Law Times

Law Times • December 10, 2012 Page 13 FOCUS 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. FEDERAL COURT OF APPEAL Taxation INCOME TAX Taxpayer had not endowed foundation with any money or property This was appeal of judge's decision allowing taxpayer's appeal. Taxpayer was reassessed under Income Tax Act (Can.), for years 1996 to 2000 to include in income, pursuant to s. 75(2), taxable portion of capital gains realized by Austrian private foundation on sale of corporate shares it purchased from taxpayer. In 1996, taxpayer and father established private foundation in Austria. Father executed founding deed and paid 1 million Austrian shillings into foundation account. Taxpayer sold shares in company to foundation for $1.177 million. Foundation paid taxpayer $117,705 with balance remaining owing on which interest accrued. In 1998, foundation sold shares to another company. Minister reassessed taxpayer on basis of s. 75(2) of act on assumption that foundation was trust, that taxpayer did not sell shares to foundation until shortly before sale to other company in 1998 and consequently realized gain on basis on non-arm's length disposition at fair market value. Taxpayer appealed. Appeal was allowed. Judge found that s. 75(2) of act did not apply to facts of case. Appeal dismissed. Section 75(2) of act was intended to ensure that taxpayer could not avoid income tax consequences of use of disposition of property by transferring it in trust to another person while retaining right of reversion in respect of property or property for which it may be substituted or retaining right to direct disposition Heydary_LT_Dec3_12.indd 1 of property or substituted property. Nothing in documents of foundation or law of Austria supported conclusion that right of foundation to deal with its property was constrained by any legal or equitable obligation analogous to those of common law trustee. Nothing gave taxpayer legal or equitable claim to corporate property that was different from that of shareholder or member of corporation. Section 75(2) of act must be interpreted and applied to give effect to its language, read in proper context and with view to giving effect to its intended purpose. Section 75(2) of act did not apply to beneficiary of trust who transferred property to trust by means of genuine sale. Foundation purchased shares from taxpayer using money from original endowment from father. Taxpayer had not endowed foundation with any other money or property. Section 75(2) of act could not apply to attribute any income or gains of foundation to taxpayer. Sommerer v. Canada (July 13, 2012, F.C.A., Blais C.J., Letourneau and Sharlow JJ.A., File No. A-188-11) Decision at 204 A.C.W.S. (3d) 674 was affirmed. 219 A.C.W.S. (3d) 226 (29 pp.). FEDERAL COURT Crown ARMED FORCES Analysis of whether injuries attributable to military service was unreasonable Applicant and husband served in Canadian Forces. Applicant returned from maternity leave. Applicant was asked to prepare family care plan. Husband was ordered to arrive early at work to complete high readiness training. Applicant informed supervisor applicant would be late These cases may be found online in BestCase and other electronic resources from Canada Law Book. To subscribe, please call 1-800-565-6967. because applicant would have to drop child to daycare rather than husband. Applicant and child suffered motor vehicle accident. Child was killed and applicant suffered injuries requiring amputation of right leg above knee. Applicant was denied disability benefits. Summary investigation found applicant was on duty at time of accident but commander disagreed. Applicant filed grievance. DGPFS gave decision but could not have acted as initial authority because initial authority had to be military officer. Proper initial authority was never identified. Applicant was offered choice of restarting process at initial authority level or forward grievance to final authority. Applicant chose to forward grievance to final authority. Grievance board recommended grievance be denied. DGCFGA found applicant was not on duty at time of accident and held family care plan was not military order. DGCFGA found there was no breach of procedural fairness. Application for judicial review was allowed. Applicant was denied procedural fairness. Fact applicant was able to participate fully in decision by final authority did not rectify error that deprived applicant of decision at initial authority level. Applicant was entitled to initial authority decision and was denied one. Applicant's choice to restart grievance with unidentified initial authority or continue to final authority was not informed choice. Applicant did not clearly waive right to procedural fairness which included decision at initial authority level. Analysis of whether injuries were attributable to military service was unreasonable. DGCFGA did not follow appropriate precedents in applying broad and liberal interpretation. Fawcett v. Canada (Attorney General) (June 18, 2012, F.C., Rennie J., File No. T-1810-11) 219 A.C.W.S. (3d) 106 (13 pp.). www.lawtimesnews.com ONTARIO CIVIL CASES Appeal LEAVE TO APPEAL Even if moratoriums could be imposed, term of five years excessive This was application for leave to appeal order of Ontario Municipal Board. Board dismissed applicant's appeal against policies of city's official plan amendment. Policy that was in issue imposed moratorium on creation of any new country lot subdivisions pending critical review of country lot subdivision policies for five-year period. Board found that moratorium was necessary because more time was required to achieve balanced approach to complex integrated planning issues that should be permitted to play out. Board found that language in s. 16 of Planning Act (Ont.), authorized policy. Leave to appeal granted. Proposed appeal involved matters of importance. Board's decision potentially affected rural land across province and provided municipalities with enlarged powers to prohibit rural land development via official plans. Overarching issue was whether collateral measure of imposing moratorium on land development to provide breathing room to develop policies was properly within power of municipality to make in official plan pursuant to s. 16 of Act. There were at least three areas of concern regarding correctness of board's interpretation of s. 16 of act, namely, language of act, similar powers to impose moratoriums on land development found in s. 38 of act and characterizing moratorium of five years duration as pause. Board's decision did not appear to recognize distinction between policy and measure to attain objective. Section 16 of act did not appear to authorize measures to maintain or change status quo in order to develop future policies and objectives for later implementation. There was reason to doubt correctness of board's decision in rejecting interpretation of s. 16 of act that reflected legislature's intention in enacting specific provision that provided for moratoriums on development and constrained effect to two years. It could be concluded that even if moratoriums could be imposed to support objectives in official plan, term of five years would be considered excessive. Thomas Cavanaugh Construction Ltd. v. Ottawa (City) (June 28, 2012, Ont. S.C.J. (Div. Ct.), Annis J., File No. 11-1789) Leave to appeal from 70 O.M.B.R. 435 was allowed. 219 A.C.W.S. (3d) 14 (11 pp.). Assessment INTERPRETATION Phrase "land owned by" did not include both beneficial and legal ownership This was stated case referred to court under s. 43 of Assessment Act (Ont.), and s. 31, paragraph 9 of General, O. Reg 282/98 (Ont.). Applicants appealed assessment of numerous properties on basis that they should have been assessed in farm property class under s. 8(2) of regulation. Issue was whether use of phrase "land owned by" in s. 8(2)(3) of regulation as it related to real property included both beneficial and legal ownership. Application granted. In general, word "owner" referred to legal owner of land. Meaning might be extended to include beneficial owners depending on subject matter and context. Purpose of legislation was to keep farmland in production as long as possible, whether land was owned by 12-11-27 1:49 PM

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