Tax Law - SCJ

The applicant sought to quash a municipal by-law establishing a new municipal accommodation tax on the grounds that it violated the Municipal Act by attempting to repeal a by-law under which a debt had been contracted, and that it was passed in bad faith to vitiate a valid and subsisting agreement.

The court found that the revenue sharing arrangement under the transient accommodation tax did not constitute a debt under the Municipal Act, and that the municipality had not acted in bad faith in passing the new by-law.

The court dismissed the application, finding that the municipality retained the power to enter into agreements with eligible tourism entities and that no exclusivity was granted to the applicant.

The applicant, The Corporation of the Township of Nipigon, sought a declaration that its Municipal Accommodation Tax By-law 1940 was properly enacted and that the respondents were in contravention of its terms.

The applicant also sought payment of outstanding municipal accommodation tax amounts.

The respondents argued that they should be compensated for the costs of collecting and remitting the tax.

The court found that the by-law was properly enacted pursuant to the Municipal Act, 2001, and that no statutory provision required the municipality to compensate businesses for tax collection efforts.

The court granted the application and ordered the respondents to pay the outstanding amounts plus costs.

Discharge hearing for a bankrupt real estate agent who filed for bankruptcy in October 2020 with significant debts including a substantial costs award from family law proceedings.

The Trustee opposed discharge on multiple grounds including failure to comply with surplus income obligations under section 68 of the Bankruptcy and Insolvency Act, failure to perform duties under the Act, and unjustifiable extravagance in living.

The bankrupt earned over $590,000 in gross income during the bankruptcy period but dissipated funds without remitting tax or HST installments.

The court found multiple section 173 facts proven and imposed a conditional discharge requiring payment of $40,000 plus 20% of proven claims, along with tax compliance conditions.

The plaintiff brought a motion to enforce a settlement agreement in a wrongful dismissal action, specifically disputing the statutory deductions made by the defendant from a $25,000 payment.

The plaintiff argued the payment should be treated as a "retiring allowance" with lower tax, CPP, and EI deductions, while the defendant treated it as employment income based on the settlement wording "payable as wages and subject to all necessary statutory deductions." The court found that the parties had an enforceable settlement and that the defendant had met its obligations, as the agreement left it to the defendant to make "necessary deductions." The court clarified that the ultimate authority to characterize the payment and determine appropriate deductions rests with the Canada Revenue Agency and the Tax Court, not the Superior Court on a motion to enforce settlement.

The appellant, William Mori, appealed convictions and sentences for income tax evasion and making false statements under the Income Tax Act.

The trial judge found Mori guilty of evading tax for three years, imposing consecutive four-month imprisonment terms and fines.

Mori argued errors in declining to exclude evidence obtained during a tax audit and in finding the requisite mens rea, and that the sentence was unfit.

The appeal court upheld the trial judge's findings on the audit's predominant purpose, concluding it was a civil audit until specific evidence of all invoices was received, and rejected Mori's "natural person" tax protestor theory as a valid defence to mens rea.

The court also found no errors in principle in the sentencing, affirming the 12-month imprisonment and fines, emphasizing general and specific deterrence against tax evasion, particularly in light of the growing "natural person" movement.

The court determined ongoing and retroactive child and spousal support following an earlier judgment on property and income issues.

Key issues included the appropriate income for retroactive calculations, the duration and quantum of ongoing spousal support, and whether retroactive spousal support should be adjusted for tax consequences due to non-deductibility.

The court fixed ongoing spousal support at the lower end of the mid-range, ordered it indefinitely subject to review, and applied a 30% reduction to retroactive spousal support for non-deductibility.

The defendants brought a motion for summary judgment seeking to dismiss the plaintiff's action for indemnity under a share purchase agreement.

The action was based on alleged breaches of a tax representation and warranty.

The defendants argued the action was statute-barred and that the plaintiff's claim for "loss of use of funds" was limited by contract.

The court granted summary judgment, finding the action was statute-barred because the six-year limitation period began when the plaintiff knew the material facts of the breach and the resulting "claim" (Revenue Canada's reassessment), not upon a demand for indemnity or its refusal.

The court also dismissed the claim for loss of use of funds beyond the contractually agreed prime rate.

