In Prince v. ACE Aviation Holdings Inc., the Ontario Court of Appeal stayed a class action based on allegations that Air Canada had improperly collected transportation taxes levied under the U.S. Internal Revenue Code (the “Code”). The Court’s decision highlights the difficulty in predicting the outcome of jurisdictional disputes involving e-commerce transactions. In addition, it illustrates the reluctance of our courts to permit class actions based on claims that engage the territorial sovereignty of other nations.
The problem and the fix
A taxpayer intends to undertake a transaction on a tax-efficient basis. But the transaction gets papered wrong, and the intended tax treatment is not achieved. Can the law of contract save the taxpayer by allowing a court to rewrite the contract documents retroactively in order to achieve the original intention of tax efficiency?
For over a decade the answer in common law Canada has been yes, through the equitable doctrine of rectification. The basic concept underlying rectification is that where a written agreement has incorrectly recorded the parties’ prior oral agreement, the court has the … Continue Reading
Earlier this week, the Prime Minister surprised many Supreme Court-watchers by nominating the Honourable Marc Nadon to replace Justice Fish at the Supreme Court of Canada. Given this recent appointment, the Canadian Appeals Monitor has taken a look at Nadon J.’s jurisprudential legacy to date and identified key cases which illustrate his judicial leanings, especially as it applies to Canadian businesses and professions. The Canadian Appeals Monitor has also looked at some of the cases that Nadon has argued to get better insights into what kind of judge he is likely to be in the Supreme Court.
A case recently decided by the Federal Court of Appeal reiterates the very high standard of good faith to which the Minister of National Revenue (the “Minister”) must be held when dealing with the courts in the context of an ex parte application provided by the Income Tax Act (“ITA”). For example, the Minister cannot ignore and omit to mention internal evidence which it knows weakens its position, or hide ulterior motives.
Context: Third-Party Information Concerning “10-8” Plans
In Canada (National Revenue) v. RBC Life Insurance Company, 2013 FCA 50 (“RBC Life”), the… Continue Reading
When a limited partner sells property to the limited partnership, is the limited partner itself a purchaser of that property, or is the only purchaser the general partner on behalf of the limited partnership? That is the question which the British Columbia Court of Appeal recently addressed in Edenvale Restoration Specialists Ltd. v. British Columbia (Finance), 2013 BCCA 85.
The Edenvale appeal concerned a sale of personal property by Edenvale to an Ontario limited partnership (“EWLP”) that also carried on business in British Columbia. The signatories to the sale agreement were Edenvale and the general partner of EWLP … Continue Reading
In a watershed ruling that is sure to have implications throughout Canada, the UK Supreme Court has held that legal advice (or “solicitor-client”) privilege does not attach to communications between accountants or other non-legal professionals and their clients. The decision in Prudential holds this to be the case even where the communications involve legal advice which the professional person is qualified to give, and that advice is given in circumstances where it would be privileged were it provided by a lawyer.
… Continue Reading
Are lower courts obliged to follow precedents of the Supreme Court of Canada, even if those precedents are decades-old and have been the subject of extensive criticism? And when should the Court overrule one of its own precedents? The Court recently addressed both of these questions in Canada v. Craig, a tax case involving the deductibility of losses from a lawyer’s horse racing business. Notably, in this case the Court overruled a precedent from 1977, on the basis that there were compelling reasons indicating that the precedent was wrongly decided. At the same time, the Court held that the… Continue Reading
The Supreme Court of Canada has recently clarified in Fundy Settlement v. Canada that for the purposes of Canadian taxation the residence of a trust is where the central mind and management resides. This decision, confirming both the Tax Court of Canada and the Federal Court of Appeal lower court decisions, is a major departure from the Canada Revenue Agency’s (CRA) 30 year old administrative position that generally considered the residence of the trust as being the same as the residence of the trustees.
