Interpretation/Definition Provisions

In connection with noting that BMO had treated an FX loss on shares not to be a loss from their disposition because the loss was deemed by s. 39(2) to be from the disposition of foreign currency, Webb JA noted that Novopharm had stated that a “deeming provision is a statutory fiction that replaces or modifies reality; it cannot be ignored” and then stated (at para. 40):

The deeming provision in subsection 39(2) of the ITA in BMO altered reality by deeming the loss realized by the Bank of Montreal (of which there was only one loss in issue) to be a capital loss from the disposition of foreign currency.

In commenting on the means and includes definition of a security interest in s. 224(1.3), Côté J stated (at para. 63):

I agree with [Justice Rothstein in Caisse populaire Desjardins de l’Est de Drummond] … that the list of examples provided is not exhaustive. However, the examples remain illustrative of the types of interests that Parliament had in mind and are clearly united by a common theme or class because Parliament employed a compound “means . . . and includes” structure to establish its definition: “security interest means any interest in, or for civil law any right in, property that secures payment or performance of an obligation and includes . . . ”. In my view, this structure evidences Parliament’s intent that the list have limiting effect, such that only the instruments enumerated and instruments that are similar in nature fall within the definition. The critical difference between the listed security interests and super-priority charges ordered under s. 11 of the CCAA or any of the sections that follow it explains both why the latter are excluded from the list of specific instruments and why there can be no suggestion that they may be included in the broader term “encumbrance” at the end of that list. The ejusdem generis principle supports this position by limiting the generality of the final words on the basis of the narrow enumeration that precedes them (National Bank of Greece (Canada) v. Katsikonouris, [1990] 2 S.C.R. 1029, at p. 1040). All of the other instruments arise by agreement or by operation of law. Therefore, court-ordered super-priority charges under s. 11 or any of the sections that follow it are different in kind from anything on the list.

On unwinding a tower structure, a Nevada subsidiary LP of BMO realized FX gains on repaying U.S.-dollar borrowings, but completely offset that loss through realizing a capital loss on winding up an NSULC subsidiary. As a technical matter, s. 112(3.1) did not apply to deny any portion of this capital loss because the NSULC paid all its dividends on a separate class of preferred shares that it had issued as a stock dividend – rather than on the common shares on which the LP had realized the loss.

CRA considered this structuring to be abusive and applied GAAR. Webb JA found that s. 112(3.1) would not have applied to grind the loss even if the NSULC had instead paid all the dividends on its common shares. Thus, the structuring was unnecessary, and there was no “tax benefit” which could engage GAAR.

In particular, he found that the pre-2013 version of s. 39(2) applied to FX gains or losses on the dispositions of property generally, rather than being restricted, as contended by the Crown, to dispositions of foreign currency and FX gains or losses arising on settlement of obligations. As s. 39(2) applied to the FX loss sustained on the disposition of the NSULC shares, s. 39(2) thus deemed that loss to be a loss from the disposition of foreign currency rather than of shares, so that s. 112(3.1) could not apply.

In further rejecting a Crown submission that the deeming of the loss by s. 39(2) to be from the disposition of foreign currency rather than shares did not apply for purposes of s. 112(3.1), Webb JA further stated (at paras 63 and 64):

There was nothing in the language of subsection 39(2) of the Act that restricted its application to only section 39 of the Act. Parliament deemed the net gain or loss as determined under this subsection to be a gain or loss from the disposition of a foreign currency. This deeming rule would have been applicable for the purposes of the Act. Since subsection 112(3.1) of the Act only applies to dispositions of shares, this subsection did not apply to reduce the capital loss of BMO that was deemed to be a capital loss from the disposition of a foreign currency.

When Parliament intends to restrict a particular deeming rule to only certain provisions of the Act, it clearly does so. …

The World Harmonized System Explanatory Note for the tariff heading 39.26 (other articles of plastics) appearing in the Schedule to the the Customs Tariff Act included various listed categories of items, the first of which was was articles of apparel and clothing, whose description did not encompass the imported items in question (goalie gloves.) Côté J essentially stated (citing National Bank of Greece (Canada) v. Katsikonouris, [1990] 2 S.C.R. 1029 (also cited by Brown J at para. 50) that “’include’ or ‘including’ are ‘terms of extension, designed to enlarge the meaning of preceding words, and not to limit them’.”) Brown J essentially indicated that it was reasonable for the CITT to consider that if the gloves were not covered by the specific paragraph dealing with clothing items, they should not be considered to be intended to be included in that heading, stating (at para. 50):

It is reasonable to interpret that list item as stating exhaustively its own criteria — meaning, in this case, that if an article of clothing or accessories is to be classified in heading 39.26, it must be made by sewing or sealing sheets of plastic together [which was not the case for the goalie gloves].

The ETA stated that a "’university’ means a recognized degree-granting institution or an organization that operates a college affiliated with, or a research body of, such an institution."

