Date: 20001016
Docket: A-993-96
Coram: THE HONOURABLE MR. JUSTICE DÉCARY
THE HONOURABLE MR. JUSTICE LÉTOURNEAU
THE HONOURABLE MR. JUSTICE NOËL
Between:
MUTUELLE DES FONCTIONNAIRES DU QUÉBEC
Appellant
- AND -
HER MAJESTY THE QUEEN
Respondent
Hearing held in Québec, Quebec on Monday, October 16, 2000
Judgment rendered in Québec, Quebec on Monday, October 16, 2000
REASONS FOR JUDGMENT BY: NOËL J.A.
Date: 20001016
Docket: A-993-96
Coram: THE HONOURABLE MR. JUSTICE DÉCARY
THE HONOURABLE MR. JUSTICE LÉTOURNEAU
THE HONOURABLE MR. JUSTICE NOËL
Between:
MUTUELLE DES FONCTIONNAIRES DU QUÉBEC
Appellant
- AND -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
(Pronounced at the hearing in Québec, Quebec
on Monday, October 16, 2000)
NOËL J.A.
[1] The issue in dispute in this appeal is whether the appellant is entitled to claim the deduction of $820,907.00 in the computation of its income for its 1983 taxation year under section 140 of the Income Tax Act.[1]
[2] We refer to the reasons of Tremblay-Lamer J. as to the relevant facts and in particular the method by which the disputed amount was computed.[2]
[3] Section 140 provided, at the time:
| 140. In computing the income for a taxation year of an insurance corporation, whether a mutual corporation or a joint stock company, from carrying on an insurance business other than a life insurance business, there may be deducted every amount credited in respect of that business for the year to a policyholder of the corporation by way of dividend, refund of premiums or refund of premium deposits if the amount was, during the year or within 12 months thereafter,
(a) Paid to the policy holder,
(b) Applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the corporation, or
c) credited to the account of the policyholder on terms that he is entitled to payment thereof on or before the expiry or termination of the policy.
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140. Lors du calcul du revenu, pour une année d'imposition, que tire une corporation d'assurance, qu'il s'agisse d'une corporation mutuelle ou d'une compagnie mutuelle ou d'une compagnie par actions, de l'exploitation d'une entreprise d'assurance-vie, il peut être déduit toute somme relative à cette entreprise, pour l'année, qui a été portée au crédit d'un assuré de la corporation, sous forme de dividende, de remboursement de primes ou de dépôt de prime, si la somme a été, pendant l'année ou dans les 12 mois qui suivent,
a) payée à l'assuré,
b) affectée à l'extinction, total ou partielle, de l'obligation de l'assuré de payer des primes à la corporation, ou
c) portée au crédit du compte de l'assuré, à des conditions qui lui donnent droit au paiement de cette somme au plus tard à l'expiration ou à la résiliation de la police.
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[4] There is a major noticeable difference between the two language versions; the French refers to the "assuré" while the English refers to the "policyholder,", strictly speaking the "payee". Although the Crown insisted on this dichotomy before the trial judge,[3] it conceded in this Court that nothing turns on this and that the only issue to be determined is whether the amounts in question were otherwise paid or credited in accordance with section 140.
[5] To succeed in its appeal, the appellant had to show that the provisional refund in the amount of $820,907.00 recorded in its books at the close of its 1983 taxation year had, during that year or within the 12 months following, been paid to the policyholder, applied to the payment of its premiums, or credited to it "on terms that he is entitled to payment thereof on or before the expiry or termination of the policy". In this case the appellant is claiming that this third condition was fulfilled.
[6] The appellant does not question the trial judge's statement as to the indeterminate nature of the refund at the relevant time and the chance factors surrounding its potential payment:
[T]he approximate amount for 1983 was cumulative with that of subsequent years, so that the exact amount of the refund could not be definitively known until the end of the insurance period. In fact, it was possible that the amount of the refund would be equal to zero if the claims paid out happened to eliminate the stabilization fund. The estimated amount in 1983 would yield a right to payment only if there was a surplus. [Emphasis by trial judge][4]
[7] In our opinion, the appellant, to succeed in its appeal, had to eliminate this interpretation by the judge below. Her reading of the insurance contract indicates that the liability the appellant relies on as the basis for its right to the deduction of the refund was conditional on a refund being payable as of December 31, 1985, an event that was future and uncertain on December 31, 1983 and that continued to be for the 12 months that followed.
[8] Thus, during that period, the insured, the policyholder acquired no right to the payment of the provisional amount credited to it. In fact, it was not until December 31, 1985 or in the days following, during the computation of the refund at the close of the period of insurance, that the policyholder acquired the right to the payment of this sum.
[9] Finally, the decision of the Ontario Court of Appeal in the Canadian Pacific case,[5] on which the appellant relies, is inapplicable in this case for two reasons. First, the Court in that case was dealing with paragraph 18(1)(e) and not the provision that concerns us, which is worded differently. Second, the expense that Canadian Pacific was seeking to deduct was sufficiently certain as to its amount to rule out the application of paragraph 18(1)(e). But in the case at bar, the record reveals not only that the amount of the refund was uncertain but that its very existence could not be taken for granted as long as the insurance period had not come to an end.
[10] The appeal will be dismissed with costs.
Marc Noël
J.A.
Québec, Quebec
October 16, 2000
Certified true translation
Suzanne M. Gauthier, LL.L., Trad. a.
FEDERAL COURT OF APPEAL
Date: 20001016
Docket: A-993-96
Between:
MUTUELLE DES FONCTIONNAIRES DU QUÉBEC
Appellant
- AND -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
FEDERAL COURT OF CANADA
APPEAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
FILE NO: A-993-96
STYLE: MUTUELLE DES FONCTIONNAIRES DU QUÉBEC
Appellant
AND:
HER MAJESTY THE QUEEN
Respondent
PLACE OF HEARING: Québec, Quebec
DATE OF HEARING: October 16, 2000
REASONS FOR JUDGMENT
OF THE COURT BY: The Honourable Mr. Justice Noël
DATED: October 16, 2000
APPEARANCES:
Jacques Côté for the appellant
Pierre Cossette for the respondent
SOLICITORS OF RECORD:
OGILVY RENAULT, advocates
Québec, Quebec for the appellant
Morris Rosenberg
Deputy Attorney General of Canada for the respondent
Date: 20001016
Docket: A-993-96
QUÉBEC, QUEBEC, THE 16TH DAY OF OCTOBER, 2000
Coram: THE HONOURABLE MR. JUSTICE DÉCARY
THE HONOURABLE MR. JUSTICE LÉTOURNEAU
THE HONOURABLE MR. JUSTICE NOËL
Between:
MUTUELLE DES FONCTIONNAIRES DU QUÉBEC
Appellant
- AND -
HER MAJESTY THE QUEEN
Respondent
JUDGMENT
The appeal is dismissed with costs.
Robert Décary
J.A.
Certified true translation
Suzanne M. Gauthier, LL.L., Trad. a.
[1] S.C. 1970-71-72, c. 63 as applicable to the appellant's 1983 taxation year.
[2] The decision is reported at 97 DTC 5030 and 127 F.T.R 142.
[3] The Crown argued that since the amount in question was intended for the payee rather than the policyholder, section 140 was inapplicable.
[4] Reasons for judgment, note 1 at pages 5033 and 151 respectively.
[5] Canadian Pacific Ltd. v. Minister of Finance, 41 O.R. (Ed) 606.
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