In a newly released decision of the Federal Court of Appeal ("Court"), Cheder Chabad v Minister of National Revenue, a registered charity under the Income Tax Act ("Act") was awarded an extension to the period of time during which the Minister of National Revenue ("Minister") was precluded from publishing a notice of revocation of its charitable registration, which would have given effect to the revocation of its registered charity status.
On July 5, 2013, the Canada Revenue Agency ("CRA") issued a notice of proposal to revoke the charitable registration of Cheder Chabad ("School"), a private school for boys offering both secular and Jewish studies in the Orthodox Chabad-Lubavitch tradition, with respect to "numerous specific areas of non-compliance". Most notably, the CRA alleged that the School was unable to substantiate the existence, value and/or use of $10 million worth of gifts in kind it claimed to have received from 2007-2009 and for which it had issued donation receipts. Unable to persuade the Minister to delay publication of the notice of revocation of the School's registration, the School submitted a notice of motion and an application to the Court for judicial review of the Minister's refusal to delay publication.
Applying the test developed by the Supreme Court of Canada in RJR-MacDonald Inc v Canada (Attorney General) for the granting of a stay or injunction to determine whether to extend the period during which the Minister was precluded from publishing the notice of revocation, the Court analyzed whether: (1) there was a serious issue to be determined: (2) the School would suffer irreparable harm if the application were refused; and (3) the School would suffer greater harm from the granting or refusal of the relief it sought than the Minister.
On the first issue, the Minister accepted that there was a serious issue to be determined and the Court agreed that this element of the test had been met.
Regarding the second part of the test, the Court found, among other things, that publication of the notice would cause the School irreparable harm stemming from its inability to secure the short-term cash flow necessary to operate the school. This cash-flow issue was compounded by the fact that parents of the students would be precluded from obtaining donation receipts with respect to fees attributable to the religious education component of the School's curriculum, which would cause tuition costs to rise, which could in turn impede access to the School for some of the students.
With respect to the third element, the Court noted that it "must also include 'a consideration of any harm not directly suffered by a party to the application'", stating that "there are the interests of the 180 students of the concerned school to take into account". Given that the academic year was to start within a few days, the Court found that there would likely be difficulties faced by parents trying to find other education suitable for their religious convictions and guaranteed disruptions to the educational pathway expected by the students in the fall.
These undue disruptions, as well as the irreparable harm that would be suffered by the School, led the Court to extend the period during which the Minister was precluded from publishing a notice of revocation to December 31, 2013. The Court's order was subject to the conditions that the School proceed with an orderly liquidation of a large part of the disputed assets as well as develop an alternative plan to continue school operations post-extension. Furthermore, the School was required to notify all parents of the likelihood of revocation of its registered charity status to allow them sufficient time to consider and secure alternate educational arrangements or to continue enrollment with the school in a non-registered charity context.
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