Capcorp Planning (2003) Inc. appealed an assessment of Ontario Sales Tax and a penalty levied by the Minister of Revenue for non-remittance of tax on premiums paid for its extended health care plans.

The central issue was whether these plans, identified as "unfunded benefits plans" under the Retail Sales Tax Act, were exempt from tax because the risks covered could not "otherwise be obtained by taking out a contract of insurance." The court found that the plans were indeed unfunded benefits plans and, based on uncontradicted evidence that purchasers could not obtain alternative health insurance due to pre-existing conditions or other impediments, concluded that the amounts paid were not taxable.

Consequently, the assessment was quashed.

The court also rejected the respondent's arguments regarding the penalty rationale and the due diligence defence.

This case involved a trial of issues arising from an application by Jack Sentineal, as estate trustee for his father Frederick Clement Sentineal, to pass his accounts.

The defendant, Jeffrey Sentineal, opposed the accounts, alleging breaches of fiduciary duty, misappropriation of assets, and unreasonable delay by the trustee.

The court addressed disputes over estate assets, including real estate and chattels, and the financial dealings of a family business (Queen’s Royal Tours Inc.).

The court found that Jeffrey had converted certain estate chattels and contributed significantly to the delay in estate administration.

Jack was found responsible for a late tax filing but otherwise discharged his duties reasonably.

The court approved the estate accounts with adjustments, awarded Jack executor's compensation, and referred legal fees for assessment.

The Cetero Group brought a motion seeking entitlement to a $298,243 tax refund (carry-back refund) held by PricewaterhouseCoopers Inc. (PWC), as receiver of PRACS Institute Canada B.C. Ltd. The Cetero Group argued the refund was not validly assigned to PRACS, that PWC would be unjustly enriched, and that they were entitled to the refund through legal or equitable set-off due to PRACS's failure to pay under an operation support agreement.

The court found the carry-back refund was validly assigned to PRACS under an asset purchase agreement, providing a juristic reason for PWC's retention, thus defeating the unjust enrichment claim.

Furthermore, the court determined that neither legal nor equitable set-off applied, as the refund was not a debt owing by BA to PRACS, and the cross-claim for unpaid invoices was not sufficiently connected to the refund to warrant equitable set-off.

The motion was dismissed.

The defendants, an accounting firm and an individual accountant, brought a motion for summary judgment to dismiss the plaintiff's professional negligence claim based on the Limitations Act, 2002.

The plaintiff alleged that the defendants' failure to timely file tax returns resulted in the loss of refundable dividend tax on hand (RDTOH) and associated penalties and interest.

The court considered whether the plaintiff's claim was discoverable more than two years prior to its commencement on August 1, 2012.

The court found that the plaintiff had sufficient knowledge of the injury, its cause, and the identity of the wrongdoers by June 2010 at the latest, and that a proceeding would have been a legally appropriate means to seek a remedy at that time, despite ongoing mitigation efforts and the defendants' failure to advise of a potential claim against them.

The court dismissed the plaintiff's arguments regarding prematurity, fraudulent concealment, and estoppel.

This application sought a rectification order for a corporate amalgamation intended to achieve specific tax outcomes under the Income Tax Act's "tax bump rules." Due to an error, the amalgamation was performed in a single step instead of the required two steps, defeating the intended tax benefit.

The court applied the test for rectification, requiring proof of a continuing specific intention to undertake the transaction on a particular tax basis.

The court found, on a balance of probabilities, that the applicant had a continuing specific intention to utilize the tax bump rules, supported by various documents and witness testimony.

The application for rectification was granted, and costs were awarded to the applicant.

The plaintiff participated in a charitable donation tax shelter, claiming substantial tax refunds which were later disallowed by the Canada Revenue Agency (CRA).

The plaintiff brought a claim in Superior Court alleging CRA and its employees owed a duty to police the registration of the charity associated with the scheme and to warn the public.

The defendants moved to strike the statement of claim.

The court allowed the motion, finding no duty of care owed by CRA to warn taxpayers about unsuccessful tax schemes, that the Charter claim was bald and untenable, and that claims against individual employees were an abuse of process.

The court also struck damages related to the lost tax deduction as being within the exclusive jurisdiction of the Tax Court.

The Aubrey Dan Family Trust (ADFT) brought a summary judgment motion to allow its income tax appeal for the 2007 taxation year and vacate a reassessment issued by the Minister of Finance.

