Date: 20021219
Docket: A-717-01
Neutral citation: 2002 FCA 520
CORAM: ROTHSTEIN J.A.
PELLETIER J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
JABIN INVESTMENTS LTD.
Respondent
Heard at Vancouver, British Columbia, on December 19, 2002.
Judgment delivered from the Bench at Vancouver, British Columbia, on December 19, 2002.
REASONS FOR JUDGMENT OF THE COURT BY: ROTHSTEIN J.A.
Date: 20021219
Docket: A-717-01
Neutral citation: 2002 FCA 520
CORAM: ROTHSTEIN J.A.
PELLETIER J.A.
MALONE J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
JABIN INVESTMENTS LTD.
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Vancouver, British Columbia,
on December 19, 2002)
ROTHSTEIN J.A.
[1] The only issue in this appeal from the decision of Judge Hamlyn of the Tax Court, under section 245 of the Income Tax Act, R.S.C. 1985 (5th Supp.) c. 1, as amended, (the "GARR"), is whether there is a clear and unambiguous policy that where a creditor would not attempt to collect a debt, although the debt remains legally enforceable, the debt is to be treated as if it was no longer legally enforceable and applied to reduce non-capital losses from prior years that would otherwise be deductible in computing a taxpayer's taxable income for subsequent years.
[2] The Minister argues that unless the debt is treated as if it is no longer legally enforceable, section 80 of the Income Tax Act (as it read prior to 1995), is misused. Judge Hamlyn dealt with this argument summarily. Where the creditor does not attempt collection but the debt continues to remain legally enforceable, the application of section 80 is avoided. Judge Hamlyn stated at paragraph 35:
Avoiding the application of a specific provision of the Act does not logically fall within the ambit of the word "misuse ". It is self-evident that if section 80 was not used it could not be misused.
We agree with his conclusion. If a provision of the Income Tax Act is not used it cannot be misused.
[3] In support of his argument that the policy of the Income Tax Act as a whole has been abused, the Minister relies on excerpts from the 1966 Carter Commission on Tax Reform. Judge Hamlyn dealt with the Carter Commission in his reasons. He expressed some doubt that the Carter Commission was an authoritative source from which to glean Parliament's policy because Parliament did not adopt "the sweeping changes proposed by the Carter Commission in 1966..." when it enacted significant amendments to the Income Tax Act in 1972. However, he found that even if the Carter Commission's recommendations were to be considered, he surmised that Carter intended that the Income Tax Act only deal with debts that were legally forgiven. The excerpts from the Carter Commission report which he cited in his reasons, and to which the Minister referred in his argument in this Court, support the conclusion of Judge Hamlyn.
[4] Before this Court , other provisions of the Income Tax Act were referred to by both the Minister and respondent, each in support of their interpretations of the policy that should govern this case. While these provisions seem to suggest that where debts are not treated as extinguished, Parliament generally provided for the eventuality of payment, we need not go so far as to determine the policy in this case. Because the policy invoked by the Minister is to override the words that Parliament has used, the policy must be clear and unambiguous if it is to be applied. (See OSFC Holdings Ltd. v. Her Majesty the Queen 2001 D.T.C 5471 at paragraph 69). We are not satisfied from the references given to us that there is a clear and unambiguous policy that debts that are not legally extinguished are to be treated as if they were.
[5] Judge Hamlyn made the important observation that a debt that is not legally extinguished could be collected in the future. The examples he has given are a change of control or the appointment of a receiver of the creditor company. In either case, it appears to us that a legally enforceable debt could be enforced even though those currently in control of the creditor company would not attempt to collect the debt.
[6] We are in agreement with the reasons of Judge Hamlyn and with his conclusion. We
will dismiss the appeal with costs.
"Marshall Rothstein"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-717-01
STYLE OF CAUSE: Her Majesty the Queen v. Jabin Investments Ltd.
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: December 19, 2002
OF THE COURT: (ROTHSTEIN, PELLETIER, MALONE JJ.A.)
RENDERED FROM THE
BENCH BY: ROTHSTEIN J.A.
APPEARANCES:
Mr. L.P. Chambers, Q.C. FOR APPELLANT
Mr. Robert Carvalho
Mr. Eric Douglas
Mr. Warren Mitchell, Q.C. FOR RESPONDENT
Mr. Douglas Mathew
Mr. Terry Gill
SOLICITORS OF RECORD:
Morris Rosenberg FOR APPELLANTS
Deputy Attorney General of Canada
Thorsteinssons FOR RESPONDENT
Vancouver, BC