http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/107979/index.do
French v. The Queen (February 11, 2015 – 2015 TCC 35, C. Miller J.).
Précis: The taxpayer was part of a large group each member of which made donations that CRA attacked based in part on alleged consideration received for the gift. The taxpayer pleaded that if he had lived in Québec the gift would have been valid since the
Civil Code does not exclude from the concept of gift those involving some form of consideration. The taxpayer argued that the
Income Tax Act should not treat taxpayers in different provinces in a different manner. The Tax Court rejected the taxpayer’s argument and struck out the impugned pleadings.
Decision: This decision involves a motion by the Crown to strike out a portion of the taxpayer’s Notice of Appeal (as well as those of 43 other named taxpayers):
[2] These Appeals all relate to the same issue, being the Appellants’ entitlement to tax credits in connection with purported donations to Ideas Canada Foundation, a registered charity. Such entitlement to a similar donation made by Ms. Kossow to Ideas Canada Foundation was denied by the Tax Court of Canada, which decision was affirmed by the Federal Court of Appeal (
Kossow v R, 2013 FCA 283) (“Kossow Appeal”). The Appellants have added arguments in their Appeals which were not made by Ms. Kossow, and they wish to be given an opportunity to make them. One of the arguments is what the Respondent wishes to have struck on the basis it is plain and obvious it has no chance of success.
[3] The portions of the Notices of Appeal which comprise the argument sought to be struck are references to the
Civil Code of Québec and the
Interpretation Act (the “Act”) (sections 8.1 and 8.2) and the following paragraphs:
23. In the alternative, the Appellant should be entitled to a deduction for that portion of each of the Donations that exceeded the value of any benefit or remuneration obtained from each of the Donation (excluding the value of any tax advantage).
24. Under the civil law, Article 1810 of the CCQ expressly provides that “a remunerative gift … constitutes a gift … for the value in excess of that of the remuneration”. Consequently, to the extent that the Loans or some aspect thereof may have constituted remuneration to the Appellant, the Donations less the remuneration constituted a “gift” in Québec through operation of sections 8.1 and 8.2 of the Interpretation Act.
25. Had the Appellant been resident of Québec during the Taxation Years, he would unquestionably be entitled under section 118.1 of the Act to a deduction of the portion of the Donations in excess of the remuneration.
26. Parliament did not intend for section 118.1 of the Act to produce radically different results for taxpayers in Québec that would not apply to taxpayers in the rest of Canada.
[4] None of the Appellants made the purported donations in Québec.
The taxpayer in the Kossow decision lost her appeal because she received a significant benefit for making the gift, i.e., a long-term, interest-free loan. In the impugned pleadings Mr. French and the others were arguing that if the taxpayers were resident in Québec the gifts would not have be invalid by virtue of the presence of the benefit.
The Crown argued that the laws of Québec could not be extended to other provinces:
[7] In a nutshell, the Respondent’s position is that because “gift” is not statutorily defined in the
Income Tax Act, one must look to the law of property and civil rights of a province which would govern the concept of gift. With the introduction of sections 8.1 and 8.2 of the Act in 2001, by the passing of the
Harmonization Act, it is clear, based on the principle of complementarity, “gift”, as defined in Québec is to apply in Québec vis-à-vis section 118.1 of the
Income Tax Act and “gift” as defined in common law jurisdictions is to apply in those jurisdictions vis-à-vis section 118.1 of the
Income Tax Act. In effect, the Québec codified definition of gift cannot apply in the rest of Canada and vice versa.
[8] This recognizes the possibility that federal laws may yield different results in different jurisdictions. Even before the passing of sections 8.1 and 8.2 of the
Interpretation Act the courts recognized this, as is evident from Justice Décary’s comment in
St. Hilaire v Canada (AG), 2001 FCA 63:
It is the Constitution of Canada itself which provides that some federal laws have differing effects according to whether they are applied in Quebec or in the other provinces. By guaranteeing the perpetuity of the civil law in Quebec and encouraging in section 94 the uniformization of the laws of provinces other than Quebec relative to property and civil rights, the
Constitution Act, 1867 enshrines in Canada the federal principle that a federal law that resorts to an external source of private law will not necessarily apply uniformly throughout the country. To associate systematically all federal legislation with common law is to ignore the Constitution.
[9] I see no need to delve more deeply into the Respondent’s argument: it is clear that sections 8.1 and 8.2 of the Interpretation Act are, in the Respondent’s view, a complete answer.
The Court rejected the argument that there was ambiguity in the common law concept of gift and as a result it was necessary to resort to the clearer definition under the
Civil Code of Québec:
[17] The Appellant’s argument is premised on a principle that when there is confusion in the common law one can look to civil law. I have been provided no authority to suggest that. In any event, this is based on the Appellants’ perception that “gift”, while clearly defined in civil law, is ambiguous in common law. Again, with respect, I disagree with that notion. Simply because the common law system has no codified definition of gift, that does not mean the expression has not been clearly defined. There is a plethora of common law jurisprudence which has very clearly established what is required for a common law gift, most succinctly put in
The Queen v Friedberg, 92 DTC 6031 (FCA), which was adopted in the more recent case of
Maréchaux v R, 2010 FCA 287:
… a gift is a voluntary transfer of property owned by a donor to a donee, in return for which no benefit or consideration flows to the donor.
[18] There is no confusion. There is no ambiguity. There is no need to seek assistance from civil law jurisdictions, Québec or elsewhere, even if such a principle existed. Again, I see no argument to be made.
As a result the Crown’s motion to strike was allowed, with costs:
[26] A decision to strike an argument is never taken lightly. It should, as the law directs, only be in cases where it would be inefficient and futile to allow a matter to proceed. It would indeed be a waste of the Court’s, the Respondent’s and Appellants’ time, and would raise false hopes. Had I perceived a glimmer of a legal basis upon which to build an argument, I would have dismissed the motion. I have not seen that glimmer.
[27] The Motion is granted and the pertinent portions of the amended Notices of Appeal are struck. I award costs in a lump sum of $2,500, inclusive of disbursements, payable within 45 days of the final disposition of this Motion. By final disposition of this Motion, I mean the ultimate determination whether by this Court, the Federal Court of Appeal or the Supreme Court of Canada. The Respondent shall file the Reply within 30, 60 or 90 days as set out in Schedule A attached to these Reasons, again, the time period to run from the final disposition of this Motion, as just defined.