A private for-profit B.C. college with a two-year arts program provided "associate degrees," which were recognized as degrees under the Degree Authorization Act (B.C.). Gleason JA found that the college unambiguously qualified as a university under this definition, so that there was no further requirement that it also be recognized as a university under provincial law. She stated (at para 14):

[T]he use of the word “means” in a statutory definition reflects Parliament’s intention that the definition be exhaustive and therefore may well displace the ordinary meaning for a defined term. …

The deemed year end under s. 128(2)(d) of the Act applied only to a "bankrupt" as specifically described in s. 2 of the Bankruptcy and Insolvency Act (the "BIA"), and did not extend to an individual (such as the taxpayer in this case) who had made a proposal notwithstanding the statement in s. 66(1) of the BIA that the provisions of the BIA would apply "with such modifications as the circumstances require" to proposals. Trudel J.A. noted (at para. 67) that Parliament had "exactly identified" the definition of "bankrupt" in the BIA and that "Parliament did not refer to the law applicable to a bankrupt under the BIA".

Noël J.A found that it followed from the fact that subsection 256(9) deemed there to be an acquisition of control of a corporation on the beginning of the day, there was a concomitant abandonment of control of the corporation by the taxpayer.

Before finding that s. 248(10) expanded the "common law" meaning of "series," Rothstein J.A. stated (at para. 33):

A deeming provision imports into a term a meaning that the term would not otherwise convey. It normally plays a function of enlargement.

After referring to the description in R. v. Verrette, [1978] 2 S.C.R. 838, at 845 of the function of a deeming provision, the Court found that a corporation which was deemed by s. 212.1 (a provision in Part XIII of the Act) to have paid a dividend, was thereby subject to withholding tax under subsection 212(2) of the same Part, notwithstanding that subsection 212(2) also, by its terms, applied to amounts that were deemed to be dividends by Part I or Part XIV of the Act.

The Court found that s. 334(1) of the ETA created an irrebuttable rather than a rebuttable presumption by deeming anything sent by first class mail to have been received on the day of mailing, given that a requirement for receipt of the notification would be administratively difficult, and s. 335(1) of the ETA would leave a gap in the legislative scheme if the presumption in s. 334(1) were rebuttable.

In finding that the making of an s. 93(1) election in respect of a distribution to the taxpayer of a promissory note by a liquidating U.S. subsidiary (which, by producing a deemed dividend, effectively deemed the taxpayer to have been paid in full) precluded the taxpayer from later claiming a deduction under s. 20(1)(p) when the uncollected balance of the promissory note proved to be uncollectible, Décary J.A. stated (at p. 5362) that:

"What is deemed to have been paid cannot also be said to be due."

Subpara. (i) of the definition of "timber resource property" in s. 13(21)(d.1) started by referring to "a right or licence to cut or remove timber from a limit or area in Canada (in this pargarph referred to an an 'original right')", and went on to specify that to come within subpara. (i) the original right must not be renewable or extendible. The taxapyer argued that this additional condition also modfied the meaning of "original right" as used in subpara. (ii) of the timber resource property definition. In rejecting this submission, Simpson J. accepted a submission of the Minister (made at para. 22) that where labelling definitions are used (i.e., "X") in this section referred to as ("Y"), only the words which precede the parenthesis describe the defined term.

In his concurring reasons in the Federal Court of Appeal, Létourneau JA stated (at para. 3):

It is obvious to me that [the additional clauses in subpara. (i)] do not serve to define or further define the term "original right" found in subparagraph (i) as contended by the appellant. These subclauses instead show under what conditions an original right will be a "timber resource property". These subclauses are in fact part of the definition of "timber resource property" which, in my view, is the only term defined in paragraph 13(21)(d .1). The use of the words "original right" in subparagraph (i) is for sheer convenience in order to avoid a repetition, in that paragraph, of the long-winded words "a right or licence to cut or remove timber from a limit or area in Canada". This is made clear by the express mention that this right is to be "referred to as an "original right"". The text does not speak in terms of definition of the right, but rather in terms of a shorter designation of that right... .

Cullen J. rejected a submission that the deeming of the accrual of interest pursuant to s. 17(1) created a rebuttable rather than an irrebuttable presumption for purposes of the Act.

Rouleau J. applied the statement in Côté Interprétation des lois that:

"In reading a statute, one must also presume that each word, phrase, clause and subsection has been drafted deliberately in order to produce a particular result. The Legislature is sparing in its language: it does not speak in order to say nothing."

The taxpayer rented out a house for many year, then changed the use to personal use so that s. 45(1) applied. However, he argued that although he was deemed by s. 45(1) to have disposed of the property for proceeds equal to its fair market value, he was not deemed to have received those proceeds, so that he could claim a reserve for proceeds that had not yet been received.