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As was already mentioned in the previous blog posted on October 25, 2011 by our colleague, Brandon Kain, the Supreme Court of Canada has granted leave to appeal in a case involving the rectification of contracts in Agence du revenu du Québec vs. Services environnementaux AES Inc. Recently, the Supreme Court of Canada also granted leave to appeal in a second case involving rectification of contracts. The appeal in Riopel c. Agence de revenu du Canada also raises the question as to whether or not Québec law permits the rectification of agreements, in a manner that is retroactively enforceable
The Supreme Court of Canada has granted leave to appeal in a case involving the rectification of contracts. The appeal in Services Environnementaux raises the question of whether Quebec law permits the rectification of agreements, in a manner that is retroactively enforceable against tax authorities, when their written terms diverge from the common intentions of the parties.
As part of a reorganization of the first respondent, Centre technologique, the second respondent, AES, decided to sell some of its shares in Centre technologique to a third party. AES and Centre technologique the entered into a reorganization agreement in which AES exchanged … Continue Reading
Are contributions to a particular sickness and accident insurance plan for a single employee deductible for tax purposes? The Federal Court of Appeal will decide that issue when it hears the taxpayer’s appeal in Labow v. R. in Ottawa on October 4th.
The taxpayer, Dr. Labow, is a surgeon and professor of surgery. With the help of an Ottawa lawyer, he set up a trust to provide employee sickness and accident insurance and to pay medical, dental and vision care expenses. Dr. Labow had three employees in his office in the relevant taxation years, one of whom was his wife. … Continue Reading
What is a cheque? What obligations arise for a bank presented with a cheque or collecting on one? Does the bank answer to the drawer, the payee, or both?
These questions were recently put before the Supreme Court of Canada in the context of a demand by the Canada Revenue Agency for remittance of funds during their transfer from the trust account of a tax debtor to a joint account held in part by the same tax debtor.
The tax debtor, McLeod, a lawyer, had a trust account at a Canada Trust branch in Surrey, B.C. McLeod also had a
On September 1, the Attorney General of Canada appealed the finding of the Federal Court in Abraham v. Canada, that the Minister of National Revenue had erred in denying members of the Sagkeeng Band tax relief on wages earned while working in a mill located on former reserve lands.
The Band members had contended that relief was due because of the surrounding circumstances surrounding the sale of the reserve land. In 1926, the Band received an offer to sell part of their Reserve land for the purposes of building a mill. The Band initially rejected the offer, saying that … Continue Reading
In Envision Credit Union v. R, the Federal Court of Appeal will determine whether an amalgamated corporation inherits tax accounts pursuant to common law principles, in the absence of a specific statutory rule.
The predecessors of Envision Credit Union, two Vancouver credit unions, amalgamated under B.C. credit union legislation. The amalgamation occurred in a way that did not meet the definition of “amalgamation” in section 87 of the Income Tax Act (a so-called broken amalgamation). Had that definition been met, a particular tax account – the undepreciated capital cost (UCC) – of Envision would have been reduced by depreciation… Continue Reading
The residence of trusts and other business entities for income tax purposes has long been a source of confusion. The Supreme Court of Canada will attempt to resolve that confusion in the St. Michael Trust cases, from which it recently granted leave to appeal.
The cases arise as conjoined appeals from the decision of the Federal Court of Appeal in St. Michael Trust Corp. v. Canada (sub nom. Garron (Trustee of) v. Canada). In both cases, the applicant was a Barbados-resident corporation that was the trustee of a trust with Canadian beneficiaries, which was settled by … Continue Reading
On January 29, 2010, the Appeal division of the Court of Quebec determined that Credit Ford Canada Ltd. did not have to include the $1,170,000,000 worth of retractable shares issued in its paid-up capital (and thus be taxed on it) and could, instead, consider it as a long-term debt. This decision alone made a $2,416,767 difference in the tax payable by Credit Ford Canada Ltd. to the Quebec government for the 2001 year only (other contestations had been filed for the 2002 and 2003 years as well).
The appeal was mainly decided on the fact that the Quebec Taxation