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May 7, 2018

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Law Times • may 7, 2018 Page 15 www.lawtimesnews.com Weldpro Limited v. Weld- world Corp. (2018), 2018 Car- swellNat 1078, 2018 CarswellNat 1281, 2018 FC 312, 2018 CF 312, Patrick Gleeson J. (F.C.). Tax INCOME TAX Administration and enforcement Auditor's certificate not sufficient evidence to conclude public interest claim was justified In course of audit, Canada Reve- nue Agency (CRA) sent taxpayer two requirement letters, requir- ing him to produce documents and information. Taxpayer brought applications for judicial review to set aside requirements, and requested all material re- lied on to issue requirements. Minister of National Revenue served redacted certified record signed by CRA auditor. Minis- ter brought applications under s. 37 of Canada Evidence Act, ancillary to judicial review ap- plications, for orders prohibiting disclosure of redacted informa- tion on ground of public inter- est privilege. Taxpayer brought motion to cross-examine au- ditor. Minister's application adjourned and taxpayer's mo- tion dismissed. Minister was to submit to court on confidential basis unredacted copies of all documents relied on in certi- fied record for determination of whether redacted information would encroach on public in- terest. Auditor's certificate did not provide sufficient eviden- tiary basis to conclude that pub- lic interest claim was justified. Taxpayer did not have standing or right to attend s. 37 hearing, which would be conducted in- camera. There was no right to cross-examine author of certifi- cate. Cross-examination would be useless because taxpayer's questions would be impeded by objections based on public interest privilege that had yet to be determined. Reasons that taxpayer provided for cross-ex- amination established apparent case for disclosure of redacted information. Canada (Attorney Gen- eral) v. Chad (2018), 2018 Car- swellNat 1141, 2018 CarswellNat 1400, 2018 FC 319, 2018 CF 319, Simon Noël J. (F.C.). Tax Court of Canada Public Law SOCIAL PROGRAMS Employment insurance Similar contract would not have been concluded if parties were at arm's length Minister informed taxpayer that his employment did not con- stitute insurable employment for purposes of Employment Insurance Act. Minister not convinced that similar contract would not have been concluded if parties were at arm's length. Taxpayer appealed. Minister sought to amend reply to notice of appeal to plead alternatively that taxpayer would have cho- sen not to be shareholder of em- ployer in order to be eligible for employment insurance or that he controlled more than 40 per cent of shares of employer Ap- peal dismissed. Amendment refused on ground that it would prejudice taxpayer and not meet rules of procedural fairness. Factors identified in s. 5(3)(b) of Act include: compensation paid, terms and conditions of employ- ment, length of employment, nature and extent of work. Bur- den of proof was on taxpayer. Taxpayer's wife owned 100 per cent of shares of employer. Tax- payer obtained contract with telecommunications company T but was required to use wife's company for payment of salary. Annual salary of $ 75,000, did not correspond to average sal- ary of engineer with experience comparable to taxpayer's. Salary was reduced without reduction in hours. Taxpayer was bound by employment contract with employer since all essential ele- ments were met at the beginning of period. Taxpayer set his own salary and adjusted it as he saw fit, even though T continued to pay amounts due to employer under project management con- tract. Taxpayer loaned salary to employer as he saw fit. Wife did not make any of decisions con- cerning employer or taxpayer's work. Minister's decision was reasonable. Kassawat c. M.R.N. (2018), 2018 CarswellNat 1077, 2018 CarswellNat 1265, 2018 TCC 54, 2018 CCI 54, Dominique Laf leur J. (T.C.C. [Employment Insurance]). Tax INCOME TAX Administration and enforcement Taxpayer awarded substantial indemnity costs after settlement offer Taxpayer treated cash settlement payments as being on income account under s. 9(1) of Income Tax Act and claimed business losses. Minister of National Rev- enue reassessed taxpayer on ba- sis that payments were made on account of capital and resulted in capital losses. Taxpayer's ap- peal was allowed. Taxpayer brought motion for increased costs. Motion granted. Taxpayer was awarded costs of $300,712 on substantial indemnity basis after settlement offer, $50,000 for time before settlement of- fer, and disbursements totalling $350,712. Thirty-day limit to re- quest increased costs in s. 147(7) of Tax Court of Canada Rules (General Procedure) applied and was not followed by taxpayer. Taxpayer's request for extension of time to provide submissions on enhanced costs was granted, as taxpayer demonstrated con- tinuing intention to seek en- hanced costs, short delay did not prejudice Minister, and taxpayer had arguable case as party who obtained judgment as favourable as settlement offer. Taxpayer was awarded substantial indemnity costs for period of time after settlement offer because offer met requirements of s. 147(3.3) of Rules. Taxpayer was awarded costs above Tariff for time before settlement offer equivalent to 30 per cent of actual costs incurred because amount in issue was significant and matter involved high volume of work and was fairly complex. Parties were to bear their own costs for this mo- tion for costs. MacDonald v. The Queen (2018), 2018 CarswellNat 1076, 2018 TCC 55, Dominique Laf- leur J. (T.C.C. [General Proce- dure]); additional reasons (2017), 2017 CarswellNat 3934, 2017 TCC 157, Dominique Laf leur J. (T.C.C. [General Procedure]). Ontario Civil Cases Bankruptcy and Insolvency DISCHARGE OF BANKRUPT Conditional discharge Fact that psychiatrist was bankrupt's treating physician was not proper basis for rejecting evidence Bankrupt declared bankruptcy after breakdown of his marriage. Bankrupt's discharge was an- nulled. Bankrupt's mental and emotional health deteriorated significantly. Bankrupt made consumer proposal. Although bankrupt received proceeds from matrimonial settlement in amount greater than total consumer proposal payments he eventually defaulted and pro- posal was annulled. Registrar ordered bankrupt's discharge on conditions that bankrupt pay amount remaining due un- der proposal and attend second counselling. Bankrupt's appeal was dismissed. Appeal judge refused to consider bankrupt's fresh evidence of psychiatric re- ports. Bankrupt appealed. Ap- peal allowed; discharge granted. Neither Registrar nor appeal judge gave proper consideration to psychiatric evidence. Fact that psychiatrist was bankrupt's treating physician was not prop- er basis for rejecting evidence. Basis upon which appeal judge found that evidence was not suf- ficiently credible or sufficiently probative were unclear. Mental health issues from which bank- rupt was suffering at time settle- ment was received were signifi- cant and clearly could have af- fected his thinking and actions. There was no evidence that bankrupt personally benefitted from settlement funds. Condi- tion imposed by Registrar that bankrupt pay $61,000 was based on incomplete understanding of mental health issues and could not be justified. Bankrupt had been effectively operating under suspension for more than three year so further period of suspen- sion would not accomplish any purpose. Kuczera (Re) (2018), 2018 CarswellOnt 4892, 2018 ONCA 322, I.V.B. Nordheimer J.A., J. MacFarland J.A., and Grant Hu- scroft J.A. (Ont. C.A.); reversed (2017), 2017 CarswellOnt 13306, 2017 ONSC 5140, F.L. Myers J. (Ont. S.C.J. [Commercial List]). Civil Practice and Procedure LIMITATION OF ACTIONS Actions in contract or debt Vendors misrepresented scope of work performed Vendors purchased home in August 2008 and began reno- vations. Purchasers agreed to purchase home in October 2008 although renovations were not completed. Home inspection found cracks in foundation. Statutory declaration sworn by vendors included representa- tion that there was no structural modification to home. Purchas- ers completed purchase in No- vember 2008. In 2009, purchas- ers discovered leak in basement. Vendors repaired leak. In 2011, water penetrated wall of base- ment. Contractor discovered damaged concrete blocks in foundation and that someone had installed steel posts to take weight of structure off of dam- ages blocks. Purchasers com- menced action two years after receipt contractor's report. Ven- dors brought motion for sum- mary judgment to dismiss action as statute-barred. Motion dis- missed. Vendors misrepresented scope of work performed by neglecting to mention reinforc- ing of basement wall and con- cealing problem of deteriorated blocks. Leak in 2011 was on op- posite wall from leak in 2009. It was reasonable for purchasers to retain contractor to repair dam- ages before commencing action. Burns v. 1681758 Ontario Inc. (2017), 2017 CarswellOnt 11858, 2017 ONSC 4051, Martin James J. (Ont. S.C.J.). LIMITATION OF ACTIONS Principles Bare assertion that impossible to have discovered report not persuasive Plaintiffs purchased property and discovered buried storage tank. Plaintiffs brought action against defendants and some of defendants brought claim for indemnity against home inspec- tor who had done inspection for previous owner. Claim for in- demnity dismissed. Principle of discoverability applies to claims for contribution and indemnity under Limitations Act. Alleged wrongdoer who seeks to com- mence third party claim more than two years after they have been served with a statement of claim entitled to rely on fact they only discovered their claim less than two years previously. Defen- dants in main action not aware of identity of home inspector un- til fall of 2015 and commenced claims for contribution and in- demnity promptly. Defendants ought to have discovered claim against home inspector more than two years prior to com- mencement of claims for con- tribution and indemnity. Had previous owner who knew of report been asked to undertake appropriate search, reasonable that he could have found it. Bare assertion that impossible to have discovered report not persuasive given defendants' knowledge and expertise in home inspection business. Service of W's state- ment of defence and cross-claim in December of 2011, indicating that a prior home inspection had been undertaken without re- vealing any defects in property, put the M and A defendants on notice of potential claim against W's inspector. Murphy v. Hart (2018), 2018 CarswellOnt 3819, 2018 ONSC 1648, P.J. Monahan J. (Ont. S.C.J.). LIMITATION OF ACTIONS Real property Limitation period for claim under stand-alone guarantees was ten years In real estate investment project, corporate defendants purchased 25 units in residential real estate complex. Credit union provided first mortgage financing, and plaintiff provided second mort- gage financing in principal ag- gregate amount of $900,750.00. Individual defendants, who were principals of corporate defendants, were to guarantee second mortgage indebtedness. Second mortgages contained guarantee covenants, and indi- vidual defendants also signed stand-alone guarantee agree- ments. Mortgages went into de- fault. Plaintiff obtained default judgment against corporate defendants under second mort- gages. Plaintiff brought action against individual defendants under guarantees. Action al- lowed. Limitation period for plaintiff 's claim under stand- alone guarantees was ten years, as provided for in s. 43(1) of Real Property Limitations Act, rather than two-year period under Limitations Act, 2002. Stand- alone guarantees were instru- ments that affected or related to interest in land. Also, by their terms, stand-alone agreements included covenants to repay money secured by mortgage. There was no justification for having different limitations pe- riods depending on whether or not payment had actually been made under guarantee, or de- pending on whether guarantee covenant was in mortgage or in separate document. Claim was not statute-barred. Hilson v. 1336365 Alberta Ltd. (2018), 2018 CarswellOnt 4761, 2018 ONSC 1836, R.A. Lo- coco J. (Ont. S.C.J.). CASELAW

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