Date: 20110303
Dockets: A-117-10
A-118-10
A-119-10
A-120-10
A-121-10
A-122-10
Citation: 2011 FCA 82
CORAM: EVANS
J.A.
DAWSON J.A.
LAYDEN-STEVENSON
J.A.
Docket: A-117-10
BETWEEN:
GERALD BALLARD
Appellant
and
HER MAJESTY THE QUEEN
Respondent
Docket: A-118-10
BETWEEN:
IRIS HIEBERT
Appellant
and
HER MAJESTY THE QUEEN
Respondent
Docket: A-119-10
BETWEEN:
TITAN CONSTRUCTION
CONTRACTORS LTD.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
Docket: A-120-10
BETWEEN:
MONICA NEVILLE
Appellant
and
HER MAJESTY THE QUEEN
Respondent
Docket: A-121-10
BETWEEN:
RICHARD COLEMAN
Appellant
and
HER MAJESTY THE QUEEN
Respondent
Docket: A-122-10
BETWEEN:
DAVID W. HARDER
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
EVANS J.A.
[1]
These are
consolidated appeals from a decision of the Tax Court of Canada (2010 TCC 109),
in which Justice Campbell Miller (Judge) dismissed the Appellants’ appeals from
their reassessments for their 2002 taxation year. These reasons apply to all the
appeals and a copy will be inserted in each file.
[2]
The Judge
held that the Appellants were not entitled to claim as charitable tax credits money
which they had “donated” to a charitable organization, the National Foundation
for Christian Leadership (NFCL). The “donations” had been solicited by their
children or, in the case of Mr Ballard, a grandchild, who were enrolled as
students at Trinity Western University (TWU). I use quotation marks around the
words “gifts”, “donations” and “donors”, instead of the adjectives actual or
purported.
[3]
Under the
program administered by NFCL, nearly all students who solicited “donations”
received bursaries for the expenses related to their education at TWU or at
other Christian post-secondary institutions in an amount equal to approximately
80% of the lesser of students’ eligible expenses and the funds that they had
solicited. Some students were awarded scholarships equal to 100% of the lesser
of their eligible expenses and the “donations” to NFCL that they had solicited.
The value of a student’s bursary or scholarship could not exceed the amount of
the solicited “donations”.
[4]
Although a
“donation” could not be earmarked by a “donor” for a particular student, the
Judge found on the basis of NFCL’s pamphlets that the Appellants either knew or
ought to have known that, if they made a “donation” to NFCL, their children and
grandchild would receive a bursary or scholarship that would defray the
expenses of their education at TWU.
[5]
The Judge
held that a gift is a gratuitous transfer of property owned by the donor in
return for which no benefit flows to the donor: The Queen v. Friedberg, 92
DTC 6031, 6032 (F.C.A.). He applied a multi-factor test to determine whether
the strength of the link between any benefit to the Appellants and their
“donations” was sufficiently strong to disqualify their “donations” from being
“gifts” for the purpose of subsections 110.1(1) and 118.1(3) of the Income
Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (Act). He concluded that it was. The
Minister had allowed charitable gift tax credits for the relatively modest
general, unsolicited donations made to NFCL by some of the Appellants.
[6]
Counsel
for the Appellants agreed that the Judge had correctly selected and formulated
the legal definition of a gift for this purpose, but had erred in applying it
to the facts. In the absence of a readily extricable question of law, this
Court may only interfere with the Judge’s application of the law to the facts
(a question of mixed fact and law) if satisfied that the Judge committed a
palpable and overriding error: Housen v.Nikolaisen, 2002 SCC 33, [2002]
2 S.C.R. 235.
[7]
Counsel
advanced three principal arguments in support of the appeals.
[8]
First,
since the Appellants were not found to be legally obliged to pay for their
children’s post-secondary education, they received no benefit from the
“donation”. I do not agree. I see no reason in principle why “benefit” in this
context should be so narrowly conceived. Nothing in the case law requires it.
[9]
On the
basis of the evidence before him, the Judge found as a fact, and the Appellants
have not challenged it, that the Appellants either regarded it as their
parental or grandparental responsibility to pay for their children’s or
grandson’s Christian post-secondary education, or did in fact financially
support them. He concluded that the Appellants received a material benefit to
the extent that their “donations” to NFCL effectively relieved them from paying
the educational expenses at TWU of their children and grandson.
[10]
It is irrelevant
in this context that the students also benefited by receiving bursaries and
scholarships from TWU as a result of the donations to NFCL that they had
solicited, and that the awards were taxable as income of the students.
[11]
Second,
counsel argued that the Judge made a palpable and overriding error when he
found as a fact (at para. 51) that there was “no uncertainty” that the
Appellants’ children and grandson would receive an 80% bursary, although there
was, he concluded, some uncertainty about their receipt of a 100% scholarship.
