Date: 19980818
Docket: 97-739-IT-G
BETWEEN:
FRED TURNER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
O'Connor, J.T.C.C.
[1] This appeal was heard at Yellowknife, Northwest Territories on August 4, 1998. The Appellant represented himself and he was the only witness.
[2] The issue is whether the Appellant is entitled to an allowable business investment loss in the 1994 year pursuant to section 50 of the Income Tax Act ("Act").
[3] I find the principal facts to be as follows:
1. The Appellant was the principal owner of Turn-Air Ltd. ("Turn-Air");
2. At all relevant times, Turn-Air operated a charter commercial air service from a base at Yellowknife pursuant to a license originally issued by the Canadian Transport Commission ("CTC") on December 10, 1980;
3. That license was cancelled on April 4, 1984 by the CTC for failure on the part of Turn-Air to submit certain documents which had been previously demanded; as detailed below, the Appellant objected to this cancellation and sought compensation from the Federal Government.
4. The Appellant in 1987 made a submission to the House of Commons Standing Committee on Transport in relation to proposed Bill C-18, the National Transportation Act. The purpose of the submission was to persuade the Committee to include in that Bill an appeal procedure with respect to certain matters including cancelled licenses. The Appellant filed his submission as Exhibit A-1. It reads in part as follows:
My story is a horror of government regulation and interference. For that reason, I am anxious to share with you details of my financial ruin in the hopes that you can assist me in receiving compensation from the government but, also, so that provisions may be put in Bill C-18 that will protect the next victim of federal bureaucracy.
The package I have given the committee includes various documents that will show you how unresponsive the present bureaucracy is to transporters as well as how unresponsive government can be. I urge you to review these documents and ask yourselves if you could perhaps supply a more direct route to appeal than I have been forced to take.
TurnAir employed ten people and operated five aircraft in a charter operation. On April 4, 1984, my small but growing airline was forced out of business by the Canadian Transportation Commission.
Mr. Chairman, this Committee has heard from witnesses who have been critical of the lack of enforcement in safety matters and you have heard witnesses call for increased numbers of safety inspectors. Therefore, Mr. Chairman, you will be amazed, that the CTC had the resources to hunt me down and to cancel my license because my company had not filed statistical data documents on time. My license was not cancelled because my company was not safe or did not supply proper service but because the Ottawa bureaucrats did not know how many passengers I carried and how much fuel I used.
The documents requested by the CTC were in the hands of the R.C.M. Police who were investigating a matter not relating to my company or myself. Though I feel I have a defence in the issue of these documents, no appeal procedure existed and I went out of business.
To add insult to injury, Cabinet later returned my license and allowed me to continue operating. By that time however, I had lost everything and did not have the ability to operate.
Bill C-18 must exclude information gathering from the new regulatory agency's mandate or, at the least, remove their authority to set their own penalties for non-safety and non-operational offenses. Even if I was guilty of this offense, which I believe I am not, how can one justify such harsh action as this? Mr. Chairman, I urge the Committee to investigate a method of putting a remedy into this Bill.
5. An Order in Council of the Privy Council dated March 28, 1986 authorized a payment to the Appellant of $15,000 in compensation for the loss of the license and the business.
6. Various Members of Parliament wrote letters pointing out the injustice of the cancellation of the license and suggesting a much larger compensation package. One example of this is a letter to the Right Honourable Brian Mulroney, P.C., M.P., in the spring of 1987 signed by 11 Members of Parliament and 1 senator urging a fairer deal for the Appellant.
7. The CTC apparently recognized that it acted irregularly in the cancellation of the license and a new license was granted to Turn-Air on July 25, 1985, but as the Appellant said in the above cited submission "By that time however, I had lost everything and did not have the ability to operate".
8. The media also went to great lengths to cronologue the apparent injustice and misfortune that befell the Appellant as a result of the cancellation. The media further ridiculed the "pitiful" compensation offer of $15,000. An illustration of this is the following excerpt from an article by Frank Howard which appeared in the Ottawa Citizen on April 14, 1987:
Turner has sought redress for the loss of his five planes and his credit working out of Yellowknife for three years. The best that cabinet has come up with to date is a return of his licence, one year too late, and an offer of $15,000 compensation.
Turner, broke and facing foreclosure on his home, has exhausted all avenues of appeal available in the Northwest Territories.
With the help of an airline ticket paid by the government leader in the NWT legislature, he came to Ottawa more than a month ago.
Since then he has been camping out in the houses of friends and the offices of friendly politicians from all parties.
On April 8 he got to see Kilgour, who subsequently wrote this letter to Crosbie:
"The above (Turner) and Ken Swelgard, an Alberta resident, came to see me today. Among their major points were the following:
"(1) He (Turner) has a wife and four children and he is an active and solid member of the Yellowknife community. He is, for example, president of the Full Gospel Businessmen's group in Yellowknife and a leader in his church.
"(2) The ex gratia of $15,000 is only adequate to pay for "coffin for Turn-Air Ltd." Why can the government fund a substantial sum for an East Coast fisherman whose boat was wrongly sunk and effectively nothing for his (Turner's) losses.
"(3) The Canadian Transport Commission in April, 1984, cancelled his licence because he failed to provide some statistics (having nothing to do with safety issues) yet the RCMP had seized the documents in issue eight months earlier. By the time new licences were provided, he'd lost his 10 employees, land, five airplanes, customers, personal credit cards and even the ownership of his home was under attack by creditors. He'd paid $75,000 to obtain the original licences from their previous owner and invested another several hundred thousand in the air line.
