Law Times

Page 14 July 23, 2018 • law Times www.lawtimesnews.com 3324, 2017 FC 529, 2017 CF 529, Russel W. Zinn J. (F.C.). Tax Court of Canada Tax INCOME TAX Business and property income Corporation conferred benefit on taxpayer by making mortgage payments for his personal residence Taxpayer was sole shareholder and directing mind of corpora- tion, as father withdrew from company business of residen- tial property rentals. Mortgages on taxpayer's and on father's personal residential properties were recorded in corporation's financial statement as long- term debt. Father remortgaged property and paid out prior mortgage, with corporation is- suing cheques within days of repayment which included one of $50,000 made out to taxpay- er. Taxpayer also obtained new mortgage and discharged one held by corporation. In audit, CRA took view that corpora- tion conferred benefits on tax- payer by making payments on both mortgages. Corporation claimed interest expenses relat- ing to mortgages and deducted wage expenses for dividends it issued to taxpayer. Minister reassessed taxpayer and corpo- ration under Income Tax Act, including by adding mortgage payment amounts into tax- payer's income as shareholder benefits and imposing gross negligence penalties. Taxpayer and corporation appealed. Taxpayer's appeal allowed in part; corporation's appeal dis- missed. Section 15(1) of Act was not broad enough to capture mortgage payments made by corporation on father's prop- erty. This conferred benefit on father who was not shareholder at relevant time. Corporation did confer benefit on taxpayer by making mortgage payments for his personal residence. CRA only audited taxpayer for two of three taxation years at issue, as- suming that corporation made mortgage payments in same amount during last year but amount for last year was only $4,840.02 as corporation ceased making mortgage payments once taxpayer discharged mort- gage. Amounts of shareholder benefit included in taxpayer's income would be reduced to $14,525, $14,521, and $4,840.02. Struck v. The Queen (2017), 2017 CarswellNat 2534, 2017 CarswellNat 8319, 2017 TCC 94, 2017 CCI 94, Valerie A. Miller J. (T.C.C. [Informal Procedure]). INCOME TAX Tax credits As project did not address technological uncertainty, its expenditures could not constitute scientific research and experimental development Taxpayer, having entered into energy drink business, under- took research projects to de- velop beverage with plant ste- rols and to develop partial hot fill system or dual-chambered bottle. Taxpayer claimed proj- ect expenditures as qualified scientific research and experi- mental development (SR&ED) expenditures and investment tax credits. Minister reas- sessed taxpayer under Income Tax Act, disallowing claimed SR&ED expenditures. Taxpay- er appealed. Appeal dismissed. While there was uncertainty involved in taxpayer's attempts to develop new product in plant sterols beverage project, main issue of suspending fat-based substance of sterols in liquid was resolved by use of method- ology and technology that was well established in food indus- try. As project did not address technological uncertainty that could not be resolved by routine engineering or standard proce- dures, its expenditures could not constitute SR&ED. Tax- payer also failed to meet other requirements for qualifying as SR&ED for this project, as no specific hypothesis was formu- lated, its experimentation was not conducted in accordance with scientific method, and it failed to attain required level of technological advancement. With respect to second proj- ect, taxpayer's current descrip- tion of it as being partial hot fill system project was incon- sistent with information filed with CRA describing dual- chambered bottle project and with other evidence suggesting that partial hot fill system had been developed in years prior. In any event, partial hot fill sys- tem developed by taxpayer was not materially different from process widely used in beverage industry at that time, and was designed using standard prac- tices and routine engineering so expenditures related to its development did not qualify as SR&ED. Taxpayer bore burden to establish that project consti- tuted SR&ED and its presenta- tion about this project was so confusing that it was impos- sible to determine whether it had to do with dual-chambered bottle or partial hot fill system. Flavor Net Inc. v. The Queen (2017), 2017 CarswellNat 4404, 2017 CarswellNat 9108, 2017 TCC 179, 2017 CCI 179, Jo- hanne D'Auray J. (T.C.C. [Infor- mal Procedure]). Ontario Civil Cases Civil Practice and Procedure COSTS Persons entitled to or liable for costs There was no evidence to establish that director engaged in absue of process in commencing action Motion judge found that plain- tiffs' action was abuse of process and that plaintiff had provided fraudulent undertaking to court on its application for interlocu- tory injunction. Motion judge awarded costs against non- party who was sole shareholder, president and director of plain- tiff. Director of plaintiff ap- pealed. Appeal allowed. Order of motion judge was set aside as well as order with respect to costs of motion and costs of ap- peal were fixed at $5,000. There was no evidence before motion judge to establish that director engaged in abuse of process in commencing action. There was no basis to award costs against director simply because he was president and sole shareholder of plaintiff. Evidence in rela- tion to undertaking did not rise to very high level of establish- ing that undertaking itself was fraudulent. It was never demon- strated that plaintiffs could not honour undertaking if called upon to do so. Quest Management Servic- es Inc. v. Quest Management Systems (2017), 2017 Carswel- lOnt 19996, 2017 ONCA 999, G.R. Strathy C.J.O., R.G. Jurian- sz J.A., and Grant Huscroft J.A. (Ont. C.A.); reversed (2017), 2017 CarswellOnt 5967, 2017 ONSC 2537, Barnes J. (Ont. S.C.J.). Construction Law BONDS AND SURETIES Bonds Insurer bargained for security