Placer Dome Canada Ltd. v. Ontario (Minister of Finance), (2006) 210 O.A.C. 342 (SCC)

• Judge: Bastarache, Binnie, LeBel, Deschamps, Fish, Abella and Charron, JJ.
• Court: Supreme Court of Canada
• Case Date: May 25, 2006
• Jurisdiction: Canada (Federal)
• Citations: (2006), 210 O.A.C. 342 (SCC);2006 SCC 20;210 OAC 342;[2006] ACS no 20;348 NR 148;147 ACWS (3d) 914;[2006] SCJ No 20 (QL);60 DTC 6532;266 DLR (4th) 513;[2006] 1 SCR 715

Placer Dome Can. v. Ont. (2006), 210 O.A.C. 342 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2006] O.A.C. TBEd. MY.073

Ontario (Minister of Finance) (appellant) v. Placer Dome Canada Limited (respondent)

(30580; 2006 SCC 20; 2006 CSC 20)

Indexed As: Placer Dome Canada Ltd. v. Ontario (Minister of Finance)

Supreme Court of Canada

Bastarache, Binnie, LeBel, Deschamps, Fish, Abella and Charron, JJ.

May 25, 2006.

Summary:

A parent company entered into financial transactions on behalf of its subsidiary as part of a "hedging program" to effectively offset a price or exchange risk inherent in another transaction or arrangement. For 1995 and 1996, net gains of $6,423,000 and $11,440,000 were realized. The Minister of Finance confirmed reassessments taxing the subsidiary on the net gains under the Mining Tax Act. The subsidiary appealed.

The Ontario Superior Court, in a judgment reported [2002] O.T.C. 706, dismissed the appeal. The subsidiary appealed. The issue was whether the transactions constituted "hedging" under the Act and whether the net gains were taxable.

The Ontario Court of Appeal, Gillese, J., dissenting, in a judgment reported (2004), 190 O.A.C. 157, allowed the appeal and remitted the matter to the Minister for reconsideration and reassessment on the basis that the net gains were not subject to tax. The Minister appealed.

The Supreme Court of Canada allowed the appeal. The transactions constituted "hedging" under the Act and the net gains were taxable.

Mines and Minerals - Topic 9625

Taxation - Income - Profit - Calculation of - Placer Dome entered into financial transactions on behalf of its subsidiary as part of a "hedging program" to effectively offset a price or exchange risk inherent in another transaction or arrangement - Net gains were realized - At issue was whether the gains were taxable "profits" under the Mining Tax Act, particularly whether the transactions constituted "hedging" under the Act - Hedging was defined as "the fixing of a price for output of a mine before delivery by means of a forward sale or a futures contract on a recognized commodity exchange" - The Ontario Court of Appeal held that, based on the plain meaning of the unambiguous definition of "hedging", the transactions could not constitute "hedging" where no part of the mine production (gold) was the subject matter of a forward sale or a futures contract - The Supreme Court of Canada disagreed, finding that "the definition of 'hedging' in the Mining Tax Act extends to transactions that do not result in the physical delivery of output from an Ontario mine. This interpretation avoids the redundancy that results ... between the statutory definition of 'hedging' and 'proceeds' of mining operations. Moreover, it ensures that resources are taxed at their 'locked in' value or their 'realized price'." - Based on the scheme and context of the Act, "hedging" had to refer to something more than transactions that were settled by the delivery of output - See paragraphs 29 to 52.

Statutes - Topic 522

Interpretation - General principles - Taxing statutes - The Supreme Court of Canada stated that "in resolving doubt about the meaning of a tax provision, the administrative practice and interpretation adopted by the Minister, while not determinative, are important factors to be weighed" - The court noted that the strict interpretation of taxing statutes had been rejected in favour of the modern approach as applied to other statutes - The court stated that "in order to resolve explicit and latent ambiguities in taxation legislation, 'the courts must undertake a unified textual, contextual and purposive approach to statutory interpretation' ... Although there is a residual presumption in favour of the taxpayer, it is residual only and applies in the exceptional case where application of the ordinary principles of interpretation does not resolve the issue. ... Any doubt about the meaning of a taxation statute must be reasonable, and no recourse to the presumption lies unless the usual rules of interpretation have been applied, to no avail, in an attempt to discern the meaning of the provision at issue." - See paragraphs 10, 21 to 24.

