Law Times

Page 14 June 18, 2018 • Law Times www.lawtimesnews.com Federal Court Tax INCOME TAX Deferred income plans Minister refusing cancellation of tax arising from taxpayer's excess contributions to RRSP In 2007 taxpayer transferred $17,000 into RRSP at another bank but that amount exceed- ed RRSP deduction limit by $15,486. Taxpayer received letter from Canada Revenue Agency (CRA) in 2014 notifying tax- payer that she may have had ex- cess RRSP contributions during 2007 and subsequent taxation years that were subject to tax of 1 percent per month; that she had not filed T1-OVP return to re- port and pay tax; and if she had RRSP excess contributions CRA would charge late-filing penalty and interest on any return filed late. In April 2015, CRA issued notices of assessment for 2007 to 2013 taxation years regarding taxpayer's excess contributions to her RRSP. Taxpayer with- drew her RRSP to eliminate her excess contribution and CRA received request for taxpayer re- lief regarding 2007 to 2015 taxa- tion years. CRA issued notices of assessment for 2014 and 2015 taxation years. Minister refused cancellation of tax arising from taxpayer's excess contributions to her RRSP in 2007 and requests for second review and then for third review were both refused by Minister. Minister waived late-filing penalties and arrears interests levied for 2007 to 2015 taxation years and issued notices of reassessment bringing bal- ance owing to $10,798.71, which taxpayer paid in full. Taxpayer applied for judicial review of de- cision. Application dismissed. Minister was justified in refusing to conduct third review. Power to conduct third review and to waive tax for excess contribution to RRSP under s. 204.1(4) of In- come Tax Act was discretionary and standard of review for both decisions was reasonableness. In letter received by CRA, taxpayer did not provide any new infor- mation. Actions by taxpayer did not constitute reasonable steps and exceeded reasonable delay. Pouchet v. Canada (Attor- ney General) (2018), 2018 Car- swellNat 2083, 2018 Carswell- Nat 2663, 2018 FC 473, 2018 CF 473, Peter Annis J. (F.C.). Tax Court of Canada TAX INCOME TAX Administration and enforcement Companies not related for purpose of s. 251(2) of Act because it did not have de jure control Holding company H Ltd. and Sc trust each held 50 per cent of shares of operating company P Ltd.. H Ltd. was held by S trust, whose beneficiaries were WS and BB. P Ltd. paid dividends to H Ltd. for no consideration at time when P Ltd. owed corpo- rate income tax debt. H Ltd. then paid dividends in S trust for no consideration, which distributed funds to WS and BB as beneficia- ries of trust, for no consideration. Minister of National Revenue assessed H Ltd., S trust, WS and BB (appellants) under s. 160 of Income Tax Act. Appellants ap- pealed. Appeals dismissed. H Ltd. was not related to P Ltd. for purpose of s. 251(2) of Act because it did not have de jure control of P Ltd.. WS, through S trust and H Ltd., controlled 50 per cent of shares of P Ltd., and MS, through Sc trust, controlled other 50 per cent of shares. Tax plan was put in place to allow for income splitting between WS and his family members, which included payment of dividends by P Ltd. to H Ltd., and then by H Ltd. to S trust. MS and WS, as P Ltd.'s only directors and officers acted in concert and with com- mon economic interest to decide how they would withdraw profits made by P Ltd. for their personal use. There was no evidence that P Ltd. paid dividends at discretion of MS. H Ltd. and P Ltd. did not deal at arm's length with respect to payment of dividends by P Ltd., and since this was only issue regarding application of s. 160 of Act, appeals were dismissed. HLB Smith Holdings Lim- ited v. The Queen (2018), 2018 CarswellNat 2072, 2018 TCC 83, Steven K. D'Arcy J. (T.C.C. [Gen- eral Procedure]). Ontario Civil Cases Business Associations NATURE OF BUSINESS ASSOCIATIONS Nature of corporation If company existed for purpose of judgment it existed for purpose of contract At trial, plaintiff pleaded that plaintiff had contract with both company and defendant per- sonally. There was discrepancy in spelling of name of defen- dant's company. Plaintiff had contracted with company under misspelled name of company. Trial judge's key finding was that because company that plaintiff contracted with did not exist as corporation, it was not entitled to carry on business. Defendant was found personally liable by trial judge. Defendant appealed judgment against finding of per- sonal liability. Appeal granted. Having relied only on fact that corporation did not exist was error in law. Trial judge rectified plaintiff 's contract so it was with correct company. However, if company existed for purpose of judgment it existed for purpose of contract. Having had made that rectification trial judge erred in law in finding defendant per- sonally liable. Heshmati v. Memarzadeh (2017), 2017 CarswellOnt 16871, 2017 ONSC 6547, Spies J. (Ont. Div. Ct.). Civil Practice and Procedure LIMITATION OF ACTIONS Real property Plaintiffs' possession was open, notorious, peaceful, adverse, exclusive, actual and continuous Plaintiffs purchased property and were told by defendants, who owned abutting land, that they had to move their fence and air conditioner because it was on defendants' land and they wanted to put up new fence on boundary. At time of purchase, chain link fence was located on defendants' property, one me- tre south of boundary between properties. Plaintiffs' action for declaration that they owned strip of defendants' land between chain link fence and lot line be- tween properties was allowed. Because of presence of chain link fence, plaintiffs' possession was open, notorious, peaceful, adverse, exclusive, actual and continuous. Trial judge found that plaintiffs had established title to disputed land by adverse possession, and that they were entitled to nominal damages of $500. Defendants appealed. Ap- peal dismissed. Trial judge gave detailed reasons explaining why he accepted plaintiffs' evidence that for relevant 10-year period prior to land being governed by land titles, their predecessors in title had adversely possessed dis- puted strip of