A-725-95
Vancouver, British Columbia, Monday, the 16th day of June, 1997
CORAM: THE HONOURABLE THE CHIEF JUSTICE
THE HONOURABLE MR. JUSTICE MARCEAU
THE HONOURABLE DARREL V. HEALD, DEPUTY JUDGE
Between:
BRUCE. E. CHAMBERS
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
Heard at Vancouver, B.C. on Monday, June 16, 1997
Reasons delivered from the Bench at Vancouver, B.C.
on June 16, 1997
REASONS FOR JUDGMENT: THE CHIEF JUSTICE
A-725-95
CORAM: THE HONOURABLE THE CHIEF JUSTICE
THE HONOURABLE MR. JUSTICE MARCEAU
THE HONOURABLE DARREL V. HEALD, DEPUTY JUDGE
Between:
BRUCE. E. CHAMBERS
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
(Delivered from the Bench at
Vancouver, B.C. on Monday, June 16, 1997)
THE CHIEF JUSTICE
This is an appeal from a judgment of the Federal Court of Canada dated 17 May, 1995, which dismissed the appellant's appeal from an assessment made under the Income Tax Act, ("the Act"), for the taxation year 1986.
We are all of the view that the appeal cannot succeed.
On 31 December, 1986, the appellant entered into a licensing agreement with West Coast Dart Digest Ltd. ("West Coast"), a magazine publisher, to distribute and to sell advertising for the magazine West Coast Activity (Tourist Edition) in South Burnaby, British Columbia, for a period of twenty years. For that right, the appellant paid to West Coast a licence fee of $100.00 and gave a promissory note, signed by him, for the sum of $25,000.00. The note became due in April, 1987. This latter instrument represented security for a guaranteed minimum royalty for the first year of the life of the licensing agreement.
In March, 1987, the appellant entered into an operating agreement with Helvetia Marketing Services Inc. ("Helvetia") pursuant to which the appellant sub-licensed Helvetia for a period of fifteen years to solicit advertising in the South Burnaby area. The advertising revenues were to be shared 61% to Helvetia and 39% to the appellant. As consideration for the agreement Helvetia issued a cheque for $20,000.00 to the appellant, as a performance bond. The appellant endorsed the cheque in favour of West Coast as part payment of its note of $25,000.00. West Coast in turn advanced the proceeds of the cheque from Helvetia to that company to be used as working capital. The two cheques were deposited at the same time.
In March, 1987, the appellant paid to West Coast, in cash, the sum of $5,000.00, being the balance payable on the promissory note.
It was a condition of the agreement between the appellant and Helvetia that the latter was not obliged to sell any advertising pursuant to the agreement until West Coast had sold 100 licences in Canada.
In 1986 and 1987, neither the appellant nor Helvetia sold any advertising or distributed West Coast Activity (Tourist Edition) in the South Burnaby area of British Columbia and the learned Tax Court Judge so found.
In his 1986 tax return the appellant claimed a business loss of $25,100 which, if it had been allowed, would have produced for the appellant a tax refund of $8,544.00.
At trial and again before us the appellant contended that when he entered into the licensing agreement with West Coast, he intended to carry on a business and had a reasonable expectation of profit and consequently, that the amount of $25,100 which he paid for the license was deductible as a business loss pursuant to paragraph 18(1)(a) of the Act.
The respondent, on the other hand, contended before the Tax Court Judge and before us that, on the evidence, the appellant carried on no business and had no reasonable expectation of profit. His intention was to obtain a business loss, as the Tax Court found.
After analyzing the relevant authorities, including the decision of this Court in Maloney et al. v. The Queen, 89 D.T.C. 5099, the Tax Court Judge found that the appellant had not carried on a business in the taxation year 1986, and that consequently he could not claim the sum of $25,100 as a business loss in that year. He therefore dismissed the appellant's appeal.
We are of the view that the Tax Court Judge was right both in principle and authority in reaching the conclusion that he did. Accordingly, we will dismiss the appeal with costs.
(Sgd.) "Julius A. Isaac"
C.J.
NAMES OF COUNSEL AND SOLICITORS OF RECORD
STYLE OF CAUSE:
BETWEEN:
BRUCE E. CHAMBERS
- and -
HER MAJESTY THE QUEEN
COURT NO.: A-725-95
PLACE OF HEARING: Vancouver, B.C.
DATE OF HEARING: June 16, 1996
REASONS FOR JUDGMENT
delivered from the Bench at Vancouver, B.C.
on Monday, June 16, 1996
APPEARANCES:
Mr. Bruce E. Chambers for appellant
Ms. Wendy M. Yoshida for respondent
SOLICITORS OF RECORD:
Mr. Bruce E. Chambers
New Westminster, B.C. for appellant
George Thomson for respondent
Deputy Attorney General of Canada