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Page 14 OctOber 15, 2018 • Law times www.lawtimesnews.com purchased land and commenced development of condominium complex that met definition of specific residential complex in s. 55(1) of New Harmonized Value-added Tax System Regu- lations, No. 2. Ontario transi- tional new housing rebate offset estimated embedded Ontario Retail Sales Tax (RST) in hous- ing construction costs prior to July 2010 where housing would be sold after that date and be subject to Harmonized Sales Tax (HST). Developer applied for transitional rebate, calculated by multiplying estimated provin- cial levy by percentage of 50 per cent on basis that construction of development was between 25 and 50 per cent completed, when including cost of land in calcula- tion. Minister of National Rev- enue reduced rebate by applying 25 per cent rebate rate because development was between ten and 25 per cent complete, when excluding cost of land in calcu- lation. Developer appealed, and brought motion to determine question of whether developer's cost of land should be included in calculation of percentage of completion of construction of its condominium complex in respect of transitional rebate pursuant to s. 256.21(1) of Excise Tax Act. Motion granted. Cost of land was factor in calculating degree of completion of con- struction of condominium com- plex to determine transitional rebate entitlement. Textual anal- ysis and case law supported de- veloper's argument that land was element in constructing con- dominium complex. Contex- tual and purposive analysis was more ambiguous but wording of provisions was not ambiguous enough to have Minister's argu- ments on absurdity and windfall succeed. Canada Revenue Agen- cy's opinion that land was not factored in to calculation of per- centage completion of develop- ment was dated before judgment where court held that construct- ing residential complex included land. Metrogate Inc. v. The Queen (2018), 2018 CarswellNat 2287, 2018 TCC 91, Réal Favreau J. (T.C.C. [General Procedure]). INCOME TAX Administration and enforcement As taxpayer did not carry on business or incur business expenses court must find he knowingly made false statement in tax returns Taxpayer claimed business losses and loss carry-backs based on theory of separation of legal en- tity and human being or "person". Minister re-assessed taxpayer, disallowing claimed business losses and carry-backs and as- sessing gross negligence penal- ties. Taxpayer appealed. Appeal dismissed. Person or human be- ing can operate business under Canadian law but no distinction between that person and indi- vidual who has a social insurance number and earns employment income. Taxpayer must be able to demonstrate that activities were undertaken with view to realiz- ing a profit. As taxpayer did not carry on business and did not incur business expenses in ques- tion court must find he know- ingly made false statement in tax returns. Taxpayer's general level of intelligence, magnitude of ad- vantage as compared to previous tax refunds, blatantness of false statement, lack of former knowl- edge of tax preparer, incompre- hensible explanations made by tax preparer, failure to make en- quiries of third parties, accoun- tant or CRA taken together sug- gested taxpayer was either wil- fully blind or grossly negligent in preparation of tax returns. Tax- payer's witness, who was propo- nent of "separation of legal entity and a human being or person," had been convicted of fraud and testimony inherently unreliable and of no probative value. Kim v. The Queen (2017), 2017 CarswellNat 7346, 2017 TCC 246, Guy R. Smith J. (T.C.C. [General Procedure]). Penalties against taxpayer who was willfully blind were valid Taxpayer A and taxpayer B were close friends who used same tax advisor to file their 2008 tax re- turns. Returns filed accurately disclosed their employment in- come but claimed false business losses for which they received large refunds. Tax advisor had been accountant of taxpayer A and his father and father's busi- ness for many years without incident. Taxpayer A was so im- pressed with tax advisor that he wanted to share it with his good friend, taxpayer B, who became client of tax advisor. Minister became suspicious of returns and sent inquiry letters to both taxpayers, which tax advisor filled out and taxpayer's signed but notice tax advisor prepared was incomprehensible. When scheme was discovered, taxpayer A retained counsel and assisted Minister as witness. Taxpayer B still used tax advisor to prepare 2009 return. Minister reassessed tax returns, disallowed losses and imposed penalties. Taxpay- ers appealed. Appeal by taxpayer A allowed; appeal by taxpayer B allowed in part. Taxpayer A's penalties for 2008 return were to be cancelled and taxpayer B also succeeded in having penalties deleted for 2008 return, but not for 2009 return. Both taxpayers should have made inquiries and reviewed their returns and not blindly trust tax advisor. How- ever, at time of signing of tax returns, returns were assembled in crafty fashion in which busi- ness losses and carry back were hidden. In addition, taxpayer A had positive history with tax advisor, and his father had used tax advisor's services for many years. This history was relevant, because it diminished need to inquire of tax preparer's reputa- tion and concerns for taxpayer A simply did not exist given tax advisor's history with him and his father. Taxpayer B did not have history with tax advisor, but tax advisor was trusted and ex- perienced long-time accountant of his good friend. However, in 2009 when taxpayer A received confirmation from lawyer that fraudulent tax returns were big problem, taxpayer B still used ac- countant to file 2009 return, ig- noring warning signs. For 2009 taxation year, it was found that taxpayer B was willfully blind and that penalties for that taxa- tion year were valid. Mahdi v. The Queen (2018), 2018 CarswellNat 4026, 2018 TCC 149, Randall S. Bocock J. (T.C.C. [General Procedure]). Ontario Civil Cases Civil Practice and Procedure SUMMARY JUDGMENT General principles Errors were material to conclusion that plaintiffs knew or ought to have known material facts giving rise to claims Plaintiffs purchased cottage. Cottage began to tilt towards lake, and plaintiffs built new cottage for which defendant construction company con- structed footings and founda- tion for