Statutes - Topic 1414

Interpretation - Construction where meaning is not plain - Ambiguity - General - [See Statutes - Topic 522 ].

Cases Noticed:

Harel v. Québec, [1978] 1 S.C.R. 851; 18 N.R. 91, refd to. [para. 10].

Will-Kare Paving & Contracting Ltd. v. Minister of National Revenue, [2000] 1 S.C.R. 915; 255 N.R. 208; 2000 SCC 36, refd to. [para. 10].

Echo Bay Mines Ltd. v. Minister of National Revenue, [1992] 3 F.C. 707; 56 F.T.R. 114 (T.D.), refd to. [para. 14].

Ludco Enterprises Ltd. et al. v. Minister of National Revenue, [2001] 2 S.C.R. 1082; 275 N.R. 90; 2001 SCC 62, refd to. [para. 16].

Quebéc (Communauté urbaine) v. Corporation Notre-Dame de Bon-Secours, [1994] 3 S.C.R. 3; 171 N.R. 161; 63 Q.A.C. 161, refd to. [para. 17].

Stubart Investments Ltd. v. Minister of National Revenue, [1984] 1 S.C.R. 536; 53 N.R. 241, refd to. [para. 21].

65302 British Columbia Ltd. v. Minister of National Revenue, [1999] 3 S.C.R. 804; 248 N.R. 216, refd to. [para. 21].

Minister of National Revenue v. Canada Trustco Mortgage Co., [2005] 2 S.C.R. 601; 340 N.R. 1; 2005 SCC 54, refd to. [para. 21].

Minister of National Revenue v. Shell Canada Ltd., [1999] 3 S.C.R. 622; 247 N.R. 19, refd to. [para. 23].

Johnston v. Minister of National Revenue, [1948] S.C.R. 486, refd to. [para. 25].

Nowegijick v. Minister of National Revenue et al., [1983] 1 S.C.R. 29; 46 N.R. 41, refd to. [para. 40].

Inco Ltd. v. Ontario (Minister of Finance), [2002] O.T.C. 585 (Sup. Ct.), refd to. [para. 41].

Hill v. William Hill (Park Lane) Ltd., [1949] A.C. 530 (H.L.), refd to. [para. 45].

Canderel Ltd. v. Minister of National Revenue, [1998] 1 S.C.R. 147; 222 N.R. 81, refd to. [para. 49].

Statutes Noticed:

Mining Tax Act, R.S.O. 1990, c. M-15, sect. 1(1) [paras. 8, 9].

Authors and Works Noticed:

Driedger, Elmer A., Construction of Statutes (3rd Ed. 1994), p. 159 [para. 45].

Grottenthaler, Margaret E., and Henderson, Philip J., The Law of Financial Derivatives in Canada (8th Ed. 2003), pp. 1-8 [para. 29]; 11-8, 11-9 [para. 34].

Hogg, Peter W., Magee, Joanne E., Li, Jinyan, Principles of Canadian Income Tax Law (5th Ed. 2005), p. 569 [para. 23].

Kraus, Brent W., The Use and Regulation of Derivative Financial Products in Canada (1999), 9 W.R.L.S.I. 31, p. 38 [para. 29].

Krishna, Vern, The Fundamentals of Canadian Income Tax (8th Ed. 2004), p. 35 [para. 25].

Smithson, Charles W., A Building Block Approach to Financial Engineering: An Introduction to Forwards, Futures, Swaps and Options (1997), 1017 PLI/Corp. 9, generally [para. 43].

Counsel:

Anita C. Veiga and Leslie M. McIntosh, for the appellant;

Al Meghji, Mahmud Jamal and Jacqueline Code, for the respondent.

Solicitors of Record:

Attorney General of Ontario, Toronto, Ontario, for the appellant;

Osler, Hoskin & Harcourt, Toronto, Ontario, for the respondent.

This appeal was heard on November 17, 2005, before Bastarache, Binnie, LeBel, Deschamps, Fish, Abella and Charron, JJ., of the Supreme Court of Canada.

On May 25, 2006, the judgment of the Supreme Court of Canada was delivered in both official languages by LeBel, J.