2023 FC, 2023 FC 1455

Date: 20231101 Docket: T-81-21 Citation: 2023 FC 1455 Ottawa, Ontario, November 1, 2023 PRESENT: The Honourable Madam Justice Elliott BETWEEN: SKECHERS USA CANADA, INC. Applicant and CANADA BORDER SERVICES AGENCY Respondent ORDER AND REASONS I. Overview [ 1 ] This is an appeal under Rule 51 of the Federal Courts Rules , SOR/98-106 [the Rules ] brought by the Applicant from an order dated August 25, 2021, made by an Associate Judge (formerly referred to as a Prothonotary) sitting as Case Management Judge.

The Associate Judge dismissed the Applicant’s Notice of Application (NoA) on the ground that the decisions identified were not subject to review by the Federal Court. The Associate Judge found the Respondent’s refusals of the Applicant’s requests for “administrative relief” were not amenable to judicial review and therefore, found the Applicant had no statutory entitlement to the relief they had requested. [ 2 ] For the reasons that follow, the Applicant’s appeal is dismissed with costs to be paid to the Respondent.

The Associate Judge made no error of law in her analysis nor did she commit any palpable and overriding error concerning the facts that affect the outcome of this motion. II. Background [ 3 ] In late 2018, the Respondent, Canada Border Services Agency (CBSA), conducted a compliance verification of declarations the Applicant made in 2017.

The Respondent issued an Interim Report on August 12, 2020 in which it proposed to find that commissions paid by the Applicant to acquire goods for import had to be included in declaring the value for duty of those goods. [ 4 ] The Applicant responded to the Interim Report explaining why the commissions it paid should not be included in the calculation of value for duty. On October 30, 2020, the Respondent issued a Final Report in which it confirmed its finding concerning the calculation of value for duty.

The Respondent advised the Applicant of its obligation to include commissions in its declarations of value for duty. [ 5 ] The Respondent further advised that the Final Report provided the Applicant with " “reason to believe” " its declarations required corrections. As such, pursuant to

section 32.2 of the Customs Act , RSC 1985, c. 1 (2 nd Supp ) the Applicant was required to file corrections to its declarations for the previous four years, being 2017-2020. [ 6 ] The Respondent also advised that if the Applicant disagreed with the Respondent’s conclusions, the Applicant could file an appeal upon CBSA’s issuance of a detailed adjustment statement (DAS). That DAS would reflect the corrections to the Applicant’s declarations for the statutory four-year period. [ 7 ] On learning of the Respondent’s position in respect of commissions, the Applicant requested that the Respondent exempt it from the requirement in

section 32.2 to file corrections for the Applicant’s Notice of Application for the statutory four-year period. The Applicant claimed that the Respondent had discretion to do so. The Applicant claimed the Respondent should exercise that discretion because, inter alia, in not including commissions in value for duty, the Applicant had allegedly followed guidance from the Respondent arising from a 2005 compliance verification to the effect that it was not necessary to do so. [ 8 ] The Respondent refused the request.

The Applicant then requested that the Respondent rescind the Final Report, indefinitely extend the statutory deadline for corrections or waive any penalties and interest that the Respondent could levy should the Applicant fail to file corrections. [ 9 ] CBSA refused these requests and the Applicant then filed this Application. [ 10 ] In this application, the Applicant seeks to challenge the reasonableness and procedural fairness of the Respondent’s refusal to exempt the Applicant from the operation of

section 32.2 . The Applicant also denies it has " reason to believe " that corrections are required to its declarations. [ 11 ] The Respondent moved to strike the Applicant’s application. The Respondent focused its submissions on its response to the Applicant’s request to be exempted from the requirement to file corrections for the statutory four-year period. The Respondent did so because the balance of the Applicant’s requests were for interim relief to allow this application to be brought.

[ 12 ] The Respondent made clear its submissions applied equally to each of the " “decisions” " the Applicant sought to challenge. The Respondent asserted its responses to the Applicant’s requests are not decisions amenable to judicial review because they do not directly affect the Applicant. [ 13 ] The Respondent also asserted that the Court’s jurisprudence was clear in dictating that challenges to issues arising from compliance verifications were subject to a statutory appeal process that ousts this Court’s jurisdiction.

The Respondent asserted that the Applicant’s request to be exempted from the requirement to file corrections for the statutory four-year period could instead be made to the Governor in Council (“GiC”). III. Decision under Review [ 14 ] On August 25, 2021, Associate Judge Milczynski granted the Respondent’s motion to strike the Applicant’s application on two grounds: (

a) the Respondent’s refusals of the Applicant’s requests are not decisions amenable to judicial review and (

b) the Customs Act ’s appeal process, which the Applicant had yet to exhaust, served to oust the Court’s jurisdiction. IV. Issues and Standard of Review [ 15 ] The main issue is whether the Associate Judge committed a reviewable error in striking the Application. [ 16 ] The Applicant submits that the Associate Judge erred by:

a) misinterpreting the operative provisions of the Act at issue in the Application, which tainted her appreciation of the essential character of the Applicant’s claims;

b) misunderstanding the limitations of the statutory appeals frameworks for re-determinations and assessments under the Act , which caused her to find that the Applicant had an adequate alternative remedy in respect of its claims; and

c) misconstruing the nature of the Applicant’s claims, which prevented her from properly refusing to exercise her discretion to strike the Application. A.

The Standard of Review on Appeal from a Associate Judge [ 17 ] In Hospira Healthcare Corp v Kennedy Institute of Rheumatology , 2016 FCA 215 [ Hospira ] the Federal Court of Appeal established that when conducting an appeal from a discretionary decision of an Associate Judge, the standard of intervention is that found in Housen v Nikolaisen , 2002 SCC 33 [ Housen ] which is that " “discretionary orders of prothonotaries should only be interfered with when such decisions are incorrect in law or are based on a palpable and overriding error in regard to the facts” " : Hospira at paras. 64-65, 79 . [ 18 ] This standard applies to questions of fact or mixed fact and law and inferences of fact: Maximova v Canada (Attorney General) , 2017 FCA 230 [ Maximova ] at para 4 ; Housen at para 25 . [ 19 ] The Associate Judge’s exercise of discretion involves applying legal standards to the facts as found.

For the purposes of the Housen framework, exercises of discretion are questions of mixed fact and law: Mahjoub v Canada (Citizenship and Immigration) , 2017 FCA 157 at paragraph 72 [ Mahjoub ]. [ 20 ] In Mahjoub , Mr. Justice Stratas laid out, in detail at paragraphs 61-65, what constitutes a palpable and overriding error and how it is determined on appeal (citations omitted): Palpable and overriding error is a highly deferential standard of review. When arguing palpable and overriding error, it is not enough to pull at leaves and branches and leave the tree standing.

The entire tree must fall. “Palpable” means an error that is obvious. Many things can qualify as “palpable.” Examples include obvious illogic in the reasons (such as factual findings that cannot sit together), findings made without any admissible evidence or evidence received in accordance with the doctrine of judicial notice, findings based on improper inferences or logical error, and the failure to make findings due to a complete or near-complete disregard of evidence. But even if an error is palpable, the judgment below does not necessarily fall.

The error must be overriding. “Overriding” means an error that affects the outcome of the case. It may be that a particular fact should not have been found because there is no evidence to support it. If this palpably wrong fact is excluded but the outcome stands without it, the error is not “overriding.” The judgment of the first-instance court remains in place. There may also be situations where a palpable error by itself is not overriding but when seen together with other palpable errors, the outcome of the case can no longer be left to stand.

So to speak, the tree is felled not by one decisive chop but by several telling ones. V. Analysis [ 21 ] In considering a motion to strike, the Court must read the notice of application with a view to understanding the real essence of the application. I agree with the Respondent that the Associate Judge properly referenced the Federal Court of Appeal’s warning about

applicants seeking to make their issues sound like administrative law matters when they are not: Canada (National Revenue) v JP Morgan Asset Management (Canada) Inc , 2013 FCA 250 at para 49 . In the case at hand, the Applicant has no statutory entitlement to the relief it sought, as the issues do not pertain to administrative law. [ 22 ] The Applicant asserts that the Respondent’s responses are amenable to judicial review. [ 23 ] I disagree. Conduct by an administrative body does not necessarily trigger a right to judicial review every time.

For that right to be triggered, the applicant must be directly affected by the challenged conduct: Federal Courts Act , RSC, 1985, c F-7 , s 18.1. In the matter at hand, the Applicant was not directly affected because the conduct did not affect their legal rights, impose legal obligations or cause prejudicial effects: Air Canada v Toronto Port Authority et al , 2011 FCA 347 at para 29 ; Democracy Watch v Conflict of Interest and Ethics Commissioner , 2009 FCA 15 at para 10 [ Democracy Watch ]. [ 24 ] Further, I agree with the Respondent that the Applicant had no statutory right to the relief it requested.