home and deck, then assembled prefabricated home and deck. Township issued rel- evant permits. New cottage also was subject to slope movement. Plaintiffs commissioned report. Plaintiffs did not act on report. Later, plaintiffs removed and replaced wall. Plaintiffs claimed that construction company was negligent in construction of their home and that township breached its statutory duty to- wards them. Plaintiffs brought action against construction company, township and another defendant. Construction com- pany and township successfully brought motion for summary judgment. Plaintiffs appealed. Appeal allowed and judgment was set aside. Errors were mate- rial to motion judge's conclusion that plaintiffs knew or ought to have known material facts giv- ing rise to all of claims against respondents. If he had not made these errors, he would not have concluded that plaintiffs' claims were discoverable in 2009 but at earliest in 2012. As a result, plaintiffs' claims were not stat- ute-barred. Trial was not neces- sary to determine this issue. Gillham v. Lake of Bays (Township) (2018), 2018 Car- swellOnt 12273, 2018 ONCA 667, L.B. Roberts J.A., Paul Rou- leau J.A., and Fairburn J.A. (Ont. C.A.); reversed (2017), 2017 Car- swellOnt 20263, 2017 ONSC 5879, E.J. Koke J. (Ont. S.C.J.). SUMMARY JUDGMENT Requirement to show no triable issue Company could not disavow terms of letter then recover on same contract Applicant power producer en- tered into agreement with re- spondent company, for energy project to take place in Barba- dos. Relationship between par- ties deteriorated. Company alleged that producer had repu- diated letter of intent, regard- ing project. Producer disputed that breach had taken place, but accepted that contract was at end. Producer claimed amount of $2,000,000 due and pay- able from company. Producer sought declaratory relief as to amount owed, and judgment on amount. Producer also sought appointment of receiver of property and assets for compa- ny. Producer applied for above- noted relief. Application grant- ed. Trial was not necessary to determine issues, which could be determined on record before court. Court had jurisdiction to hear application. There was no judicial estoppel. It was within court's powers to appoint re- ceiver. Company's claim that final approval was obtained was not supported. Conversations took place, but no approval was signed or agreed upon. Having failed to obtain final approval, company was obligated to pay back $1.5M of $2M owing. Re- maining payment of $500,000 was payable, based on terms of letter of intent. Company could not disavow terms of letter, then recover on same contract. Potentia Renewables Inc. v. Deltro Electric Ltd. (2018), 2018 CarswellOnt 12310, 2018 ONSC 3437, T. McEwen J. (Ont. S.C.J.). TRIALS Jury trial Crucial to considering potential juror bias was whether prospective jurors capable of setting aside any bias if instructed to do so In motor vehicle personal in- jury action plaintiff sought to challenge all potential jurors who paid automobile insur- ance premiums either for cause or eligibility and in alternative to strike jury notice. Applica- tion dismissed. Absence of ex- press provision in Juries Act or Courts of Justice Act or related legislation or rules allowing for exclusion of residents from jury panel who are insured under motor vehicle insurance poli- cies warranted dismissal of re- quest for same. Common law does not permit pre-screening of prospective jurors at large. Pre-screening of jurors only appropriate where connection between prospective juror and proceeding or party is direct, manifest, obvious and un- controversial. Ineligibility on grounds of having "interest in an action" cannot be founded on conf lict or partiality other than "summoned as a witness" or "likely to be called as a wit- ness." Section 3(3) of Juries Act only makes individuals who are or who are likely to be called as witnesses ineligible to serve as jurors. Sections 32 to 34 of Juries Act clearly silent with respect to any challenge based on prospective jurors being in- sured under policy of motor ve- hicle liability insurance or pay- ing premiums for same. Plain- tiff sought to introduce affida- vit of senior law clerk employed by her solicitors. Attached to affidavit was survey of answers by 300 Brampton insured as to impact of higher auto insurance premiums on persons inter- viewed and whether they would seek to lower their auto insur- ance premiums by limiting damages. Survey inadmissible. No affidavit evidence offered by author of covering letter ac- companying survey so all evi- dence related to survey at best hearsay. Crucial to considering potential juror bias or partiality in context of survey was wheth- er respondents, as prospective jurors, capable of setting aside any bias if instructed to do so. Evidence from proposed expert as to education, training or ex- perience in conducting surveys, and knowledge of scientific principles applicable to gath- ering survey evidence and its analysis was absent. Author of- fered no analysis or opinion re- garding survey results. Survey did not even meet minimum requirements to constitute ex- pert opinion evidence. Kapoor v. Kuzmanovski (2018), 2018 CarswellOnt 13235, 2018 ONSC 4770, Daley R.S.J. (Ont. S.C.J.). TRIALS Place of trial Transfer motion was, in some respects, thinly disguised adjournment motion Action was scheduled to pro- ceed to trial in Barrie next month. Discoveries have been completed, and mediation has also been attempted. Defen- dant brought transfer motion to transfer action from Barrie to Milton. Motion dismissed. First, just and most expeditious resolution of matter favoured leaving case in Barrie for now. Second, transfer motion was, in some respects, thinly disguised adjournment motion. Proper place to seek adjournment of trial was in Barrie, or before RSJ for Central East Region. Darteh v. Gross (2017), 2017 CarswellOnt 5824, 2017 ONSC 2479, LeMay J. (Ont. S.C.J.). Construction Law CONTRACTS Breach of terms of contract Builder's last-minute dump of costs documents was violation of production order Plaintiff builder built custom design home for individual defendant home owners, with most contractual and opera- tional dealings handled by M for builder and L for owners. Parties were friends prior to litigation and owners trusted and relied on builder's advice CASELAW

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