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Case Law is a sample selection from the weekly summaries of notable unreported civil and criminal court decisions published in Law Times newspaper.

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Taxation

Income tax

Subsection 242(1) of Business Corporations Act (Ont.) does not authorize dissolved corporation to initiate civil proceeding.

Appellant was incorporated in 2000 pursuant to Business Corporations Act (Ont.) and dissolved in 2007. In 2010, Minister of National Revenue issued notice of assessment against appellant in respect of tax indebtedness of related corporation. Minister confirmed assessment when appellant objected. Appellant filed notice of appeal in Tax Court. Tax Court held that appellant lacked capacity to initiate appeal and adjourned appellant’s pending appeal to allow appellant to revive its corporate status. Appellant instead appealed Tax Court’s order. Section 242(1) of Act provides that civil, criminal or administrative actions or proceedings may be brought against corporation as if corporation had not been dissolved. Tax Court distinguished previous decisions on basis that Act was subsequently amended. Appeal dismissed. No distinction of substance between words “in the same manner and to the same extent as if it had not been dissolved” and “shall be deemed for all purposes to have never been dissolved”. Previous decisions, however, were no longer good law. Procedure differed significantly from that now in place and in place at time of decisions. It was no longer correct to say that filing of notice of appeal in Tax Court does not constitute initiation of legal proceeding. Fact that legal proceeding is directed against Minister’s assessment does not detract from conclusion that by filing notice of appeal in Tax Court, one institutes legal proceeding. Subsection 242(1) of Act does not authorize dissolved corporation to initiate civil proceeding. Tax Court did not err by adjourning appeal and requiring appellant to revive its corporate status so it could continue the appeal.
1455257 Ontario Inc. v. R. (Mar. 30, 2016, F.C.A., Eleanor R. Dawson J.A., D.G. Near J.A., and Richard Boivin J.A., A-319-15) Decision at 254 A.C.W.S. (3d) 975 was affirmed. 264 A.C.W.S. (3d) 255.


Industrial and Intellectual Property

Trademarks

Appellants would not be prejudiced if respondents elected accounting of profits

Court allowed respondents’ appeal in part, finding that there was likelihood of confusion between appellants’ no-name cigarettes and respondents’ MARLBORO, especially in “dark market”, and therefore infringement of respondents’ trademark. Matter was referred back to judge, who allowed respondents to elect accounting of profits. Appellants appealed. Appeal dismissed. Judge turned his mind to restitutionary purpose of remedy as he weighed relevant factors. Judge clearly considered all of issues and evidence in concluding that calculation of damages was likely to be as complex as accounting of profits. Causal link had been established between damages suffered and use of their property by appellants. Court had determined that there was confusion and infringement, which was source of appellants’ unjust enrichment. Appellants would not be prejudiced if respondents elected accounting of profits in view of parallel litigation that had been initiated by respondents alleging infringement of their MARLBORO trademark. When either infringement proceeding or reference was ready to be heard, other proceeding could be stayed until decision was rendered.
Philip Morris Products S.A. v. Marlboro Canada Ltd. (Feb. 17, 2016, F.C.A., Johanne Trudel J.A., A.F. Scott J.A., and Richard Boivin J.A., A-187-15) 264 A.C.W.S. (3d) 186.


Taxation

Income tax

Tax Court judge erred by failing to consider whether it was implicit that taxpayer was required to incur certain costs in order to earn commissions

