Vancouver Art Metal Works Ltd. v. Minister of National Revenue, (2001) 202 F.T.R. 287 (TD)

• Judge: Muldoon, J.
• Court: Federal Court (Canada)
• Case Date: March 30, 2001
• Jurisdiction: Canada (Federal)
• Citations: (2001), 202 F.T.R. 287 (TD)

Vancouver Art Metal Works v. MNR (2001), 202 F.T.R. 287 (TD)

MLB headnote and full text

Temp. Cite: [2001] F.T.R. TBEd. AP.099

Vancouver Art Metal Works Ltd. (plaintiff)

v. Her Majesty the Queen (defendant)

(T-2072-87; T-2073-87; T-2074-87; T-2075-87; 2001 FCT 265)

Indexed As: Vancouver Art Metal Works Ltd. v. Minister of National Revenue

Federal Court of Canada

Trial Division

Muldoon, J.

March 30, 2001.

Summary:

The plaintiff taxpayer sought to have a reassessment of the 1983 taxation year referred back to the Minister of National Revenue for reconsideration on the basis that gains that it had realized from the disposition of managed investments were capital gains, not income from a business.

The Federal Court of Canada, Trial Division, allowed the application.

Editor's note: for an earlier decision between these parties, see 152 N.R. 309.

Evidence - Topic 2103

Judicial admissions - How made - The Federal Court of Canada, Trial Division, noted that a "formal" admission was one made for the purpose of dispensing with truth at trial - Thus, it was, or ought to be, conclusive with regard to the matters admitted - If one party intended to provide the other with statements for the purpose of proving the issues in question, that party had to utilize such "formal" means as affidavits, written admissions and statements made during cross-examination - The court held that an admission made during an examination for discovery was an "informal" admission and a party who made an "informal" admission could adduce contradictory evidence at trial - See paragraphs 9 to 25.

Income Tax - Topic 1762

Capital gains and losses - Capital gains, securities - Trader or dealer in securities - What constitutes - A corporation (the taxpayer) owned shares in another corporation (the business) - The taxpayer used its share dividends to acquire investments - The business was sold in 1976 and the taxpayer acquired other investments with the proceeds - The investments were managed by an investment company for a fee - In 1977, the taxpayer elected to have every Canadian security owned by it deemed to have been a capital property (Income Tax Act, s. 39(4)) - The Federal Court of Canada, Trial Division, held that the taxpayer was not "a trader or dealer in securities", but "a person engaged in an adventure or concern in the nature of trade" - Thus, capital gains realized by the taxpayer from the disposition of managed investments were capital gains, not income from a business - See paragraphs 38 to 42.

Income Tax - Topic 7845

Returns, assessments, payment and appeals - Assessments and reassessments - Time for - On December 17, 1982, a taxpayer corporation declared and paid to its shareholders a $690,000 dividend - The taxpayer elected to have the dividend deemed to be a capital dividend - The Minister treated the dividends as capital and issued a Notice of Assessment in April 1983 - Subsequently, on April 16, 1987, the Minister issued a Notice of Reassessment, assessing the gains as income, not capital gains - In 1984, the Income Tax Act had been amended to reduce the Minister's time for reassessment from four years to three years from the original assessment date - The Federal Court of Canada, Trial Division, held that the three year period applied and the reassessment was statute barred - See paragraphs 43 to 48.

Practice - Topic 2134

Pleadings - Amendment of pleadings - At trial - After evidence taken - The Minister of National Revenue reassessed a taxpayer on the basis that gains realized by it from the disposition of Canadian securities were income from a business, not capital gains - The taxpayer applied for judicial review - The taxpayer argued that the Minister's representative had admitted at discovery that the taxpayer was involved in an adventure in the nature of trade, making the capital gains rules applicable - After the taxpayer had rested its case, the Minister sought to amend his pleadings to include an alternative explanation if bound by the discovery admissions - The Federal Court of Canada, Trial Division, refused to permit the amendment - While it was unlikely that the proposed amendment would cause injustice to the taxpayer, the timing provided additional concerns - See paragraphs 26 to 37.

