Law Times

PAGE 14 CASELAW CaseLaw is a weekly summary of notable civil and criminal court decisions by the Supreme Court of Canada, the Federal Court of Canada, and all Ontario courts. SUPREME COURT OF CANADA Bankruptcy And Insolvency PRIORITIES Crown became owner of money required before bankruptcy Crown sent requirement to pay to appellant bank pursuant to s. 317 of Excise Tax Act (Can.) ("ETA"), in relation to debtor. Debtor then made assignment into bankruptcy. Trustee sent notice to bank to stay requirement to pay, but bank did not comply with requirement to pay. Crown then issued notice of assessment to bank. Reassessment was made, which bank appealed. Tax Court Judge dismissed bank's appeal, concluding that, according to language of s. 317(3) of ETA money subject to requirement to pay immediately relinquished to Crown on bank's receipt of requirement. Money was no lon- ger part of tax debtor's patrimony when notice of stay issued under s. 69 of Bankruptcy and Insolvency Act (Can.) ("BIA"), filed. Tax Court Judge found there was no conflict between BIA and requirement to pay, which remained fully applica- ble. Federal Court of Appeal held that when Crown issued require- ment to pay under s. 317(3) of ETA before notice of stay under s. 69 of BIA filed and, on date of that notice, payment owed in respect of requirement to pay had still not been made, s. 70(1) of BIA did not give priority to assignment of tax debtor's prop- erty over Crown's requirement to pay. Provisions of any enactment must be construed contextually having regard to statute read as whole. Parliament intended that power under s. 317(3) of ETA only be exercised before bankruptcy. Even if requirement to pay issued at a time that coincided with tax debtor's bankruptcy, there was no conflict possible between BIA and right of ownership conferred upon Crown under s. 317(3) of ETA. Words "other than the Bankruptcy and Insolvency Act" were not inserted in s. 317(3) of ETA to give precedence to BIA in event of conflict since no conflict possible. Purpose of "other than the Bankruptcy and Insolvency Act" to prevent power set out in s. 317(3) from being exercised after bankruptcy. Requirement to pay received by bank before notice of stay filed. Tax Court Judge cor- rectly concluded Crown became owner of money required before bankruptcy. Money not part of tax debtor's patrimony at time of bankruptcy and bank had obliga- tion to pay amount required. On further appeal to Supreme Court of Canada, held, appeal dismissed for reasons given by Court of Appeal. Toronto Dominion Bank v. Canada (Jan. 12, 2012, S.C.C., LeBel, Deschamps, Abella, Rothstein, Cromwell, Moldaver and Karakatsanis JJ., File No. 33878) Decision at 325 D.L.R. (4th) 174, 193 A.C.W.S. (3d) 1073 was affirmed. 209 A.C.W.S. (3d) 495 (2 pp.). Municipal Law BYLAWS Imposition of tax need bear no relationship to costs of service being provided Appellant owned pulp and paper mill in respondent district. Mill had own transportation infra- structure, waste disposal, emer- gency response systems and water supply and not highly dependent on municipal services. Assessed values of residential properties increased greatly over years, but taxes had not. Ratio between resi- dential and major industry classes dramatically higher than ratio prescribed by statute and highest in British Columbia. Mill encoun- tered severe financial challenges. Appellant concerned it could not sustain unreasonably high prop- erty taxes and hired consultants to analyze relationship between services and benefits provided by local municipalities and con- These cases may be found online in BestCase and other electronic resources from Canada Law Book. To subscribe, please call 1-800-565-6967. sumed or available to major industry and proportion of taxes paid by that class. Consultants found that major industry paid disproportionately high percent- age of total municipal tax rela- tive to consumption while other classes paid far less in taxes than they consumed in services. Consultants advanced municipal sustainability model but district declined to adopt model, instead passing tax rates by-law that per- petuated very high ratio between residential and major industry classes. Appellant brought peti- tion to set aside by-law on basis it was unreasonable and therefore illegal. Chambers judge found that argument based on model incon- sistent with nature of decision- making process contemplated by Community Charter (B.C.). He concluded by-law within range of reasonable and acceptable out- comes