Tax Law - SCJ

The plaintiff brought a proposed class action against the Canada Revenue Agency and a CRA employee on behalf of investors in a tax-driven investment scheme.

The parties negotiated a settlement to resolve the tax disputes and civil claims, which was accepted by over 90% of the putative class members.

The plaintiff moved for a pre-certification order to discontinue the proposed class action to implement the settlement.

The court approved the discontinuance under s. 29 of the Class Proceedings Act, 1992, finding it was not prejudicial to the putative class members.

The Crown brought an application to unseal documents held by an accounting firm (PWC) that were subject to a production order in a fraud investigation.

The respondent claimed blanket solicitor-client and litigation privilege over the entire PWC file, arguing the accountants were retained by his law firm to assist with a CRA voluntary disclosure application.

The court rejected the blanket privilege claim, finding that the accountants were primarily performing independent accounting functions (preparing tax returns) rather than acting solely as a conduit for legal advice.

The court ordered a document-by-document review by appointed referees to identify any specific privileged communications.

The accused, a chartered accountant, was convicted of defrauding the Government of Canada of income tax and GST/HST over $5,000.

The Crown sought a three-year penitentiary sentence and a $500,000 fine, arguing the fraud exceeded $1 million.

The court found the Crown failed to prove beyond a reasonable doubt that the fraud exceeded $1 million, so the statutory aggravating factor did not apply.

Considering the accused's lack of prior record, good character, and the availability of a conditional sentence at the time of the offence, the court imposed a conditional sentence of two years less a day and a fine of $445,789.30.

The appellant corporation claimed a tax refund resulting from carrying back non-capital losses to a previous taxation year.

After a successful objection to a reassessment, the appellant received the refund but was denied the enhanced rate of interest under s. 82(5) of the Corporations Tax Act.

The appellant brought a Rule 21 motion to determine whether 'tax payable' under s. 82(5) must take into account a deduction from a loss carried back.

The court answered the question in the negative, finding that the specific deeming provision in s. 79(7) applies to the calculation of interest under s. 82(5), meaning tax payable is calculated without regard to subsequent year tax losses.

The appeal was effectively dismissed in favour of the respondent Crown.

Mary Aquino brought a motion for a garnishment hearing under Rule 60.08(16) of the Rules of Civil Procedure to vary garnishment letters issued by the Minister of Finance.

The Minister had assessed Aquino for her common law spouse's pre-existing unpaid tax debt under the Retail Sales Tax Act (RSTA) and subsequently issued garnishment letters against her commissions and wages.

The court dismissed Aquino's motion, holding that Rule 60.08(16) does not apply to the Minister's garnishment letters issued under section 36 of the RSTA, and therefore, the court lacked jurisdiction to grant the requested relief.

The plaintiffs in a class action sought court approval for a settlement agreement with certain defendants, class counsel fees and disbursements, and honorariums for the representative plaintiffs.

The settlement amount was $37 million.

The court approved the settlement, finding it fair and reasonable given the litigation risks, including dissolved corporate entities and limitations issues.

The court also approved the 30% contingency fee for class counsel and $50,000 honorariums for each representative plaintiff, recognizing their exceptional involvement and exposure to costs.

The applicants sought an urgent interlocutory injunction or stay to prohibit an arbitrator from hearing further proceedings related to HST issues, pending the determination of an application for leave to appeal the arbitrator's award.

The court dismissed the motion, finding that the applicants failed to establish a serious issue to be tried, irreparable harm, or that the balance of convenience favored granting the injunction.

The court emphasized deference to the arbitrator's scheduling decisions and the limited scope for judicial intervention in arbitration matters, particularly when a party attempts to re-litigate issues or change positions taken during the arbitration.

The appellant, acting as estate trustee for the late Sophia De Jonge, appealed the disallowance of a property claim by the bankruptcy trustee of the estate of Jeffrey Wilson.

Jeffrey, who was the executor of Sophia's estate, had transferred real property to himself without satisfying a significant tax liability owed by Sophia's estate.

