Docket: A-491-15
Citation:
2016 FCA 304
|
CORAM:
|
NOËL C.J.
TRUDEL J.A.
BOIVIN J.A.
|
|
BETWEEN:
|
|
BAREJO HOLDINGS
ULC
|
|
Appellant
|
|
and
|
|
HER MAJESTY THE
QUEEN
|
|
Respondent
|
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Montréal, Quebec, on
November 29, 2016).
NOËL C.J.
[1]
These are consolidated appeals brought by Barejo
Holdings ULC (the appellant) from two orders of the Tax Court of Canada (2015
TCC 274) wherein Boyle J. (the Tax Court judge) made a pre-hearing
determination of the following question of mixed fact and law, the application
for which had been previously granted by him pursuant to Rule 58 of the Tax
Court of Canada Rules (General Procedure), S.O.R./90-688a:
Whether the two [Notes] held by [St.
Lawrence Trading], a non-resident entity, constitute debt for the purposes of
the [Income Tax Act, R.S.C., 1985, c. 1 (5th Supp.) (the Act)]? (the
Rule 58 Question)
[2]
The Tax Court judge answered the Rule 58
Question in the affirmative.
[3]
Four weeks prior to the hearing of the appeal,
the Court issued the following direction:
Direction
The parties are asked to provide written
submissions as to why these consolidated appeals should not be dismissed on the
basis that disposing of them would resolve nothing and give rise to an improper
use of judicial resources.
The underlying issue in the appeal before
the Tax Court turns on the meaning of the word “debt” as it appears in section 94.1
of the Act. In response to the broad question submitted to him jointly by the
parties, − i.e.: whether the two [Notes] in issue at trial “constitute debt
for the purposes of the Income Tax Act” − the Tax Court judge
identified “the core essential characteristics of debt generally for purposes
of the Act” (Reasons, para. 129) and determined that the two [Notes] were
debt within that description. This affirmative answer is the subject matter of
the appeal before this Court, the appellant challenging it and the respondent
supporting it.
Subject to the submissions of the parties on
this point, it does not appear as though the answer to the question asked will
resolve anything in the context of the underlying appeal which turns on the
meaning of the word “debt” in section 94.1 of the Act. A related difficulty is
that there would appear to be no statutory criteria against which the
correctness of the opinion expressed by the Tax Court judge can be assessed as
no legal consequence attaches under the Act to an instrument found to be a debt
“for the purpose of the act as a whole” (Reasons, para. 132).
The parties have attempted to overcome this
difficulty by asserting that “[i]t is common ground that…there is no special
meaning to the word ‘debt’ in section 94.1” (Memorandum of the appellant, para.
25), thereby suggesting that the general meaning ascribed by the Tax Court
judge to the word “debt” coincides with the meaning of that word in subsection
94.1. Again, subject to the parties’ submissions, this reading seems
problematic as the Tax Court judge has expressly provided that his opinion
cannot be read as applying to the word “debt” as it appears in section 94.1 or
for that matter in any other section of the Act (Reasons, paras. 5 to 13 and
132).
The parties are asked to provide written
submissions not exceeding five (5) pages in each case on or before November 15,
2016 and to address the issue orally at the beginning of the hearing, on
November [29], 2016.
[4]
In conformity with this last paragraph, joint
submissions were received on November 15, 2016 and the parties were given the
opportunity to address the issue raised in the direction orally at the
beginning of the hearing, on November 29, 2016.
[5]
In their submissions, the parties attempt to
explain as best they can why the Rule 58 Question was framed in the broad terms
that it was (Joint Submissions, paras. 10 and 18). However, nothing that they
say takes away from the fact that the problem now confronting them would not
have arisen had they framed the question by reference to the provisions of the
Act that were in issue in the underlying appeals.
[6]
As the Tax Court judge indicates at the
beginning of his reasons, the meaning of the words “debt
obligations” for purposes of subsection 95(1) and “debt” under section 94.1 were initially at issue.
However, prior to the Rule 58 hearing, he was advised that the only issue which
remained live as between the parties was the meaning of the word “debt” in section 94.1 of the Act (Reasons, para. 4).
[7]
The Tax Court judge understood from the broad
question which had been jointly submitted to him by the parties that he was to
devise a general opinion about the meaning of the word “debt”
for purposes of the Act generally. He further understood that he was not
to opine on the meaning of the word “debt” as it
appears in the provisions at play in the underlying appeals (Reasons, paras. 5,
7, 11, 13, 132, and footnote 25). That is the context in which he concluded
that the two Notes in issue at trial constitute debt “for
the purpose of the Act as a whole” (Reasons, para. 132), or “for the purposes of the Income Tax Act” (Reasons,
para. 134).
[8]
As indicated in the above direction, it does not
appear as though the general answer given by the Tax Court judge will resolve
anything in the context of the underlying appeal which, as noted, turns on the
meaning of the word “debt” as it appears in
section 94.1 of the Act.
[9]
In responding to the direction, the parties
assert that the legal and factual context makes it clear that the Tax Court
judge was being asked to determine whether the Notes were “debt” for purposes of 94.1 (Joint Submissions, para.
19). They go on to suggest that the general opinion given by the Tax Court
judge identifies the “ordinary meaning” of the
word “debt” and that the word “debt” as it is used in section 94.1 is intended to be
given its “ordinary meaning” (Joint Submissions,
para. 20).
[10]
The difficulty is that the Tax Court judge did
not understand that he was to give an opinion as to the meaning of the word “debt” in section 94.1 and that, as a result, his
answer cannot be read as addressing this question.
[11]
The issue in an appeal from an order answering a
Rule 58 question is whether the answer can withstand appellate scrutiny. In
making this determination, this Court must consider the answer that was given
to the question asked as it is the answer that is under appeal. In the present
case, the answer given by the Tax Court judge, whether read on its own or with
the reasons given in support of it, leave no doubt about the fact that he makes
no pronouncement on the meaning of the word “debt”
in section 94.1. It is therefore not possible to review his opinion as if he
had, as the parties invite us to do (Joint Submissions, para. 20).
[12]
The parties insist that they did not intend the
Tax Court judge to give an academic opinion (Joint Submissions, para. 19). No
doubt that is so. However, they do not confront the fact that the broad answer
which he gave was responsive to the question asked. In this respect, the
reasons make it clear that the Tax Court judge assumed that the question had
been drafted as it was for a reason and that some usefulness could be derived
from the general answer which it called for (Reasons, para. 2):
This question was referred to the Court by
joint application of the parties. The parties were each of the view that the
determination of this question prior to a full hearing and trial could dispose
of all or part of their dispute, or result in a substantially shorter hearing
or in a substantial savings of costs.
[13]
As it turns out however, the parties have been
unable to identify what that usefulness might be.
[14]
The end result is that nothing in the underlying
appeals turns on whether the Tax Court judge was right or wrong in holding that
the two Notes in issue were debt for the purposes of the Act as a whole.
[15]
It follows that endeavouring to dispose the
appeals on the merits would serve no useful purpose and give rise to an
improper use of judicial resources.
[16]
At the end of his oral submissions, counsel for
the appellant asked that we amend the question so as to refer to section 94.1,
and provide the appropriate answer.
[17]
As indicated in open court, only the Tax Court
has the jurisdiction to answer a Rule 58 question at first instance, the
jurisdiction of this Court being limited to the appellate review of the answer
given by the Tax Court.
[18]
For these reasons, these appeals are dismissed,
the parties assuming their respective costs.
"Marc Noël"
Email this Content