Citation: 2010 FCA 266
Heard at Toronto, Ontario, on October
Judgment delivered from the
Bench at Toronto,
Ontario, on October 13, 2010.
REASONS FOR JUDGMENT OF THE COURT BY: DAWSON J.A.
Citation: 2010 FCA 266
REASONS FOR JUDGMENT OF THE
(Delivered from the Bench at Toronto, Ontario, on October 13,
This is an
appeal from a judgment of the Tax Court of Canada, rendered under the informal
procedure. In reasons reported as 2009 D.T.C. 1183, 2009 TCC 293 a Judge
dismissed the appellant's appeal from a reassessment made under the Income
Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (Act).
giving rise to this appeal are carefully set out in the reasons of the Judge.
Briefly, the appellant has a registered retirement savings plan (RRSP).
Included in the appellant's RRSP were units in certain mutual funds managed by
Franklin Templeton Mutual Funds and AIC Mutual Funds (together the Companies).
The Ontario Securities Commission (OSC) found that the Companies had allowed
improper market timing transactions to occur. The Companies entered into
settlement agreements with the OSC in which they agreed to pay monies to fund
holders who had suffered losses in their RRSPs as a result of the market timing
transactions. In return, the OSC agreed not to initiate proceedings against the
Companies. In 2005, the appellant received the total sum of $313 from the
Companies (payments). The Companies had agreed to pay the settlement funds
directly to the annuitants of the RRSPs. The appellant did not deposit the
payments into his RRSP because he had already contributed the maximum amount
allowed for the 2005 taxation year. Nor did the appellant include the sum of
$313 as income in his 2005 tax return. A notice of reassessment later issued,
including the sum of $313 in the appellant's income.
concluded on the evidence before him that the payments from the Companies were
not windfalls, but rather were payments from a source. Applying the surrogatum
principle, the Judge characterized the payments to be benefits received out of,
or under, the appellant's RRSP. As such the Judge found the payments to be
taxable and he dismissed the appellant's appeal from the reassessment.
following reasons, we are of the view that the appeal should be dismissed.
the payments to be income from a source the Judge considered and rejected the
appellant's argument that the payments were a windfall. On this appeal counsel
for the appellant concedes that in so doing, the Judge applied the correct test
at law: that set out in The Queen v. Cranswick,  1 F.C. 813
or overriding error has been shown in the Judge’s findings of fact or in his
application of the evidence to the factors identified in Cranswick. It
was open to the Judge to conclude that the payments were properly characterized
as being in the nature of compensation. While the purpose of the payments was
in part to impose a penalty on the Companies, the payments were also made to
compensate investors, at least in part, for their losses. It was also open to
the Judge to find that while the appellant did not pursue claims or negotiate
settlements with the Companies, this was done on his behalf by the OSC as part
of its statutory mandate to protect investors from unfair, improper or
fraudulent practices. These findings were based upon the evidence, including
the Settlement Agreements and the Plans of Distribution.
we have not been persuaded that the Judge erred in law in concluding that the surrogatum
above, the Judge found as a fact that the payments were made, at least in part,
to compensate the appellant for the loss in value of his RRSP. Accordingly,
the Judge properly found that the payments should be treated for tax purposes
as though they were part of the Registered Plan held by the trustee. Applying
subsections 146(8) and 146(1) of the Act, the Judge concluded that the payments
fell to be treated as benefits out of, or under, the appellant's RRSP. In
reaching this conclusion the Judge applied the correct legal test and his
findings of fact were supported by the evidence.
reasons, the appeal will be dismissed, with costs payable to the respondent.
“Eleanor R. Dawson”
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND
SOLICITORS OF RECORD
APPEAL FROM THE JUDGMENT OF THE HONOURABLE JUSTICE E. A. BOWIE, FROM THE TAX
COURT OF CANADA, DATED JANUARY 29, 2007, IN TAX COURT FILE NO.: 2007-33811 (IT)
STYLE OF CAUSE: RUSSELL W. LAVOIE v. HER MAJESTY THE QUEEN
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: OCTOBER 13, 2010
REASONS FOR JUDGMENT
OF THE COURT BY: EVANS, DAWSON & STRATAS
BY: DAWSON J.A.
FOR THE APPELLANT
Martineau Du Moulin LLP
Attorney General of Canada
FOR THE APPELLANT