JAFT Corp. v. Jones et al., 2014 MBQB 59

JudgeMcKelvey, J.
CourtCourt of Queen's Bench of Manitoba (Canada)
Case DateMarch 24, 2014
JurisdictionManitoba
Citations2014 MBQB 59;(2014), 304 Man.R.(2d) 86 (QB)

JAFT Corp. v. Jones (2014), 304 Man.R.(2d) 86 (QB)

MLB headnote and full text

Temp. Cite: [2014] Man.R.(2d) TBEd. AP.027

JAFT Corporation (applicant) v. David A. Jones, Lance C. Laufer and William C. Jones (respondents) and The Attorney General of Canada (intervener)

(CI 12-01-76339; 2014 MBQB 59)

Indexed As: JAFT Corp. v. Jones et al.

Manitoba Court of Queen's Bench

Winnipeg Centre

McKelvey, J.

March 24, 2014.

Summary:

JAFT Corporation (with the concurrence and consent of the first two respondents) sought: (a) an order that the employment contract(s) between it and each of the three respondents, respecting JAFT's 2005 and 2006 taxation years, and the payments of salaries by JAFT to each of the respondents, in 2005 and 2006, were rescinded; and/or (b) in the alternative, an order that the employment contract(s) between JAFT and each of the respondents, and the payments of those salaries, were void ab initio. JAFT took the position that the salaries were paid out to the respondents based on the honest belief, expectation and understanding that its claims for Scientific Research and Experimental Development (SR&ED) tax credits for the 2005 and 2006 taxation years would be allowed based upon the fact that the projects were of a continuing nature and the credits had been allowed in the 2003 and 2004 taxation years. It was anticipated by JAFT that the SR&ED tax credit refunds would be utilized to cover the required payroll tax remittances of the salaries that were paid out. The Canada Revenue Agency (CRA) assessed JAFT, David and Lance for unpaid payroll tax remittances for 2005 and 2006. Further, the CRA had not allowed JAFT to amend the T4s issued for 2005 and 2006. The CRA had also denied the first two respondents a 2007 tax deduction for repayment of the salaries paid out by JAFT in 2005 and 2006. The application was opposed by the Attorney General of Canada as intervener.

The Manitoba Court of Queen's Bench dismissed the application. The court should decline to exercise jurisdiction to grant the relief sought where the Tax Court of Canada (TCC) might make findings in its tax appeal decisions which would include contractual, employment and commercial matters. Much of what JAFT was arguing related to such issues. It would be inappropriate to allow a parallel running of litigation respecting these matters. This was particularly so when rescission, if granted, would serve to alter the essence of the litigation before the TCC and, hence, inappropriately interfere with the jurisdiction assigned to a specialized tribunal. Alternatively, the court would have denied the relief in any event. The case smacked of attempts to adopt a retroactive/no-risk tax planning scenario or, in essence, rewrite history. The payroll tax remittances were lawfully owed under the transaction as originally structured and should not be rectified, rescinded, or declared void ab initio.

Contracts - Topic 1610

Formation of contract - Misunderstanding, rescission - JAFT Corporation (with the first two respondents' concurrence and consent) sought: (a) an order that the employment contract(s) between it and each of the three respondents, respecting JAFT's 2005 and 2006 taxation years, and the payments of salaries by JAFT to each of the respondents, in 2005 and 2006, were rescinded; and/or (b) in the alternative, an order that the employment contract(s) between JAFT and each of the respondents, and the payments of those salaries, were void ab initio - JAFT took the position that the salaries were paid out to the respondents based on the honest belief, expectation and understanding that its claims for Scientific Research and Experimental Development (SR&ED) tax credits for the 2005 and 2006 taxation years would be allowed based upon the fact that the projects were of a continuing nature and the credits had been allowed in the 2003 and 2004 taxation years - It was anticipated by JAFT that the SR&ED tax credit refunds would be utilized to cover the required payroll tax remittances of the salaries that were paid out - The Canada Revenue Agency (CRA) assessed JAFT, and the first two respondents for unpaid payroll tax remittances for 2005 and 2006 - Further, the CRA had not allowed JAFT to amend the T4s issued for 2005 and 2006 - The CRA had also denied the first two respondents a 2007 tax deduction for repayment of the salaries paid out by JAFT in 2005 and 2006 - The application was opposed by the Attorney General of Canada as intervener - The Manitoba Court of Queen's Bench held that it should decline to exercise jurisdiction to grant the relief sought where the Tax Court of Canada (TCC) might make findings in its tax appeal decisions which would include contractual, employment and commercial matters - Much of what JAFT was arguing related to such issues - It would be inappropriate to allow a parallel running of litigation respecting these matters - This was particularly so when rescission, if granted, would serve to alter the essence of the litigation before the TCC and, hence, inappropriately interfere with the jurisdiction assigned to a specialized tribunal - Alternatively, the court would have denied the relief - The case smacked of attempts to adopt a retroactive/no-risk tax planning scenario or, in essence, rewrite history - The payroll tax remittances were lawfully owed under the transaction as originally structured and should not be rectified, rescinded, or declared void ab initio.