This is because

section 32.2 of the Customs Act clearly states that an importer must file corrections within 90 days to any declarations made in the previous four years upon having reason to believe corrections are required. The Applicant’s request to the Respondent to have it exempt from complying with this statutory obligation goes against the provisions of the Customs Act .

Therefore, the Applicant was not directly affected by the Respondent’s refusal to grant the right, as it is the Customs Act , and not the Respondent’s responses to the Applicant that imposes legal obligations on the Applicant. [ 25 ] When, as is the case here, an applicant has no statutory right to the relief it requests, and an administrative body has no statutory duty to act on the request, the refusal of the requested relief is not amenable to judicial review : Democracy Watch 2009 at para 11 ; Canada (Attorney General) v Democracy Watch , 2020 FCA 69 at para 28 . [ 26 ] Moreover, in my view, the Associate Judge made no errors in applying the principle that applicants for judicial review are first required to exhaust statutory remedies.

The Applicant argues that their application does not have an effective alternative remedy. I disagree, because the Applicant has the alternative statutory relief available to it in the form of submitting a request to the GiC.

In JP Morgan Asset Management (Canada) Inc v Canada (National Revenue) , 2013 FCA 250 at paragraph 85 , it was confirmed that judicial review remedies are those of last resort. [ 27 ] In 1099065 Ontario Inc v Canada (Minister of Public Safety and Emergency Preparedness) , 2008 FCA 47 at paragraph 13 [ 1099065 Ontario Inc. ], the Federal Court of Appeal warned of the risks of failing to compel importers to exhaust their remedies under the Customs Act as follows: It is not necessary for us to decide whether the comprehensive review process set up by the [ Customs] Act has ousted the jurisdiction of the Federal Court of Canada to entertain an application for judicial review.

However, we are mindful of the following warning of the Supreme Court of Canada in Canada v. Addison & Leyen Ltd. , 2007 SCC 33 , at paragraph 11 : “Reviewing courts should be very cautious in authorizing judicial review in such circumstances. The integrity and efficacy of the system of tax assessments and appeals should be preserved. Parliament has set up a complex structure to deal with a multitude of tax-related claims and this structure relies on an independent and specialized court, the Tax Court of Canada.

Judicial review should not be used to develop a new form of incidental litigation designed to circumvent the system of tax appeals established by Parliament and the jurisdiction of the Tax Court. Judicial review should remain a remedy of last resort in this context.” [ 28 ] The Associate Judge made no errors in applying the doctrine of exhaustion of remedies and dismissing this application because the Applicant has remedies that are yet to be exhausted. The Applicant is required to pursue its statutory remedies " “before pursuing any recourse to the Courts” " : C.B.

Powell Limited v Canada (Border Services Agency), 2010 FCA 61 at para 4 [ C.B. Powell ]. Allowing the Applicant to proceed with its application while its statutory appeal rights remain to be exercised would " “inject an alien element into Parliament’s design”: " C.B. Powell at para 28 of the Customs Act and therefore, undermining the important principles protected by the doctrine of exhaustion of remedies. VI. Conclusion [ 29 ] For the reasons set out above, the Applicant’s appeal is dismissed, with costs to the Respondent. ORDER in T-81-21 THIS COURT’S JUDGMENT is that : 1 .

The Applicant’s appeal is dismissed. 2 . Costs to the Respondent. "E. Susan Elliott" Judge FEDERAL COURT

SOLICITORS OF RECORD DOCKET: T-81-21 STYLE OF CAUSE: SKECHERS USA CANADA INC. v CANADA BORDER SERVICES AGENCY PLACE OF HEARING: HELD BY WAY OF VIDEOCONFERENCE DATE OF HEARING: MARCH 1, 2022 ORDER AND REASONS: ELLIOTT J. DATED: NOVEMBER 1, 2023 APPEARANCES : Thang Trieu Allison Blackler For The Plaintiff Roger Flaim Elizabeth Koudys For The Defendant SOLICITORS OF RECORD : KPMG Law LLP Barrister and Solicitor Toronto, Ontario For The Plaintiff Attorney General of Canada Toronto, Ontario For The Defendant