Law Times

Law Times • apriL 30, 2018 Page 15 www.lawtimesnews.com Security Tribunal (GD-SST) found that claimant was not eligible for disability benefits under Canada Pension Plan as her disability was not "severe" prior to minimum qualifying period (MQP) date and she did not demonstrate that she was incapable of regularly pursuing any occupation at time of MQP. Appeal Division of SST (AD- SST) refused leave to appeal. Claimant brought application for judicial review. Application granted. Matter remitted to AD-SST. AD-SST unreason- ably found that claimant's ar- gument that GD-SST made its decision without regard for ma- terial before it did not have rea- sonable chance of success. AD- SST failed to consider that GD- SST failed to consider medical evidence that post-dated MQP but spoke directly to claimant's condition prior to that date and conf licted with evidence that GD-SST relied upon. GD-SST failed to properly account for at least some evidence before it that may have had significant impact on decision, especially reports by doctors that changed opinions in earlier reports. Bowles-Fraser v. Canada (Attorney General) (2018), 2018 CarswellNat 1140, 2018 CarswellNat 1363, 2018 FC 308, 2018 CF 308, Russel W. Zinn J. (F.C.). Tax Court of Canada Tax INCOME TAX Administration and enforcement Where no " incorporation agreement" any designation that taxpayer was director was invalid Taxpayer entered into agree- ment with long-time employee and her husband after deciding to acquired new salon. Long- time employee's husband pre- pared articles of incorporation for new corporation and he and taxpayer signed these articles, each as "incorporator", in early January 2007. Husband also prepared 10 page "Partnership Agreement" which taxpayer signed. In 2009 taxpayer's in- terest was bought out by hus- band. Taxpayer was assessed under s. 323 of Excise Tax Act for unremitted net GST for an- nual reporting periods ending December 31, 2007, 2008, 2009, 2010 and 2011 totalling $35,659. Taxpayer was assessed under s. 227.1 of Income Tax Act for unremitted source deductions respecting corporate taxation years of 2007, 2008 and 2009 totaling $15,675. Taxpayer ap- pealed. Appeal allowed and as- sessments vacated. Taxpayer was neither de jure nor de facto director of corporation. Direc- tor's liability assessments were invalid. There was no actual "incorporation agreement" in situation, which statutorily and unavoidably led to conclusion that taxpayer was not "incorpo- rator" as defined in s. 1 of Busi- ness Corporations Act (BCA) which in turn led to invalidity of any designation that taxpayer was director. Fact that taxpayer signed her name over designa- tion of "Director" did nothing to alter these conclusions. Section 413 of BCA did not apply. At no time did taxpayer conduct or hold herself out as director. Tax- payer was not de facto director of corporation. Le v. The Queen (2018), 2018 CarswellNat 1458, 2018 Car- swellNat 1655, 2018 TCC 65, 2018 CCI 65, B. Russell J. (T.C.C. [Informal Procedure]). Minister required to show total or partial failure to remit by company Taxpayer corporation failed to remit amounts withheld from employees for income tax and Employment Insurance. C was manager of taxpayer but in real- ity had limited powers and had taken position at owner's request as owner of taxpayer was only customer of C's business. Min- ister assessed C for $ 41 193,30 as jointly responsible for unre- mitted amounts. C appealed. Appeal allowed. Pursuant to s. 227.1(2)(a) of Income Tax Act Minister must show, on bal- ance of evidence, not only that certificate specifying amount was registered in Federal Court, but also that there was total or partial failure to remit by com- pany. Minister's duty was not displaced by C's failure to plead noncompliance in modified notice of appeal. Onus on Min- ister to prove that conditions in s. 227.1(2) met. Proof normally made by court certificate, writ of execution, or nulla bona return by bailiff but none of these were filed in evidence. Custodio c. La Reine (2018), 2018 CarswellNat 990, 2018 CCI 47, Sylvain Ouimet J. (T.C.C. [General Procedure]). INCOME TAX Employment income Work characterized as employment as described in employment agreement Company was starting up music streaming business and hired worker to be executive assis- tant to Chief Executive Officer (CEO) and to act in media rela- tions role. Company paid work- er $18,000 over several months but did not make any withhold- ings at source and did not pay federal or provincial sales tax on invoices for her work. CRA characterized worker's work as employment. Company ob- jected and CRA recharacterized relationship as independent contractor. Worker appealed. Appeal allowed. Worker was employee based on relevant fac- tors. Worker's yoga instructor activities did not occur during work hours and was not incon- sistent with her being employee. Employment agreement de- scribed relationship as one of employment, and even if it was not signed, it was basis upon which worker started work. There was either shared inten- tion that relationship would be employment, or CEO misled worker into believing he would be hiring her as employee. Worker was wholly supervised in her executive assistant role by CEO and in her media relations role by supervisor. Worker's work was done at premises used by company and during normal office hours. Tools and supplies, including office space, com- puter, telephone headset and reimbursed phone plan, were provided by company. Worker was paid fixed hourly rate. Hendriks v. M.N.R. (2018), 2018 CarswellNat 1264, 2018 CarswellNat 934, 2018 TCC 50, 2018 CCI 50, Patrick Boyle J. (T.C.C. [Employment Insur- ance]). OTHER FEDERAL TAXES Federal excise tax Softwood lumber products recovered in exempt region and exported to U.S. not subject to export charge Taxpayer reclaimed softwood lumber which exported recov- ered lumber to United States. Taxpayer marked origin of wood as "Yukon Territory" which was not subject to excise tax under Softwood Lumber Agreement (SLA) with United States. Minister reassessed tax- payer for under-reported soft- wood lumber export charges on basis that products in 24 exports reported as originating in Yu- kon instead originated in Brit- ish Columbia and were subject to export charges