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Docket: 2003-3997(IT)I |
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BETWEEN: |
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JOHN BRAND, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
____________________________________________________________________
Appeal heard on June 23, 2005 at Calgary, Alberta
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Before: The Honourable Justice L.M. Little |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Elena Sacluti |
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AMENDED JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 2000 taxation year is allowed, without costs, in accordance with the attached Reasons for Judgment.
The attached Reasons for Judgment are issued in substitution for the Reasons for Judgment dated August 22, 2005.
Signed at Vancouver, British Columbia, this 27th day of October 2005.
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"L.M. Little" |
Little J.
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Citation: 2005TCC494 |
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Date: 20051027 |
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Docket:2003-3997(IT)I |
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BETWEEN: |
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JOHN BRAND, |
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Appellant, |
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And |
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HER MAJESTY THE QUEEN, |
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Respondent. |
AMENDED REASONS FOR JUDGMENT
Little J.
A. FACTS:
[1] Brand Pallets Services Ltd. (the "First Company") was a Company incorporated under the laws of the Province of Alberta.
[2] The First Company carried on the business of manufacturing pallets for sale to the public.
[3] The Appellant's son, John Brand Jr., was the owner of all of the issued shares of the First Company.
[4] Brand Manufacturing and Lumber Ltd. (the "Second Company") was a company incorporated under the laws of the Province of Saskatchewan.
[5] The Second Company carried on the business of manufacturing pallets for sale to the public.
[6] The Appellant's daughter-in-law, Marnie Brand, was the owner of all of the issued shares of the Second Company.
[7] The First Company and the Second Company are collectively referred to as the "Companies".
[8] The Appellant maintains that he lent money to the First Company and the Second Company to enable the Companies to continue to operate and to assist the Companies in their dealings with their bank.
[9] The Appellant lent the following sums of money to the Companies:
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June 25, 1999 |
$10,000.00 |
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August 23, 1999 |
$ 5,000.00 |
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September 10, 1999 |
$ 3,000.00 |
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October 31, 1999 |
$35,000.00 |
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$53,000.00 |
[10] The Appellant testified that cheques were issued by him as follows:
June 25, 1999 $10,000.00 Marnie Brand
August 23, 1999 $5,000.00 John Brand Jr.
September 10, 1999 $3,000.00 John Brand Jr.
October 31, 1999 $35,000.00 John Brand Jr.
[11] John Brand Jr. testified that all of the $43,000.00 that he received from the Appellant was deposited in his personal bank account and transferred immediately by him to the bank account of the First Company.
[12] Marnie Brand testified that all of the $10,000.00 that she received from the Appellant was deposited in her personal bank account and transferred immediately by her to the bank account of the Second Company.
[13] The Companies used the funds referred to above in carrying on their respective businesses.
[14] The First Company and the Second Company encountered serious financial problems and the business operations of each company were discontinued.
[15] J ohn Brand Jr. and Marnie Brand lost their home and their automobile as a result of the financial problems encountered by the Companies. John Brand Jr. and Marnie Brand were each compelled to file for personal bankruptcy.
[16] The Appellant received the following payments from the Companies in connection with the loans that he had made:
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December 9, 1999 |
$ 2,100.00 |
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July 19, 2000 |
$ 2,000.00 |
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February 11, 2000 |
$ 2,000.00 $ 6,100.00
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[17] As a result of the financial problems encountered by the Companies, the Appellant maintains that he was not repaid the amount of $47,000.00 that he lent to the Companies.
[18] When the Appellant filed his income tax return for the 2000 taxation year the Appellant claimed an allowable business investment loss in the amount of $47,000.00.
[19] On May 3, 2001 the Minister of National Revenue (the "Minister") assessed the Appellant as filed.
[20] The Minister issued a Notice of Reassessment on March 6, 2003 for the Appellant's 2000 taxation year. In the said Reassessment the Minister denied the Appellant's claim for a business investment loss. The Minister maintains that the Appellant lent the amount of $43,000.00 to his son and that the Appellant lent the amount of $10,000.00 to his daughter-in-law. The Minister maintains that the loans were not made to the Companies. The Minister therefore concluded that the Appellant was not entitled to claim an allowable business investment loss.
B. ISSUE:
[21] The issue to be decided is whether the Appellant is entitled to an allowable business investment loss in respect of the loans as outlined in paragraph 9 above.
C. ANALYSIS AND CONCLUSION:
[22] The parties filed with the Court an agreement dated November 30, 1999 referred to as "Agreement to Pay" (Exhibit A-4). The Agreement to Pay reads as follows:
Brand Pallets Services Ltd., an Alberta corporation, together with Brand Manufacturing Ltd., a Saskatchewan corporation, agree to pay to John Brand Jr. of Calgary, Alberta, the full amount of $53,000 (Fifty Three Thousand) dollars together with an annual interest rate of nine per cent. Monthly instalment payments will be due on the 30th day of each month, with payments of $2,000 principal plus interest.
[23] In Ernest Bouchard v The Queen, [1983] C.T.C. 173, Mr. Justice Cattanach of the Federal Court - Trial Division considered the consequences of a trust. In that decision, Mr. Justice Cattanach referred to the concept of a trust at page 179 and said:
Equity looks to the intent rather than to the form and if an intention to create a trust can be unmistakably inferred the court will give effect to that intention.
Despite the difficulty in giving an all-embracing definition of a trust, the concept thereof is easy enough to grasp. The general idea of a trust is that one person in whom property is vested is compelled in equity to hold the property for the benefit of another.
Lord Lindley said in Hardow v. Belilios, [1901] A.C. 118 at 123:
All that is necessary to establish the relationship of trustee and cestui que trust is to prove that legal title was in the plaintiff and equitable title was in the defendant.
At page 181, Mr. Justice Cattanach said:
... Lord Lindley then made the statement which has been cited and followed in the United Kingdom and the courts in the provinces of Canada.
He said at 206:
But it is not necessary that the trust should have been declared by such a writing in the first instance; it is sufficient if the trust can be proved by some writing signed by the defendant and the date of the writing is unilateral.
[24] In this situation we have the Agreement to Pay (Exhibit A-4) signed by the Appellant, his son and his daughter-in-law. It should also be noted that the Appellant received payments totalling $6,100.00 after the Agreement to Pay was signed.
[25] Based on the testimonies of the parties and the wording of the Agreement to Pay and based upon the comments referred to above from the Bouchard decision, I find as a fact that when John Brand Jr. received the amount of $43,000.00 from the Appellant, he received the $43,000.00 in trust for the First Company.
[26] I also find as a fact that when Marnie Brand received $10,000.00 from the Appellant, she received the $10,000.00 in trust for the Second Company.
[27] In my opinion, the Appellant has satisfied the requirements of subparagraph 39(1)(c)(iv) of the Income Tax Act and he is entitled to claim a business investment loss in the amount of $46,900.00 in determining his income for the 2000 taxation year.
[28] The appeal is allowed without costs.
Signed at Vancouver, British Columbia, this 27th day of October 2005.
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"L.M. Little" |
Little J.
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CITATION: |
2005TCC494 |
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COURT FILE NO.: |
2003-3997(IT)I |
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STYLE OF CAUSE: |
John Brand and Her Majesty the Queen |
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PLACE OF HEARING: |
Calgary, Alberta |
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DATE OF HEARING: |
June 23, 2005 |
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AMENDED REASONS FOR JUDGMENT BY: |
The Honourable Justice L.M. Little |
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DATE OF AMENDED JUDGMENT: |
October 27, 2005 |
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APPEARANCES: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Elena Sacluti |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada |