Citation:
2015 TCC 35
Date: 20150211
Docket: 2014-1244(IT)G
BETWEEN:
GLEN
FRENCH
AND
ALL THOSE LISTED IN ATTACHED SCHEDULE "A",
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS
FOR ORDER
C. Miller J.
[1]
The Respondent brings this Motion under rule
53(1)(d) of Tax Court of Canada Rules (General Procedure) (the “Rules”) in connection with all of the
Appellants, being Mr. Glen French and all those listed in attached Schedule “A”. In referencing paragraph numbers of an Amended
Notice of Appeal, I will be referring to the Amended Notice of Appeal of Mr.
Glen French. The Respondent seeks:
1. an
Order striking out the following passages from the Amended Notice of Appeal
dated May 30, 2014, without leave to amend:
a. the
references to the Civil Code of Québec and the Interpretation Act
from paragraph 18;
b. paragraphs
23, 24, 25 and 26; and,
c. the phrase, “or alternatively, on the basis that the
appellant was entitled to deduct the portion of the Tax Credits attributable to
the portion of the Donations in excess of any benefit or remuneration received
by the Appellant for the Donations” on page 6 of the Amended Notice of Appeal;
2. an Order extending the time in which the respondent may
file her Reply to the Amended Notice of Appeal to thirty days from the date of
the final disposition of this motion;
3. costs of this motion; and
4. such other relief as counsel may
request and this Court deems just.
[2]
These Appeals all relate to the same issue,
being the Appellants’ entitlement to tax credits in connection with purported
donations to Ideas Canada Foundation, a registered charity. Such entitlement to
a similar donation made by Ms. Kossow to Ideas Canada Foundation was denied by
the Tax Court of Canada, which decision was affirmed by the Federal Court of
Appeal (Kossow v R, 2013 FCA 283) (“Kossow Appeal”).
The Appellants have added arguments in their Appeals which were not made by Ms. Kossow,
and they wish to be given an opportunity to make them. One of the arguments is
what the Respondent wishes to have struck on the basis it is plain and obvious
it has no chance of success.
[3]
The portions of the Notices of Appeal which
comprise the argument sought to be struck are references to the Civil Code
of Québec and the Interpretation Act (the “Act”)
(sections 8.1 and 8.2) and the following paragraphs:
23. In the alternative, the Appellant should be entitled to a
deduction for that portion of each of the Donations that exceeded the value of
any benefit or remuneration obtained from each of the Donation (excluding the
value of any tax advantage).
24. Under the civil law, Article 1810 of the CCQ expressly
provides that “a remunerative gift … constitutes a gift …
for the value in excess of that of the remuneration”. Consequently, to the
extent that the Loans or some aspect thereof may have constituted remuneration
to the Appellant, the Donations less the remuneration constituted a “gift” in
Québec through operation of sections 8.1 and 8.2 of the Interpretation Act.
25. Had the Appellant been resident of
Québec during the Taxation Years, he would unquestionably be entitled under
section 118.1 of the Act to a deduction of the portion of the Donations in
excess of the remuneration.
26. Parliament did not intend for
section 118.1 of the Act to produce radically different results for taxpayers
in Québec that would not apply to taxpayers in the rest of Canada.
[4]
None of the Appellants made the purported
donations in Québec.
[5]
The jurisprudence is clear that to strike
pleadings under rule 53(1) of our Rules it must be plain and obvious the
pleadings have no chance of success.
[6]
Integral to this matter is reliance on section
8.1 and 8.2 of the Interpretation Act which read:
8.1 Both the common law and the civil law are equally
authoritative and recognized sources of the law of property and civil rights in
Canada and, unless otherwise provided by law, if in interpreting an enactment
it is necessary to refer to a province’s rules, principles or concepts forming
part of the law of property and civil rights, reference must be made to the
rules, principles and concepts in force in the province at the time the
enactment is being applied.
8.2 Unless otherwise provided by law, when an enactment
contains both civil law and common law terminology, or terminology that has a
different meaning in the civil law and the common law, the civil law
terminology or meaning is to be adopted in the Province of Quebec and the
common law terminology or meaning is to be adopted in the other provinces.
