Tax Law - OCA

The appellant, a former director who paid the company's outstanding GST and payroll remittances, appealed the dismissal of his claim for contribution from the respondents, whom he alleged were also directors.

The Court of Appeal held that the trial judge erred by independently determining the respondents' tax liability instead of deferring to the Canada Revenue Agency's assessments.

However, applying the correct approach, the appeal was dismissed because the CRA had determined that neither respondent was liable for the tax.

The appellant's alternative claim for unjust enrichment also failed as the respondents received no benefit.

The appellant purchased land for $20 million from a bank exercising its power of sale.

The appellant acquired the land as trustee for a group that already held a 69% beneficial interest in the property prior to the sale.

The appellant argued that land transfer tax should only be paid on the 31% increase in beneficial interest ($6.172 million).

The Minister assessed tax on the full $20 million purchase price.

The Court of Appeal upheld the assessment, finding that the bank sold the property for its own benefit and the gross sale price of $20 million was the value of the consideration for the conveyance under the Land Transfer Tax Act.

The Minister of Finance appealed a decision declaring that the respondent is exempt from paying retail sales tax on wooden pallets it rents to ship consumer goods.

The application judge found the pallets were exempt under s. 7(1)41 of the Retail Sales Tax Act because they were attached to or incorporated into tangible personal property for the purpose of sale, and were not returnable containers.

The Court of Appeal upheld the decision, finding that the transfer of pallets to customers constituted a sale for consideration, as the rental costs were built into the product price, and the final product sold was a palletized package.

The respondent sued the Ministers of National Revenue and Indian Affairs and CRA officials, alleging they targeted him and his business regarding the tax exemption in s. 87 of the Indian Act.

The appellants moved to strike the Amended Statement of Claim.

The motion judge dismissed the motion in part.

The appellants appealed, focusing on the Superior Court's jurisdiction to declare a GST assessment null and void.

The Court of Appeal allowed the appeal and struck the claim for declaratory relief, finding the pleadings did not provide a basis in fact or law for such a declaration, without deciding the broader jurisdictional issue.

The Minister of Finance appealed a decision entitling the respondent corporation to defer land transfer tax on the acquisition of properties from a related company.

The deferment depended on whether the two companies were 'affiliates' controlled by the same person under the Land Transfer Tax Act.

While the companies were under the de facto control of the same individual, they were not under the same de jure control.

The Court of Appeal held that the statutory definition of control is exhaustive and requires de jure control.

The appeal was allowed and the Minister's decision denying the deferment was restored.

The Minister of Finance appealed a trial decision finding that a partnership providing management services to two corporations was not an employee for the purposes of the Employer Health Tax Act.

On appeal, the Minister argued that the individual partners, rather than the partnership, were employees.

The Court of Appeal applied the Wiebe Door factors and concluded that the partners were not employees at common law, nor were they remunerated as officers or directors.

The appeal was dismissed.

The Minister of Finance appealed a trial judge's decision allowing FCMI Financial Corporation's appeal of capital tax reassessments for the years 1984 to 1989.

The Court of Appeal dismissed the appeal, holding that FCMI was entitled to use its own fiscal year end to calculate its share of a partnership's paid-up capital, could retroactively reduce its earned surplus based on unpaid income tax reassessments, and could rely on a revised financial statement to correct an error in its 1989 return.

The appellant and his companies were convicted of wilfully obtaining and attempting to obtain GST refunds by submitting false invoices for condominium development work.

He was sentenced to 30 months' imprisonment and fined over $700,000.

On appeal, the appellant argued that the Crown failed to prove the exact fraud amounts, raised the defence of officially induced error, and sought to introduce fresh evidence of undisclosed CRA documents.

The Court of Appeal dismissed the conviction appeal, finding the exact amount was not an essential element, the officially induced error defence was inapplicable, and the undisclosed documents would not have affected the trial's outcome.

The sentence appeal was also dismissed, as the substantial fraud justified the penalty.

The appellant mortgagor appealed a summary judgment granting the respondent mortgagee possession of his residential property.

The mortgagee claimed the mortgage was in default because the mortgagor failed to remit GST and employee tax deductions to the CRA for his business, resulting in a CRA lien on the property.

The Court of Appeal allowed the appeal, finding that whether unremitted GST constitutes a default under the standard charge terms of a residential mortgage is a novel issue of first instance that requires a full trial.

The Court also found a genuine issue for trial regarding whether the mortgagor had put the mortgage into good standing under s. 23 of the Mortgages Act by tendering the outstanding principal and interest.

The appellants appealed a sentence imposed for failing to remit $750,000 in GST funds.

The Court of Appeal found that while the trial judge erred in rejecting unchallenged submissions regarding the appellants' financial circumstances without notice, a conditional sentence was not appropriate.

The court held that the massive fraud on the public ordinarily called for a penitentiary sentence, and although mitigating factors justified a reformatory sentence, general deterrence required a custodial term.

The appeal was dismissed.

The appellants appealed the judgment of the Superior Court of Justice regarding the interpretation of the Income Tax Act and the Supreme Court of Canada's decision in First Vancouver Finance v. Canada.

The Court of Appeal for Ontario dismissed the appeal, expressing substantial agreement with the trial judge's reasons.

Costs were awarded to the respondent in the amount of $8,000.

