Law Times

Law Times • December 11, 2017 Page 19 www.lawtimesnews.com CASELAW Tax Court of Canada Tax GOODS AND SERVICES TAX Supply When person makes supply that is taxable, that person has to collect GST/HST Registrant company operated transportation service business and was GST/HST registrant. In 2011, due to its financial situ- ation, registrant began liquidat- ing assets, notably three lim- ousines which had been used in course of commercial activi- ties. Limousines were sold for $105,700.00. Registrant did not collect and remit GST/HST on sales of limousines. Registrant was reassessed under Excise Tax Act. Registrant appealed. Appeal dismissed. Registrant was deemed by s. 141.1(1)(a) of Act to have made supply in course of commercial activity since limousines sold by regis- trant were used by it in its com- mercial activity. Under s. 221 of Act, when person makes supply that is taxable, that person has to collect GST/HST. Registrant should have collected $13,741.00 of GST/HST on limousines sale. Brian & Deborah Dewan Enterprises Ltd. v. The Queen (2017), 2017 CarswellNat 3466, 2017 TCC 135, Johanne D'Auray J. (T.C.C. [Informal Procedure]). Ontario Civil Cases Civil Practice and Procedure DISPOSITION WITHOUT TRIAL Discontinuance of action Taxpayers incorrect to attribute to employee all that was known by CRA at time of reassessments Setting aside. Canada Revenue Agency (CRA) charged plain- tiff taxpayers with fraud and tax evasion for underreporting their incomes. Criminal trial judge found that CRA employee had been intentionally mislead- ing in swearing Information to Obtain (ITO), and charges were later stayed. Taxpayers brought action for misfeasance in public office against CRA and employ- ee. Parties consented to discon- tinuance of action. When tax- payers received reassessments showing monies received as non-taxable, taxpayers brought application to set aside discon- tinuance based on exceptional circumstances. Motion judge dismissed motion on ground that reassessments would not have had any impact on deci- sion. Judge held that reassess- ments could not help prove what employee knew when swearing ITO. Judge found that evidence could have been obtained by time of trial had they exercised proper diligence. Taxpayers ap- pealed. Appeal dismissed. Tax- payers did not meet high bar for setting aside consent dis- continuance because fresh evi- dence could not have affected result. Taxpayers were incor- rect to attribute to employee, at early stage of investigation, all that was known and concluded by CRA at time of new reassess- ments. Equivocal nature of fresh evidence would not affect out- come of action, as reassessments could show that employee had reasonable grounds, or believed he had reasonable grounds, or acted unlawfully knowing he did not have reasonable grounds when he swore ITO. Reassess- ments addressed one concern raised by trial judge that taxpay- ers could not prove that original assessment was incorrect, but other obstacles remained. Tax- payers were not faulted on their diligence in pursuing reassess- ments. Holterman v. Fish (2017), 2017 CarswellOnt 15346, 2017 ONCA 769, K. Feldman J.A., E.A. Cronk J.A., and B.W. Miller J.A. (Ont. C.A.); affirmed (2016), 2016 CarswellOnt 8589, 2016 ONSC 3275, Lederer J. (Ont. S.C.J.). Estates and Trusts MENTAL INCOMPETENCY Practice and procedure in mental incompetency proceedings No reason to depart from normal award of costs despite concerns about depleting estate Adult children of elderly mother suffering from Alzheimer's dis- ease, M, A, C and P, could not agree on her care. Counsel was appointed for mother, C was ap- pointed guardian of mother's personal care, bank was ap- pointed guardian of mother's property, and M as was appoint- ed mother's litigation guardian. Mother's counsel obtained or- der replacing C as guardian of mother's personal care with M. P and C brought number of un- successful appeals which deplet- ed estate and sought to discredit mother's counsel and applica- tions judge. Hearing was held to determine costs. M was awarded $24,400 in costs for review mo- tion and appeals on partial in- demnity basis, inclusive of fees, disbursements and HST, paid by bank as guardian of prop- erty for mother, from current assets of mother, with amount offset against any inheritance P and C were to receive on death of mother, equally. Any unpaid costs orders in proceedings in favour of M, payable by P and or C, were to be paid by bank as guardian of property for mother, from current assets of mother, to be offset against any inheritance P and C were to re- ceive on death of mother, equal- ly. Despite M's concerns about depleting mother's estate, there was no reason to depart from normal practice of awarding costs on partial indemnity basis to successful party. Childs v. Childs (2017), 2017 CarswellOnt 11044, 2017 ONCA 608, Eileen E. Gillese J.A., Grant Huscroft J.A., and Gary T. Trotter J.A. (Ont. C.A.); additional reasons (2017), 2017 CarswellOnt 9394, 2017 ONCA 516, Eileen E. Gillese J.A., Grant Huscroft J.A., and G.T. Trotter J.A. (Ont. C.A.). Family Law COSTS In family law proceedings generally Woman was entitled to costs as she was forced to proceed to trial Costs of application after ap- peal. Parties were in common- law relationship for four years. Issue arose concerning woman's entitlement to 50 per cent inter- est in home occupied by par- ties during latter part of their cohabitation and man's claim for credit in respect of funds used by him to retire joint debt incurred by parties to facilitate purchase of home. Application judge awarded woman 50 per cent interest