[7]
In a nutshell, the Respondent’s position is that
because “gift” is not statutorily defined in the Income
Tax Act, one must look to the law of property and civil rights of a
province which would govern the concept of gift. With the introduction of
sections 8.1 and 8.2 of the Act in 2001, by the passing of the Harmonization
Act, it is clear, based on the principle of complementarity, “gift”, as defined in Québec is to apply in Québec
vis-à-vis section 118.1 of the Income Tax Act and “gift” as defined in common law jurisdictions is to
apply in those jurisdictions vis-à-vis section 118.1 of the Income Tax Act.
In effect, the Québec codified definition of gift cannot apply in the rest of Canada and vice versa.
[8]
This recognizes the possibility that federal
laws may yield different results in different jurisdictions. Even before the
passing of sections 8.1 and 8.2 of the Interpretation Act the courts
recognized this, as is evident from Justice Décary’s comment in St. Hilaire
v Canada (AG), 2001 FCA 63:
It is the
Constitution of Canada itself which provides that some federal laws have
differing effects according to whether they are applied in Quebec or in the
other provinces. By guaranteeing the perpetuity of the civil law in Quebec and
encouraging in section 94 the uniformization of the laws of provinces other
than Quebec relative to property and civil rights, the Constitution Act, 1867
enshrines in Canada the federal principle that a federal law that resorts to an
external source of private law will not necessarily apply uniformly throughout
the country. To associate systematically all federal legislation with common
law is to ignore the Constitution.
[9]
I see no need to delve more deeply into the
Respondent’s argument: it is clear that sections 8.1 and 8.2 of the Interpretation
Act are, in the Respondent’s view, a complete answer.
[10]
The Appellants’ position is that the threshold
is very high for the Respondent to be successful in striking pleadings. The
Respondent must effectively show the Appellants’ position is hopeless. The
Appellants’ counsel raises a number of points to suggest there is an argument
that is by no means hopeless. I wish to explore the Appellants’ argument in
more detail, as at first blush, I find the Respondent’s position unassailable.
[11]
The Appellant first suggests that this is a
novel argument, the argument being that the Tax Court of Canada can look to
Québec law to assist in defining gift in common law jurisdictions, if it is not
clearly defined. The Appellants suggest that this is particularly apropos where
the area of law is in the state of evolution, such as is the case with the
implications of bijurilism generally. The Appellants refer to cases prior to
the enactment of sections 8.1 and 8.2 of the Interpretation Act (R v
Littler, [1978] CTC 235 and Gervais v R, 85 DTC 5004) which indicate
a willingness of courts to opt for equitable tax treatment across the country.
The Appellants also reference academic commentary from Professor David
Duff addressing this very issue. Finally, the Appellants suggest there is an
argument that the legislative change by the Government effective December 20,
2002 was a clarification that Parliament always intended the Québec definition
of remunerative gift to be applicable to section 118.1 of the Income Tax Act.
[12]
I will first address the Appellants’ contention
that the courts should not slam the door on novel arguments. The Appellants
raise the decision of Dudley v British Columbia, 2013 BCSC 1005, as an
example of court willingness to embrace novel arguments. That case dealt with a
declaration under section 24 of the Canadian Charter of Rights and Freedoms,
sought by a mother on behalf of her deceased daughter. She relied on foreign
and international human rights jurisprudence and evolving jurisprudence with
respect to section 24 of the Canadian Charter of Rights and Freedoms to allow
courts to revisit precedents. The court described this as a novel but arguable
claim and did not strike the pleading at issue.
[13]
With respect, I am dealing with a different
kettle of fish. The Appellants’ position may be novel, but I find reliance on
Québec laws to interpret common law, when the common law is clear, is not
arguable. At the turn of the century, bijuralism was a significant federal
project and indeed led to the Harmonization legislation enacting sections 8.1
and 8.2 of the Interpretation Act. No revisit of these provisions is
being sought. What is being sought is an interpretation of them and in the
name, perhaps, of complementarity, an interpretation that flies in their face. I have
read the articles by Professor Duff and Marc Cuerrier, Sandra Hassan and
Marie-Claude Gaudreault and conclude that complementarity does not mean
uniformity, which is, in effect, what the Appellants seek. Professor Duff is
clear that the new rules (sections 8.1 and 8.2 of the Interpretation Act)
are to ensure that Québec law is not applied in the rest of Canada, and common law is not applied in Québec where private law concepts of the two legal
systems are called into play, which is the very situation before me. Professor
Duff is also explicit in suggesting that cases such as Littler and Gervais,
cases relied upon by the Appellants, are “cases where
courts have dissociated the meaning of gift in the Income Tax Act from
the meaning under the Civil Law of Québec…and should not be followed.”