Courts - Topic 4502

Tax Court of Canada - General - Jurisdiction - [See Contracts - Topic 1610 ].

Courts - Topic 5695.2

Provincial courts - General - Jurisdiction or powers - Respecting income tax matters - [See Contracts - Topic 1610 ].

Equity - Topic 1106

Equitable relief - Contracts - Rescission - When available - [See Contracts - Topic 1610 ].

Mistake - Topic 4005

Relief - General - Circumstances when granted - [See Contracts - Topic 1610 ].

Practice - Topic 43

Actions - Commencement of - General principles - Avoidance of multiplicity of proceedings - [See Contracts - Topic 1610 ].

Cases Noticed:

Addison & Leyen Ltd. et al. v. Canada Customs and Revenue Agency, [2007] 2 S.C.R. 793; 365 N.R. 62; 2007 SCC 33, refd to. [para. 21].

Felsen Foundation v. Jabs Construction Ltd. et al. (1998), 98 D.T.C. 6454 (S.C.), refd to. [para. 21].

GLP NT Corp. v. Canada (Attorney General), [2003] O.T.C. Uned. 573; 65 O.R.(3d) 840 (Sup. Ct.), refd to. [para. 21].

Baxter v. Canada (Attorney General) et al., 2013 ONSC 3153, refd to. [para. 21].

Agence du Revenu du Québec v. Services Environnementaux AES inc. et al. (2013), 453 N.R. 119; 2013 SCC 65, refd to. [para. 25].

771225 Ontario Inc. et al. v. Bramco Holdings Co. et al. (1995), 77 O.A.C. 75; 21 O.R.(3d) 739 (C.A.), to appeal refused (1995), 198 N.R. 79; 90 O.A.C. 160 (S.C.C.), refd to. [para. 30].

Juliar v. Canada (Attorney General) et al. (2000), 136 O.A.C. 301; 50 O.R.(3d) 728 (C.A.), refd to. [para. 31].

Slocock's Will Trusts, Re, [1979] 1 All E.R. 358 (Ch. D.), refd to. [para. 31].

Ashcroft v. Barnsdale, [2010] EWHC 1948 (Ch.), refd to. [para. 31].

Stone's Jewellery Ltd. v. Arora et al. (2009), 484 A.R. 286; 314 D.L.R.(4th) 166; 2009 ABQB 656, refd to. [para. 33].

KRG Insurance Brokers (Western) Inc. v. Shafron et al., [2009] 1 S.C.R. 157; 383 N.R. 217; 265 B.C.A.C. 1; 446 W.A.C. 1; 2009 SCC 6, refd to. [para. 34].

Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd. and O'Connor (No. 2), [2002] 1 S.C.R. 678; 283 N.R. 233; 299 A.R. 201; 266 W.A.C. 201; 2002 SCC 19, refd to. [para. 34].

Authors and Works Noticed:

Berryman, Jeffrey, The Law of Equitable Remedies (2nd Ed. 2013), pp. 510, 511 [para. 32].

Counsel:

Paul K. Grower and Ari M. Hanson, for the applicant and respondents, D.A. Jones and L.C. Laufer;

W.C. Jones, unrepresented/no appearance;

Sandra M. Hoeppner and Ainslie N. Schroeder, for the intervener.