"(4) Among the people with whom he's spoken and who have indicated support were Dave Nickerson and Gerry St. Germain. Our colleague, Don Mazankowski, at one point while Minister he says offered to appoint an independent arbitrator to propose a fair damages settlement for the matter. The government of the Northwest Territories is fully supportive of his position and has brought his air ticket to come to Ottawa. The aboriginal communities are also fully supportive.
"In short, Mr. Turner now seeks only to have a reputable person appointed quickly to arbitrate fair damages. Time is of the essence to him because of his financial position."
9. The Appellant and Turn-Air also filed a Statement of Claim in the Federal Court Trial Division on April 3, 1986. The gist of this is contained in the following paragraphs of the Statement of Claim:
6. The Plaintiffs state and the fact is that Turn-Air was unable, for reasons beyond its control, to provide the required information to the Air Transport Committee due to the fact that its records, necessary to collate the information required, were seized by the Royal Canadian Mounted Police as part of their investigations into the activities of another air carrier, a fact of which the Air Transport Committee was or should have been aware.
7. The Plaintiffs state that the cancellation of the said licence was wrongful and inequitous and made in breach of the obligations of the Air Transport Committee to act in accordance with the principles of natural justice.
8. As a result of the cancellation of the said licence, Turn-Air has lost its business capacity, including loss of assets, (airplanes, equipment and land) as a result of foreclosure by creditors, loss of credit rating, loss of business profits and loss of goodwill. The said company has been totally inactive since the cancellation of its licence due to its inability to operate its business.
9. As a result of the inability of Turn-Air to operate, Turner has suffered damages due to his personal obligations a a guarantor of Turn-Air's debts. Turner has, among other things, incurred the loss of his residence due to foreclosure proceedings, lost his credit rating, and has been subjected to a series of legal proceedings at the instance of creditors of Turn-Air.
10. The Plaintiffs state that the damages suffered by Turn-Air and Turner, which damages are continuing, are the direct result of the wrongful cancellation of the said licence by the Air Tranport Committee, actions for which the Minister of Transport is directly responsible.
11. Turn-Air undertook various appeal proceedings with respect to its licence cancellation with the result that, by Order-in-Council 1985-1809, dated the 30th day of May, 1985, the cancellation order was amended whereby Turn-Air's licence was deemed to have only been suspended for a period of one (1) year and the said licence was, on the 26th day of July, 1985, reinstated to Turn-Air.
12. Notwithstanding the reinstatement of the said licence, the Minister of Transport has failed to compensate Turn-Air or Turner for the damages suffered by them, which damages are continuing, arising from the shutdown of business caused by the original licence cancellation.
CLAIM
The Plaintiffs claim as follows:
(a) damages in the sum of $2,000,000.00;
(b) interest on the amount of any judgment from the 4th day of April, 1984, to the date of judgment;
(c) costs of this action; and,
(d) such further and other relief as to this Honourable Court seems just.
10. The Appellant continued his battle with the government but in 1994 he reluctantly accepted the settlement offer of $15,000. He and Turn-Air signed a general release on June 6, 1994 releasing the Government of Canada from all claims related to the foregoing including the Statement of Claim filed in the Federal Court.
11. On December 22, 1994, a Notice of Intent to Dissolve was issued by Industry Canada to Turn-Air because the corporation had not filed annual returns for 1992, 1993 and 1994 and Turn-Air was dissolved pursuant to that notice.
12. It is clear from the evidence, including in particular the said Statement of Claim, and many other documents that the business of Turn-Air ceased in 1984 after the cancellation of the license however Turn-Air continued to exist legally until the end of 1994.
POSITION OF THE APPELLANT:
[4] The Appellant claims that he suffered the loss in question which according to the Appellant's Income Tax Return for 1994, amounts to $68,599, the allowable portion of which (ABIL) is $51,449.25. The $68,599 is made up of $55,099 being the alleged value of the shares and $13,500 claimed as a debt owing to the Appellant. He states that Turn-Air continued in existence until 1994 and it was only in 1994 that he finally settled his claim against the government in taking the $15,000 settlement. He argues that it was only then that he could evaluate his loss and thus the loss was incurred in 1994 and not earlier. The Appellant also raised a treaty issue but in my opinion that issue was not properly before the Court.
POSITION OF THE RESPONDENT:
[5] The Respondent claims that the loss was not incurred in 1994 and most probably was incurred in 1984 when the license was cancelled and the business ceased. The Respondent also argues that there has been no proof of the adjusted cost base of the debt and shares, in other words, the Respondent points out that even if the loss had occurred in 1994 which is contested, the loss would be nil as Turn-Air had no value in 1994.
ANALYSIS:
[6] In my opinion, it is quite obvious that the loss did not occur in 1994 and most likely occurred in 1984 because that is the year in which the license was cancelled and the operations of Turn-Air ceased. The Appellant himself in his submission to the Standing Committee and in his Statement of Claim acknowledges this. Moreover, as contended by counsel for the Respondent even if the loss can be considered (because of the continued existence of the corporation notwithstanding no operations) to have occurred in 1994 the loss would be nil since there was no proof to establish the amount of the loss. One of the assumptions of the Minister in the Reply is that the value was nil. This assumption was not rebutted and therefore must be presumed to be true.
[7] For the above reasons, the appeal is dismissed.
Signed at Ottawa, Canada this 18th day of August, 1998.
"T.P. O'Connor"
J.T.C.C.