[14]
I have read nothing that the Appellants have
provided to me that suggested, notwithstanding perhaps taxpayers’ expectations,
that a principle of bijuralism is uniformity. That is not its objective, and
there has been nothing presented to me to suggest the evolution of bijuralism
is headed in that direction. The Appellants’ contention that Parliament did not
intend section 118.1 of the Act to produce radically different results simply
has no foundation in the law, notwithstanding it may be supportable by common
sense. It is not an argument.
[15]
The Appellants seek support in the preamble to
the Harmonization Act: it reads:
WHEREAS all Canadians are entitled to
access to federal legislation in keeping with the common law and civil law
traditions;
WHEREAS the civil law tradition of
the Province of Quebec, which finds its principal expression in the Civil Code
of Québec, reflects the unique character of Quebec society;
WHEREAS the harmonious interaction of
federal legislation and provincial legislation is essential and lies in an
interpretation of federal legislation that is compatible with the common law or
civil law traditions, as the case may be;
WHEREAS the full development of our
two major legal traditions gives Canadians enhanced opportunities worldwide and
facilitates exchanges with the vast majority of other countries;
WHEREAS the provincial law, in
relation to property and civil rights, is the law that completes federal
legislation when applied in a province, unless otherwise provided by law;
WHEREAS the objective of the
Government of Canada is to facilitate access to federal legislation that takes
into account the common law and civil law traditions, in its English and French
versions;
AND WHEREAS the Government of Canada
has established a harmonization program of federal legislation with the civil
law of the Province of Quebec to ensure that each language version takes into
account the common law and civil law traditions;
[16]
Again, nothing in this preamble invites one, as an interpreter of
federal legislation, to ignore common law in favour of civil law or vice
versa: indeed, quite the opposite.
[17]
The Appellant’s argument is premised on a principle that when
there is confusion in the common law one can look to civil law. I have been
provided no authority to suggest that. In any event, this is based on the
Appellants’ perception that “gift”,
while clearly defined in civil law, is ambiguous in common law. Again, with
respect, I disagree with that notion. Simply because the common law system has
no codified definition of gift, that does not mean the expression has not been
clearly defined. There is a plethora of common law jurisprudence which has very
clearly established what is required for a common law gift, most succinctly put
in The Queen v Friedberg, 92 DTC 6031 (FCA), which was adopted in the
more recent case of Maréchaux v R, 2010 FCA 287:
… a gift is a voluntary transfer of property owned by a donor to
a donee, in return for which no benefit or consideration flows to the donor.
[18]
There is no confusion. There is no ambiguity. There is no need to
seek assistance from civil law jurisdictions, Québec or elsewhere, even if such
a principle existed. Again, I see no argument to be made.
[19]
The Appellants suggest that common law has acknowledged
the concept of split receipting for a long time (see for example Woolner v Canada, [1997] T.C.J. No. 1395). I presume this is raised to convince me that the
common law concept of gift is murky. Reliance on Woolner does not justify
looking to Québec law, but goes more to the Appellants’ view of the
correctness of the Maréchaux, Kossow and R v Berg, 2014
FCA 25 decisions. Again, it certainly does not sway me that there is any
confusion with respect to the common law meaning of “gift”.
