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Law Times • November 27, 2017 Page 15 www.lawtimesnews.com CASELAW Tax INCOME TAX Administration and enforcement Funds became taxpayer's property when they were deposited into her bank account Pursuant to direction from op- tometrist spouse of taxpayer, Ontario Health Insurance Plan (OHIP) deposited $959,403.03 into taxpayer's savings account, linked to joint chequing ac- count, from 1994 through 1997. Spouse failed to pay $993,730.31 in taxes with respect to 1993 through 1996 taxation years, and owed balance of $145,367.12 as of 2012. Minister of National Revenue assessed taxpayer pur- suant to s. 160(1) of Income Tax Act in amount of $959,403.03 with respect to transfers from OHIP to her bank account. Tax Court judge allowed taxpayer's appeal in part to extent that as- sessment should be reduced by $3,614.51. Judge held that each time OHIP deposited spouse's payments into taxpayer's sav- ings account, there was transfer of those funds to taxpayer and s. 160 of Act was engaged. Judge held that fact that spouse had access to funds through chequ- ing account was not sufficient to reverse triggering of s. 160 of Act. Judge held that taxpayer held legal and beneficial title to funds deposited in her account and it was not necessary that she receive benefit for s. 160 of Act to apply. Judge found evidence that some funds in taxpayer's sav- ings account were used to pay spouse's business expenses, so she did give consideration to her spouse in amount of $1,426.60 in 1996 and $2,187.91 in 1997. Taxpayer appealed. Appeal dismissed. Judge did not make any error in determining that funds became taxpayer's prop- erty when they were deposited into her bank account and that spouse transferred property to her by directing OHIP to make these deposits. In order for limit- ing amount to be amount based on fair market value of property transferred, amount of consid- eration given by taxpayer would have to have been more than $800,000, so she did not pursue these arguments. Klundert v. Canada (2017), 2017 CarswellNat 3196, 2017 FCA 134, Dawson J.A., Wyman W. Webb J.A., and Rennie J.A. (F.C.A.); affirmed (2016), 2016 CarswellNat 10785, 2016 Car- swellNat 2093, 2016 TCC 130, 2016 CCI 130, Valerie A. Miller J. (T.C.C. [General Procedure]). Federal Court Tax INCOME TAX Administration and enforcement Taxpayer's request for cancellation of interest refused Taxpayer entered into compli- cated departure trade transac- tion with bank before move to Malta in 1998, borrowing mon- ey and incurring interest be- fore departure to be deductible while reinvesting such money with bank and earning interest after move to be non-taxable. Taxpayer claimed deduction of $47,499,149 as interest and car- rying charges, offsetting income he realized from three of his companies. Minister reassessed taxpayer and his companies for 1998 and 1999 taxation years, taking various positions in mul- tiple reassessments that included denying corporate deductions for payments to taxpayer while including such payments in tax- payer's income and premise that taxpayer had not terminated his Canadian residency. Litiga- tion ensued, with taxpayer's ap- peal held in abeyance pending outcome of similar case. Parties entered into settlement and tax- payer paid total balance of tax liabilities owing of $38,067,818, twelve years after reassessment. Taxpayer's request for cancel- lation of interest in relation to 1998 taxation year was refused. Taxpayer applied for judicial review. Application dismissed. Taxpayer presented no evidence that he was without any other realistic options other than waiting for outcome of similar case before courts, simply rely- ing on amount of aggregate of liabilities to support such as- sumption. Amounts, while sig- nificant, did not in themselves establish that he could not have paid assessed tax debts at time of reassessment. CRA's aggressive reassessments were response to lack of information from tax- payer, who could have provided information for realistic as- sessment, could have provided waiver so that CRA did not need to take defensive positions or could have made settlement of- fer. Taxpayer chose, no doubt with advice of counsel, to deal with issues by waiting for court to pronounce upon validity of his complex and aggressive de- parture trade scheme. Taxpayer knowingly failed to pay tax debt pending decision in related case, knowing that interest would continue to accrue on tax debt. Complexities of situation were of taxpayer's making and could not be used to absolve him from having to pay interest. There was nothing unreasonable in Minis- ter's decision. Walsh v. Canada (Attorney General) (2017), 2017 Carswell- Nat 1809, 2017 FC 411, James Russell J. (F.C.). Tax Court of Canada Tax INCOME TAX Other income Payment of lump sum withdrawn from RSP not pension income under Old Age Security Regulations Taxpayer was denied denied a Guaranteed Income Supple- ment (GIS) for period of July 1, 2014 to June 30, 2015 on grounds lump sum RSP payment in 2013 of $19,279.11 pushed taxpayer's income above GIS threshold. Taxpayer appealed. Appeal dis- missed. Taxpayer's situation did not factually fall within defini- tion contained in s. 14(a) of Old Age Security Regulations exclu- sions as pension income. Pay- ment was lump sum withdrawn from RSP, not converted peri- odic annuity paid monthly over statutorily-mandated annuity term. McArthur v. Canada (Em- ployment and Social Develop- ment) (2017), 2017 CarswellNat 5838, 2017 TCC 213, Randall S. Bocock J. (T.C.C.). Ontario Civil Cases Bankruptcy and Insolvency COMPANIES' CREDITORS ARRANGEMENT ACT Initial application Necessary and appropriate to grant stay of proceedings to preserve status quo among stakeholders Debtor was incorporated to own and operate electrical co-gener- ation facility and encountered difficulties retrofitting its facil- ity, which resulted in energy out- put being lower and costlier than expected. Debtor was in default on various obligations and in litigation with former contrac- tor. Debtor believed its under- lying business was strong, but it required restructuring to inject new funds into its operations. Debtor was in negotiations with proposed DIP lender and credi- tor to reach agreement on SISP. Debtor brought application for initial order under Companies' Creditors Arrangement