Jeffrey subsequently died bankrupt.

The court found that Jeffrey breached his fiduciary duty as executor by failing to pay the estate's debts before distributing assets to himself.

The court imposed a constructive trust over the real property in favour of Sophia's estate to remedy the unjust enrichment of Jeffrey's bankrupt estate, allowing the appellant to trace the beneficial interest into the net sale proceeds.

The defendants, a law firm and lawyer, brought a motion to temporarily stay a negligence action against them.

The plaintiffs, estate trustees, had sued the defendants for allegedly negligent advice regarding a share transfer to a charitable foundation, which led to a significant tax liability after a Canada Revenue Agency reassessment.

The plaintiffs had also appealed this reassessment to the Tax Court of Canada.

The court granted the temporary stay, finding a substantial overlap of issues and factual background between the negligence action and the tax appeal.

It concluded that the outcome of the tax appeal would significantly influence, if not be determinative of, the negligence claim, and that a stay would avoid unnecessary and costly duplication of judicial and legal resources without causing significant prejudice to the plaintiffs' access to justice.

The applicant corporation sought an order to rectify its corporate records to retroactively declare a tax-free capital dividend.

The sole shareholder had drawn funds from the corporation, which were recorded as shareholder loans and subsequently assessed as personal income by the CRA.

The applicant argued that the intention of a prior rollover agreement was to permit tax-free withdrawals.

The court dismissed the application, applying the Supreme Court's decision in Fairmont Hotels, holding that rectification is not available for retroactive tax planning or to cure a failure to maintain proper corporate records where no specific mechanism was agreed upon and improperly recorded.

The Gordin Family Members, defendants by counterclaim, brought a Rule 21 motion to strike portions of the counterclaim and dismiss it against them.

The counterclaim by Residences of Springhill Inc. (RSH) alleged fraudulent misrepresentation, civil fraud, and breach of contract related to an underpayment of HST on a condominium unit sale.

The court found no reasonable cause of action against the Gordin Family Members, as the pleadings failed to establish causation for the alleged torts and the breach of contract claim was negated by RSH's admission of receiving the full purchase price including HST.

The motion was granted, and the counterclaim was dismissed against the Gordin Family Members.

The Minister of Finance reassessed BFL Canada Risk and Insurance Services Inc. for a late retail sales tax return, imposing an administrative penalty.

BFL sought an extension and penalty waiver based on extenuating circumstances, which the Minister rejected.

BFL appealed to the Superior Court of Justice, challenging the Minister's refusal to apply its Extenuating Circumstances Policy.

The Minister argued the Superior Court lacked jurisdiction, asserting the matter should proceed by judicial review in Divisional Court.

The motion addressed the question of law regarding the Superior Court's jurisdiction under s. 25(1) of the Retail Sales Tax Act to vacate or vary a tax assessment based on the Minister's discretionary decisions.

The court found that the Superior Court has jurisdiction, as the RSTA's appeal mechanism is broad and not limited to the validity and correctness of an assessment, nor does it immunize discretionary decisions.

Dr. Baldeep Kaur Saran, a dentist, applied for a discharge from bankruptcy, which was opposed by her Trustee and the Canada Revenue Agency (CRA).

The bankruptcy was tax-driven, stemming from her participation in a 'natural person' detaxing scheme and a charitable giving scheme, resulting in over $3.1 million in tax debt (including penalties and interest).

The court found that her assets were less than 50 cents on the dollar of unsecured liabilities and that she contributed to the bankruptcy through unjustifiable extravagance in living.

The court rejected her claims of being duped and imputed income to her based on her past earnings and her husband's control over their combined income.

A conditional discharge was granted, requiring her to pay an additional $200,000 to the Trustee, file accurate tax returns, remain current with CRA obligations, and her discharge was suspended for a minimum of 36 months.

The appellants, placement agencies, appealed tax assessments by the Minister of Revenue under the Employer Health Tax Act, arguing they were not the employers of temporary workers supplied to the federal government.

