Date: 20030912
Docket: A-539-02
Citation: 2003 FCA 332
CORAM: LÉTOURNEAU J.A.
NADONJ.A.
PELLETIERJ.A.
BETWEEN:
CLAUDE BOULANGER
Appellant
and
HMQ - CANADA
Respondent
Hearing held at Ottawa, Ontario, on September 9, 2003.
Judgment delivered at Ottawa, Ontario, on September 12, 2003.
REASONS FOR JUDGMENT: LÉTOURNEAU J.A.
CONCURRED IN BY: NADON J.A.
PELLETIER J.A.
Date: 20030912
Docket: A-539-02
Citation: 2003 FCA 332
CORAM: LÉTOURNEAU J.A.
NADONJ.A.
PELLETIERJ.A.
BETWEEN:
CLAUDE BOULANGER
Appellant
and
HMQ - CANADA
Respondent
REASONS FOR JUDGMENT
LÉTOURNEAUJ.A
[1] The Court has before it two appeals involving the same facts and issues (docket A-539-02, Boulanger and A-540-02, Dufour). Both appellants are attorneys and represented themselves. A single argument was made by Mr. Boulanger for both cases.
Facts and proceedings
[2] The appellants are challenging a decision by Her Honour Judge Lamarre of the Tax Court of Canada (TCC) refusing the deduction of their capital loss as an allowable business investment loss under paragraph 39(1)(c) of the Income Tax Act, R.S.C. 1985, c. 1 (Act), as amended. Lamarre J. found that the Corporation, in which the appellants were shareholders through their management companies, was not operating a small business within the 12 months preceding the disposition in 1996 of their shares of a claim against the Corporation. Under section 248 of the Act, a "small business corporation," is a Canadian-controlled private corporation all or substantially all of the fair market value of the assets of which are attributable to assets that were, in this case, used principally in an active business carried on primarily in Canada [emphasis added].
Appellants' submissions
[3] The appellants claim that the TCC applied an incorrect test in determining what constitutes an active business under the Act. They submit that the TCC emphasized the requirement of an operational business structure, thereby rejecting all the endeavours and business activities of the Corporation that were consistent with carrying on an active business. In doing so, they submit, the TCC made an error in law warranting our intervention. It gave "active business" an overly restrictive interpretation, which defeats Parliament's intention to encourage Canadians to invest in small businesses.
Analysis of the TCC decision
[4] The Act does not define the concept of an "active business." Determining the requirements applicable to the definition of this concept is a question of law. But the application of the definition itself to the facts of the case is a mixed question of fact and law: Hudon v. Canada, 2001 FCA 320, at paragraph 43.
[5] The substance of the concept of carrying on an active business is itself somewhat elusive. As our colleague Madam Justice Desjardins stated in Hudon, supra at paragraph 62, at one end of the spectrum there are businesses which have not begun operations and at the other there are dormant businesses, while in between there are many activities "which are signs that a company is operating and which should fall within the spectrum of the concept of carrying on business, even though, for example, the activities are carried on for the purpose of reaching an agreement which eventually is not reached or even though they do not result in the earning of income." It follows from this assertion that each case should be examined on its individual merits and factual circumstances. This, in my humble opinion, was the exercise engaged in by the TCC.
[6] The lack of organizational structure in the appellants' business was not the sole evidence considered by the TCC to demonstrate the absence of carrying on an active business. The Court examined certain key indicia of an active business. The Court concluded that during the period in question, "the Corporation was unable to conduct any major transaction with respect to the type of business it was supposed to carry on": TCC decision, at paragraph 34. Further, it was of the opinion that the Corporation did not have any employees and had not done any market research or cost benefit analysis. These findings are supported by the evidence.
[7] Added to these findings is the fact that in 1994 and 1995 the Corporation derived no income from the allegedly active business, while in 1993 it reported only a modest income from property. Certainly, as this Court stated in Hudon, supra, the absence of business income is not in itself determinative, but it is not without relevance, either. In the present context and in light of the background and evolution of the Corporation, the TCC was justified in considering this additional factor.
[8] Finally, and in my opinion this is determinative, the record discloses that at the time of disposition by the appellants in 1996, the Corporation's only assets since 1992 had consisted of a portion of a vacant lot and the residual balance from the selling price of close to half the property originally intended for the operation of the business. It is difficult to understand how these two assets, especially the one consisting of the balance of the selling price, satisfy the definition in section 248 of the Act as assets the market value of which is attributable to assets that are used in an active business carried on in Canada.
[9] With respect, I do not believe that the TCC was mistaken in its factual and legal analysis of the appellants' situation or that our interference with their findings is warranted. I would dismiss the appeal without costs in both this case and docket A-540-02. A copy of these reasons will be filed in docket A-540-02 to have effect as reasons in support of the judgment rendered.
"Gilles Létourneau"
J.A
"I concur.
M. Nadon, J.A."
"I concur.
J.D. Denis Pelletier, J.A."
Certified true translation
Kelley A. Harvey, BA, BCL, LLB
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
DOCKET: A-539-02
STYLE OF CAUSE: Claude Boulanger v. HMQ-Canada
PLACE OF HEARING: Ottawa
DATE OF HEARING: September 9, 2003
REASONS FOR JUDGMENT: LÉTOURNEAU J.A.
CONCURRED IN BY: NADON J.A.
PELLETIER J.A.
DATE OF REASONS: September 12, 2003
APPEARANCES:
|
Claude Boulanger |
FOR THE APPELLANT
|
|
Carole Benoit Marlyse Dumel |
FOR THE RESPONDENT
|
SOLICITORS OF RECORD:
|
Claude Boulanger Hull, Quebec
|
FOR THE APPELLANT |
|
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Ontario |
FOR THE RESPONDENT
|
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
DOCKET: A-540-02
STYLE OF CAUSE: Pierre Dufour v. HMQ-Canada
PLACE OF HEARING: Ottawa
DATE OF HEARING: September 9, 2003
REASONS FOR JUDGMENT: LÉTOURNEAU J.A.
CONCURRED IN BY: NADON J.A.
PELLETIER J.A.
DATE OF REASONS: September 12, 2003
APPEARANCES:
Claude Boulanger FOR THE APPELLANT
Carole Benoit
Marlyse Dumel FOR THE RESPONDENT
SOLICITORS OF RECORD:
Claude Boulanger
Hull, Quebec
FOR THE APPELLANT
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Ontario FOR THE RESPONDENT
Date: 20030912
Docket: A-539-02
Ottawa, Ontario, September 12, 2003
CORAM: LÉTOURNEAU J.A.
NADON J.A.
PELLETIER J.A.
BETWEEN:
CLAUDE BOULANGER
Appellant
and
HMQ - CANADA
Respondent
JUDGMENT
The appeal is dismissed without costs.
"Gilles Létourneau"
J.A
Certified true translation
Kelley A. Harvey, BA, BCL, LLB
Date: 20030912
Docket: A-540-02
Ottawa, Ontario, September 12, 2003
CORAM: LÉTOURNEAU J.A.
NADON J.A.
PELLETIER J.A.
BETWEEN:
PIERRE DUFOUR
Appellant
and
HMQ - CANADA
Respondent
JUDGMENT
The appeal is dismissed without costs.
"Gilles Létourneau"
J.A
Certified true translation
Kelley A. Harvey, BA, BCL, LLB