Coast Capital Savings Credit Union v. British Columbia, (2011) 298 B.C.A.C. 268 (CA)

• Judge: Ryan, Newbury and Hinkson, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: November 24, 2010
• Jurisdiction: British Columbia
• Citations: (2011), 298 B.C.A.C. 268 (CA);2011 BCCA 20

Coast Capital Savings v. B.C. (2011), 298 B.C.A.C. 268 (CA);

    505 W.A.C. 268

MLB headnote and full text

Temp. Cite: [2011] B.C.A.C. TBEd. JA.017

Coast Capital Savings Credit Union (respondent/petitioner) v. Her Majesty The Queen in Right of the Province of British Columbia (appellant/respondent)

(CA037833; 2011 BCCA 20)

Indexed As: Coast Capital Savings Credit Union v. British Columbia

British Columbia Court of Appeal

Ryan, Newbury and Hinkson, JJ.A.

January 24, 2011.

Summary:

A credit union issued "Class C Shares" under the Credit Union Incorporation Act (B.C.) as "equity shares" under the Act to raise working capital. On the advice of its accountants, it did not include the shares in its paid up capital stock under s. 7 of the Corporation Capital Tax Act (CCTA) when it filed its CCTA tax returns for 2003-2006 because it believed them to be non- equity shares. Section 7 required a financial institution to include all of its paid up capital in its capital stock for taxation purposes, except for non-equity shares as defined by the Financial Institutions Act. The credit union received Notices of Revised Assessment for the taxation years 2003-2006. The reassessments changed the credit union's characterization of the shares from non-equity shares to equity shares and therefore taxable under the CCTA. The credit union appealed. The Minister of Small Business and Revenue dismissed the appeal and affirmed the reassessments. The credit union appealed.

The British Columbia Supreme Court, in a decision reported at [2009] B.C.T.C. Uned. 1768; 2009 BCSC 1768, allowed the appeal, set aside the revised tax assessments and ordered the Minister to refund the additional taxes the credit union had paid pursuant to those assessments. The Minister sought leave to appeal pursuant to s. 33(7) of the CCTA.

The British Columbia Court of Appeal, per D. Smith, J.A., in a decision reported at 286 B.C.A.C. 106; 484 W.A.C. 106, granted leave to appeal.

The British Columbia Court of Appeal dismissed the appeal.

Company Law - Topic 9918

Special corporation taxes - Definitions - Non-equity shares - A credit union issued "Class C Shares" under the Credit Union Incorporation Act (B.C.) as "equity shares" under the Act to raise working capital - It did not include the shares in its paid up capital stock under s. 7 of the Corporation Capital Tax Act (CCTA) when it filed its CCTA tax returns for 2003-2006 because it believed them to be non-equity shares, which were not taxable - Section 7 required a financial institution to include all of its paid up capital in its capital stock for taxation purposes, except for non-equity shares as defined by the Financial Institutions Act (FIA) - The credit union received Notices of Revised Assessment which changed the credit union's characterization of the shares from non-equity shares to equity shares and therefore taxable - The credit union appealed - The Minister of Small Business and Revenue affirmed the reassessments - A chambers judge allowed the credit union's appeal, finding that the shares, which were issued as "equity shares", came within the definition of "non-equity share" in s. 1(1) of the FIA and thus the CCTA for tax purposes - Section 1(1) defined non-equity share as a share in a credit union that, inter alia, did not represent an "equity interest" in the credit union - The British Columbia Court of Appeal dismissed the Minister's appeal - The chambers judge clearly strove to give effect to the "legal substance" or "actual legal effect" of the Class C shares - He did not err in his statutory interpretation of the section - It was clear that these shares, which were restricted to a 6% non-cumulative dividend and to the amount paid up thereon on the winding-up or dissolution of the credit union, did not represent an equity interest in the ordinary meaning of the term - See paragraphs 32 to 39.