under s. 10 of Softwood Lumber Products Export Charge Act (SLPECA). Taxpayer appealed. Appeal dis- missed. Nothing in text of SLA to suggest that Canada and United States intended to ex- clude reclaimed softwood lum- ber from scope of SLA. Minister assumed as fact that wood origi- nated in British Columbia and was purchased from persons located in British Columbia. Basis for treating Minister's as- sumptions of fact as true is that taxpayer knows or has means of knowing facts relevant to as- sessment. Evidence established that wood was recovered from demolition sites in British Co- lumbia and shipped to U.S.. On evidence wood was exported by taxpayer from British Columbia to U.S.. Taxation of wood under SLPECA not arbitrary although reclaimed softwood lumber products recovered in exempt region and exported to United States would not be subject to an export charge while reclaimed softwood lumber products re- covered in non-exempt region and exported to United States would. Montana Reclaimed Lum- ber Co. v. The Queen (2018), 2018 CarswellNat 937, 2018 TCC 51, John R. Owen J. (T.C.C. [Gen- eral Procedure]). Ontario Civil Cases Aboriginal Law FAMILY LAW Miscellaneous Father relying on communal aboriginal right not capable of being advanced by individual member of community Mother and father of child were in relationship that began 2008 and ended in 2013. Mother, father and child were all H people and mem- bers of Six Nations and father lived on reserve. Mother applied for custody, child support and spousal support. Father filed An- swer and Claim in response but month later served and filed No- tice of Constitutional Question in which he gave notice that he in- tended to challenge jurisdiction of court and applicability of Family Law Act to his family law dispute with mother. Father filed Amend- ed Answer and Claim seeking order dismissing application in its entirety or staying application based on his constitutional chal- lenges. Father brought motion for orders including order that family law application by stayed pending hearing and outcome of constitutional questions and mother brought motion for vari- ous relief including order striking Amended Answer. Motion by mother granted in part. Amend- ed Answer should be struck in its entirety and constitutional claims set out in pleading should be dismissed based on conclusions that Amended Answer failed to satisfy basic rules of pleading, fa- ther lacked standing to advance aboriginal rights claims set out in Amended Answer and plead- ing failed to set out reasonable claim or defence in law. Father's Amended Answer did not sat- isfy minimum requirements for pleading. Notion that individual member of aboriginal group could on their own initiative and for their sole benefit seek to define content of broad H rights of self- government in family law matters was simply untenable. Aborigi- nal right father was relying on was communal one that was not capable of being exercised or ad- vanced by individual member of community. Alleged aboriginal right as framed in pleading was not cognizable pursuant to juris- prudence about s. 35(1) of Consti- tution Act, 1982 regarding deter- mination of aboriginal rights and father's constitutional case should be dismissed on that basis. Allow- ing respondent in such circum- stances to raise s. 35(1) jurisdic- tion challenge at any point, with- out giving court any discretion to determine whether constitutional case should proceed would es- sentially turn s. 35(1) into trump card that respondent could pull out at any time. Aboriginal rights must be pleaded and advanced in timely manner. Beaver v. Hill (2017), 2017 CarswellOnt 19385, 2017 ONSC 7245, Deborah L. Chappel J. (Ont. S.C.J.). Bankruptcy and Insolvency PROVING CLAIM Practice and procedure Equitable set-off principles applied to separate but connected contracts Pursuant to Master Sale and Purchase Agreement (MSPA) A Ltd. sold its commercial port assets to and leased to P Ltd. real property upon which port was located (Port Transaction). Consideration paid to A Ltd. under MSPA totaled US$171.5 million, of which US$150 mil- lion was funded in cash through loan from GIP to P Ltd. (GIP Loan), US$19.8 million was paid by Promissory Note (Note) given by P Ltd, and US$4.2 mil- lion in cash by P Ltd. directly. Note was assigned with closing of Port Transaction and indi- rect parent company (EGFL) of both A Ltd. and P Ltd. became obligor under Note, and P Ltd. was released of its obligations. Upon maturity of Note, it was never paid. Other agreements were made between A Ltd. and P Ltd. on same day including Cargo Handling Agreement (CHA) to which P Ltd. commit- ted to provide port services to A Ltd.. A Ltd. ceased payments under CHA and advised that no other payments would be made since its lenders would not ap- prove its budget which contem- plated payments to P Ltd. while amount due to A Ltd. under Note remained outstanding. P Ltd. defaulted under GIP Loan. P Ltd. moved for orders resum- ing payments but were denied on basis that it was premature to decide motions before avail- ability and quantum of A Ltd.'s entitlement to equitable set-off was determined. In oppression proceeding, it was held that Port Transaction was prejudicial to, and unfairly disregarded in- terests of A Ltd. and it was or- dered that Port Agreements be amended to provide A Ltd. with right to terminate them follow- ing satisfaction in full in respect of GIP Loan. A Ltd. brought motion for declaration that any amounts owed under Note were set-off against amounts owed to P Ltd. under CHA. Motion granted. Applying equitable set-off principles lead to find- ing that A Ltd. was entitled to set-off its obligation to P Ltd. under CHA against payments not made to it by EGFL under Note. EGFL controlled both A Ltd. and P Ltd. and entire Port Transaction, as found in oppression proceeding was driven by EGFL. While Note, its assignment to EGFL and CHA were separate contracts, they were all made pursuant to MSPA on same day and were connected. In circumstances, to require A Ltd to make payments to P Ltd. under CHA would be manifestly inequitable. Essar Steel Algoma Inc. et al Re (2017), 2017 CarswellOnt 12528, 2017 ONSC 3930, New- bould J. (Ont. S.C.J.). CASELAW

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