David M. Rovan v. Minister of National Revenue, [1986] 2 CTC 2337, 86 DTC 1791

Christie, A.CJ.T.C.:—This appeal relates to the appellant’s 1981 taxation year. The issue is whether, in computing the income earned by a partnership engaged in the practice of law of which the appellant was a member, certain expenses may be deducted. The expenses were incurred in respect of a convention attended by him at Monte Carlo in the Principality of Monaco. The relevant taxation year of the partnership ended January 31, 1981.

The convention was held by the Continuing Education in Law Institute ("the Institute”). Mr. Alan S. Price, a barrister and solicitor of Toronto, testified on behalf of the appellant. He informed the Court that the Institute was a sole proprietorship. The hope of profit motivated the creation of the Institute and its purpose “was to produce and conduct seminars for the legal profession". During its existence the Institute held two conventions in Canada, one in Las Vegas, Nevada, and the one already mentioned. The first was held at the Sheraton Centre, Toronto, on Saturday, April 29, 1978. The first page of a brochure published in conjunction with the meeting reads:

CONTINUING EDUCATION IN LAW INSTITUTE presents

A TRIAL ADVOCACY PROGRAM FEATURING NOTED AMERICAN TRIAL LAWYER F. LEE BAILEY

AND

FORMER CHIEF COUNSEL AND DIRECTOR OF THE HOUSE OF REPRESENTATIVES SELECT COMMITTEE ON ASSASSINATIONS RICHARD A. SPRAGUE

Canadian Commentary and Critique by Noted Canadian Criminal Lawyer DAVID G. HUMPHREY, Q.C.

Evidence will be lead (sic) from the trial of REGINA vs. DEMETER

Mr. Bailey and Mr. Sprague will conduct an examination in chief

and a cross-examination of witnesses

PRESIDING AS TRIAL JUDGE WILL BE ROBERT CARTER, Q.C.

CURRENT CHAIRMAN OF THE CRIMINAL LAW SECTION OF THE BAR ADMISSION COURSE

What follows are biographical sketches of the principal participants, more details regarding the agenda and registration information. This caution is included: "Not associated with the Canadian Bar Association or the Law Society of Upper Canada Continuing Education program". Between 250 and 300 attended. Most were from Ontario. The second convention was also held at the Sheraton Centre. The date was October 7, 1978. The advertising led off with this:

CONTINUING EDUCATION IN LAW INSTITUTE presents

A TRIAL ADVOCACY PROGRAM FEATURING NOTED AMERICAN TRIAL LAWYER MELVIN M. BELLI

AND

CANADIAN TRIAL COUNSEL PAUL A. LEE, Q.C.

AND

RICHARD J. SOMMERS

Participating as Medical Witness will be DR. JERRY J.T. COOPER M.D., D.PSYCH., F.R.C.P.(C) DR. EZRA A. SILVERSTEIN M.D., B.Sc. (Med), F.R.S.C.(C)

DEFENCE COUNSEL WILL CONDUCT EXAMINATION IN CHIEF AND PLAINTIFF’S COUNSEL WILL CONDUCT

COMPARATIVE CROSS-EXAMINATIONS OF MEDICAL WITNESSES IN A SAMPLE PERSONAL INJURY ACTION

PRESIDING AS TRIAL JUDGE WILL BE THE HONORABLE MR. JUSTICE ALLEN M. LINDEN

A JUDGE OF THE SUPREME COURT OF ONTARIO

The format of the rest of the brochure is essentially the same as the first pamphlet. This was added: “RECEIPTS WILL BE ISSUED FOR INCOME TAX PURPOSES”. Fewer attended. Attendance was estimated at "200 plus”. Again, most were from Ontario.

The Las Vegas brochure commences with:

CONTINUING EDUCATION IN LAW INSTITUTE PRESENTS A LEARN AND PLAY SEMINAR

APRIL 25th — 29th, 1979 AT THE M.G.M. GRAND HOTEL LAS VEGAS, NEVADA

On the following page it is said that three topics will be discussed, namely, “MEDICAL MALPRACTICE”, "FAMILY LAW” and “CRIMINAL LAW”. Details regarding the aspects of the subjects to be discussed are given. There are biographical sketches of the principal participants. There is also registration information regarding such things as cancellation charges, cancellation insurance, medical, accident and baggage insurance, rates for rooms, etc. Again, reference is made to receipts for income tax purposes. There is no reference to the Canadian Bar Association or the Law Society of Upper Canada Continuing Education program.

