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www.lawtimesnews.com LAW TIMES 14 COVERING ONTARIO'S LEGAL SCENE | JANUARY 28, 2019 Tax Court of Canada Tax GOODS AND SERVICES TAX zero-rated sUpplies Anesthetics in issue supplied by registrant were not designed to serve as emergency relief Registrant carried on business of selling and distributing dental products and equipment across Canada, including Quebec. During period in issue, regis- trant supplied dentists with local anesthetic solutions and failed to collect and remit Goods and Ser- vices Tax (GST) that Minister al- leged was payable by dentists in respect of supplies. Assessment was made pursuant to Excise Tax Act which made adjustments in total amount of $1,111,930.52 to registrant's reported net tax. Registrant appealed. Appeal dis- missed. Section 2(e) of Part I of Schedule VI of Act enumerates list of non-prescription drugs used to treat life-threatening conditions that are zero-rated at all levels of production and dis- tributions. Pursuant to s. 2(e)(x), epinephrine and its salts were zero-rated for purposes of such provisions. Anesthetics in issue supplied by registrant were not designed to serve as emergency relief for patients suffering from major death threatening condi- tions as required for being listed in s. 2(e) of Act. By allowing epinephrine or any other drug listed in s. 2(e) to be mixed with other substances and to charac- terize this type of mixture with zero-rating would be contrary to policy established by Depart- ment of Finance. If Parliament wished to grant zero-rated status under s. 2(e) to other substances or to mixture of drugs, it should amend legislation. Patterson Dental Canada Inc. v. The Queen (2018), 2018 CarswellNat 3674, 2018 TCC 112, Réal Favreau J. (T.C.C. [General Procedure]). INCOME TAX corporations Residual income was incidental to taxpayer's active business and not derived from property Taxpayer corporation composed music and was member of Soci- ety of Composers, Authors and Music Publishers of Canada (SOCAN). SOCAN was per- forming rights organization that distributed payments to its writ- ers and publishers in respect of public performance of musical works by way of telecommunica- tion to public. Taxpayer wrote for wide variety of television shows, including number of children's shows, and won Emmy award. Although taxpayer did receive residuals, income derived from residuals was very little. Minis- ter denied taxpayer small busi- ness deduction for three taxation years, because Minister claimed that music from which royalties were received was not income from active business. Taxpayer appealed. Appeal allowed. It was concluded that principal pur- pose of taxpayer's music com- posing business was to derive in- come from provision of services. Taxpayer's business was to earn income from daily activities of originating and recording music tracks for individual television episodes, which was evidenced by fact that taxpayer wrote and recorded at least 6,000 new mu- sic tracks for specific television episodes during relevant period. Although taxpayer did receive so-called residual income, such income was incident to and per- tained to taxpayer's active busi- ness, accordingly, such income was not derived from property but from active business. Case was referred back to Minister for reconsideration and reassess- ment on basis that taxpayer was engaged in active business car- ried on in Canada. Rocco Gagliese Productions Inc. v. The Queen (2018), 2018 CarswellNat 3661, 2018 TCC 136, Steven K. D'Arcy J. (T.C.C. [General Procedure]). Ontario Civil Cases Civil Practice and Procedure COSTS costs of particUlar proceedings Costs award would not be consistent with what unsuccessful party could reasonably expect Employee brought success- ful wrongful dismissal ac- tion against former employer and was awarded judgment in amount of $69,091.12. Hearing was held to determine costs. Employee was awarded costs fixed at $15,000 inclusive. Case was not complicated case war- ranting award of actual costs of $26,198.65 Considering prin- ciple of proportionality, such an award would not be consistent with what unsuccessful party could reasonably expect to pay for simplified procedure matter. Theberge-Lindsay v. 3395022 Canada Inc. (2018), 2018 Car- swellOnt 13594, 2018 ONSC 4900, V.R. Chiappetta J. (Ont. S.C.J.); additional reasons (2018), 2018 CarswellOnt 8835, 2018 ONSC 3222, V.R. Chiappetta J. (Ont. S.C.J.). COSTS scale and qUantUm of costs Refusal to retract ill-considered words suggested some reduction from costs claimed would be appropriate Applicant was resident of Town- ship and brought application in that capacity although he was also mayor of Township. Respondent was resident of Township and counsellor rep- resenting ward. Mayor unsuc- cessfully requested declaration that counsellor's participation in two meetings of Township violated s. 5(1)(c) of Municipal Conf lict of Interest Act ("Act"). Parties made submissions on costs. Mayor was ordered to pay costs to counsellor in amount of $25,000 inclusive of disburse- ments and taxes. Counsellor had sought costs on partial indemni- ty basis in amount of $33,176.60. There was no exemption under public interest litigation as both parties had strong material in- terest in outcome of litigation. Action of bringing application while Mayor of Township was extraordinary and favoured award of full amount claimed. Counsellor's refusal to retract ill-considered words and fact that she took feud public over in- ternet and local press suggested some reduction from amount claimed would be appropriate. Furniss v. Nishikawa (2018), 2018 CarswellOnt 13618, 2018 ONSC 4859, T.M. Wood J. (Ont. S.C.J.); additional reasons (2018), 2018 CarswellOnt 10651, 2018 ONSC 3674, T.M. Wood J. (Ont. S.C.J.). DISPOSITION WITHOUT TRIAL stay or dismissal of action Superior court judge finding no satisfactory explanation for delay and complete lack of action by lawyer Motor vehicle collision occurred involving three vehicles. Driver and passengers ("appellants") in one vehicle affected by col- lision brought action against drivers of other two vehicles ("respondents") for damages for negligence in December 2010. Registrar dismissed action as abandoned on