Company Law - Topic 9918

Special corporation taxes - Definitions - Non-equity shares - A credit union issued "Class C Shares" under the Credit Union Incorporation Act (B.C.) as "equity shares" under the Act to raise working capital - It did not include the shares in its paid up capital stock under s. 7 of the Corporation Capital Tax Act (CCTA) when it filed its CCTA tax returns for 2003-2006 because it believed them to be non-equity shares, which were not taxable - Section 7 required a financial institution to include all of its paid up capital in its capital stock for taxation purposes, except for non-equity shares as defined by the Financial Institutions Act (FIA) - The credit union received Notices of Revised Assessment which changed the credit union's characterization of the shares from non-equity shares to equity shares and therefore taxable - The credit union appealed - The Minister of Small Business and Revenue affirmed the reassessments - A chambers judge allowed the credit union's appeal, finding that the shares, which were issued as "equity shares", came within the definition of "non-equity share" in s. 1(1) of the FIA and thus the CCTA for tax purposes - Section 1(1) defined non-equity share as a share in a credit union that, inter alia, evidenced "indebtedness" of the credit union to the holder of the share - The Minister appealed, arguing, inter alia, that the Class C shares did not represent indebtedness of the credit union prior to the Maturity Date of the shares (i.e., indebtedness was confined to indebtedness that was due and owing unconditionally) - The British Columbia Court of Appeal rejected the argument - If the court were to so interpret "indebtedness", it would be restricting the scope of "non-equity shares" almost out of existence - The court adopted the definition of "debt" as a sum of money which was certainly, and at all events, payable without regard to the fact whether it be payable now or at a future time - Therefore, the Class C shares did evidence indebtedness to their holders - See paragraphs 40 to 59.

Practice - Topic 9015

Appeals - Restrictions on argument on appeal - Issues conceded or agreed upon by parties - A credit union received Notices of Revised Assessment for the taxation years 2003-2006 - It appealed - The Minister of Small Business and Revenue dismissed the appeal and affirmed the reassessments - A chambers judge allowed the credit union's appeal - The Minister appealed - On appeal, the Minister wished to argue a point that had been allegedly conceded before the the chambers judge - The British Columbia Court of Appeal stated that, in normal circumstances, it would decide the appeal on the basis that the point was well and truly conceded below and could not now be asserted - The court had warned in the past that a litigant who deliberately adopted, for whatever reason, a position in the court below, had to live with it in the Court of Appeal - As the matter involved a taxing statute, the issue could be of importance to persons other than the parties - The Court of Appeal was not bound by a concession on a point of law - As a result, the court decided it should carry out its own analysis on the point - See paragraphs 40 and 41.

Words and Phrases

Debt - The British Columbia Court of Appeal discussed the meaning of this word - See paragraph 57.

Words and Phrases

Indebtedness - The British Columbia Court of Appeal discussed the meaning of this word as used in the definition of "non-equity share" in s. 1(1) of the Financial Institutions Act, R.S.B.C. 1996, c. 141 - See paragraphs 54 to 58.

Words and Phrases

Non-equity share - The British Columbia Court of Appeal discussed the meaning of this phrase as defined in s. 1(1) of the Financial Institutions Act, R.S.B.C. 1996, c. 141 - See paragraphs 35 to 39.

Cases Noticed:

Canada (Attorney General) v. Ford Credit Canada Ltd., 2006 TCC 441, affd. (2007), 367 N.R. 37; 2007 FCA 225, refd to. [para. 12].

Valin (A.) Petroleums Ltd. et al. v. Imperial Oil Ltd. et al. (2007), 438 A.R. 389; 28 B.L.R.(4th) 60; 2007 ABQB 134, refd to. [para. 23].

Placer Dome Canada Ltd. v. Ontario (Minister of Finance), [2006] 1 S.C.R. 715; 348 N.R. 148; 210 O.A.C. 342; 2006 SCC 20, refd to. [para. 34].

Protection Mutual Insurance Co. v. Beaumont (1991), 58 B.C.L.R.(2d) 290 (C.A.), refd to. [para. 41].

Armstrong v. North West Life Insurance Co. of Canada (1990), 48 B.C.L.R.(2d) 131 (C.A.), refd to. [para. 41].