The convention was advertised in the United States I in a magazine published by the Association of Trial Lawyers of America. The time devoted to lecturing and discussion of the topics named was from 9:00 a.m. to 12 noon or 1:00 p.m. on three consecutive days. One subject was considered on each day.

We now come to the convention which gives rise to this litigation. The frontispiece of the Monte Carlo brochure reads:

CONTINUING EDUCATION IN LAW INSTITUTE PRESENTS THREE MONTE CARLO SEMINARS AT THE LOEWS MONTE CARLO HOTEL, MONTE CARLO, MONACO April 27 - May 4, 1980

Programme Information

SEMINARS

1. Condominiums — comparison of North American and European approaches to condominium law and development. The comparative analysis will include:

A—Legislation affecting Condominiums or Co-tenancy

B—Creation of the Condominium or Co-tenancy

C—Relationship between owner and Condominium

D—Creation and enforcement of rules

E—Restrictions on use of units/Residence and common areas

F—Budgets and reserves

G—Structure for sharing common expenses and enforcement procedures

2. Criminal Law

3. Family Law—the role of conduct and support of awards and division of assets, a commonwealth view.

PROGRAM PARTICIPANTS

a. DAVID MILMAN—Macaulay, Lipson & Joseph, Toronto, Canada.

b. ANTHONY HOOPER—Barrister, London, England.

c. EDWARD GREENSPAN—Greenspan, Moldaver, Toronto, Canada.

d. PHILLIP EPSTEIN—Epstein, Cole, Toronto, Canada.

e. BASIL HILLMAN—Barrister, London, England.

f. PHILIPPE BILLOT—Paris, France.

g. ARNE HOMANN—Copenhagen, Denmark.

h. FRANK C. KRAUS—London, England.

i. WELLAND SARAIKA—Frankfurt, West Germany.

j. FINN ARNESEN—Oslo, Norway.

FEE

Lawyers	$1,319.00
Spouses or Guests	999.00
Two Lawyers Sharing	1,159.00
Single Room	1,479.00
Hotel and Seminar only—
Lawyer	662.00
Spouse or Guest	422.00

Further information follows regarding such things as what is included in the seminar fee (six nights double accommodation, admission to all seminars and seminar materials) insurance, cancellation charges, etc. There is no reference to receipts for income tax purposes and again reference to the Canadian Bar Association and the Law Society of Upper Canada Continuing Education program is omitted. This convention was advertised in the United States and Europe as well as in Canada. As the brochure states the three topics on the programme were “Condominiums”, “Criminal Law” and “Family Law”. While it contains details regarding the Condominiums subject and some particulars pertaining to Family Law, there is nothing of this kind with respect to Criminal Law. In fact, the Criminal Law topic consisted of two papers and discussions pertaining thereto. One is entitled “Recent Developments in the Law of Fraud” and was delivered by Mr. Edward L. Greenspan. The other is entitled “A Look Back in Regret” and was delivered by Mr. Anthony Hooper. It dealt with changes in England in criminal law and procedures, some of which, in his opinion, were changes for the worse. Matters such as delays in bringing cases on for trial, burden of proof and sentencing were touched upon. As occurred at Las Vegas, the lectures were given and the subject matters discussed from 9:00 a.m. to 12 noon or 1:00 p.m. on three days. This means that a maximum of 12 hours was devoted by delegates to the three legal subjects on the convention's programme.

The appellant testified at the hearing. There is nothing in his evidence to suggest that, when he decided to attend the convention at Monte Carlo, he had any information regarding it other than that previously described. His attention was drawn to the meeting by an advertisement in the Ontario Weekly Notes that was “in line” with the Monte Carlo brochure.

After Monte Carlo the Institute went out of business for economic reasons.

Perhaps the best way to describe the nature of his legal practice at the time of the convention is to resort to his testimony. He said:

I was called to the Bar in 1974. l commenced my practice in Metropolitan Toronto working for a firm called Magerman & Page. I worked for that firm between the years 1974 and 1978. The principal area of my practice at that time was litigation, criminal and civil, and some matrimonial.

In 1978 I left the firm of Magerman & Page and myself and Mr. Joseph Faust formed a partnership known at that time as Faust & Rovan, and that partnership carried on between 1978 and I believe it was the fall of 1980 when Mr. Harvey Harker joined the firm and the firm became known as Faust, Rovan & Harker.

At the time the partnership was formed Mr. Faust’s area of practice was personal injury litigation and we carried on business in a store front office at 723 Ossington Avenue at the time. We carried on basically a general practice of law, a neighbourhood law office.