Act (CCAA), with appointment of monitor, authorization to bor- row $5,000,000 pursuant to DIP facility as interest financing, with maximum of $1.6 million advanced prior to comeback hearing, and sealing order. Ap- plication granted. Applicant was debtor company with over $5,000,000 in debts and was entitled to relief under CCAA. Debtor was insolvent and met threshold requirements under s. 10 of CCAA. It was necessary and appropriate to grant stay of proceedings to preserve status quo among stakeholders and allow SISP to unfold. It was nec- essary and appropriate to allow debtor to pay certain amounts, including pre-filing amounts to suppliers. Monitor requested by debtor consented to appoint- ment and was appropriate. DIP lenders charge satisfied relevant criteria and was integral part of credit facility. Coverage for liability was extended to direc- tors and officers since they did not have insurance. To protect integrity and fairness of process, sealing order was made. Index Energy Mills Road Corporation (Re) (2017), 2017 CarswellOnt 13040, 2017 ONSC 4944, G.B. Morawetz R.S.J. (Ont. S.C.J.). PRACTICE AND PROCEDURE IN COURTS Costs Fact that defendants agreed to pay high amount to monitor not determinative of what was reasonable Plaintiff monitor, on behalf of creditors, pensioners and retir- ees of A Ltd., brought oppres- sion action under Companies' Creditors Arrangement Act, involving A Ltd. as applicant in proceedings. E defendants and GIP objected to monitor as proper complainant argu- ing it was A Ltd. that should be party by way of derivative ac- tion, however, monitor was held to be proper complainant and was authorized and directed to take oppression action with A Ltd. named as party and en- titled to participate as advised. E defendants agreed with overall total of $1.7 million to be paid to monitor. A Ltd. sought costs against E defendants on partial indemnity basis around $1.7 million including disburse- ments for ediscovery docu- ment review; GIP sought costs against monitor on partial in- demnity scale of $750,156.18 on basis that relief sought by monitor at various times in one form or another would have affected GIP security. E defen- dants were ordered to pay legal fees of $425,000 inclusive of HST and disbursement claim of $1,138,384.19 for total costs of $1,138,809.19; No order as to costs for claim against monitor by GIP. E defendants signifi- cantly understated A Ltd.'s role. E defendants acknowledged document review production was carried on for monitor but disagreed with quantum. It was assumed that legal fee portion was around $1.3 million taken size of disbursements claimed by monitor, however, size of fees paid to monitor's counsel did not necessarily mean total fees for both monitor and A Ltd. should be same or some frac- tion of fees paid. E defendants` actions, including companies in Europe and India ran show that ended up in litigation and while they knew what had happened, collective plaintiffs had to figure it out. Consideration needed to be given that if total fees of mon- itor and A Ltd. were too high, that it could be fault of monitor's counsel. Fact that E defendants agreed to pay high amount to monitor was not determinative of what was reasonable. Monitor acknowledged that if only posi- tion taken by GIP was scope of relief, they were entitled to costs but GIP took broader attack, including whether monitor had standing to bring action, con- tending they had veto provision in was commercially reasonable and fair value of transaction was established, none of which was established. GIP appealed op- pression decision and requested appellate court order that it was error to find that monitor was proper complainant or to find oppression of A Ltd. and thus it was contended that GIP could not say it was wholly successful. Success was divided between monitor and GIP and no order was made to costs. Ernst & Young Inc. v. Essar Global Fund Ltd et al (2017), 2017 CarswellOnt 12508, 2017 ONSC 4017, Newbould J. (Ont. S.C.J.); additional reasons (2017), 2017 CarswellOnt 4049, 2017 ONSC 1366, Newbould J. (Ont. S.C.J. [Commercial List]). Civil Practice and Procedure CLASS AND REPRESENTATIVE PROCEEDINGS Representative or class proceedings under class proceedings legislation Ontario court having jurisdiction simpliciter over absent foreign claimants Jurisdiction over foreign par- ties. Plaintiffs brought motion to certify action, alleging that de- fendant domestic and foreign air carriers were engaged in global price fixing conspiracy, as class proceeding, with proposed class including claimants from more than 30 countries ("absent for- eign claimants"). Motion judge granted defendants' motion to stay action relating to absent foreign claimants on basis that court did not have jurisdic- tion over them. Judge held that court did not have jurisdiction simpliciter over absent foreign claimants. Judge held that ju- risdiction over class members could only be established if they were present in Ontario or had consented to jurisdiction of court. Plaintiffs appealed. Ap- peal allowed. Judge erred in re- jecting real and substantial con- nection test. Judge erred in an- choring her jurisdiction analysis in negation of traditional bases for jurisdiction of presence or consent. In this case, there was real and substantial connection between subject matter of action and Ontario, as all defendants carried on business in Ontario and tortious conduct related to air freight shipments linked to Canada. There were common issues between representative plaintiffs over whom court had jurisdiction and absent foreign claimants. As result of settle- ments with some defendants, absent foreign claimants had been afforded procedural safe- guards of adequacy of represen- tation, adequacy of notice, and right to opt out. There was suf- ficient basis on which to ground jurisdiction over absent foreign claimants. Judge erred in de- clining jurisdiction on basis of forum non conveniens because she failed to determine whether any jurisdiction was clearly more appropriate than Ontario. Airia Brands Inc. v. Air Canada (2017), 2017 Carswel- lOnt 15877, 2017 ONCA 792, E.E. Gillese J.A., J. MacFarland J.A., and S.E. Pepall J.A. (Ont. C.A.); reversed (2015), 2015 CarswellOnt 12787, 2015 ONSC 5332, L.C. Leitch J. (Ont. S.C.J.).

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