M. v. H., [1999] 2 S.C.R. 3; 238 N.R. 179; 121 O.A.C. 1, refd to. [para. 41].

Ocean Port Hotel Ltd. v. Liquor Control and Licensing Branch (B.C.), [2001] 2 S.C.R. 781; 274 N.R. 116; 155 B.C.A.C. 193; 254 W.A.C. 193, refd to. [para. 41].

Canada Deposit Insurance Corp. v. Canadian Commercial Bank (No. 3), [1992] 3 S.C.R. 558; 143 N.R. 321; 131 A.R. 321; 25 W.A.C. 321, refd to. [para. 42].

Royal Bank of Canada et al. v. Central Capital Corp. (1996), 88 O.A.C. 161; 27 O.R.(3d) 494 (C.A.), refd to. [para. 43].

Central Capital Corp., Re - see Royal Bank of Canada et al. v. Central Capital Corp.

East Chilliwack Agricultural Cooperative, Re (1989), 74 C.B.R.(N.S.) 1; 58 D.L.R.(4th) 11 (B.C.C.A.), refd to. [para. 47].

Interclaim Holdings Ltd. v. Down - see Down (Bankrupt) et al., Re.

Down (Bankrupt) et al., Re (2001), 147 B.C.A.C. 285; 241 W.A.C. 285; 2001 BCCA 65, refd to. [para. 54].

Canadian Airlines Corp., Re (2001), 294 A.R. 253; 92 Alta. L.R.(3d) 140 (Q.B.), refd to. [para. 54].

The Custodian v. Passavant, [1928] S.C.R. 242, refd to. [para. 54].

Taxsave Consultants Ltd. v. Pacific Lamp Corp. (1990), 52 B.C.L.R.(2d) 128; 45 C.P.C.(2d) 150 (C.A.), refd to. [para. 54].

Barrette v. Crabtree (Succession de), [1993] 1 S.C.R. 1027; 150 N.R. 272; 53 Q.A.C. 279, refd to. [para. 54].

Mail Printing Co. v. Clarkson (1898), 25 O.A.R. 1 (C.A.), refd to. [para. 57].

Enterprise Capital Management Inc. v. Semi-Tech Corp. (1999), 10 C.B.R.(4th) 133 (Ont. Sup. Ct.), refd to. [para. 57].

Dyadic Industries International Ltd. v. Award Cleaners Ltd. et al. (1996), 114 Man.R.(2d) 193 (Q.B.), refd to. [para. 57].

Mortimore v. Inland Revenue Commissioners (1864), 33 L.J. Ex. 263, refd to. [para. 57].

Tapp v. Jones (1875), L.R. 10 Q.B. 591, refd to. [para. 57].

Lyall (P.) & Sons Construction Co. v. Baker et al., [1933] 21 O.R. 286 (C.A.), refd to. [para. 57].

Webb v. Stenton (1883), 11 Q.B.D. 518, refd to. [para. 57].

Barsi v. Farcas, [1924] 1 D.L.R. 1154 (Sask. C.A.), refd to. [para. 57].

Souris Credit Union Ltd. v. MacDonald (1986), 61 Nfld. & P.E.I.R. 1; 185 A.P.R. 1 (P.E.I. Gen. Div.), refd to. [para. 57].

Statutes Noticed:

Corporation Capital Tax Act, R.S.B.C. 1996, c. 73, sect. 7(2) [para. 8].

Financial Institutions Act, R.S.B.C. 1996, c. 141, sect. 1(1) [para. 9].

Authors and Works Noticed:

Driedger, Elmer A., Construction of Statutes (2nd Ed. 1983), pp. 81 to 87 [para. 34].

McGuinness, Kevin P., Canadian Business Corporations Law (2nd Ed. 2007), pp. 373, 374 [para. 38].

Palmer's Company Law (25th Ed. 1992), para. 4012 [para. 38].

Counsel:

A.H. Dalmyn, for the appellant;

D.G. Cowper, Q.C., and H. Brinton, for the respondent.

This appeal was heard at Vancouver, British Columbia, on November 24, 2010, before Ryan, Newbury and Hinkson, JJ.A., of the British Columbia Court of Appeal. Newbury, J.A, delivered the following reasons for the court on January 24, 2011.