Christie,
A.C.J.T.C.
[Orally]:—
1
will
now
deliver
the
reasons
for
the
judgment
that
shall
be
issued
in
Potvin
v.
M.N.R.
The
notices
of
appeal
are
dated
June
16,
1986
and
were
received
by
the
Court
on
June
20,
1986.
At
that
time
Mrs.
Potvin
was
alive,
but
she
died
on
October
26,
1987,
so
the
style
of
cause
was
changed
as
just
indicated
at
the
commencement
of
the
hearing
this
morning.
The
appeals
were
heard
together.
The
years
under
review
in
each
case
are
1982
and
1983.
Both
notices
of
appeal
are
worded
in
the
same
way.
It
reads:
Re:
Mr.
Adrian
Potvin
SIN
420-161-952;
and
Mrs.
Therese
Potvin
SIN
218-583-458
As
authorized
agents
for
the
above
taxpayers,
we
are
appealing
the
confirmation
of
the
reassessments
for
the
taxpayer's
1982
and
1983
taxation
years.
The
appeal
is
being
made
for
the
following
reasons:
1.
In
1982
and
1983,
Mr.
and
Mrs.
Potvin
lived
in
a
suite
in
the
apartment
building
which
they
managed.
They
were
not
required
to
pay
any
rent
for
their
suite.
The
fair
market
rental
value
of
the
suite
is
$410
per
month.
2.
For
each
of
the
1982
and
1983
taxation
years,
Revenue
Canada
has
assessed
an
income
benefit
of
$3,444
($410
X
12
x
70%)
to
Mr.
and
Mrs.
Potvin.
The
benefit
was
allocated
as
follows:
|
1982
|
|
1983
|
1983
|
|
Mr.
Potvin
|
$1,722
|
50%
|
$2,066
|
60%
|
|
Mrs.
Potvin
|
1,722
|
50%
|
1,378
|
40%
|
|
$3,444
|
100%
|
$3,444
|
100%
|
3.
Mr.
and
Mrs.
Potvin
are
required,
as
a
condition
of
their
management
contract,
to
inhabit
the
caretaker
suite.
The
operations
of
this
particular
apartment
building
are
conducted
from
this
suite.
4.
As
a
result
of
their
obligations
as
caretakers,
Mr.
and
Mrs.
Potvin
do
not
enjoy
the
privacy
normally
afforded
to
other
tenants
of
this
building.
The
reasons
for
this
are
as
follows:
(a)
They
are
on
call
24
hours
a
day
to
resolve
any
problems
other
tenants
may
have;
(b)
Their
suite
is
used
as
a
storehouse
for
certain
equipment,
supplies
and
tenant
records;
(c)
Their
suite
is
used
as
show
suite
for
prospective
tenants;
and
(d)
Their
suite
is
also
used
as
an
office
to
sign
tenant
leases,
etc.
5.
Obviously,
Mr.
and
Mrs.
Potvin
do
not
have
quiet
use
and
enjoyment
of
their
apartment.
They
therefore
object
to
Revenue
Canada
assessing
70%
of
the
fair
market
rental
value
of
the
apartment
as
an
income
benefit.
While
Mr.
and
Mrs.
Potvin
acknowledge
there
is
some
personal
benefit
to
living
in
the
apartment,
it
is
their
position
that
the
income
benefit
should
be
no
more
than
25%
of
the
fair
market
rental
value
as
a
result
of
their
extensive
contractual
obligations.
Paragraphs
1
to
7
of
the
reply
to
the
notice
of
appeal
in
the
case
of
Adrian
Potvin
read:
A.
Statement
of
Facts
1.
Except
as
hereinafter
expressly
admitted,
the
Respondent
denies
each
and
every
allegation
as
set
forth
in
the
Notice
of
Appeal.
2.
The
Respondent
admits
paragraphs
1,
2
and
3
of
the
Notice
of
Appeal.
3.
In
answer
to
paragraph
4
of
the
Notice
of
Appeal
the
Respondent
admits
that
the
Appellant
and
his
wife
Therese
Potvin
are
on
call
at
their
suite,
that
some
portion
of
their
suite
is
used
as
a
storehouse
for
some
equipment,
supplies
and
tenant
records
and
that
some
office
functions
are
at
times
performed
by
the
Appellant
and
his
wife
Therese
Potvin
at
their
suite.