Taxpayer employee of car dealership incurred various expenses to support sales, including costs relating to contact with clients and promotional expenses, as well as costs of transferring new cars to dealership to obtain higher commission and of installing certain accessories on certain cars sold. Taxpayer claimed expenses as deductions from employment income. Minister assessed taxpayer, disallowing such deductions on basis that expenses were not “required under employment contract” as set out in s. 8(1)(f) of Income Tax Act (Can.). Taxpayer’s appeal was dismissed. Taxpayer appealed. Appeal allowed in part. Tax Court judge erred in relying on employer’s personal perspective, without considering whether, regarding contract objectively, it was implicit that taxpayer would be required to incur certain costs in order to earn commissions contemplated by contract. Tax Court judge also erred in failing to address possibility that some expenses might be required under contract and others might not. Tax Court judge did not identify and segregate those expenses related to development and marketing of taxpayer’s sales, which he was not required to incur under contract, and those which, when contract was viewed objectively, were directly needed for taxpayer to sell cars and earn commissions and were expressly agreed with dealership. Taxpayer’s evidence showed mutual understanding that expenses for transporting cars to dealership and purchasing accessories to be included on delivery of vehicle were required. Without such expenses, taxpayer could not earn higher percentage commission that dealership agreed to pay him if vehicle was present in community or could not deliver merchandise that dealership had agreed to deliver to client. Assessment should be varied to allow deductions for costs incurred on transportation of vehicles to deliver and to purchase accessories or enhancement where dealership was also covering part of costs and expense was charged back.
Urquhart v. R. (Mar. 4, 2016, F.C.A., Johanne Gauthier J.A., Donald J. Rennie J.A., and Mary J.L. Gleason J.A., A-56-15) 263 A.C.W.S. (3d) 1082.

Taxation

Income tax

Lump sum payment from workers’ compensation board constituted income

In 1969, taxpayer was injured while working, which caused continuing pain. Taxpayer made claim to workers’ compensation board in 2011 on basis of new diagnosis of complex regional pain syndrome. Taxpayer received award of $39,123.95, retroactive to 1969, and lump sum of $53,816 in 2012. Taxpayer did not include lump sum amount in his income claiming it was award of damages for pain suffered. Minister of National Revenue determined that taxpayer was to repay Old Age Security Pension in amount of $3,269 that he received in 2012, on basis that his income for 2012 included lump sum payment, making his total income $109,634. Tax Court judge dismissed taxpayer’s appeal and held that lump sum received from board should have been included in taxpayer’s income for purposes of ss. 56(1)(v) and 180.2(1) of Income Tax Act (Can.). Taxpayer appealed. Appeal dismissed. Judge was correct in holding that lump sum payment constituted income. Even if lump payment was made on account of non-economic loss, it would still constitute income within meaning of s. 56(1)(v) of Act. Policies of board did not determine whether non-economic loss compensation payments constituted income for purpose of Act. Section 56(1)(v) of Act was sufficiently broad to encompass non-economic loss payments received by injured workers under provincial workers’ compensation legislation to compensate them for pain and suffering. Lump sum payment received by taxpayer was compensation and was made in respect of compensable injury or disability, within meaning of s. 56(1)(v) of Act.
Butler v. R. (Feb. 26, 2016, F.C.A., Johanne Gauthier J.A., Donald J. Rennie J.A., and Mary J.L. Gleason J.A., A-166-15) Decision at 249 A.C.W.S. (3d) 898 was affirmed. 263 A.C.W.S. (3d) 533.


Taxation

Income tax

Arguable that Parliament intended to recognize split gifts, wherever made, in line with civil law