and dismissed petition. British Columbia Court of Appeal dismissed appellant's appeal, find- ing that municipality had virtually unfettered discretion to consider whatever information it deemed relevant and to allocate tax burden among classes as it saw fit. Appeal to Supreme Court of Canada dis- missed. In passing delegated leg- islation, municipality must make policy choices that fall reasonably within scope of authority granted by legislature. Parties disagreed on what standard of reasonableness required. Case law suggests review of municipal by-laws must reflect broad discretion provincial legis- lators have traditionally accorded to municipalities. By-laws involve array of social, economic, politi- cal and other non-legal consid- erations. Municipal by-laws will not be overturned unless "no rea- sonable body could have adopted them". Reasonableness means sub- stance of by-laws must conform to rationale of statutory regime. Community Charter gives munic- ipalities broad and virtually unfet- tered legislative discretion to estab- lish property tax rates. Imposition of tax need bear no relationship to costs of service being provided. Municipality not required to for- mally explain or provide rational basis for by-law. Reasons for by- law traditionally deduced from debate, deliberations and policy statements. Municipal councils entitled to consider broader social, economic and political factors rel- evant to electorate. Adoption of tax rates by-law did not consti- tute decision that no reasonable elected municipal council could have made. Catalyst Paper Corp. v. North Cowichan (District) (Jan. 20, 2012, S.C.C., McLachlin C.J.C., LeBel, Deschamps, Fish, Abella, Rothstein and Cromwell JJ., File No. 33744) Decision at 318 D.L.R. (4th) 350, 188 A.C.W.S. (3d) 548 was affirmed. 209 A.C.W.S. (3d) 697 (22 pp.). FEDERAL COURT OF APPEAL Administrative Law FETTERING OF DISCRETION No practical end served by setting aside Minister's decision This was appeal from Federal Court's decision upholding Minister of National Revenue's decision. Appellants used com- mon financial representative to make tax filings. For 2000 to 2003 taxation years appellant's representatives' were of opin- ion that they did not need to file T1135 forms, contrary to word- ing of s. 233.3(3) of Income Tax Act (Can.). Canadian Revenue Agency ("CRA") alerted appel- lants to fact that they had not filed forms. Appellants filed forms late and explained misunderstand- ing. Appellants' representatives requested relief under s. 220(3.1) of Act against penalty and inter- est assessed against appellants for late filing of forms. CRA denied request, finding that appellants did not fall within one of three specific situations set out in information circular. Appellants applied for relief to Minister, who reduced interest for six months due to CRA's delay in replying. Appellants applied for judicial review. Federal Court found that Minister had not fettered discre- tion and that decision was reason- able. Appeal dismissed. Standard of review of Minister's decision was reasonableness. Decision that was product of fettering of discretion was unreasonable. In circumstances, Minister did not draw upon law that was source of authority, s. 220(3.1) of Act, but fettered discretion by having regard to only three specific sce- narios set out in information cir- cular. Minister's reasons as set out in decision letter evidenced that Minister restricted consideration to three scenarios in information circular. Record shed no light on grounds for Minister's decision and decision letter must speak for itself. As Minister did not draw upon law that was source of authority and drew only on information circular, decision was unreasonable. However, there would be no practical end served by setting aside Minister's deci- sion. Appellants' excuses and jus- tifications for delay in filing forms and grounds offered in support of relief had no merit. Granting relief under s. 220(3.1) would be unrea- sonable exercise of discretion. Stemijon Investments Ltd. v. Canada (Attorney General) (Oct. 26, 2011, F.C.A., Noel, Trudel and Stratas JJ.A., File No. A-376-10; A374- 10; A375-10; A-377-10; A-378- 10; A-382-10) Decision at 193 A.C.W.S. (3d) 1016 was affirmed. 209 A.C.W.S. (3d) 721 (30 pp.). Employment Insurance ENTITLEMENT Board did not examine facts of case in relation to relevant principles of law While attending college respon- dent worked part-time at Canadian Tire store in Winnipeg. 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