Date:
20081216
Docket:
A-373-06
Citation:
2008 FCA 403
CORAM: NADON
J.A.
EVANS
J.A.
RYER
J.A.
BETWEEN:
LOBA LIMITED
Appellant
and
MINISTER OF
NATIONAL REVENJUE
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered
from the Bench at Ottawa, Ontario, on December 16, 2008)
RYER J.A.
[1]
To be
eligible for registration or to maintain registration as a registered pension
plan, within the meaning of subsection 248(1) of the Income Tax Act,
R.S.C. 1985, c. 1 (5th Supp.) (the “ITA”), a plan must comply with
certain prescribed conditions that are set out in the Income Tax Regulations,
C.R.C., c. 945 (the “ITR”). One such condition (the “Primary Purpose
Condition”) is contained in paragraph 8502(a) of the ITR, which reads as
follows:
|
8502(a)
the primary purpose of the plan is to provide periodic payments to
individuals after retirement and until death with respect to their service as
employees.
|
8502 a) le
principal objet du régime consiste à prévoir le versement périodique de
montants à des particuliers, après leur retraite et jusqu’à leur décès, pour
les services qu’ils ont accomplis à titre d’employés;
|
[2]
In Loba
Limited v. Minister of National Revenue, 2004 FCA 342, this Court dismissed
an appeal by Loba Limited, the appellant in this appeal, against a notice of
intent to revoke the Pension Plan for Employees of Loba Limited (the “Plan”),
the same pension plan that is in issue in this appeal. In that case, the
Minister of National Revenue (the “Minister”) based the notice of intent to
revoke on his finding that the Plan did not meet the Primary Purpose Condition
as of the date of intended revocation, principally because he was not satisfied
that a bona fide employer/employee relationship existed between the
appellant and members of the Plan. The registration of the Plan was revoked on
April 11, 2005, effective as of April 1, 2000.
[3]
On December 21, 2005, the appellant applied to the
Minister to have the Plan registered with an effective date of January 1, 2005.
[4]
The
Minister undertook to examine this new application on the basis of the evidence
that was before him at the time of such examination. On July 27, 2006, the
Minister notified the appellant that the application to register the Plan was
refused. The notification letter describes in detail the evidence upon which
the refusal is based. The Minister found that the appellant had provided new
documentation but that such documentation did not “significantly counter” the
evidence that the Minister relied on to determine that the Plan does not
qualify for registration, in essence concluding that any new material that was
provided by the appellant in its application and subsequent submissions was not
sufficient to establish that the Plan met the Primary Purpose Condition. In
that regard, the Minister stated that evidence upon which he based his prior
decision to revoke the Plan continued to be relevant.
[5]
At page 8
of the July 27, 2006 correspondence, the Minister concluded that the Plan fails
to meet the Primary Purpose Condition, stating:
The
preponderance of evidence suggests that the relationship between Loba Limited
and the members of the Plan is not one of a bona fide employee/employer
relationship, that indeed efforts were made to create the appearance of such a
relationship in order to satisfy the requirements of the Income Tax Act and
Regulations; and, that the primary purpose of the plan is to give former
public servants access to an increased transfer value from the PSSA by
utilizing a Reciprocal Transfer Agreement between Treasury Board and Loba
Limited.
[6]
We can
detect no error of law or fact in the decision of the Minister in refusing to
accept the Plan for registration. We reject the argument of the appellant that
in determining whether the Plan meets the Primary Purpose Condition, the
Minister was limited to a review of only the actual provisions of the Plan. In
our view, this Court in Boudreau v. Canada (National Revenue), 2007 FCA
32, rejected the argument that in seeking to ascertain the primary purpose of a
pension plan, the Minister is precluded from examining the motives of the
sponsors of the plan under consideration. At paragraph 22 of that decision,
Pelletier J.A. stated:
This
argument mistakes form for substance. The question of the purpose of the Plan
is a question of fact. See Loba Ltd. v. Canada (Minister of
National Revenue – M.N.R.), 2004 FCA 342, [2004]
F.C.J. No. 1678, at paragraph 2. What purpose did the
sponsors of the Plan have in mind when they established it? That is the
relevant purpose. Relying on the information before him, the Minister concluded
that the Plan was established for the purpose of facilitating pension
transfers, as part of a scheme to induce the government to pay substantial premiums
to the pension accounts of departing public servants.
[7]
In this
regard, the July
27, 2006
notification letter referred to a statement from the appellant in
correspondence to the Minister, dated March 13, 2006, which reads:
… “my
motivation to seek registration of the Loba Pension Plan is to enable the
transfer of pension entitlements of former public servants for the PSSA
pursuant to the Reciprocal Transfer Agreement (RTA)”.
In our view, this statement is consistent with the
Minister’s determination that the Plan did not meet the Primary Purpose Condition.
[8]
Having
concluded that the Minister made no reversible error respecting the primary
purpose of the Plan, we need not decide whether the Minister erred in
maintaining his position that there was no bona fide employer/employee
relationship between the appellant and members of the Plan.
[9]
Finally,
the appellant argues that the Minister’s decision must be set aside on the
ground that he made it in bad faith and with a closed mind. These are serious
allegations which, in our view, are not supported by the evidence before us.
[10]
For the
foregoing reasons, the appeal will be dismissed with costs.
“C.
Michael Ryer”
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