the villas down to the slightest detail in a laudatory manner, going so far as to comment on the reasonable rental price, along with the services included in the price of rent (housekeeping, option for a private chef, etc.). Therefore, I am of the view that it is reasonable to find that the production is “advertising” that offers entertainment or information combined with the promotion of goods or services in an almost indistinguishable manner.

[35]  Serdy submits that the Decision is unreasonable, because the interpretation of “advertising” that was used in the Decision is inconsistent with the ordinary meaning of the term and, therefore, with the ITA and the Regulations. As stipulated in the ITA and the Regulations, it is on the Minister that Parliament has conferred the role of defining the concepts that are important to designating a Canadian film or video production in the Guidelines. The Minister therefore acts lawfully by using the definition set out in the Guidelines in order to determine what constitutes a Canadian film or video production; this is not inconsistent with the ITA or the Regulations. However, I am not satisfied that the interpretation used is inconsistent with the ordinary meaning of the word. Certain definitions, particularly the one in the Larousse dictionary cited by the respondent, are consistent with the interpretation of “advertising” that was used in the Decision.

[36]  Moreover, the interpretation of the concept of “advertising” is within the Minister’s expertise. Therefore, it is generally not for the Court to intervene to apply a different interpretation (Council of Canadians with Disabilities v. VIA Rail Canada Inc., 2007 SCC 15, [2007] 1 S.C.R. 650 at paragraph 104; Zone3 at paragraph 38).

[37]  In light of the foregoing and after having viewed episodes of Villas de rêves myself during the hearing, I concur with the respondent that it is clear that the Decision is reasonable. There is a rational basis for the Decision that Villas de rêves is “advertising”, which is excluded under the ITA and the Regulations. In fact, even using the definition of “advertising” proposed by Serdy, namely [translation] “the presence of a sponsor that benefits from and pays for the advertising”, its production would be excluded. Serdy admits to having a sponsorship agreement with certain renters, and their logos benefited from the visibility given to them by the production. The Decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law. The application for judicial review should not be allowed.

VII.  Conclusion

[38]  For all these reasons, the application for judicial review is dismissed, with costs of $5,000.00, including taxes and disbursements, payable by the applicant in favour of the respondent.

JUDGMENT in T‑1483‑16

  THE COURT ORDERS that the application for judicial review is dismissed, with costs of $5,000.00, including taxes and disbursements, payable by the applicant in favour of the respondent.

“B. Richard Bell”

Certified true translation

This 17th day of February 2020

Lionbridge

APPENDIX A

Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.):

Income Tax Regulations, C.R.C., c. 945:

CPTC Program Guidelines, published on April 2, 2012, by the Canadian Audio‑Visual Certification Office:

 

FEDERAL COURT

SOLICITORS OF RECORD

DOCKET:		T-1483-16
STYLE OF CAUSE:		SERDY VIDEO II INC. v. MINISTER OF CANADIAN HERITAGE
PLACE OF HEARING:	Montreal, Quebec
DATE OF HEARING:	December 19, 2017
REASONS FOR JUDGMENT AND JUDGMENT:	BELL J.
DATED:	April 18, 2018

APPEARANCES:

Alexandre Ajami	FOR THE APPLICANT
Nadine Dupuis	FOR THE RESPONDENT

SOLICITORS OF RECORD:

Miller Thomson L.L.P. Montreal, Quebec	FOR THE APPLICANT
Attorney General of Canada Ottawa, Ontario	FOR THE RESPONDENT