August 25, 2011, pursuant to R. 48.15(1) of Rules of Civil Procedure (Ont.), which was then in force. Appellants brought motion to set aside dis- missal in February 2014. Master heard motion in June and Sep- tember 2015 and overturned reg- istrar's administrative dismissal on December 11, 2015. Respon- dents appealed master's decision. Superior Court judge allowed appeal and overturned master's decision, thus reinstating admin- istrative dismissal. Appellants appealed. Appeal dismissed. As of January 1, 2015, R. 48.15 was repealed, and registrar no longer had jurisdiction to dismiss action as abandoned. Under amended rule, appellants would have had five years from commencement of their action on December 29, 2010 to set their action down for trial or otherwise conclude ac- tion. Master described changes to RR. 48.14 and 48.15 and statutory scheme, noting that acceptable level of diligence in prosecution of action was now "much easier test to meet" than and that repeal of R. 48.15 "may … be considered as part of the context in which this motion to set aside a regis- trar's order dismissing an action as abandoned was argued". This was in error, as R. 48.15 was in force when registrar dismissed action as abandoned, but by time motion was argued, it had been repealed, and as such, it could not form part of applicable con- text. Superior court judge cor- rectly concluded it was error for master to make this statement. Given master's consideration of incorrect context, blame allocat- ed to respondents, and absence of any evidence from appellants, superior court judge was correct in setting aside master's decision and considering merits of motion anew. Superior court judge found no satisfactory explanation for delay and noted complete lack of action by lawyer and absence of evidence from appellants. Supe- rior court judge was entitled to conclude as she did. Prescott v. Barbon (2018), 2018 CarswellOnt 8641, 2018 ONCA 504, David Watt J.A., S.E. Pepall J.A., and B.W. Mill- er J.A. (Ont. C.A.); affirmed (2017), 2017 CarswellOnt 2326, 2017 ONSC 1048, Kristjanson J. (Ont. S.C.J.). Construction Law CONSTRUCTION AND BUILDERS' LIENS loss or discharge of lien Striking out a claim or dismissing action was severe remedy Plaintiff LL entered into oral agreement with MC on behalf of C Inc. to complete certain office renovations at property. Defen- dants, MC and C Inc. brought motion for order declaring that plaintiff 's registered construc- tion lien had expired and there- fore lien should be vacated as well as certificate of action against title to property and order dis- missing underlying action. Mo- tion dismissed. Plaintiff will have opportunity, if he so chooses, to serve and file affidavit setting out his position as to underlying action should not be dismissed within 20 days after receipt of endorsement. More than two years had passed since plaintiff commenced action. Plaintiff failed to complete steps required by s. 37(1) of Construction Lien Act ("Act"). Where requirements of s. 37 of Act had not been com- plied with court shall declare that the lien has expired and dis- miss the lien action. Court did not have discretion to allow the lien to remain if criteria set out in s. 37(1) were not satisfied. The one factor that weighed in favour of not dismissing action was that matter should be heard on its merits and that striking out a claim or dismissing action was severe remedy. In circumstances, it was appropriate that plaintiff be given one more opportunity to respond to motion on terms set out below, failing which ac- tion will be dismissed. Lee v. Chiarella (2018), 2018 CarswellOnt 21402, 2018 ONSC 7374, Dennison J. (Ont. S.C.J.). Estates and Trusts ESTATES passing of accoUnts Application unnecessarily complicated as result of failure to provide accounts in proper form Judge ordered that EB pass his accounts under power of attor- ney for property granted by his mother, IB. EB was found to had breached his fiduciary duty when he took $82,000.00 from IB's bank account to purchase home which he registered in his name alone. EB also used IB's money to pay legal fees of $44,098.50 for litigation against objectors, legal services which were not for IB's benefit. It was ordered that home be sold, with net proceeds to be paid to IB's estate, and that EB repay estate for legal fees, plus certain disallowed expenses. Submissions were made on costs. EB was to pay partial indemnity costs of $16,466.60 for fees and HST, plus disbursements; estate was to pay balance of full indem- nity costs, for total net payable by estate of $10,977.70. Application was unnecessarily complicated as result of EB's failure to pro- vide his accounts in proper form and failure to respond to proper objections. Blended costs order was appropriate. Litigation was necessary to ensure IB's property was properly administered. Ob- jectors' proposal that estate pay 85 per cent of their full indemni- ty costs was not accepted, as costs order requiring EB to pay only 15 per cent would not give sufficient recognition to principle of "loser pays" and "discipline" that prin- ciple was intended to encourage. In The Estate of Irmgard Burgstaler (disability) (2018), 2018 CarswellOnt 13742, 2018 ONSC 4725, D.C. Shaw J. (Ont. S.C.J.); additional reasons (2018), 2018 CarswellOnt 3573, 2018 ONSC 1187, D.C. Shaw J. (Ont. S.C.J.). Evidence OPINION experts Chiropractor qualified only to give opinion on general anatomy since he did not review medical records Plaintiff claimed damages for in- juries allegedly sustained in 2010 accident. Plaintiff alleged various injuries including soft tissue in- juries to neck and shoulder, some depression, and difficulty swal- lowing. Plaintifff was diagnosed with achalasia. Plaintiff intended to call two chiropractors and or- thopedic surgeon to give expert evidence concerning causes of achalasia and whether condition was caused or exacerbated by in- juries sustained in 2010 accident. Defendant objected to chiro- practors and orthopedic surgeon giving expert evidence about swallowing disorders and pos- sible causes. Defendant claimed chiropractors and orthopedic surgeon were not qualified to give necessary opinion on im- CASE LAW

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