Law Times

PAGE 16 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. COURT OF CANADA SUPREME Courts STARE DECISIS Section 31(1) of Income Tax Act (Can.), limits deductible losses where taxpayer' Taxpayer must devote significant time and resources to farming business income for taxation is neither farming nor combination of farming and some other source of income. Supreme Court of Canada held in Moldowan v. Canada (1977), 77 D.L.R. (3d) 112 (S.C.C.), that s. 31(1) con- templated three classes of tax- payer involved in farming. Loss deductions not limited for tax- payers for whom farming pro- vided bulk of income or centre of work routine. Loss deductions limited for taxpayers who car- ried on farming as sideline busi- ness and did not look to farming or farming and some subordi- nate source of income for liveli- hood. Losses not deductible for taxpayers who carried on some farming activities as hobby, not as business. More generous in- terpretation of combination of farming and some other source of income adopted by Federal Court of Appeal in Gunn v. Canada (2006), 150 A.C.W.S. (3d) 958 (F.C.A.). Taxpayer' s chief source of mary source of income was law practice. He also had income from farming in form of buying, selling, training and maintaining race horses. Minister of National Revenue limited deductions for losses from horse-racing busi- ness from other income, finding that combination of law practice and horse-racing business not chief source of income. Trial judge, following Gunn, did not apply loss deduction limitation and Federal Court of Appeal s pri- peal to Supreme Court of Can- ada dismissed. In determining whether to overrule Moldowan, court must be satisfied based on compelling reasons that prec- edent wrongly decided. Court must determine whether pref- erable to adhere to incorrect precedent to maintain certainty, or to correct error. Relevant considerations justified over- ruling Moldowan. Moldowan essentially read combination test out of s. 31(1). There are two separate exceptions to loss deduction limitation and each must be given meaning. Sig- nificant judicial, academic and other criticism of Moldowan and judge-made rule that reads exception out of provision not consistent with statute. Authori- ties supported interpretation that s. 31(1) does not contem- plate simple aggregation of two sources of income but requires wider inquiry into amount of capital, time, effort, commit- ment and general emphasis by taxpayer with respect to sources of income. Under combina- tion test, taxpayer must devote significant time and resources to farming business even if he also devotes significant time and resources to another busi- ness. Crown conceded taxpay- er' dismissed Minister's appeal. Ap- business. Trial judge held that although taxpayer derived prin- cipal income from and devoted more hours to law practice, he devoted both material amount of capital and very significant part of daily work routine to horse-racing business. Finding that horse-racing operation was chief source of income and that loss deduction limitation not ap- plicable supported by evidence. Craig v. Canada (Aug. 1, 2012, S.C.C., LeBel, Deschamps, Abella, Rothstein, Cromwell, Moldaver and Karakatsanis JJ., File No. 34144) Decision at 199 A.C.W.S. (3d) 1357 was af- s horse-racing operation was These cases may be found online in BestCase and other electronic resources from Canada Law Book. To subscribe, please call 1-800-565-6967. firmed. 217 A.C.W.S. (3d) 495 (27 pp.). COURT OF APPEAL FEDERAL Agriculture MARKETING Canadian Wheat Board charged with marketing Canadian grain in interprovincial and export trade. Section 47.1 of Canadi- an Wheat Board Act (CWBA) requires Minister of Agricul- ture to engage in consultative process with Canadian Wheat Board and to gain consent of western Canadian wheat and barley producers with respect to proposed changes to well- established process of market- ing grains. Minister unilaterally securing imminent passage of Marketing Freedom for Grain Farmers Act (Can.). Intention of proposed legislation to replace present centralized marketing system with marketing free- dom for grain farmers. Board and producers applied for dec- laration that Minister' require consent of democratic institutions affected Legislative changes do not constituted affront to rule of law. Sole question was whether Min- ister breached process require- ments of s. 47.1. Federal Court Judge granted declaration, finding that Minister tendered proposed legislation without conducting consultation and gaining consent expressed in s. 47.1. Appeal to Federal Court of Appeal allowed. Under modern contextual approach to statutory interpretation, grammatical and ordinary sense of provision not necessarily determinative. Re- gard must also be had to context in which words used and pur- pose of provision considered as whole within legislative scheme. s conduct Most significant element is de- termination of legislative intent. Since its inception, marketing monopoly subject to regulatory exclusions. Section 47.1 largely reverted back to Parliament prior limited regulatory au- thority of Governor in Council concerning exclusions or inclu- sions of certain kinds or grades of grain. However, nothing in s. 47.1 or legislative history that suggested Parliament fettered Minister' and recommend to Parliament legislation to repeal substantive provisions of CWBA. Review of Parliamentary debates sup- ported conclusion that s. 74.1 only concerns exclusion of cer- tain kinds or grades of wheat or barley from board' s authority to introduce sory price pooling system or inclusion of certain grains into monopoly. Parliament did not intend to provide producers with extensive veto power over all aspects of CWBA. Nothing in record supported conclu- sion that repeal of marketing monopoly or of CWBA in en- tirety conditional to obtain- ing prior consent of board or grain producers. While board' s compul- Board v. Canada (Attorney General) (June 18, 2012, F.C.A., Sharlow, Trudel and Mainville JJ.A., File No. A-470-11; A-471- 11) Decision at 345 D.L.R. (4th) 335, 211 A.C.W.S. (3d) 338 was reversed. 217 A.C.W.S. (3d) 261 (47 pp.). FEDERAL COURT Immigration Application for judicial review of decision of Refugee Protec- tion Division of Immigration and Refugee Board that presumption of state protection REFUGEE STATUS Applicant failed to rebut democratic marketing practices significant and fundamental, they do not trump will of demo- cratically elected Parliament. Save in circumstances where constitutional constraint estab- lished, legislative changes do not require consent of democratic institutions affected or of their electors. Principal purpose of proposed legislation to allow open and free market for grain producers. Purpose does not run afoul of NAFTA or other international trade agreements. Nor does right to freedom of association, found in s. 2(d) of Canadian Charter of Rights and Freedoms, protect marketing monopoly or compulsory price pooling system as contemplated by CWBA. Friends of the Canadian Wheat s plicants, citizens of Columbia, were neither Convention Refu- gees nor persons in need of pro- tection. Board found that appli- cant failed to rebut presumption of state protection in Columbia finding there was no reason why he could not have called police to address subsequent threats since he was willing to contact police as result of initial issues with members of AUC and po- lice responded each time. Ap- plication dismissed. Logical to assume that similar action and response would be reasonably forthcoming in more serious situations. Tarazona v. Canada (Minister of Citizenship and Immigra- tion) (May 18, 2012, F.C., Near J., File No. IMM-5232-11) 217 A.C.W.S. (3d) 427 (12 pp.). ap- protection a relevant consideration Application for judicial review of decision of Refugee Protec- tion Division of Immigration and Refugee Board that appli- cant, a citizen of El Salvador, was neither a Convention Refugee nor a person in need of protec- tion. Claim based on risk of harm at hands of Mara 18 gang. Failure to take steps to seek state OctOber 22, 2012 • Law times Heydary-2-LT_Apr2-12.indd 1 www.lawtimesnews.com 12-03-29 8:43 AM

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