land. Defendants' case rested almost entirely on evidence of K, persons who had owned their lands for 10 months between 1988 and 1989. Evi- dence of all other predecessors in title was that during relevant 10-year period, chain link fence divided disputed land from that of defendants and incorporated it into plaintiffs' land. Trial judge was entitled to find on evidence that while K had erected board fence on part of property, chain link fence was present and de- fined rear boundary of property while K owned it. He did not err in finding that statutory declara- tion relied upon by defendants simply ref lected mutual mis- take of all parties when chain link fence was boundary. There was no err to justify interference with trial judge's decision. Beffort v. Zuchelkowski (2017), 2017 CarswellOnt 15478, 2017 ONCA 774, Robert J. Sharpe J.A., Robert A. Blair J.A., and Gloria Epstein J.A. (Ont. C.A.); affirmed (2016), 2016 Car- swellOnt 1009, 2016 ONSC 583, Trimble J. (Ont. S.C.J.). Family Law CUSTODY AND ACCESS Joint custody Parties did not cooperate sufficiently or communicate effectively such that joint custody would be workable Parties were married for seven years and had three children. Mother brought motion for re- lief, including sole custody of children. Motion granted. Par- ties did not cooperate sufficient- ly or communicate effectively such that joint custody would be workable. Joint custody would likely complicate and delay abil- ity to make decisions that affect- ed children's daily lives. Chil- dren had lived with mother all of their lives, and she had always been their primary caregiver. Fa- ther had been absent for periods of time given his employment schedule. Mother was granted sole custody of children, and father was to have liberal access that was set out. Johnson v. Johnson (2017), 2017 CarswellOnt 4344, 2017 ONSC 1543, H.A. Rady J. (Ont. S.C.J.). SUPPORT Spousal support under Divorce Act and provincial statutes Not appropriate to apply guidelines for support due to uncertainty concerning wife's income Parties began cohabiting in 1989 and married in 1995. Parties separated in 2009 or 2010. Hus- band's income was $209,000 and wife's income was $9,000. Wife brought application for interim spousal support. Application granted. Wife was employed throughout marriage and had businesses related to animals. Parties cooperated in keep- ing house and raising children. Wife kept significant property and husband took on signifi- cant debt at time of separation. It was not clear that wife was economically disadvantaged by marriage. Wife failed to disclose information about businesses. It was not appropriate to ap- ply guidelines for support be- cause of uncertainty concerning wife's income or ability to earn income. Husband ordered to pay interim spousal support of $2,000 per month. White v. White (2017), 2017 CarswellOnt 4687, 2017 ONSC 1867, J.A. Ramsay J. (Ont. S.C.J.). Insurance ACTIONS ON POLICIES Practice and procedure Expert opinion of any practice in industry could remedy plaintiff 's failure to provide evidence of loss Plaintiff entered into contract with buyer for sale and shipment of 26 containers of sesame seeds to be delivered from Nigeria to China. Goods were insured by insurer under policy of marine insurance and were damaged in transit. Plaintiff sought com- pensation under insurance pol- icy but was denied coverage on basis that cause of damage was expressly excluded under policy. Plaintiff brought action for dam- ages. Insurer brought motion for summary judgment to dismiss. Motion granted. Motion judge found that plaintiff had insur- able interest in goods at time of loss but plaintiff was paid in full for goods. Motion judge found no evidence sufficient to raise genuine issue for trial on wheth- er plaintiff suffered loss. Plain- tiff appealed from dismissal and sought to admit fresh evidence. Insurer cross–appealed motion judge's finding that plaintiff had insurable interest. Appeal and motion to admit fresh evi- dence dismissed; cross–appeal dismissed as moot. Plaintiff pleaded that shipments were damaged by contact with water, resulting in loss of $550,081.38 USD but plaintiff 's affidavit of documents and examination for discovery were silent on any evidence of loss. No evidence of any kind was filed in support of purported short–payments. In- surer was not advised of alleged offsetting payments until litiga- tion was commenced. Expert opinion of any practice in indus- try to short–pay on subsequent shipments could not serve to remedy plaintiff 's failure to pro- vide any evidence of loss. There was no palpable and overriding error, and deference was owed to motion judge's conclusion that plaintiff was paid in full and that there was no credible evidence to contrary. Broadgrain Commodities Inc. v. Continental Casualty Company (CNA Canada) (2018), 2018 CarswellOnt 7194, 2018 ONCA 438, Doherty J.A., S.E. Pepall J.A., and D.K. Gray J. (ad hoc) (Ont. C.A.); affirmed (2017), 2017 CarswellOnt 15085, 2017 ONSC 4721, Monahan J. (Ont. S.C.J.). CONTRACT OF INDEMNITY Subrogation Lease did not bar insurer from seeking subrogated damages Tenant operated restaurant in leased unit in building owned by landlord. Fire in restaurant kitchen causing damage to building. As term of lease, land- lord covenanted to maintain fire insurance, for which tenant con- tributed to premiums. Insurer indemnified landlord for losses caused by fire and brought claim against tenant through right of subrogation. Tenant brought ap- plication on availability of sub- rogated claim. Trial judge ruled that claim was barred and found that where landlord covenanted to obtain insurance for fire dam- age, landlord was barred from recovering losses from tenant unless there was clear, express or unambiguous language stat- ing otherwise. Insurer appealed. Appeal allowed. Lease did not bar insurer from seeking sub- rogated damages. Trial judge erred in interpreting lease in light of ruling legal principles laid down by Supreme Court of Canada (SCC). SCC did not pronounce rule of general appli- cation but trial judge repeatedly used words "the general rule". Trial judge recognized his task CASELAW

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