in property but not joint account. Judge awarded woman $180,000 for costs of application. While there was divided success on issues, judge found that woman was entitled to costs as she was forced to pro- ceed to trial. It was not possible to determine whether woman's offer to settle was as good as or better than trial outcome. Woman's offer to settle was more reasonable than man's offer. Man's failure to prove breach of trust and breach of fi- duciary duty did not carry same costs consequences as failure to prove alleged fraud. Man's ap- peal of property order was al- lowed in part. Man was award- ed costs of appeal in amount of $12,500. Parties made submis- sions on costs of application. Woman's costs of application were reduced to $135,000. Man achieved only partial success on his appeal. In light of disputed issues on appeal and rulings, woman remained entitled to her costs of application although at reduced amount. Reduction of 25 per cent in quantum of costs of application awarded to wom- an was fair and justified. Chechui v. Nieman (2017), 2017 CarswellOnt 18375, 2017 ONCA 911, G.R. Strathy C.J.O., E.A. Cronk J.A., and S.E. Pepall J.A. (Ont. C.A.); additional rea- sons (2017), 2017 CarswellOnt 13119, 2017 ONCA 669, G.R. Strathy C.J.O., E.A. Cronk J.A., and S.E. Pepall J.A. (Ont. C.A.). Guarantee and Indemnity GUARANTEE Contract of guarantee Defendant failed to adduce persuasive evidence to demonstrate that plaintiff sold assets improvidently Plaintiff bank made two loans to debtor which were guar- anteed by defendant. Debtor defaulted on loans and plain- tiff demanded payment under guarantees. Defendant did not make payments and plaintiff proceeded to dispose of debtor's assets in accordance with terms of loan agreement. Plaintiff hired appraiser who conducted inventory of assets and reported that distress value of assets was $7,200 and going concern value was $21,600. Plaintiff sold as- sets for $30,000 but ultimately did not receive any proceeds from sale as there was priority charge of more than $30,000. Plaintiff brought action against defendant seeking payment under guarantees. Defendant acknowledged default but took position that plaintiff made im- provident sale of debtor's assets and was therefore not entitled to amount claimed. Plaintiff brought motion for summary judgment on guarantees. Mo- tion granted. It was possible to make just and fair determina- tion of matter based on evidence on motion and submissions of counsel. Given that defendant acknowledged that debtor de- faulted on its obligations under loans, only issue in dispute was whether sale of debtor's assets was improvident. Defendant failed to demonstrate that there was triable issue as to whether sale was improvident. Loan agreement gave plaintiff broad latitude in selling debtor's as- sets, requiring it to be "reason- able" in sale. Plaintiff acted rea- sonably in circumstances and was able to sell assets for more than amount at which they were appraised. Defendant failed to adduce admissible or persuasive evidence in support of his alle- gation that plaintiff sold assets improvidently. There was no genuine issue for trial. The Bank of Nova Scotia v. Scholaert (2017), 2017 Car- swellOnt 15516, 2017 ONSC 5960, Favreau J. (Ont. S.C.J.). Insurance ACTIONS ON POLICIES Practice and procedure Privileged settlement agreement must be disclosed to non- settling parties and court Action arose from subrogated claim brought by plaintiff 's in- surers for damages arising from leaking oil tank at plaintiff 's home and there were two poten- tial liability streams, first from tank stream related to H&M Inc. and second from oil supply stream related to GWF Inc.. Oil tank was supplied by GWF Inc. . Just prior to expiry of limitation period for claims for contribu- tion and indemnity, insurer en- tered into agreement with H&M Inc., which provided that H&M Inc. would defend action, com- mence third party claim, insurer would pay $5000 to counsel and communication between insurer and H&M were subject to privilege . GWF Inc. brought application to stay action based upon agreement relating to con- duct of litigation, which was not disclosed to third parties for five years. Application dismissed. General rule was that privileged settlement agreement must be immediately disclosed to non- settling parties and court, where agreement changed adversarial orientation of lawsuit, or where court required knowledge of set- tlement to maintain fairness and integrity of its process. There was settlement between insurer and H&M Inc. that ought to have been disclosed. Third party claim was in tank supply stream of the litigation and in terms of potential liability, H&M Inc. was unaffected by third party claim, because third parties' li- ability could not exceed H&M Inc.'s liability. Reason why third parties were part of litigation for five years was that parties to liti- gation blithely continued to liti- gate, without regard to fact that H&M Inc. had been voluntarily dissolved prior to commence- ment of litigation, that third par- ty claim was therefore nullity, and that as result, limitation pe- riod had continued to run, and had expired shortly after third party claim was filed. Handley v. DTE Industries Limited (2017), 2017 Carswel- lOnt 12088, 2017 ONSC 4349, Bale J. (Ont. S.C.J.). CASELAW Additional caselaw is available on Law Times website, at lawtimesnews.com. 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. These cases may be found online in WestlawNext Canada. To subscribe, please access carswell.com or call 1-800-387-5164.

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