The motion focused on whether the reassessment was issued outside the statutory limitation period and, if so, whether the limitation period was properly waived.

The court found that the original notice of assessment triggered the normal reassessment period, which expired before the reassessment was issued.

However, the court also found that the T2029 waiver form signed by ADFT was valid under the Ontario Income Tax Act, deeming it a prescribed form and thus effectively waiving the limitation period.

Consequently, ADFT's motion for summary judgment was dismissed.

This application sought rectification of a corporate resolution declaring a dividend.

Due to a clerical error, the resolution and Canada Revenue Agency election form were incorrectly dated, resulting in a 60% tax liability under the Income Tax Act instead of the intended tax-free capital dividend.

The court granted the rectification, finding a clear and specific intention to achieve a tax-free distribution that was frustrated by a simple mistake in implementation.

The appellant appealed his conviction for tax evasion under s. 239(1)(d) of the Income Tax Act following a lengthy trial in the Ontario Court of Justice.

He argued that the trial judge erred in assessing the mens rea for tax evasion, rendered inconsistent findings by accepting the direct method of proof while rejecting the net worth method, and improperly reversed the burden of proof by relying on assumptions made by a CRA investigator.

The Superior Court held that the trial judge correctly applied the legal test for wilful tax evasion and that the evidence supported the finding that the appellant knowingly failed to file a tax return to avoid payment of taxes.

The court further found no inconsistency between rejecting one evidentiary method while accepting another and no improper shifting of the burden of proof.

The appeal against conviction was dismissed.

The defendants brought a motion under Rule 21.01(1)(b) and Rule 21.01(3)(d) of the Rules of Civil Procedure to strike the statement of claim for disclosing no reasonable cause of action and constituting an abuse of process.

The self‑represented plaintiff attempted to sue federal officials and government counsel following unsuccessful tax litigation relating to a reassessment request and Canada Child Tax Benefit claim.

The court found the pleaded causes of action, including negligence, fraudulent and negligent misrepresentation, misfeasance in public office, breach of duty of good faith, and malicious falsehood, lacked the essential elements required in law.

The action was also an impermissible attempt to relitigate matters already determined by the courts.

The statement of claim was struck without leave to amend and costs were awarded to the defendants.

The accused applied for a stay of proceedings on charges of tax evasion, alleging abuse of process arising from late disclosure shortly before the scheduled trial.

The Crown had provided multiple volumes of trial materials days before trial, asserting that the documents largely contained previously disclosed records reorganized into trial volumes.

The court held that the materials constituted evidence intended to be tendered at trial and therefore fell within the Crown’s disclosure obligations under R. v. Stinchcombe, and that the disclosure was not provided sufficiently in advance of trial.

However, applying the abuse of process framework set out in R. v. Nixon, the court found that the prejudice alleged by the accused did not meet the high threshold required for a stay.

The adjournment of the trial, combined with the opportunity for the defence to review the new materials, was found to be an adequate remedy.

A tobacco manufacturer sought declarations that a shipment of unmarked cigarettes seized by authorities under the Tobacco Tax Act was unlawfully seized and that it had a right to possess the tobacco.

The court found that the warrantless search and seizure of a delivery vehicle violated s. 8 of the Canadian Charter of Rights and Freedoms because the detention and search occurred without reasonable and probable grounds and because the authorized official improperly directed police remotely.

Although the court held that the applicant’s operations demonstrated substantial non‑compliance with the Tobacco Tax Act and its permit conditions, the Charter breach justified a remedy.

The court ordered the return of the seized cigarettes belonging to the applicant or compensation for their value if they had deteriorated.

The successful appellants sought costs following summary judgment motions in land transfer tax appeals.

They requested over $260,000 and argued that costs should also include work performed for additional related appeals and disputes that had been held in abeyance, as well as elevated costs based on a purported Rule 49 settlement offer.

The court declined to award costs for the additional appeals and related disputes because they were not before the court and there was no evidentiary basis to assess the work performed.

The court also held that the settlement proposal was not a valid Rule 49 offer because it addressed matters beyond the proceedings before the court and therefore did not justify elevated costs.

The parties were directed to attempt to agree on the remaining costs or provide further submissions limited to the four appeals heard.