This application was heard by McKelvey, J., of the Manitoba Court of Queen's Bench, Winnipeg Centre, who delivered the following decision for the court on March 24, 2014.

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5 practice notes
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    • Canada
    • Supreme Court (Canada)
    • December 9, 2016
    ...2015 DTC 5084; Husky Oil Operations Ltd. v. Saskatchewan (Minister of Finance), 2014 SKQB 116, 443 Sask. R. 172; JAFT Corp. v. Jones, 2014 MBQB 59, 304 Man. R. (2d) 86, aff’d 2015 MBCA 77, 323 Man. R. (2d) 57; Capstone Power Corp. v. 1177719 Alberta Ltd., 2016 BCSC 1274; Quebec (Agence du r......
  • JAFT Corp. v. Jones et al., (2015) 323 Man.R.(2d) 57 (CA)
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    ...Attorney General of Canada, as intervener, opposed the application. The Manitoba Court of Queen's Bench, in a decision reported at (2014), 304 Man.R.(2d) 86, dismissed the application. The court should decline to exercise jurisdiction to grant the relief sought where the Tax Court of Canada......
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    ...et al. v. Bramco Holdings Co. et al. (1995), 77 O.A.C. 75; 21 O.R.(3d) 739 (C.A.), consd. [para. 42]. JAFT Corp. v. Jones et al. (2014), 304 Man.R.(2d) 86; 2014 MBQB 59, refd to. [para. Agence du Revenu du Québec v. Services Environnementaux AES inc. et al. (2013), 453 N.R. 119; 2013 SCC 65......
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    • Supreme Court of British Columbia (Canada)
    • December 16, 2014
    ...jurisdiction in favour of the TCC where appropriate. [65] CRA points to JAFT Corp. v. Jones ( sub nom JAFT Corp. v. Canada (A.G.) ), 2014 MBQB 59 as an example of where the provincial court declined jurisdiction in favour of the TCC. In JAFT, the parties asked the court to rescind certain c......
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4 cases
  • Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56
    • Canada
    • Supreme Court (Canada)
    • December 9, 2016
    ...2015 DTC 5084; Husky Oil Operations Ltd. v. Saskatchewan (Minister of Finance), 2014 SKQB 116, 443 Sask. R. 172; JAFT Corp. v. Jones, 2014 MBQB 59, 304 Man. R. (2d) 86, aff’d 2015 MBCA 77, 323 Man. R. (2d) 57; Capstone Power Corp. v. 1177719 Alberta Ltd., 2016 BCSC 1274; Quebec (Agence du r......
  • JAFT Corp. v. Jones et al., (2015) 323 Man.R.(2d) 57 (CA)
    • Canada
    • Manitoba Court of Appeal (Manitoba)
    • March 3, 2015
    ...Attorney General of Canada, as intervener, opposed the application. The Manitoba Court of Queen's Bench, in a decision reported at (2014), 304 Man.R.(2d) 86, dismissed the application. The court should decline to exercise jurisdiction to grant the relief sought where the Tax Court of Canada......
  • Pallen Trust, Re, 2015 BCCA 222
    • Canada
    • British Columbia Court of Appeal (British Columbia)
    • April 27, 2015
    ...et al. v. Bramco Holdings Co. et al. (1995), 77 O.A.C. 75; 21 O.R.(3d) 739 (C.A.), consd. [para. 42]. JAFT Corp. v. Jones et al. (2014), 304 Man.R.(2d) 86; 2014 MBQB 59, refd to. [para. Agence du Revenu du Québec v. Services Environnementaux AES inc. et al. (2013), 453 N.R. 119; 2013 SCC 65......
  • Lau et al. v. Canada (Attorney General), [2014] B.C.T.C. Uned. 2384 (SC)
    • Canada
    • Supreme Court of British Columbia (Canada)
    • December 16, 2014
    ...jurisdiction in favour of the TCC where appropriate. [65] CRA points to JAFT Corp. v. Jones ( sub nom JAFT Corp. v. Canada (A.G.) ), 2014 MBQB 59 as an example of where the provincial court declined jurisdiction in favour of the TCC. In JAFT, the parties asked the court to rescind certain c......
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