4.
The
Appellant
and
his
wife
are
not
employees
of
the
owners
of
the
building
and
accordingly
report
their
contract
fee
for
conducting
the
business
of
managing
the
building
in
question.
Provision
of
the
suite
in
question
is
considered
by
the
Minister
on
behalf
of
Her
Majesty
to
be
part
of
the
remuneration
for
their
services.
The
Minister
has
assumed
that
the
fair
market
value
of
the
two
bedroom
suite
on
the
second
floor
of
the
building
in
issue
in
this
proceeding
was
$410.00
a
month.
The
Minister
has
assumed
that
the
shelter
obtained
by
the
Appellant
and
his
wife
is
of
substantial
value
regardless
of
the
contractual
duties
performed
by
the
Appellant
and
his
wife
at
the
apartment
in
issue.
5.
The
Minister
has
assumed
that
the
total
benefit
for
each
of
the
two
years
in
issue
for
the
Appellant
and
his
wife
was
$4,920.00
per
year
of
which
the
Appellant's
share
was
$1,722.00
in
1982
and
$2,066.00
in
1983.
B.
Statutory
Provisions
upon
which
the
Respondent
Relies
and
the
Reasons
which
he
Intends
to
Submit
6.
The
Respondent
relies,
inter
alia,
upon
Section
3
and
subsection
9(1)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148,
as
amended
by
S.C.
1970-71-72,
c.63,
s.1,
applicable
to
the
1982
and
1983
taxation
years
of
the
Appellant.
7.
The
Respondent
intends
to
submit
that
value
is
received
by
the
Appellant
from
occupation
of
the
rent
free
apartment
at
issue
and
that
the
Minister
has
correctly
assessed
the
Appellant
with
a
50%
share
of
the
value
of
personal
use
in
question
or
$1,722.00
in
1982
and
a
60%
share
of
the
value
of
personal
use
in
question
or
$2,066.00
in
1983.
The
reply
to
the
notice
of
appeal
in
the
second
case
is
the
same
except
for
adjustments
for
gender
and
relationship.
Also,
there
are
differences
in
paragraphs
5
and
7.
In
this
reply
they
read:
5.
The
Minister
has
assumed
that
the
total
benefit
for
each
of
the
two
years
in
issue
for
the
Appellant
and
her
husband
was
$4,920.00
per
year
of
which
the
Appellant's
share
was
$1,722.00
in
1982
and
$1,378.00
in
1983.
7.
The
Respondent
intends
to
submit
that
value
is
received
by
the
Appellant
from
occupation
of
the
rent
free
apartment
at
issue
and
that
the
Minister
has
correctly
assessed
the
Appellant
with
a
share
of
the
value
of
personal
use
in
question
of
$1,722.00
in
1982
and
a
share
of
the
value
of
personal
use
in
question
of
$1,378.00
in
1983.
These
additional
facts
were
adduced
in
evidence:
the
management
contract
was
entered
into
between
the
Potvins
and
Assaly
Holdings
Limited
on
June
13,
1977.
It
related
to
two
rental
properties
at
Hinton,
Alberta,
which
is
180
miles
from
Edmonton.
One
was
known
as
Greenwood
Court
and
the
other
as
Parkview
Court.
The
former
consisted
of
24
townhouses,
and
the
latter,
36
townhouses.
These
properties
were
across
the
street
from
each
other.
The
Potvins
lived
in
Parkview
Court.
The
management
contract
of
June
13,1977
was
placed
in
evidence.
It
was
the
only
formal
contract
signed
by
the
Potvins,
and
it
is
the
only
document
entered
as
an
exhibit.
Some
of
its
terms
were
changed
from
time
to
time
in
some
informal
way.
For
example,
in
the
document
of
June
13
the
rental
value
of
the
unit
occupied
by
the
Potvins
is
set
at
$271
per
month
and
they
were
required
to
pay
$130
of
this,
or
48
per
cent,
as
representing
personal
use
by
them.
By
1982
this
had
increased
to
$410,
none
of
which
was
payable
for
personal
use.
In
June
1977,
apart
from
the
suite,
the
Potvins
received
$1100
as
the
"contracted
amount",
and
by
1982
this
was
$1,420
per
month.
The
Potvins
remained
in
Hinton
under
the
management
contract
until
about
January
1987,
when
a
move
to
Edmonton
was
made
because
both
were
ill.