Martin, J. held that a taxpayer should be assumed, in the absence of any provision to the contrary, to have received proceeds of disposition at the same time that he was deemed by s. 45(1)(a) to have disposed of the property. This view was reinforced by the deemed reacquisition referred to in s. 45(1)(a)(iv). "This indicates to me, in this fictional world of taxation, that Parliament must have intended the deemed proceeds to have been received by the plaintiff because it provided for the expenditure of the proceeds by the plaintiff immediately after their creation."

"[T]he word 'include' may be used in such a definition to enlarge the natural meaning of the word defined, or to clarify it, or to introduce examples of its meaning, or to introduce restrictions on that meaning, or for two or more of those purposes. Exceptionally it may be used to introduce an exhaustive definition of the word in question."

"'The purpose of any deeming clause is to impose a meaning, to cause something to be taken to be different from that which it might have been in the absence of the clause.'"

The definition of "office" in S.248(1) stated that it "means" X (as well as going to specifiy that it includes various listed positions). Reed J found that X overrode the ordinary sense of the word "office", stating (at p. 6217) that the opening words of the definition "impart a mandatory aspect to the definition."

At 646:

"When considering the extent to which a deeming provision should be applied, the court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to. It will not always be clear what those purposes are. If the application of the provision would lead to an unjust, anomalous or absurd result then, unless its application would clearly be within the purposes of the fiction, it should not be applied. If, on the other hand, its application would not lead to any such result then, unless that would clearly be outside the purposes of the fiction, it should be applied."

After being referred to the statement in Verrette [1978] 2 S.C.R. 838 at 844 that "in definition provisions, the word 'includes' is generally used extensively in contradistinction to the restrictive word 'means'," Heald J.A. accepted (at p. 6160) a submission of the Crown that the word "including" in s. 212(1)(d) was used in its extensory sense for the purpose of enlarging the meaning of the preceding words, so that payments described after the word "including" were subject to the charge of the section whether or not they could be said to be ejusdem generis with "rent, royalty or a similar payment".

At 5072:

"In the context of s. 20(5), the definitions of 'disposition of property' and 'proceeds of disposition' cannot be said to be exhaustive; these expressions must bear both their normal meaning and their statutory meaning; it would be wrong to restrict the former because of the latter."

The accused, who had danced in a public performance completely bare, was charged under the Criminal Code for the offence of being “nude in a public place.” The Quebec Court of Appeal had referenced a provision which deemed a partially clad person to be nude where public decency was offended, and quashed the conviction because the prosecution had not established that the dancing offended public decency. Before allowing the appeal (on the basis that no reference to the deeming provision was needed where the accused, in fact, was nude), Beez J stated (at pp. 845-846):

A deeming provision is a statutory fiction; as a rule it implicitly admits that a thing is not what it is deemed to be but decrees that for some particular purpose it shall be taken as if it were that thing although it is not or there is doubt as to whether it is. A deeming provision artificially imports into a word or an expression an additional meaning which they would not otherwise convey beside the normal meaning which they retain where they are used; it plays a function of enlargement analogous to the word “includes” in certain definitions; however, “includes” would be logically inappropriate and would sound unreal because of the fictional aspect of the provision. Thus, a scantily dressed person is not really nude; but if under certain conditions that person be deemed to be nude in a provision prohibiting nudity, the word “nude” keeps its ordinary meaning which at the same time is extended to something which is not nudity. That is why, under the old s. 205A , in cases of complete nudity, it was clearly unnecessary for the prosecution to prove that the nudity offended against public decency or order: far from restricting the ordinary meaning of “nude”, the deeming provision preserved that meaning and at the same time enlarged it by bringing scantiness of dress within its scope.

"Where a definition section uses the word 'includes', as it does in ss.62(3), then the expression said to be defined includes not only those things declared to be included, but such other things' ... as the word signifies according to its natural import'".

In finding that the reference in the definition of “farming” to "maintaining" of horses for racing included an operation where the care and training of the horses was contracted out to independent contractors, Jackett CJ stated (at p. 6541):

[T]he words “maintaining of horses for racing” were intended to apply not only to what is commonly thought of as the operation of a racing stable but also to the less pretentious business operations consisting of racing horses in circumstances where the businessman does not have his own stable and pasture premises and staff of “boys” and trainers … . This would seem to follow from the context of the definition where expressions such as ‘“tillage of the soil”, “raising of poultry” and ‘the keeping of bees” are obviously used, in each case, to refer to the whole gamut of operations constituting the particular class of business succinctly described by the words commonly used to describe it. …

What was being done throughout the definition of “farming” was the adoption of short “tags” to indicate different types of operations.

In considering what scope should be given to what then was s. 36 of The Wills Act (Ontario), Judson J. stated (p. 1167):

"The fiction should not be pushed beyond its purpose. There is the high authority of Lord Mansfield in Morris v. Pugh et al., (1761) 3 Burr. 1241 at 1243, 97 E.R. 811, for caution of this kind."

"If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it."