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Tax

Income tax

Capital gains and losses

Taxypayer’s securities trading gains reassessed as income

Taxpayer maintained two investment accounts at company, one for Canadian and one for U.S. dollar positions. Taxpayer’s strategy was to invest in diversified securities that had potential for 30 percent returns. In early 2009, taxpayer liquidated holdings in both accounts and converted them in cash to supposedly pay off mortgage. Taxpayer, however, purchased and sold stocks costing about $2.5 million. Taxpayer’s total gain was $550,000. Taxpayer reported his gains and losses on these positions as capital gains in his 2009 income tax return. Canada Revenue Agency (CRA) reassessed to include full amount in income. Taxpayer appealed. Appeal dismissed. Reassessment characterizing gains as income gains was not incorrect. Taxpayer was trading in securities as business activity, or at least was buying and selling securities as part of adventure in nature of trade. Taxpayer’s primary intention when purchasing securities was to sell them at profit as soon as reasonable return could be realized. Taxpayer spent considerable time each day monitoring markets beyond what he said was required for his employment. Nature of gains realized by taxpayer buying and selling securities in his investments accounts bore close similarity to what he was doing in his investment dealer positions for decades. Taxpayer was buying and selling throughout year, and his holding periods were clearly short and often very, very short. On balance of probabilities, taxpayer did not satisfy Court about his mortgage paydown plans. There were no bank documents showing when taxpayer committed to renew mortgage. Surely at some point in first part of taxpayer’s 2009 reinvestment activities, he realized that he was picking securities for quickest target cumulative return. Combined results of not being able to conclude taxpayer’s investment strategy was unchanged in 2009 or that he liquidated in 2009 in order to pay off mortgage, and not having been given detailed evidence regarding prior years meant Court only considered actual activity in his accounts in 2009. Taxpayer’s expertise extended to what he regarded as trading activities; whilst his securities trading activities in 2009 may not have risen to level of him carrying on business of trading securities, they appeared to handily meet all of requirements to have been considered adventure or concern in nature of trade. Taxpayer was not treated differently or singled out because his investments were in securities.
R. v. Foote (2017), 2017 CarswellNat 1729, 2017 TCC 61, Patrick Boyle J. (T.C.C. [General Procedure]).

Tax

Goods and Services Tax

Administration and enforcement

Sole officer, director and shareholder not entitled to represent corporation

Corporation filed motion seeking order to allow Z to represent corporation in action. According to Z’s affidavit, he was sole officer, director and shareholder of corporation. No details were provided as to financial situation of corporation and it was not alleged that corporation was unable to pay. Relevant rule was in s. 30(2) of Tax Court of Canada Rules (General Procedure). Rule did not provide specific requirements as to when relevant leave was to be granted. It was left for court to develop reasonable criteria taking into account variety of circumstances. Motion dismissed. Corporation had not demonstrated that it was unable to pay for counsel. With over $115,000 at stake, this was not case where legal costs would overwhelm amount at issue. Case was not as easy or straightforward as corporation believed it to be. Based on documents that corporation attached to notice of appeal and on reply filed by Minister of National Revenue, biggest amounts in issue appeared to be related to output tax. Based on materials, assessment was in large measure based on Minister’s analysis of deposits into corporation’s bank accounts and into Z’s bank account. Corporation seemed to claim that deposits into Z’s account related to Z’s business unrelated to corporation’s business. Organizing evidence of detailed nature relating to all deposits in issue and all input tax credits in issue was not likely to be easy or straightforward. Both corporation’s submissions and affidavit asserted that all of corporation’s representations were pure factual documents and that documents were unavailable in audit process. It was not clear that Z understood that he would have to testify to explain documents and put them in context to show errors in bank deposits analysis and to show why certain input tax credits were justified. Z would not be able to adequately represent corporation. There was no necessity to allow agent because of inability to pay counsel, given that amount in issue was significant, that it was not shown that Z was able to adequately represent corporation, and given public interest in having effective trial process while attempting to limit costs.
WJZ Enterprises v. R. (2017), 2017 CarswellNat 1404, 2017 TCC 57, Gaston Jorré J. (T.C.C. [General Procedure]).