and security differed from damages In order to obtain construc- tion bonds for building project, respondent general contractor undertook to applicant insurer that it would direct certain funds from owner of building to be held in trust to be available to indemnify insurer if bonds were triggered. General contractor did not honour its undertaking. Insurer brought application for mandatory order compelling general contractor to comply with its undertaking. Applica- tion was granted. General con- tractor appealed. Appeal dis- missed. It was not agreed that motion judge erred in finding that damages were inadequate remedy. Insurer bargained for security and security differed from damages. Berkley Insurance Compa- ny v. Rob Piroli Construction Inc. (2018), 2018 CarswellOnt 1284, 2018 ONCA 74, Laskin J.A., Sharpe J.A., and Fairburn J.A. (Ont. C.A.); affirmed (2017), 2017 CarswellOnt 7810, 2017 ONSC 3145, Perell J. (Ont. S.C.J.). CONSTRUCTION AND BUILDERS' LIENS Payment of moneys into court Loss of security constituted irreparable harm Stay pending appeal. Lien claimant brought appeal from motions judge's order permit- ting owner to vacate lien claim from title to condominium by posting security for slightly more than half amount claimed. Lien claimant brought mo- tion for order staying motions judge's order pending appeal. Motion granted. Reduction of quantum of security converted part of claim from secured to unsecured and thus affected substantive rights of parties and was final order subject to appeal. Motion was clearly nec- essary and, to extent it was re- quired, leave was granted. On face of order, motions judge ap- peared to have erred in finding lien claimant failed to account for certain payment made. Lien claimant set out alleged pal- pable and overriding errors and appeal was not without merit. Construction Lien Act provid- ed full and comprehensive code for lien claimants to obtain se- curity for improvements made to land and order altered these rights and remedies available to lien claimant. Loss of security constituted irreparable harm. Appeal was scheduled and any inconvenience to owner would be short-lived. Individual unit owners who required lien re- moved from their units could post proportionate share of lien and security for costs, and lien claimant had already consented to such vacating orders. Balance of convenience favoured lien claimant. H.I.R.A Limited v. Middle- sex Standard Condominium Corporation No. 823 (2018), 2018 CarswellOnt 9729, 2018 ONSC 3661, G.B. Morawetz R.S.J. (Ont. Div. Ct.). CONSTRUCTION AND BUILDERS' LIENS Practice on enforcement of lien No costs payable to lien claimant who played no active part in motion Moving party brought motion for order vacating liens regis- tered against moving party's fee simple interest in land because moving party was not "owner" of improvement within mean- ing of Construction Lien Act. Counsel for lien claimant 771 Ltd. was primarily responsible for response of lien claimants to moving party's motion. Lien claimant O Ltd. was present at hearing of motion but did not make submissions. Moving party's motion was successfully resisted by lien claimants. Issues arose concerning costs. Sum of $3,810.61 was payable by mov- ing party to 771 Ltd., and no costs were payable to O Ltd.. In accordance with general rule, costs should follow event. Partial indemnity was usual basis upon which legal costs were awarded. Partial indemnity rate of solici- tor for 771 Ltd. was $180.00 per hour. His bill of costs showed about 17.6 hours dealing with certain court date which should be deducted because costs had been awarded to moving party for attendance in issue, which left 16.7 hours at $180.00 per hour. This translated to $3,006.00, rounded to $3,000.00 plus disbursements of $372.23 plus HST on fees and disburse- ments. O Ltd. did not play active part in motion. Filippi v. 315 Pembroke St. East (2018), 2018 CarswellOnt 1700, 2018 ONSC 859, Martin James J. (Ont. S.C.J.); additional reasons (2017), 2017 Carswel- lOnt 9709, 2017 ONSC 3851, Martin James J. (Ont. S.C.J.). Estates and Trusts ESTATES Dependants' relief legislation Court may make provision for proper support of dependant as it considers adequate to be paid from estate Deceased was survived by his wife of almost 50 years (from whom he had long been separat- ed), two adult daughters, and six grandchildren. His wills, which appointed his wife as trustee, di- vided residue of his estate equal- ly between his wife and daugh- ters, but did not provide for ap- plicant, his long-time common law spouse. Applicant, who still lived in luxury condominium she had shared with deceased, brought motion for interim support pending return of her application for adequate provi- sion for her support from his es- tate pursuant to Succession Law Reform Act (SLRA). Motion for interim support granted. Under s. 58 (1) of SLRA, where deceased has not made adequate provision for proper support of dependant, court may make such provision as it considers adequate to be paid from estate for dependant's support. Appli- cant claimed that she was en- tirely dependent on deceased for financial support during their relationship. Effectively, appli- cant sought final determination of application rather than in- terim amount to meet her needs pending return of application. Applicant's budget was not con- sidered to be accurate ref lection of her actual monthly expenses. Since deceased's death, she had received $900,000 from estate but had not produced any re- cords to show how that money had been spent. Sum of $30,000 per month, net of taxes, was more than adequate to meet ap- plicant's needs pending return of application. Zavet v. Herzog (2018), 2018 CarswellOnt 9608, 2018 ONSC 3398, L.A. Pattillo J. (Ont. S.C.J.). Family Law CHILDREN IN NEED OF PROTECTION Application for permanent custody Mother lacked insight with respect to exposing her children to violence Mother had two children, daughter and son. Children had different fathers. Mother CASELAW

• Cover