[12]
Counsel for
the Appellants pointed out that, in fact, 5-10% of students who solicited funds
from “donors” either did not receive a bursary or had to repay it to NFCL because
they failed to meet the eligibility criteria prescribed by NFCL. For example,
some students did not enrol at TWU or another Christian post-secondary
education, some did not take a full course load, while others did not maintain
the requisite grade point average. About one third of the students who solicited
funds did not receive a 100% scholarship. When students failed to qualify for
or to retain a bursary, the “donations” that they had solicited were not
returned by NFCL to “donors”.
[13]
While not
entirely accurate, the Judge’s statement that there was “no uncertainty” with
regard to the students’ receipt of a bursary does not, in our opinion,
constitute a palpable and overriding error that vitiates the Judge’s ultimate
conclusion. For one thing, he found on the facts before him that the Appellants
knew that the students met the grade point average and course load requirements
to qualify for bursaries, and none had had to repay their bursary to NFC.
Hence, there was no uncertainty in fact about their receipt of a bursary.
[14]
Further,
it is clear from the Judge’s discussion of the scholarships (at para. 52) that he
did not regard the existence of an element of uncertainty as necessarily
sufficient to find, for the purpose of determining the strength of the link
between a benefit to the Appellants’ and their “donations”, that the
Appellants had no expectation or anticipation of benefit from their “donation”.
It was, he said, “a question of degree, a matter of balancing the factors.” A
priori, the same must apply to the much smaller possibility that a student who
solicited a “donation” to NFCL would not receive or retain a bursary.
[15]
Third, the
Judge did not deal with the funds “donated” to NFCL by the Appellants that were
solicited by students other than their children or grandson. Thus, Mr Coleman
caused the Appellant Titan Construction Contractors Ltd. (Titan) to “donate”
$2,500 solicited by Carla Ohman, the daughter of his cousin, while the other
Appellants, except Ms Neville, “donated” smaller amounts to NFCL solicited by
students who were family friends.
[16]
Since the
Minister allowed a charitable deduction with respect to the donation solicited
from Titan by Ms Ohman, because reassessment was statute-barred, it is not
necessary for us to say more about it.
[17]
It would
have been preferable for the Judge to have dealt expressly with the “donations”
solicited by family friends. However, despite the absence of a finding of fact
by the Judge, we are satisfied that, with the possible exception of a $25
donation by Ms Hiebert solicited by Cheryl Doerksen, the “donors” of money to
NFCL solicited by family friends received a benefit from them.
[18]
It appears
from the Judge’s statement of the facts that the family friends’ donations were
reciprocal, in the sense that a “donation” by the parent of student A
solicited by student B was matched by a donation by the parent of
student B solicited by student A. This enabled the students to
enhance their chances of receiving a scholarship by increasing the number of
“donors” from whom they had solicited funds.
[19]
In
addition, counsel also questioned the propriety of the Judge’s holding that, if
the “donations” by Titan that had been solicited by Mr Coleman’s son were not
charitable gifts, Titan’s donation was a taxable benefit to Mr Coleman by
virtue of subsection 246(1) of the Act. Counsel had conceded this point in the
Tax Court. Titan Holdings Ltd. is the sole shareholder of Titan, and Mr Coleman
owns 51% of Titan Holdings’ shares. He is a director of both companies, and
president of Titan.
[20]
Before
this Court, counsel for the Appellants made two arguments that are particular
to Titan. First, he said, Titan could not be said to have received any benefit
from its “donation” to NFCL. I disagree. By virtue of his shareholdings and
positions in the corporations, Mr Coleman could direct Titan to make the
payment to NFCL. Titan thereby, in effect, stepped into his shoes by relieving
him from paying his son’s educational expenses. In my view, this suffices to
ascribe a benefit to Titan from its “donation”.
[21]
Second,
counsel said that, if Titan’s “donation” were not found to be a gift to NFCL,
it would be treated as a taxable benefit to Mr Coleman under subsection 246(1).
This, he said, would lead to double taxation, because the bursary awarded to Mr
Coleman’s son was taxable in his hands.
[22]
For
reasons already given, I do not agree with the argument that the Appellants
cannot be said to have received a benefit from their “donations” to NFCL
because the student-recipients benefited from the bursaries and were liable to
pay income tax on them, depending on their other income.
[23]
Moreover,
in view of counsel’s concession in the Tax Court, it is not open to him to now
argue that the application of subsection 246(1) warrants treating Mr Coleman
differently from the other Appellants merely because he chose to make his
“donation” through a corporation that he controlled.
[24]
To
conclude, the Appellants have not demonstrated that the Judge committed any
palpable and overriding error on a question of either fact or mixed fact and
law. For all the reasons given above, the appeals will be dismissed with costs.
“John
M. Evans”
“I
agree
Eleanor
R. Dawson J.A.”
“I
agree
Carolyn
Layden-Stevenson J.A.”
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