The court considered the tripartite relationship between the agency, the worker, and the client, and the definition of "employer" under the EHTA.

The court found that the appellants were the only entities with contractual obligations to pay the workers, and therefore were the employers for the purposes of the Act.

The appeals were dismissed.

The defendants brought a motion for summary judgment, arguing the plaintiff's claim for negligent financial advice and misrepresentation was statute-barred under the Limitations Act, 2002.

They contended the plaintiff discovered her claim by August 2009 when she had concerns about her Individual Pension Plan (IPP) and sought legal advice.

The plaintiff argued the limitation period did not begin until September 28, 2011, when the Canada Revenue Agency (CRA) officially deregistered her IPP, as she could not have known of her loss or that a legal proceeding was appropriate before this final determination, especially given the defendants' prior reassurances.

The court dismissed the defendants' motion, finding the claim was timely.

The plaintiffs, Michael and Solbyung Coveley, brought a professional negligence action against their former law firm, Thorsteinssons LLP, and several lawyers, alleging negligent advice regarding tax appeals.

The defendants moved for summary judgment, arguing the action was statute-barred under the Limitations Act, 2002.

The court found that the plaintiffs knew or ought to have known of their claim by October 27, 2010, when they received advice that fundamentally contradicted earlier assurances about the strength of their tax appeals.

As the action was commenced on November 2, 2012, more than two years after discovery, the claim was statute-barred.

The defendants' motion for summary judgment was granted, and the action was dismissed.

This decision provides supplementary reasons for calculating child and spousal support arrears following a 2002 consent order.

The court addressed the imputation of income, the methodology for calculating spousal support after children ceased to be "children of the marriage" and the tax treatment of lump sum spousal support arrears.

It was held that the applicant was not entitled to 60% of the family's net disposable income after child support obligations ended, and that a lump sum award of arrears of spousal support, representing amounts due under an existing order, was not required to be "netted down" for income tax deduction purposes as the Canada Revenue Agency permits such non-retroactive lump sum payments to be deducted by the payor.

La demanderesse, un organisme de bienfaisance enregistré, a contesté l'interprétation et l'application par l'Agence du revenu du Canada (ARC) du paragraphe 149.1(6.2) de la Loi de l'impôt sur le revenu.

L'ARC limitait à 10 % les ressources qu'un organisme pouvait consacrer à des activités politiques non partisanes.

La Cour a conclu que cette restriction portait atteinte à la liberté d'expression garantie par l'alinéa 2b) de la Charte, car elle empêchait la demanderesse de poursuivre ses fins de bienfaisance par la défense d'intérêts publics.

L'atteinte n'était pas justifiée au regard de l'article premier de la Charte.

La Cour a déclaré que les activités politiques non partisanes contribuant aux fins de bienfaisance doivent être considérées comme des activités de bienfaisance sans restriction de pourcentage.

The applicant, a registered charity focused on poverty relief through public advocacy, challenged the Canada Revenue Agency's (CRA) interpretation and enforcement of section 149.1(6.2) of the Income Tax Act.

This section limits non-partisan political activities to "substantially all" of a charity's resources, which the CRA interpreted as 90% or more, effectively capping political activities at 10%.

The applicant argued this restriction infringed its freedom of expression under section 2(b) of the Canadian Charter of Rights and Freedoms.

The court found that the CRA's 10% rule and the distinction between charitable and non-partisan political activities were unconstitutional, as they burdened the applicant's effective pursuit of its charitable purpose through advocacy.

The Plaintiff, a numbered corporation, sought summary judgment for HST payment on a property sale to the Defendant, Lucia Pessoa Park, amounting to $364,000.

The Defendant brought a cross-motion for summary judgment regarding municipal development fees owed by the Plaintiff.

The court dismissed the Plaintiff's claim for HST, finding the sale was exempt as a used residential unit under the Excise Tax Act, and that even if HST were payable, the Plaintiff was deemed to have collected it due to a statutory declaration.

The court granted the Defendant's cross-motion for development fees, which the Plaintiff had conceded.