Kingsdale Securities Co. v. Minister of National Revenue, (1974) 6 N.R. 240 (FCA)

JudgeUrie and Ryan, JJ. and Baston, D.J.
CourtFederal Court of Appeal (Canada)
Case DateDecember 04, 1974
JurisdictionCanada (Federal)
Citations(1974), 6 N.R. 240 (FCA)

Kingsdale Securities Co. v. MNR (1974), 6 N.R. 240 (FCA)

MLB headnote and full text

Kingsdale Securities Co. Ltd. v. Minister of National Revenue

Indexed As: Kingsdale Securities Co. v. Minister of National Revenue

Federal Court of Appeal

Urie and Ryan, JJ. and Baston, D.J.

December 4, 1974.

Summary:

This case arose out of an income tax assessment by the Minister of National Revenue. The assessment was in respect of income from a family business for the taxation years 1964 to 1967 inclusive. The taxpayer was assessed income tax on all of the income from the family business. The taxpayer alleged that it was assessable on only 1/6 of the income from the family business because on or before January 1, 1964 the taxpayer entered into a partnership agreement with five other persons for the purpose of carrying on the family business. The five other persons were family trusts. Under the alleged partnership agreement the taxpayer was the general partner and the five family trusts were limited partners. The partnership was formed to minimize federal income taxes and also for estate planning purposes. The trusts were allegedly created by acts of settlement but the trial judge found as a fact that the settled trusts were not established before the partnership agreement was allegedly made on January 1, 1964. The Trial Division dismissed the taxpayer's appeal and affirmed the Minister's assessment against the taxpayer.

On appeal to the Federal Court of Appeal the appeal was dismissed and the judgment of the Trial Division was affirmed. The Federal Court of Appeal held that there was no valid partnership agreement because the family trusts were not established before the date that the partnership agreement was allegedly made.

The taxpayer pleaded that the family trusts were created on or before January 1, 1964. In argument at trial, after the close of the evidence, the taxpayer argued for the first time that the trusts were created during March or April of 1964. The Federal Court of Appeal stated that the taxpayer was precluded from arguing the new point on appeal because the Federal Court of Appeal was not satisfied "beyond all reasonable doubt that all requisite evidence had been adduced to unable the defendant to rebut the plaintiff's new position" - see paragraphs 20 to 25 and 56 to 61.

Bastin, D.J., dissenting, in the Federal Court of Appeal, would have allowed the appeal and would have set aside the judgment of the Trial Division and the Minister's assessment. Bastin, D.J., stated that the trusts were validly created for a valid purpose and the only issue on appeal was whether the creation of the five family trusts was a sham. Bastin, D.J., stated that the family trusts were not a sham and that the beneficiaries were entitled to enforce their rights against the funds created - see paragraph 79.

Note that a notice of appeal with respect to this case was filed in the Supreme Court of Canada on or about January 17, 1975 - see January 17, 1975 issue of the Bulletin of Proceedings taken in the Supreme Court of Canada at page 457.

Partnership - Topic 1043

Creation of partnerships - Personal capacity - The Minister of National Revenue assessed a taxpayer for business income without regard to the existence of a partnership - The taxpayer alleged that the business was operated by a partnership comprised of the taxpayer and five family trusts - The taxpayer entered a partnership agreement with five family trusts on January 1, 1964 for the purpose of operating a family business and also for the purpose of minimizing the payment of income tax - The taxpayer was assessed for taxes on all of the income of the partnership - The taxpayer claimed that only 1/6 of the income of the partnership was income to the taxpayer - The family trusts were not established before the partnership agreement was allegedly made on January 1, 1964 - The Federal Court of Appeal held that there was no valid partnership agreement as of January 1, 1964 because the trusts were not in existence on that date - The Federal Court of Appeal held that the taxpayer was properly assessed on all of the income from the family business.

Partnership - Topic 1003

Creation of partnerships - What constitutes a "person" - Ontario Partnerships Act, s. 2 - The Federal Court of Appeal stated that a trust is not a person capable of entering into a partnership agreement - See paragraphs 27 to 30.

Practice - Topic 9012

Appeals - Restrictions on arguments on appeal - Issues or points not raised at trial or in the pleadings - Appeal from an income tax assessment for 1964 - The taxpayer pleaded that certain trusts were created on or before January 1, 1964 - In argument at trial after the close of the evidence the taxpayer argued for the first time that the trusts were created during March or April of 1964 - The Federal Court of Appeal stated that the taxpayer was precluded from arguing the new point on appeal because the Federal Court of Appeal was not satisfied "beyond all reasonable doubt that all requisite evidence had been adduced to enable the defendant to rebut the plaintiff's new position" - See paragraphs 20 to 25 and 56 to 61.

Words and Phrases

Person - The Federal Court of Appeal discussed the meaning of the word "person" as found in the Ontario Partnerships Act.

Cases Noticed:

Owners of the Ship TASMANIA et al. v. Smith et al. (1980), 15 A.C. 223, folld. [para. 23].

Charles Lamb and H.L. Miller v. Samuel T. Kincaid and Anthony Krober, 38 S.C.R. 516, folld. [para. 24].

Johnston v. M.N.R., [1948] S.C.R. 486, folld. [paras. 71, 86].

Hatzfeldt-Wildenbury v. Alexander, [1912] 1 Ch. 284, folld. [para. 74].

Ayrshire Pullman Motor Services and D.M. Ritchie v. C.I.R., 14 T.C. 754, folld. [para. 77].

Stanley v. United Fruit, [1929] 3 W.W.R. 522, folld. [para. 86].

London Passenger Transport Board v. Moscrop, [1942] A.C. 345, folld. [para. 90].

Statutes Noticed:

Partnerships Act, R.S.O. 1970, c. 339, sect. 2 [para. 28]; sect. 10 [para. 84].

Interpretation Act, R.S.O. 1970, c. 225, sect. 30.28 [para. 29].

Counsel:

H. Buchwald, Q.C. and M. Greene, for the appellant;

D.K. Laidlaw, Q.C., for the respondent.

This appeal was heard by the Federal Court of Appeal at Toronto, Ontario on September 30 and October 1, 2 and 3, 1974. Judgment was delivered by the Federal Court of Appeal on December 4, 1974 and the following opinions were filed:

URIE, J. - see paragraphs 1 to 36.

RYAN, J. - see paragraphs 37 to 61.

BASTIN, D.J. - dissenting, see paragraphs 62 to 91.

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