Immigration and Citizenship

Refugee protection

Credibility

Refugee Protection Division’s treatment of evidence was unreasonable

Applicant N was Ukrainian citizen, who claimed that he faced persecution due to his bisexuality and relationship with another man. N was beaten by other men, causing him to leave for Canada to study in 2015. N returned to Ukraine to move in with his partner, but was again attacked when he tried to save his partner from being attacked. N returned to Canada, and later filed refugee claim. Refugee Protection Division (RPD) accepted likelihood of persecution based on sexual orientation, in Ukraine. However, RPD found N’s evidence lacking in credibility. RPD ruled that claim was manifestly unfounded. N applied for judicial review of RPD decision. Application granted. RPD made improper credibility findings, based on phone evidence which it used to determine that N’s relationship was not genuine. N clarified evidence when asked, but was not asked about details that could have further clarified matter for RPD. RPD made no finding as to authenticity of medical note, but determined that medical evidence was fraudulent. Proper consideration of this evidence could have changed outcome of application. N had reasonable explanation for amending his evidence, but this was not accepted by RPD. As whole, RPD’s treatment of evidence was unreasonable.
Nagornyak v. Canada (Minister of Citizenship and Immigration) (2017), 2017 CarswellNat 680, 2017 FC 215, Cecily Y. Strickland J. (F.C.).

Immigration and Citizenship

Admission

Immigrants

Settlement funds not equating to economic establishment

Foreign national (BJ), 53-year-old Indian citizen, applied for permanent resident visa as federal skilled worker, and included his spouse and two children as accompanying family members. BJ’s self-assessed points were one point short of minimum amount for senior managers - financial, communications and other business services, but he submitted he had CAD $3,000,000 in assets and would transfer CAD $1,000,000 when they immigrated. Citizenship and Immigration Canada Program Support Officer (PSO) informed BJ that his application received positive determination of “eligibility to be processed,” but that final decision on his “eligibility to be selected” would be made by visa office. Immigration Officer (IO) refused BJ’s application because he was not satisfied BJ would be able to become economically established in Canada. BJ brought application for judicial review. Application dismissed. It was reasonable for IO to state and find that settlement funds did not equate to economic establishment for purpose of obtaining permanent resident visa in federal skilled worker class. While settlement funds might be relevant consideration when visa officer makes substituted evaluation under s. 76(3) of Immigration and Refugee Protection Regulations, they do not, in and of themselves, equate to economic establishment or likelihood of skilled worker to become economically established in Canada. IO’s determination was reasonable. While BJ had significant settlement funds, he provided no evidence as to his efforts to seek employment in Canada. IO was entitled to review all factors to determine whether points awarded properly reflected BJ’s ability to economically establish in Canada. PSO did not purport to make any decision regarding merits of BJ’s application.
Jain v. Canada (Minister of Citizenship and Immigration) (2017), 2017 CarswellNat 1463, 2017 FC 377, Keith M. Boswell J. (F.C.).

Public Law

Social programs

Employment insurance

Employee entitled to employment insurance benefits during leave of absence

L was employed by bank until October 2013 when she took personal, unpaid leave of absence in order to care for her elderly parents. Written agreement between bank and L provided that during her leave, she would continue to accrue service with bank and receive benefits. Agreement further provided that intended purpose of bank’s leave policy was to provide employees with time away from workplace to address personal needs and that earning income from other sources over period of leave was not permitted. L made arrangements for her parents’ care and began applying for jobs at bank without success and her leave of absence ended when her employment was terminated. L applied for employment insurance benefits and her claim was antedated so that her benefit period was established effective to October 27, 2013. Employment Insurance Commission rejected application for benefits on basis that L had not shown that she was available for work during her benefit period. General Division of Social Security Tribunal concluded that L was entitled to benefits. Decision was confirmed on appeal by Appeal Division. Attorney General applied for judicial review. Application for judicial review dismissed. Appeal Division made findings of facts including that L pursued more than 10 possible positions with bank in one year and did all she could to look for work within bank. Appeal Division found that by limiting her job search to positions at bank, L did not unduly limit her chance of returning to labour market so as to be unavailable. While it may have been open to Appeal Division to make another finding, it did not reach unreasonable conclusion.
Canada (Attorney General) v. Lavita (2017), 2017 CarswellNat 1521, 2017 FCA 82, Eleanor R. Dawson J.A., Wyman W. Webb J.A., and Donald J. Rennie J.A. (F.C.A.).