The Ottawa Senators Hockey Club Corporation entered CCAA protection.

The Crown claimed priority over secured creditors for unremitted payroll deductions, GST, and associated penalties and interest.

The motion judge held the Crown did not have priority for penalties/interest on payroll deductions or for unremitted GST.

On appeal, the Court of Appeal upheld the decision regarding payroll deduction penalties and interest, finding the Crown ranks as an unsecured creditor.

However, the Court allowed the appeal regarding unremitted GST, holding that the deemed trust provision in section 222(3) of the Excise Tax Act prevails over section 18.3(1) of the CCAA based on the rule of effectivity for 'notwithstanding' clauses.

The appellant gold mining company engaged in financial hedging transactions to protect against fluctuations in the spot price of gold.

The Minister of Finance assessed the net gains from these transactions as taxable 'proceeds' under the Mining Tax Act.

The trial judge upheld the assessment, finding a sufficient nexus between the transactions and the mine's output.

The Court of Appeal allowed the appeal, holding that the statutory definition of 'hedging' is clear and unambiguous, requiring the fixing of a price for the actual output of a mine before delivery.

Since the appellant sold all its gold at spot prices and did not deliver any gold pursuant to the hedging contracts, the gains were not taxable under the Act.

The accused, a tax protestor, was charged with making a false statement on his tax return and tax evasion after failing to report income and pay taxes based on his belief that the federal government lacked the constitutional power to impose income tax.

At trial, the jury convicted him of making a false statement but acquitted him of tax evasion.

The Crown appealed the acquittal, and the accused appealed the conviction.

The Court of Appeal allowed both appeals and ordered a new trial on both counts.

The Court held that the trial judge erred in instructing the jury that an honest belief in the unconstitutionality of the Income Tax Act could negate the mens rea for tax evasion.

Furthermore, the Court found the jury's verdicts to be irreconcilably inconsistent, as the same defence was advanced for both charges.

The appellant sought to appeal a retail sales tax assessment but served the notice of appeal on the Minister one day after the 90-day statutory limitation period expired.

The motions judge dismissed the appellant's motion to extend the time for service and allowed the Minister's cross-motion to strike the appeal.

The Court of Appeal upheld the decision, finding that neither section 29 of the Retail Sales Tax Act, the Rules of Civil Procedure, nor the Courts of Justice Act grant the court jurisdiction to extend the strict 90-day statutory limitation period for instituting an appeal.

The appellants were convicted of fraud and uttering forged documents in relation to a complex tax loss scheme involving limited partnerships.

On appeal, they argued that evidence obtained during a joint investigation by Revenue Canada's Tax Avoidance and Special Investigations sections violated their Charter rights and should have been excluded.

The Court of Appeal held that while the predominant purpose test from Jarvis might push back the date the Charter breach occurred, the evidence was inevitably discoverable and properly admitted under s. 24(2).

The court also dismissed the sentence appeals, finding the sentences fit for a massive $118 million tax fraud.

The appellant, a self-employed lawyer, filed a proposal to creditors under the Bankruptcy and Insolvency Act.

The Canada Customs and Revenue Agency (CCRA) was an unsecured creditor for unpaid income tax.

After the proposal date, the appellant made installment payments for his current-year tax obligations and subsequently claimed a tax refund.

The CCRA prorated the installment payments over the entire year, applying a portion to the pre-proposal tax debt, which eliminated the refund.

The Court of Appeal held that the CCRA had no statutory basis to apply post-proposal installment payments to pre-proposal tax liability, as doing so would allow the CCRA to recover more than its pro rata share under the proposal.

The appeal was allowed and the CCRA was ordered to pay the refund.

A real estate broker became insolvent after its principal misappropriated trust funds for day-to-day operations.

The Director, representing the trust claimants, asserted priority over the broker's assets, including accounts receivable collected by a secured bank and funds remaining in trust accounts.

The Court of Appeal held that the accounts receivable were not impressed with a constructive trust because there was no clear connection between the misappropriated funds and the generated receivables, allowing the bank to realize its security.

Furthermore, the funds remaining in the trust accounts were not restored trust funds, giving the Crown priority over those funds pursuant to the deemed trust provisions of the Income Tax Act.

The appellant hospital was created by amalgamation and enjoyed a general exemption from provincial taxation under its incorporating statute.

The province subsequently amended the Retail Sales Tax Act to provide that no person is exempt from retail sales tax by reason of an exemption in another Act unless that other Act expressly mentions the Retail Sales Tax Act.

The Court of Appeal held that this amendment removed the appellant's general exemption from retail sales tax, as the incorporating statute did not expressly mention the Retail Sales Tax Act in a way that reflected an intention to preserve the general exemption.

The appellant imported and distributed disposable contact lenses.

To promote its brand, it supplied free contact lenses to authorized practitioners, who then dispensed them to patients.

The Minister of Finance assessed retail sales tax on these free lenses.

The appellant objected, arguing the lenses were exempt under s. 7(1)37 of the Retail Sales Tax Act as optical appliances sold on prescription.

The trial judge dismissed the appeal, finding the transaction was between the appellant and practitioners without a prescription.

The Court of Appeal allowed the appeal, holding that the 'sale' occurred when the patient received the lenses on prescription, thus qualifying for the tax exemption.