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Page 14 March 5, 2018 • Law TiMes www.lawtimesnews.com CASELAW Supreme Court of Canada Professions and Occupations AUDITORS Negligence Auditor liable for increase in liquidation deficit following audit which failed to disclose fraud D and G formed business, L Inc., and manipulated its finan- cial records. L Inc. continued to raise capital and reinvested it in unprofitable enterprises. Au- ditor's report for 1997 did not disclose fraud. L Inc. filed for insolvency protection and went into receivership. L Inc. brought successful action in tort and contract against auditor. Court of Appeal dismissed appeal and cross-appeal. Auditor appealed. Appeal allowed in part; dam- ages reduced. Auditor should not be liable for L Inc.'s increase in liquidation deficit which fol- lowed auditor's provision of negligent services in relation to solicitation of investment. As L Inc.'s losses did not f low from failure to solicit investment, recovery should be denied for increase in L Inc.'s liquidation deficit beginning in fall of 1997. Auditor should be liable for increase in L Inc.'s liquidation deficit which followed statutory audit. Shareholders were unable to discharge their function of supervising management and safeguarding interests of cor- poration by reason of auditor's negligence. As consequence, L Inc.'s corporate life was artifi- cially prolonged, resulting in deterioration of its finances. Recovery should be allowed for increase in L Inc.'s liquidation deficit which followed 1997 au- dit. Deloitte & Touche v. Livent Inc. (Receiver of) (2017), 2017 CarswellOnt 20138, 2017 Car- swellOnt 20139, 2017 SCC 63, 2017 CSC 63, McLachlin C.J.C., Karakatsanis J., Wagner J., Gas- con J., Côté J., Brown J., and Rowe J. (S.C.C.); reversed (2016), 2016 CarswellOnt 122, 2016 ONCA 11, G.R. Strathy C.J.O., R.A. Blair J.A., and P. Lauwers J.A. (Ont. C.A.). Criminal Law OFFENCES AGAINST THE PERSON AND REPUTATION Sexual assault Trial judge erred in relying on impermissible stereotype about behaviour of sexual assault victims Complainant alleged that step- father touched her in sexual manner when she was between ages of 11 and 16. Trial judge found that complainant did not show behaviour consistent with abuse such as avoiding accused, and acquitted accused. Crown's appeal was allowed and new trial was ordered. Appeal court held that trial judge erred in re- lying on impermissible stereo- type or myth about behaviour of sexual assault victims when assessing complainant's cred- ibility. Accused appealed. Ap- peal dismissed. Trial judge com- mitted error of law in assessing complainant's credibility solely on correspondence between her behaviour and expected behav- iour of stereotypical victim of sexual assault. R. v. A.R.J.D. (2018), 2018 CarswellAlta 252, 2018 Car- swellAlta 253, 2018 SCC 6, 2018 CSC 6, Wagner C.J.C., Abella J., Moldaver J., Karakatsanis J., Gascon J., Côté J., and Brown J. (S.C.C.); affirmed (2017), 2017 CarswellAlta 1272, 2017 ABCA 237, Marina Paperny J.A., Frans Slatter J.A., and Frederica Schutz J.A. (Alta. C.A.). Federal Court Tax GOODS AND SERVICES TAX Administration and enforcement Minister refusing to reduce or cancel tax penalties and interest after considering history of compliance Registrant sought relief from penalties and interest on GST/ HST account based on financial hardship and inability to pay. Minister of National Revenue refused to reduce or cancel inter- est and penalties under s. 281.1 of Excise Tax Act after considering registrant's explanations, finan- cial information, and history of compliance. Registrant brought application for judicial review on ground that decision did not address all facts, including reg- istrant's principal's marriage breakdown and mental state. Application dismissed. Min- ister's decision was reasonable. Registrant could not advance po- sition relating to principal's mar- riage breakdown or mental state because argument was available to registrant but not relied on in its requests to Canada Rev- enue Agency. Evidence relating to purported extraordinary cir- cumstances of principal's mar- riage breakdown was not admis- sible. Decision was rendered after extensive review of registrant's circumstances. It was reasonable to separate principal's personal financial hardship from that of registrant. Minister reasonably found that registrant was con- tinuing to operate throughout and after period of financial dif- ficulty, and reasonably inferred that registrant was not experi- encing type of financial hardship that would justify taxpayer relief. There was nothing before Minis- ter explaining why returns were not filed on time so it was rea- sonable to refuse to grant relief with respect to penalties arising from late returns. Dougal & Co Inc. v. Cana- da (Attorney General) (2017), 2017 CarswellNat 7094, 2017 CarswellNat 7572, 2017 FC 1075, 2017 CF 1075, Alan S. Diner J. (F.C.). Tax Court of Canada Tax INCOME TAX Business and property income Court examined pursuit of profit test to determine if venture undertaken in sufficiently commercial manner to be considered source of income Taxpayers appealed assess- ments for taxation years 2010 to 2012 denying them losses they claimed arose in carrying on of dog kennel business. Minister concluded they were not en- gaged in a business but that dog kennel operation was hobby. Ap- peals dismissed. Taxpayers had moved from Pickering to Hunts- ville in 2010 and lost contacts as well as losing championship dog. Taxpayers lacked business plan. Revenues from their op- eration arose from training and boarding and had never shown a profit. Given personal element of attraction to dogs court had to examine pursuit of profit test to determine if venture was under- taken in sufficiently commer- cial manner to be considered source of income. Dog train- ing did not make up significant part of business and not clear exactly what was breakdown of revenue among breeding, train- ing, boarding and dog sitting. While some thought given as to future course of action, it did not appear to be based on making any profits for some years which did not support commercial- ity of venture in years at issue. Taxpayer produced no financial records illustrating whence rev- enues were derived, no finan- cial statements, no ledgers, no customer lists nor advertising materials. Venture could at best be described as dabbling, which suggested hobby than business. Savage v. The Queen (2017), 2017 CarswellNat 7138, 2017 CarswellNat 7368, 2017 TCC 247, 2017 CCI 247, Campbell J. Miller J. (T.C.C. [Informal Procedure]). INCOME TAX Tax credits Available tax credit to be determined on basis of fair market value of donated property Taxpayer claimed donation tax credits of $19,340 for 2009 and $15,252 for 2010 per s. 118.1 of Income Tax Act. Minister reas- sessed taxpayer's 2009 and 2010 taxation years' liabilities and disallowed donation tax credits. Minister assumed that property ostensibly donated was worth- less despite taxpayer's filing with Minister charitable gift receipt stating that property had value of $35,000. Taxpayer objected to reassessments, which subse- quently Minister reaffirmed. Taxpayer appealed. Appeal dis- missed. Taxpayer brought no evidence to displace Minister's assumption that fair market val- ue of corporate shares taxpayer claimed as having been donated to charity was nil. Available tax credit for purposes of s. 118.1 of Act was determined on basis of fair market value of donated property, which here was nil. Lappan v. The Queen (2017), 2017 CarswellNat 6940, 2017 CarswellNat 6983, 2017 TCC 240, 2017 CCI 240, B. Russell J. (T.C.C. [Informal Procedure]). 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. These cases may be found online in WestlawNext Canada. To subscribe, please access carswell.com or call 1-800-387-5164. REACH ONE OF THE LARGEST LEGAL AND BUSINESS MARKETS IN CANADA! AVAILABLE ONLINE AND IN PRINT With more than 300,500 page views and 100,000 unique visitors monthly canadianlawlist.com captures your market. 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