Municipal Law

Municipal liability

Practice and procedure

International Boundary Waters Treaty Act not applying to action against municipal and provincial governments relating to flood damage

Plaintiffs alleged that portions of road allowance in defendant municipality were built up to serve as dike that blocked natural flow of water across international border north into Manitoba and caused extensive flooding and damage to plaintiffs’ land on American side of international border. Plaintiffs sought injunctive relief and damages, and claims were based on s. 4(1) of International Boundary Waters Treaty Act (“Act”). Defendants, municipality and Government of Manitoba, were successful in motions to strike out amended statement of claim on basis that Federal Court did not have jurisdiction. Plaintiffs appealed. Appeal dismissed. Court carefully considered reasons given by motions judge in concluding that Parliamentary record supported his interpretation of section 4 of Act. He expressed his view as to meaning and intent of what was discussed by Parliament. At paragraph 61 of his reasons, he opined that Parliamentary record supported interpretation that section 4 of Act “only covers downstream situations where there is interference or diversion of ‘waters in Canada’ that would otherwise flow across the border into the United States (the Article II situation) and not Article IV situation”. Motions judge did not place undue reliance upon those debates or fail to appreciate context in which they occurred.
Pembina (County) Water Resource District v. Manitoba (2017), 2017 CarswellNat 1898, 2017 FCA 92, M. Nadon J.A., Donald J. Rennie J.A., and Yves de Montigny J.A. (F.C.A.); affirmed (2016), 2016 CarswellNat 1967, 2016 FC 618, James Russell J. (F.C.).

Criminal Law

Offences

Extortion

Accused receiving suspended sentence for extortion conviction

Accused attended offices of paralegal agency and threatened B that complaint to Law Society of Upper Canada would be made regarding Z’s conduct that would result in Z being disbarred and agency being shut down. Accused also suggested that this fate could be avoided were he paid $25,000, a figure he subsequently agreed to reduce to $10,000. Accused re-elected to proceed to trial by judge alone and has pleaded guilty to crime of extortion contrary to s. 346(1.1)(b) of Criminal Code. Sentencing hearing held. Having considered carefully submissions of both parties, age and character of offender, nature of offence and circumstances surrounding commission, this was appropriate case to exercise discretion under s. 731(1)(a) of Criminal Code to suspend passing of sentence while directing that accused be released on certain conditions of probation for period of 18 months. There were mitigating circumstances present. Accused was young man who had just completed university education. Accused’s youth was subject to unusual stresses associated with breakdown of parent’s marriage and father’s financial distress. Accused was attempting to launch legal career under the cloud of what will very certainly be challenging circumstances for many years to come as result of conviction regardless of what sentence may be imposed. Accused had no criminal record or record of involvement with police.
R. v. Fattore (2017), 2017 CarswellOnt 5587, 2017 ONSC 2410, S.F. Dunphy J. (Ont. S.C.J.).

Criminal Law

Offences

Dangerous driving causing bodily harm

Police officer convicted of dangerous driving for collision while speeding to emergency

Accused OPP constable responding to emergency call about serious motor vehicle accident entered small village, travelling at 178 km/h in 50 km/h zone, and entered intersection where he collided with complainant’s vehicle. Complainant suffered cracked ribs and concussion, and property damage resulting from collision was extensive. Accused was found guilty of dangerous driving causing bodily harm. Trial judge found that accused’s conduct amounted to marked departure from standard of care of reasonable police officer. Accused fined $2,500. It was aggravating that accused, police officer sworn to uphold laws of province, committed criminal offence. Facts were also aggravating, given his extremely high rate of speed through village in mid-afternoon leading to collision causing bodily harm. It was accepted that accused was remorseful. Deterrent sentence must emphasize community disapproval of act and brand it reprehensible. Gravamen of offence was disregard for public safety. Accused’s motive being protection of public safety substantially mitigated his moral culpability. His act became criminal only because he responded in disproportionate manner. Sentence must attempt to balance accused’s level of culpability and need to denounce and deter with other relevant circumstances, including fact that complainant made illegal left turn into path of accused’s police vehicle. Accused did not need specific deterrence or rehabilitation. However, discharge sought by defence would be contrary to public interest as it would not satisfy general deterrence or denunciation. Proportionate sentence was $2,500 fine with appropriate surcharge and driving prohibition of 12 months.
R. v. Porto (2017), 2017 CarswellOnt 4880, 2017 ONSC 733, Bruce Thomas J. (Ont. S.C.J.).

