Date: 20120613
Docket: A-202-11
Citation:
2012 FCA 180
CORAM: BLAIS C.J.
LÉTOURNEAU J.A.
PELLETIER J.A.
BETWEEN:
OUMAR MBÉNAR
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
Issue on
appeal and standard of review
[1]
Mr. Mbénar, who is not represented by
counsel, is appealing from a decision of Justice Favreau of the Tax Court
of Canada (judge).
[2]
In his decision dated May 6, 2011, the
judge found that the expenses incurred by the appellant in renovating two rental
properties he had acquired were capital expenditures and not current
expenditures, as the appellant claimed. On this basis, the judge therefore
confirmed the reassessments made by the Minister of National Revenue for the
years 2004 to 2006.
[3]
This appeal is in fact a repeat of the debate on
the nature of the expenditures incurred, except that, as required by the case
law of this Court, we cannot exercise our power to intervene with regard to the
judge’s decision unless he has made an error of law or, in cases of questions
of fact or of mixed fact and law, a palpable and overriding error: see Housen
v. Nikolaisen, [2002] 2 S.C.R. 235.
Analysis of
judge's decision and arguments of parties
[4]
The appellant correctly points out that,
particularly in borderline cases, it is not easy to determine the true nature
of an expenditure for tax purposes. The case law, with its at times subtle
nuances, reflects this difficulty. For a taxpayer who, like the appellant, is
representing himself, the challenge is even greater.
[5]
After both parties had presented all of their
evidence but before they began their oral arguments, the judge tried to help
the appellant, to the extent that his adjudicative functions allowed him to do
so, by pointing out to him that the expenditures seemed to him to be [translation] “pretty much capital in nature”: see in the Appeal Book, at
page 69, the transcript of the discussion between the parties and the
judge. In a final effort and gesture that he called [translation] “a little exceptional”, the judge ordered an adjournment to allow
the appellant to reconsider the settlement offer made by the respondent and to
discuss it one more time with counsel for the respondent: ibidem, at
pages 69, 70 and 73. The judge even went so far as to inform the appellant
that, in the circumstances, the expenditures were such that they could not be
separated into current expenditures and capital ones. In short, that judge told
the appellant that, in terms of deductibility, it was all or nothing, and he
should think it over carefully: ibidem at pages 72 and 73.
[6]
When the hearing resumed, the appellant informed
the judge that he had been unable to come to an agreement, and the parties made
their respective arguments. The case was reserved for judgment.
[7]
At the end of his analysis of the evidence, the
judge writes the following at pages 12 and 13 of his reasons for decision
regarding the major renovations that the appellant made between the
September 2004 and November 2005:
[12] Based on
the evidence, the expenditures that were deducted by the appellant were related
to major renovations done in all parts of the building, inside and outside:
foundation, insulation, roof, windows and doors, electrical, heating system,
plumbing, parking lot, etc. In fact, it was a complete rehabilitation of a
building that was in total disrepair and dangerous for the tenants.
.
[13] The
expenditures in question were significant, close to $175,000 in total, in
comparison with the purchase price of the building, which was $98,500, that
is, 1.75 times higher than the acquisition cost. Such expenditures
cannot in any way be considered as being for minor repairs or regular
maintenance. Those expenditures were made in order to provide a lasting benefit
for the property so that the units can be rented out safely.
[Emphasis
added.]
[8]
The respondent’s reply to the notice of appeal
indicates a complete rehabilitation and lists the following as just the main
examples of this work:
the
cracks in the foundation were repaired;
the
vehicle parking was redone;
the
front entrance of 2221 Bardy Avenue was demolished and rebuilt;
the
electrical wiring and plumbing were completely redone;
the
existing heating system was removed;
a
new service room was built, including new electrical input and new water
supply;
the
roof and the exterior wall stonework were repaired;
existing
doors and windows were replaced;
exterior
balconies were repaired;
the
interior was redesigned; and
the
damage done to the existing building resulting from repairing cracks and from
mechanical and electrical work was also repaired.
[9]
I cannot see in the judge’s finding any error in
law or overriding and palpable error that would warrant intervention. Bishop
v. Attorney General of Canada, 2010 FCA 137, affirming the decision of the
Tax Court of Canada in Bishop v. Canada, 2009 TCC 323, and the judgments
in Fiore (F.) v. Canada, [1993] 2 C.T.C. 68 and Gauthier v. Québec
(Sous-ministre du Revenu), 2010 QCCQ 3068 are similar in terms of the facts
to the appellant’s situation and support the judge’s finding. The renovations
go beyond mere repairs and regular maintenance and would have a lasting effect
on the appellant’s properties.
[10]
For these reasons, I would dismiss the appeal.
Like the Tax Court of Canada, which did not grant any, I would not allow any
costs on appeal in the circumstances.
“Gilles Létourneau”
“I agree.
Pierre
Blais C.J.”
“I agree.
J.D. Denis Pelletier J.A.”
Certified true
translation
Michael Palles
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