At that time, as Mr. Faust was more interested in personal injury work, it fell to me because when one is starting a practice or building a practice one does not turn away business, it fell to me to get involved in the area of real estate law.

So at the time of the Monte Carlo seminars which were originally advertised in the fall of 1979 but took place in April and May of 1980, my principal areas of practice were criminal law, which constituted approximately 30 percent of my practice, matrimonial law, maybe 10 to 15 percent, real estate law approximately 25 percent, and the balance I did do some personal injury litigation myself.

Since Mr. Harker joined the firm I have given up basically all my interest in real estate law and I now deal mainly with criminal law and civil litigation.

In cross-examination the appellant added that he had been involved in “condominium transactions”, but he had “‘no idea” of how many.

The appellant rests his claim to make the deduction in computing his income entirely on subsection 20(10) of the Act. It provides:

Notwithstanding paragraph 18(1)(b), there may be deducted in computing a taxpayer’s income for a taxation year from a business an amount paid by the taxpayer in the year as or on account of expenses incurred by him in attending, in connection with the business, not more than two conventions held during the year by a business or professional organization at a location that may reasonably be regarded as consistent with the territorial scope of that organization.

If the very raison d'être of the entity which holds a convention is to organize and stage conventions inside and outside of Canada for profit then I believe that its territorial scope, for the purposes of subsection 20(10), is where it in fact holds conventions. In short its territorial scope is where it goes in the fulfillment of its business. The evidence of Price establishes that the Institute is an entity of the kind just described. Consequently Monte Carlo was a location that may reasonably be regarded as consistent with the territorial scope of the Institute.

This, however, does not dispose of this appeal. In order to succeed the appellant must also establish that the expenses incurred in attending the convention at Monte Carlo were in connection with the business of the members of the partnership within the meaning of subsection 20(10).

Subsections 3(1) and 2(1) and section 11 of the Interpretation Act, R.S.C. 1970, c. 1-23, provide:

3.(1) Every provision of this Act extends and applies, unless a contrary intention appears, to every enactment, whether enacted before or after the commencement of this Act.

2.(1) In this Act

“Act” means an Act of the Parliament of Canada;

“enactment” means an Act or regulation or any portion of an Act or regulation.

11. Every enactment shall be deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

In Stubart Investments Limited v. The Queen, [1984] C.T.C. 294; 84 D.T.C. 6305, Mr. Justice Estey speaking for the majority of the Supreme Court said at 316 (D.T.C. 6323):

While not directing his observations exclusively to taxing statutes, the learned author of Construction of Statutes, 2nd ed., (1983), at 87, E. A. Dreidger, put the modern rule succinctly:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

Bearing these rules in mind I believe that the object to be attributed to the legislation is to allow a taxpayer engaged in business to deduct convention expenses in computing his income if the primary purpose of attending was the enhancement of his business as a source of income. I do not regard the subsection as providing a means whereby a taxpayer belonging to a limited class of taxpayers shall have the benefit of deducting the expenses incurred in going to a convention if in truth and substance the primary purpose of attending was a vacation. Expenditures made for what is a vacation under the guise of attending a convention for business purposes are not deductible in computing income. If they were, this would in effect be allowing certain taxpayers to have other taxpayers share the cost of their vacations. This cannot be what the legislation intends. This is not to suggest that indulgence at a convention in activities normally associated with a vacation precludes the deductibility of expenses incurred, but those activities must be clearly subservient to the overriding business purposes of the meeting.

In deciding what the primary purpose is, recourse can be had to things of this kind: the nature of the taxpayer's business in relation to the subject matters to be discussed and studied at the convention. In this regard it is relevant to consider the depth of the information the taxpayer had regarding the topics to be considered when he decided to attend. The distance travelled, the time spent and the amount of expenses incurred in relation to the time devoted to business at the convention is also pertinent. The nature of the convention site and its climatic attractions are also relevant. If its commerce is especially oriented towards attracting pleasure seekers, this has weight in determining the taxpayer’s purpose. None of these things is of itself necessarily conclusive. They are to be regarded in the light of the whole of the evidence.

Applying this approach to the case at hand I conclude that the appellant has failed to establish that his primary purpose in attending at Monte Carlo during the period April 27 to May 4, 1980, was the enhancement of the partnership's business as a source of income. Consequently, the expenses incurred were not in connection with business within the meaning of subsection 20(10) of the Act.

The appeal is dismissed.

Appeal dismissed.