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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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Income tax

Administration and enforcement

Minister imposing gross negligence penalties against taxpayer for failing to review tax return

In 2007, two holding companies owned and controlled by taxpayer paid him dividends, resulting in taxable dividends. Accountants failed to include dividends in taxpayer’s 2007 tax return, which taxpayer did not read or review before signing. Minister imposed gross negligence penalties against taxpayer. Tax Court judge dismissed taxpayer’s appeal on ground that penalties were warranted because of wilful blindness to actual content of tax return. Judge held that taxpayer assented to, participated or acquiesced in omission of dividends in his tax return in circumstances amounting to gross negligence. Size of omitted dividends was objectively massive, and related to unique and planned event of retirement. Taxpayer’s failure to review return was departure from his usual practice. Judge found that warning signs of omitted dividends were sufficient to strongly suggest that taxpayer initiate specific inquiry and review of tax return, and yet taxpayer averted his eyes to any warning. Taxpayer appealed. Appeal dismissed. Judge articulated correct legal test for establishing gross negligence. Minister did not need to establish that taxpayer knowingly made omission. Judge did not make any palpable and overriding error with respect to findings, which supported finding of wilful blindness amounting to gross negligence. Taxpayer did not demonstrate any palpable and overriding error in judge’s appreciation of totality of evidence.
Melman v. R. (2017), 2017 CarswellNat 1808, 2017 FCA 83, Eleanor R. Dawson J.A., Webb J.A., and Rennie J.A. (F.C.A.); affirmed (2016), 2016 CarswellNat 3044, 2016 TCC 167, Randall S. Bocock J. (T.C.C. [General Procedure]).


Income tax

Administration and enforcement

Canada Revenue Agency not requiring taxpayer’s consent to copy records

In April 2014, Canada Revenue Agency (CRA) advised taxpayer, by letter, that his income tax returns for 2006 to 2010 taxation years, which were under objection, and his returns for 2011 and 2012 taxation years, which were not yet assessed, were under review. CRA listed specific records it required to carry out audit. Taxpayer would only allow one auditor to enter premises and no other person. CRA decided not to proceed with audit at that time as it was not confident that taxpayer would allow audit to proceed without interference. CRA then notified taxpayer, by letter that s. 231.1 of Income Tax Act provided it with authority to inspect requested records and that taxpayer failed to comply with CRA’s request to submit records. CRA advised that failure to submit records requested by specified date would result in CRA seeking compliance order pursuant to s. 231.7 of Act. Federal Court Judge ordered taxpayer to provide information and documents pursuant to s. 231.7 of Act. Taxpayer appealed. Appeal dismissed. There was no reviewable error in Judge’s finding that taxpayer did not provide required access, assistance or information sought by CRA under Act. Contrary to taxpayer’s understanding, CRA did not require taxpayer’s consent to copy his records. Taxpayer could not dictate how CRA conducted audit or frustrate CRA’s ability to carry out its statutory duties by refusing entry to second auditor or insisting on videotaping audit process. There were no grounds to set aside compliance order.
Beima v. Minister of National Revenue (2017), 2017 CarswellNat 1805, 2017 FCA 85, Stratas J.A., D.G. Near J.A., and de Montigny J.A. (F.C.A.).

Immigration and Citizenship


Application for grant of or retention of citizenship

Citizenship application placed on hold pending cessation proceedings

Applicant Sri Lankan citizen was granted refugee protection and became permanent resident. Applicant returned to Sri Lanka for extended stays. Minister of Citizenship and Immigration commenced cessation proceedings against applicant under s. 108(2) of Immigration and Refugee Protection Act (IRPA) on basis that applicant had re-availed himself of Sri Lanka’s protection. Applicant applied for Canadian citizenship, but processing of that application was suspended due to ongoing cessation proceedings. Applicant’s application for mandamus order requiring processing of citizenship application was granted with award of costs. Minister appealed. Appeal allowed. If there was final determination that applicant’s refugee protection had ceased, then he would lose permanent residence and become inadmissible under IRPA. Minister had power under s. 13.1 of Citizenship Act to place hold on citizenship applications where there were admissibility concerns under IRPA and both ss. 40.1 and 44 of IRPA labelled cessation as admissibility issue. Minister’s interpretation to effect that s. 13.1 of Citizenship Act allowed him to suspend processing of citizenship application for permanent resident whose refugee status had been challenged for cessation was reasonable and reflected Parliament’s intention. Minister did not have public legal duty to continue processing applicant’s application notwithstanding that cessation proceedings had yet to be determined and so test for mandamus was not met. While costs awards were highly discretionary decisions, intervention was warranted. Fact that conflicting jurisprudence existed at time that application was suspended undermined application judge’s finding that Minister acted in bad faith. Minister acted legally and there was no basis in record for finding of bad faith or subterfuge.
Canada (Minister of Citizenship and Immigration) v. Nilam (2017), 2017 CarswellNat 696, 2017 FCA 44, Near J.A., Richard Boivin J.A., and Rennie J.A. (F.C.A.); reversed (2016), 2016 CarswellNat 3621, 2016 FC 896, James Russell 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.).

Public Law

Social programs
Employment insurance

Applicant retiring early to retain benefits not voluntarily leaving employment without just cause

Applicant’s employer gave notice of its intent to discontinue health and dental insurance benefits for new retirees and advised her that she had to retire by specified date to retain her retirement coverage. Applicant retired. Applicant’s application for employment insurance benefits was denied. Social Security Tribunal General Division (SST-GD) held that applicant voluntarily left her employment without just cause within meaning of ss. 29 and 30 of Employment Insurance Act. Applicant’s appeal was allowed by Social Security Tribunal Appeal Division (SST-AD). Crown applied for judicial review. Application dismissed. SST-AD’s decision was not unreasonable, as it fully explained basis for its determination that applicant’s need to maintain coverage for herself and husband provided just cause for retiring and that roll back of coverage was akin to significant modification in wages or salary. Result reached was not unjustified as there was reasonable basis for conclusion that SST-GD made reviewable error in failing to properly apply applicable test under ss. 29 or 30 of Act to applicant’s situation. Given multiple medications required by applicant and husband as well as their significant dental needs, conclusion was not unreasonable. SST-AD was not required to refer to cases cited by Crown as determination of just cause was largely fact-specific inquiry and SST-AD applied correct law. On facts of applicant’s case, result reached by SST-AD was not unreasonable.
Canada (Attorney General) v. Hong (2017), 2017 CarswellNat 718, 2017 FCA 46, Stratas J.A., Webb J.A., and Mary J.L. Gleason J.A. (F.C.A.).

Civil Practice and Procedure


Vexatious proceedings / Abuse of process

Respondent declared vexatious litigant

Applicants applied for order declaring respondent AO vexatious litigant under section 40 of Federal Courts Act. Application allowed. AO was declared vexatious litigant. He was not to institute new proceedings, whether acting for himself or having his interests represented by another individual Court, except by leave of Court. In roughly three years, AO has brought at least 47 matters in various courts. In this court, he had brought 18, most of which have been dismissed summarily. As for those not dismissed, pleadings, motions and affidavits contained many scandalous and irrelevant allegations and it was not possible to see any merit in them. AO flouted directions and orders of court.
Canada v. Olumide (2017), 2017 CarswellNat 610, 2017 FCA 42, David Stratas J.A. (F.C.A.).
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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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