Appellant claimed tax credits with respect to alleged gifts made to registered charity pursuant to s. 118.1 of Income Tax Act (Can.) (ITA). Some gifts were made from personal funds and some were funded by loans tied to the gifts. Appellant claimed he was entitled to full amount of claimed tax credits or, alternatively, to tax credits claimed in respect of portion of gifts that exceeded the value of any consideration he would have received in the process. Alternative argument invoked civil law of Quebec even though no purported donations were made in that province. Tax Court judge allowed motion by respondent to strike out alternative plea, rejecting argument that appellant could resort to civil law of Quebec. Interpretation Act (Can.) (IA) ensures that civil law is not applied in rest of Canada and that common law not applied in Quebec when private law concepts of two legal systems are called into play. Tax Court judge found support in 2002 amendments to ITA allowing a tax credit for certain ‘gifts’ that would be invalid under private law solely because taxpayer received benefit in return for making the gift. He held that by providing result more clearly reflecting civil law concept of remunerative gift, 2002 amendment “legislatively dissociates the common law meaning of gift from the federal legislation”. He held that common law meaning of “gift” has been clearly established and common law does not recognize as a gift a transfer of property for partial consideration. Appellant’s appeal allowed. Explanatory Notes to 2002 ITA amendments state that there have been certain decisions made under common law where it has been found that transfer of property to charity was made partly in consideration for services and partly as gift. Notes suggest that state of jurisprudence in common law provinces was not as certain as Tax Court judge held. Nor has jurisprudence clearly rejected split gifting. It could not be said with certainty that meaning of “gift” prior to 2002 amendments excluded notion of split gift in common law provinces and that effect of amendments was to change that state of affairs. Quest for uniformity in application of ITA not, in itself, sufficient reason for disregarding applicable private law. IA recognizes role of civil law and common law in application of federal legislation which necessarily entails possibility of diverging results. Appellant argued that Parliament intended to recognize split gifts, wherever made, in line with civil law. It would have been open to Parliament to do so and it was arguable this was what Parliament intended. Tax Court judge should not have struck out impugned plea.
French v. R. (Feb. 29, 2016, F.C.A., Marc Noël C.J., A.F. Scott J.A., and Yves de Montigny J.A., A-102-15) Decision at 249 A.C.W.S. (3d) 222 was reversed. 263 A.C.W.S. (3d) 534.


Labour Relations

Judicial review

Adjudicator could have entertained request to correct order

Applicant represented interests of certain federal government lawyers. Applicant, on behalf of bargaining unit, was party to collective agreement with employer. Applicant filed policy grievance against employer, alleging violation of collective agreement in force at time. While adjudicator’s order provided that grievance was dismissed, part of grievance was resolved in favour of employees. Applicant noticed discrepancy and asked adjudicator to correct his order, but adjudicator declined to correct his order because he considered himself functus officio. Applicant brought applications for judicial review. Applications granted. By dismissing grievance, order effectively stated that all aspects of grievance set out in policy grievance presentation form had no merit, but plainly this was not case. Something on certain issue in grievance had been conceded before adjudicator in favour of employees represented by applicant. Applicant was successful on part of grievance. Adjudicator could have entertained applicant’s request to correct order. His decision not to do so on ground that he was legally barred from doing so could not stand.
Assn. of Justice Counsel v. Canada (Attorney General) (Feb. 18, 2016, F.C.A., David Stratas J.A., C. Michael Ryer J.A., and Yves de Montigny J.A., A-379-15, A-380-15) 263 A.C.W.S. (3d) 761.


Constitutional Law

Remedies

Court had basis for declining to grant interim constitutional exemption from Controlled Drugs and Substances Act (Can.)

Individual self-represented litigants, numbering about 300 persons, challenged constitutionality of Marihuana Medical Access Regulations, and Marihuana for Medical Purposes Regulations. Federal Court exercised its discretion by granting interlocutory order staying challenges brought by all of self-represented litigants on ground that challenge by A was much further advanced. Court also dismissed motions for interim constitutional exemptions from Controlled Drugs and Substances Act (Can.) pending trial of challenges. Self-represented litigants appealed. Appeal dismissed. Federal Court had basis for declining to grant interim constitutional exemption. Federal Court left door open for those who could establish, by further and better proof than that found in template affidavits, that they had medically verifiable need for medical marihuana. Decision to stay self-represented litigants’ challenges until final disposition of A challenge supportable on evidentiary record before judge. Evidence before Federal Court supported its finding that there was significant overlap.
Turmel v. R. (Jan. 13, 2016, F.C.A., J.D. Denis Pelletier J.A., David Stratas J.A., and Mary J.L. Gleason J.A., A-342-14) 128 W.C.B. (2d) 39.


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