[20]
The Appellants’ counsel maintains there is an argument based on
the principles of horizontal and vertical equity, citing the Supreme Court of
Canada in Symes v Canada, [1993] 4 S.C.R. 695, that:
Taking up this last point, I note
that in a tax system which is at least partly geared toward the preservation of
vertical and horizontal equities ("[h]orizontal equity merely requires
that ‘equals’ be treated equally, with the term ‘equals’ referring to equality
of ability to pay" and "vertical equity merely requires that the
incidence of the tax burden should be more heavily borne by the rich than the
poor": V. Krishna, "Perspectives on Tax Policy" in Essays on
Canadian Taxation …
[21]
This concept, however, does not derive from bijuralism. It is
inappropriately conflating principles to suggest horizontal equity means that Gatineau residents subject to Québec civil law are to be treated equally to Ottawa residents subject to common law, provided their ability to pay is equal. This
argument simply sidesteps the bijural issue. It presupposes the circumstances
are similar when they are not: they are governed by two different legal
systems. That is the point.
[22]
I find no basis upon which the Appellants can mount any argument
that would extend the civil law definition of gift to the advantage of
taxpayers in common law jurisdictions for purposes of the Charitable Donation
Tax Credit. Their position with respect to this argument is hopeless.
[23]
The federal law was amended effective December 20, 2002 by adding
subsections 248(3) through (32) to the Income Tax Act, allowing a tax
credit for certain “gifts” that would be invalid under private law solely because the
taxpayer has received a benefit in return for making the gift. This reflects
more clearly the Québec view of remunerative gift. It legislatively dissociates
the common law meaning of gift from the federal legislation. In applying
section 8.1 of the Interpretation Act under this new regime, reliance
can now be placed on the term “unless
otherwise provided by law,” as it is now provided by law. Prior
to December 22, 2002 it was not, confirming the futility of the Appellants’
argument. As the Respondent pointed out, if Parliament wants to ensure
uniformity of result, it can derogate from provincial private law, which is
just what it has done with the 2002 amendments. It is not for this Court to
impose uniformity, not even when based on taxpayers’ not unreasonable
expectations, where the laws of interpretation clearly mandate otherwise.
[24]
The Appellants’ final point is that these amendments clarify the
existing law rather than amend the law. Again there is no argument. Even in the
Department of Finance’s own Explanatory Notes introducing the amendments it is
recognized that a sale at less than fair market value could be treated in part
as a gift in civil law, but not in common law. The amendments have clearly changed
the law by identifying situations in which the charitable donation tax credit
will be available, notwithstanding benefits received by the donor taxpayer.
[25]
The Appellants suggest that the sheer volume of precedents and
materials presented at the Motion can only lead to a conclusion there must be
some argument, that the position is not hopeless. It is substance not quantity
at issue. I indicated at the outset I found, at first blush, the
Respondent’s position unassailable. I remain of that view. I see no need to go
into elaborate or extensive reasons, providing fuel to this aspect of the
Appellant’s argument.
[26]
A decision to strike an argument is never taken lightly. It
should, as the law directs, only be in cases where it would be inefficient and
futile to allow a matter to proceed. It would indeed be a waste of the Court’s,
the Respondent’s and Appellants’ time, and would raise false hopes. Had I
perceived a glimmer of a legal basis upon which to build an argument, I would
have dismissed the motion. I have not seen that glimmer.
[27]
The Motion is granted and the pertinent portions of the amended
Notices of Appeal are struck. I award costs in a lump sum of $2,500, inclusive
of disbursements, payable within 45 days of the final disposition of this
Motion. By final disposition of this Motion, I mean the ultimate determination
whether by this Court, the Federal Court of Appeal or the Supreme Court of
Canada. The Respondent shall file the Reply within 30, 60 or 90 days as set out
in Schedule A attached to these Reasons, again, the time period to run
from the final disposition of this Motion, as just defined.
[28]
Before leaving this matter, I wish to address concerns I
expressed to counsel at a conference call held on January 30, 2015. I am well
aware that another group of appeals is proceeding with a similar issue and has
also raised what I have referred to as the bijural issue. The Crown has not
brought a similar motion in these other appeals due to the fresh step
provisions, nor did the Appellants in the other appeals intervene in this
Motion. That is regrettable, but it is not a reason for me not to give a
decision on this Motion, well and fully argued before me. My role is as judge
not as litigation strategist.
Signed at Ottawa, Canada, this 11th day of February 2015.
“Campbell J. Miller”
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