Bankruptcy and Insolvency

Discharge of bankrupt

Conditional discharge

Student loan indebtedness discharged by assignment in bankruptcy

Applicant obtained student loans for her first course of study in connection with Bachelor of Science program. She obtained loan money between August 1996 and April 2001 and graduated in October 2004. In her second course of study, applicant attended college between 2006 and 2007, but did not obtain student loans. Applicant left program in April 2007. Applicant filed assignment in bankruptcy on December 3, 2011. By virtue of s. 178(1)(g)(ii) of Bankruptcy and Insolvency Act (“BIA”), some student loan debt survives bankruptcy in certain circumstances. Student loan debt is not discharged by bankruptcy if bankruptcy occurred within seven years after person ceased being student. Applicant brought application seeking declaration that she ceased to be student with respect to her student loans in October 2004, and declaration that those student loans were discharged by virtue of applicant’s assignment in bankruptcy. Application granted. Interpretation of s. 178(1)(g)(ii) must be guided by overall purpose of BIA, which was namely rehabilitating and reintegrating individuals to allow for future participation in Canadian economy. Permitting bankrupt to discharge her debts after seven years from date of program to which student loan was connected goes some distance in promoting intent and purpose of BIA, that is to promote rehabilitation of debtors, providing them with fresh start while discouraging any abuse of bankruptcy system. For purposes of applicant’s student loans, she ceased to be student in October 2004. Therefore, seven-year delay requirement had been met. Accordingly, applicant’s indebtedness for student loans obtained prior to October 1, 2004 was discharged by her assignment in bankruptcy.
St. Dennis v. Ontario (Ministry of Training, Colleges & Universities) (2017), 2017 CarswellOnt 6316, 2017 ONSC 2417, Patricia C. Hennessy J. (Ont. S.C.J.).

Bankruptcy and Insolvency

Companies’ Creditors Arrangement Act

Arrangements

Reopening sale and investment solicitation process would be unfair and foolhardy

Applicants, group of insolvent steel companies, sought Companies’ Creditors Arrangement Act (CCAA) protection. Sale and investment solicitation process (SISP) was authorized. E Global was deemed non-compliant bidder under SISP as it failed to prove it had adequate financial resources. In accordance with SISP, applicants accepted joint bid from approved joint bidders and brought motion for order approving asset purchase agreement (APA). Before motion was heard, one joint bidder decided not to proceed. Other joint bidder sought to close transaction in partnership with certain senior noteholders of applicant. Union filed cross-motion to advance purported transaction with O Steel, entity owned by E Global. E Ltd. brought motion to reopen SISP. Union brought motion for directions as to whether it could engage in discussions with O Steel regarding potential sale. Motions dismissed. Re-opening SISP in circumstances would be unfair and foolhardy. There was no evidence E Global had financial wherewithal to undertake asset purchase and no evidence of any interested, viable bidder. Fact that large percentage of senior noteholders replaced one of joint bidders made accepted bid more viable, not less reliable. There was no basis for order authorizing union to do anything with O Steel in current process. In Non-Disclosure Agreement signed by union, it was agreed that union needed applicants’ consent to talk to SISP bidder and that bidder needed to be qualified SISP bidder. O Steel was not SISP bidder.
Essar Steel Algoma Inc., Re (2017), 2017 CarswellOnt 4050, 2017 ONSC 1401, Newbould J. (Ont. S.C.J. [Commercial List]).
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An estate trustee who took an ‘egregious' position in litigation has been ordered to personally pay more than $140,000 in costs. Will this ruling serve as an appropriate caution to executors on how they conduct themselves in litigation?
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