Docket: A-171-13
Citation: 2014 FCA 196
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CORAM:
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NADON J.A.
TRUDEL J.A.
BOIVIN J.A.
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BETWEEN:
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IMMUNOVACCINE TECHNOLOGIES INC.
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Appellant
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and
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HER MAJESTY THE QUEEN
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Respondent
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REASONS FOR
JUDGMENT
BOIVIN J.A.
[1]
The appellant appeals from a decision of
Lamarre J. (the Judge) of the Tax Court of Canada, dated April 10, 2013.
[2]
The Judge upheld the decision of the
Minister of National Revenue that the payments the appellant received from the
Atlantic Canada Opportunities Agency (ACOA) for the tax years 2005, 2006, 2007,
and 2008 were “government assistance”
pursuant to subsection 127(9) of the Income Tax Act, R.S.C. 1985, c. 1
(5th Supp.) (the Act).
As government assistance, these sums reduce the amount of scientific research
and experimental development expenses that the appellant can claim for the tax
years in question.
[3]
The appellant, a research and development
company, develops vaccines against infectious diseases. ACOA is a federal
agency established to support the economic development of the Atlantic region.
[4]
On December 31, 2004, the appellant concluded an
agreement with ACOA for close to $3,8 million in funding over the years
2005-2008 (the Agreement). Altogether, the appellant received $3,786,474 from
ACOA under this Agreement.
[5]
In March 2008, the Minister of National Revenue
determined that the above amounts constituted government assistance.
[6]
The Judge found that ACOA, in entering into the
Agreement with the appellant, was carrying out its object and exercising its
powers under the Atlantic Canada Opportunities Agency Act (R.S.C., 1985,
c. 41 (4th Suppl.)). Hence, based on the evidence and the context,
the contribution by ACOA constituted “government
assistance” within the meaning of subsection 127(9) of the Act and was
not a regular loan advanced on reasonable terms for business purposes.
[7]
The appellant contends that the Agreement
entered into with ACOA does not amount to a “forgivable
loan” pursuant to subsection 127(9) of the Act but constitutes instead a
“regular loan” which is not part of the definition
in subsection 127(9) of the Act. The appellant thus argues that the Judge erred
in law by interpreting the term “government assistance”
as defined in subsection 127(9) of the Act and then applying this
interpretation in respect of the Agreement between the appellant and ACOA.
[8]
Finding of facts and mixed fact and law of the
Judge are reviewable under the standard of palpable and overriding error (Housen
v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235).
[9]
In the present case, the Judge thoroughly
reviewed the facts and the parties’ arguments. After careful consideration of
the record and of counsel’s written and oral submissions, I propose to dismiss
the appeal. The appellant has not convinced me that the Judge committed a
reviewable error which would warrant the intervention of this Court.
[10]
In Canada v. CCLC Technologies Inc., 139
D.L.R. (4th) 765, 96 D.T.C. 6527 [CCLC Technologies], this Court adopted
a test which determines whether payments made by a public authority, akin to ACOA
and pursuant to an agreement, have the attributes of a commercial venture. In
other words, the key question becomes: is the public authority in question
acting in a business rather than a governance capacity?
[11]
The Judge made reference to and applied the test
developed in CCLC Technologies as to whether the government body acted “in exactly the same way for exactly the same reasons as
payments made by private business, that is, for the purpose of advancing the
[business] interests of the payor” (Judge’s reasons at para. 46).
[12]
The Judge further considered the line of
jurisprudence that resulted in CCLC Technologies, namely Canada v.
Consumers’ Gas Co., [1987] 2 F.C. 60, [1987] 1 C.T.C. 79 (FCA) [Consumers’
Gas] and Ottawa Valley Power Co. v. Minister of National Revenue,
[1969] 2 Ex.C.R. 64, 69 D.T.C. 5166, confirmed on appeal to the Supreme
Court in Ottawa Valley Power Company v. Minister of National Revenue,
[1970] S.C.R. 941, [1970] C.T.C. 305.
[13]
I note that the appellant does not dispute that
the CCLC Technologies test has been adopted to determine whether a
payment constitutes “government assistance” for
purposes of the Act. Rather, the appellant argues that it does not need to
satisfy this test as it is in essence a “judge-made-rule”. Relying heavily on
the ejusdem generis rule of
statutory interpretation, the appellant urges the Court to interpret the
text of subsection 127(9) as limiting the scope of “assistance” instead of
applying the existing CCLC Technologies test. However, I am of
the opinion that the appellant’s proposed textual interpretation of subsection
127(9) must fail for the following reasons.
[14]
Subsection 127(9) of the Act is a definitions
provision. Amongst other terms, it defines “government
assistance” as follows:
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“government
assistance” means assistance from a government, municipality or other public
authority whether as a grant, subsidy, forgivable loan, deduction from tax,
investment allowance or as any other form of assistance other than as a
deduction under subsection 127(5) or 127(6).
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« aide
gouvernementale » Aide
reçue d’un gouvernement, d’une municipalité ou d’une autre administration
sous forme de prime, subvention, prêt à remboursement conditionnel, déduction
de l’impôt ou allocation de placement ou sous toute autre forme, à
l’exclusion d’une déduction prévue au paragraphe (5) ou (6).
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[15]
It is worthy of note that the phrase “assistance from a government” precedes an enumeration:
grant, subsidy, forgivable loan, deduction from tax, investment allowance.
However, the words “or as any other form of assistance”
immediately follow this enumeration. Contrary to the appellant’s contention –
and as the Judge found at paragraph 45 of her reasons – such phrasing does not
restrict the form of assistance included in subsection 127(9). Instead, it
provides a broad meaning to the word “assistance,” capable of encompassing a
variety of forms of government assistance not necessarily limited to the said
enumeration. Accordingly, this definition can include agreements which are not
purely gratuitous and unilateral.
[16]
Finally, I agree with the Judge that the
language of the Agreement entered into by the parties indicates that their
intention was to consider the contribution as “government
assistance” and not as an ordinary business arrangement. Indeed, several
substantive provisions in the Agreement and the schedules clearly point in that
direction: the Agreement contains reporting requirements; the appellant is
required to pay the contribution but only to the extent and as a percentage of
gross income earned; the Agreement ends in 2017 whether or not there has been
repayment; and the most ACOA can expect is the return of its contribution
without interest.
[17]
I cannot detect any error in the Judge’s
interpretation of the Agreement.
[18]
For these reasons, the appeal should be
dismissed with costs.
“Richard Boivin”
“I agree
M. Nadon J.A.”
“I agree
Johanne Trudel J.A.”
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