Mr.
Potvin
now
manages
a
property
in
Edmonton
for
Assaly
Holdings
Ltd.
The
combination
of
the
contract
of
June
13,1977,
Mr.
Perry
Assaly's
evidence
and
the
evidence
of
Adrian
Potvin
shows
that
the
Potvins
were
to
a
very
considerable
degree
left
to
their
own
devices
in
managing
Greenwood
and
Parkview.
It
was
necessary
for
them
to
live
in
Parkview
in
order
to
do
the
job.
They
were
responsible
for
collecting
rents,
keeping
the
grounds
clean,
cutting
grass,
snow
removal,
emergency
repairs
to
things
such
as
plumbing
and
heating.
There
were
60
separate
heating
units
in
the
two
properties.
It
was
their
responsibility
to
interview
prospective
tenants
and
to
select
what
hopefully
would
be
suitable
tenants
from
among
them.
They
entered
into
leases
on
behalf
of
Assaly
Holdings
Ltd.
with
tenants.
They
had
to
deal
with
complaints
from
tenants
about
things
like
undue
noise,
cars
blocked
by
others
in
the
parking
lots.
Garbage
could
not
be
left
to
removal
only
by
the
municipality
because
it
would
be
scattered
by
animals,
so
Mr.
Potvin
would
take
garbage
to
the
dump
three
or
four
times
a
week.
The
Potvins
handled
evictions,
which
occurred
three
to
five
times
a
year.
They
would
on
occasion
become
involved
in
domestic
and
other
fights
among
tenants.
A
good
deal
of
the
business
with
tenants
and
prospective
tenants
would
take
place
in
their
unit.
It
also
served
as
a
significant
storehouse
for
material
related
to
the
rental
business.
These
features
of
Parkview
and
Greenwood
require
special
mention:
A
great
majority
of
the
tenants
were
either
shift
workers
at
a
local
coal
mine
or
a
local
pulp
mill,
or
were
related
to
them.
Mr.
Potvin
described
these
employees
as
“well-paid,
hard-drinking
and
hard-fighting".
On
one
occasion
he
was
severely
assaulted
by
youths
related
to
a
tenant.
There
was
a
large
and
persistent
turnover
of
tenants.
Mr.
Potvin
said
that
the
managing
job
at
Hinton
was
basically
the
same
throughout
his
time
there.
As
already
mentioned,
the
personal
use
factor
in
the
June
13,
1977
document
was
set
at
48
per
cent
of
the
rental
value
of
the
unit.
In
the
notices
of
appeal
it
is
said
that
"the
income
benefit
should
be
no
more
than
25
per
cent
of
the
fair
market
rental
value”.
At
the
hearing
today
Mr.
Champion
took
the
position
that
there
was
"no
quantifiable
benefit".
Counsel
for
the
respondent,
Ms.
Nahorniak,
said
the
70
per
cent
used
in
the
reassessments
was
probably
too
high,
and
thought
the
correct
percentage
was
somewhere
between
25
and
70.
She
did
not
specify
a
figure.
On
the
whole
of
the
evidence
I
have
concluded
that
25
per
cent
of
$410
is
the
correct
monthly
amount
of
income
benefit.
This
is
in
line
with
the
unpublished
reasons
for
judgment
delivered
by
Judge
Kempo
on
May
6,
1987
in
Sandor
Somodi
v.
M.N.R.
(unreported),
Kempo,
J.,
May
6,
1987.
I
fully
appreci
ate
that
each
of
these
cases
must
be
decided
on
their
own
particular
facts.
There
are
in
my
view,
however,
sufficient
similarities
or
off-setting
factors
in
Somodi
and
the
case
at
bar
that
Somodi
can
be
helpfully
referred
to.
Regarding
off-setting
factors,
I
refer
in
particular
to
the
fact
that
the
rental
complex
in
Somodi
was
20
storeys
high
and
had
134
units.
Against
this
the
nature
of
the
tenants
at
Greenwood
and
Parkview
must
be
borne
in
mind.
The
appeal
is
allowed
and
the
matter
is
referred
back
to
the
respondent
for
reconsideration
and
reassessment
on
the
basis
indicated.
The
appellants
are
entitled
to
party-and-party
costs.
There
will
be
only
one
counsel
fee.
Appeal
allowed.
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