Westcoast Energy Inc. v. Minister of National Revenue, (1991) 41 F.T.R. 165 (TD)

• Judge: Denault, J.
• Court: Federal Court (Canada)
• Case Date: April 25, 1991
• Jurisdiction: Canada (Federal)
• Citations: (1991), 41 F.T.R. 165 (TD)

Westcoast Energy Inc. v. MNR (1991), 41 F.T.R. 165 (TD)

MLB headnote and full text

Westcoast Energy Inc. (plaintiff) v. Her Majesty The Queen (defendant)

(No. T-2679-89)

Indexed As: Westcoast Energy Inc. v. Minister of National Revenue

Federal Court of Canada

Trial Division

Denault, J.

April 25, 1991.

Summary:

A taxpayer received $20,250,000 in settlement of a court action. The Minister reassessed the taxpayer's tax return on the basis that the amount was a "reimbursement" under s. 12(1)(x) of the Income Tax Act and should have been included as income or deducted from its undepreciated capital cost. The taxpayer appealed.

The Federal Court of Canada, Trial Division, allowed the appeal. The court held that "reimbursement" under s. 12(1)(x) did not include damage awards.

Income Tax - Topic 1104

Income from business or property - Income - Monies received as inducement or reimbursement - The taxpayer sued a contractor for breach of contract and negligence for constructing a defective gas pipeline - The taxpayer added its costs of rebuilding the failed pipeline to its undepreciated capital cost and recovered monies for the reconstruction by settling the action against the contractor - The Minister claimed that the settlement amount was a "reimbursement" under s. 12(1)(x) of the Income Tax Act, requiring the taxpayer to either include the amount in income or deduct the amount from undepreciated capital cost - The Federal Court of Canada, Trial Division, held that "reimbursement" did not include damage awards - The result was inequitable, but it was not the court's function to expand the meaning of a word to make the tax system fair.

Words and Phrases

Reimbursement - The Federal Court of Canada, Trial Division, held that "reimbursement" under s. 12(1)(x) of the Income Tax Act, S.C. 1970-71-72-73, c. 63, did not include damage awards.

Cases Noticed:

Henley v. Murray (1949), 31 T.C. 351 (K.B.), refd to. [para. 12].

Consumers' Gas Company Ltd. v. Minister of National Revenue, [1987] 2 F.C. 69; 72 N.R. 206 (F.C.A.), refd to. [para. 18, footnote 1].

Minister of National Revenue v. Pillsbury Holdings Ltd., [1964] D.T.C. 5184 (S.C.C.), refd to. [para. 23, footnote 3].

Johnston v. Minister of National Revenue, [1987] D.T.C. 632 (T.C.C.), refd to. [para. 23, footnote 3].

Minister of National Revenue v. Atkins, [1976] C.T.C. 497 (F.C.A.), refd to. [para. 26, footnote 5].

Bayker Construction Ltd. v. M.N.R. (1974), 74 D.T.C.(T.R.B.), refd to. [para. 33, footnote 7].

Courrier M.H. Inc. v. Minister of National Revenue (1976), 76 D.T.C. 6331 (F.C.T.D.), refd to. [para. 33, footnote 8].

Manley v. Minister of National Revenue, [1986] 2 F.C. 210; 57 N.R. 364 (F.C.A.), refd to. [para. 35, footnote 10].

London & Thames Haven Oil Wharves Ltd. v. Attwooll, [1967] 2 All E.R. 124, refd to. [para. 35].

Woodward Stores Ltd. v. Minister of National Revenue (1991), 40 F.T.R. 241 (F.C.T.D.), refd to. [para. 40, footnote 13].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72-73, c. 63, sect. 3, sect. 9 [para. 35]; sect. 12(1)(f) [para. 22]; sect. 12(1)(x) [para. 16]; sect. 13(21)(c), sect. 13(21)(d), sect. 13(21)(f) [para. 22]; sect. 54(h)(iii) [para. 32]; sect. 248(1) [para. 35].

Income Tax Act and Related Statutes, An Act to Amend, S.C. 1986, c. 6, sect. 6(2) [para. 38, footnote 11].

Authors and Works Noticed:

Black's Law Dictionary (5th Ed.) [para. 43].

Canada Tax Service (May 23, 1985), p. 79 [para. 18, footnote 2].

McGregor on Damages (15th Ed. 1988), p. 7 [para. 28, footnote 6].

Shorter Oxford English Dictionary [para. 42].

Counsel:

W. Mitchell and K. Sharlow, for the plaintiff;

T. McAuley, for the defendant.

Solicitors of Record:

Thorsteinssons Tax Lawyers, Vancouver, British Columbia, for the plaintiff;

John C. Tait, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the defendant.

This appeal was heard on November 13 and 14, 1990, at Vancouver, British Columbia, before Denault, J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on April 25, 1991.