Practice - Topic 2143

Pleadings - Amendment of pleadings - Circumstances when amendment denied - [See Practice - Topic 2134 ].

Practice - Topic 4954

Admissions - Effect of - [See Evidence - Topic 2103 ].

Cases Noticed:

Canada v. Crosson, [1999] F.T.R. Uned. 90 (T.D.), refd to. [para. 15].

Dennison Manufacturing Co. of Canada Ltd. v. Dymo of Canada Ltd. (1975), 23 C.P.R.(2d) 155 (F.C.T.D.), refd to. [para. 16].

Graydon v. Graydon (1921), 67 D.L.R. 116 (Ont. H.C.), refd to. [para. 17].

Amfac Foods Inc. v. Irving Pulp & Paper Ltd., [1984] F.C.J. No. 105 (T.D.), refd to. [para. 18].

Preston v. 20th Century Fox Canada Ltd. and Lucas et al. (1987), 15 F.T.R. 54 (T.D.), refd to. [para. 19].

Flexi-Coil Ltd. v. Bourgault (F.P.) Industries (1991), 123 N.R. 235; 35 C.P.R.(3d) 154 (F.C.A.), refd to. [para. 20].

Minister of National Revenue v. Canderel Ltd., [1994] 1 F.C. 3; 157 N.R. 380; 93 D.T.C. 5357 (F.C.A.), folld. [para. 28].

Andersen Consulting v. Canada, [1998] 1 F.C. 605; 220 N.R. 35 (F.C.A.), refd to. [para. 28].

Beloit Canada Ltd. v. Valmet Oy (1986), 64 N.R. 287; 7 C.I.P.R. 205; 8 C.P.R.(3d) 289 (F.C.A.), refd to. [para. 29].

Minister of National Revenue v. Furukawa (1997), 211 N.R. 295; 97 D.T.C. 5117 (F.C.A.), refd to. [para. 30].

Merck Frosst Canada Inc. et al. v. Canada (Minister of National Health and Welfare) et al. (1997), 138 F.T.R. 94; 76 C.P.R.(3d) 468 (T.D.), refd to. [para. 33].

Hoechst Aktiengesellschaft v. Adir et al. (1998), 153 F.T.R. 52; 82 C.P.R.(3d) 344 (T.D.), refd to. [para. 34].

Visx Inc. v. Nidek Co. et al. (1998), 234 N.R. 94; 82 C.P.R.(3d) 289 (F.C.A.), refd to. [para. 35].

Statutes Noticed:

Income Tax Act, R.S.C. 1952, c. 148, sect. 39(4) [para. 4].

Authors and Works Noticed:

Cross on Evidence (9th Ed. 1999), generally [paras. 11, 36, footnotes 2, 5].

Jackett, W.R., Federal Court of Canada: a manual of practice (1971), generally [paras. 26, 36, footnote 5].

Phipson, S., The Law of Evidence (15th Ed. 2000), generally [paras. 12, 36, footnotes 3, 5]; p. 723 [para. 14].

Sheppard, Anthony F., Evidence (1988), generally [paras. 13, 36, footnotes 4, 5].

Sopinka, John, Lederman, S.N. and Bryant, A.W., The Law of Evidence in Canada (1st Ed. 1999), generally [paras. 9, 36, footnotes 1, 5].

Counsel:

Craig Sturrock and Thomas Bauer, for the plaintiff;

Robert Carvalho and Eric Douglas, for the defendant.

Solicitors of Record:

Thorsteinssons, Vancouver, British Columbia, for the plaintiff;

Morris Rosenberg, Deputy Attorney General of Canada, Ottawa, Ontario, for the defendant.

This appeal was heard at Vancouver, British Columbia, on January 26 and July 13, 14, 2000, by Muldoon, J., of the Federal Court of Canada, Trial Division, who delivered the following decision on March 30, 2001.