BC Take Five March 2013

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BRITISH COLUMBIA EDITION EDITION

INSIDE THIS ISSUE:

Civil litigation; Constitutional Issues; Costs; Court Fees - With 2 Counsel Comments

Aboriginal Law; Treaties and Agreements; Constitutional Law; Separation of Powers

Real Property Law; Sale of Land; Forfeiture of Deposit - With Counsel Comments

Taxation; Partnership Law; Sales Tax

Civil Procedure; Striking Pleadings; Appearance by Non-parties; Civil Forfeiture

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March 2013

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The Appellant Intervenor was the

Attorney General of British Columbia. The Respondent Intervenors were the Canadian Bar Association, British Columbia Branch, the Trial Lawyers Association of British Columbia, and West Coast Women’s Legal Education and Action Fund. This appeal dealt with a constitutional challenge to the rules regarding exemptions from court hearing fees. At trial, the Plaintiff had requested that the judge exempt her from paying hearing fees, despite the fact that she did not count as ‘impoverished’ or ‘indigent’ as required by Rule 20-5 of the Rules of Court, am. B.C. Regs.

119/2010, Sch. A, s. 34 (a); 112/2012, Sch. A, s. 4 (b):

“Rule 20-5 – Persons Who Are Impoverished

Court may determine indigent status

(1) If the court… finds that a person receives benefits under the Employment and Assistance Act or the Employment and Assistance for Persons with Disabilities Act or is otherwise impoverished, the court may order that no fee is payable by the person to the government under Schedule 1 of Appendix C in relation to the proceeding…”

The trial judge found that, although the Plaintiff was not impoverished and did not

Vilardell v. Dunham, 2013 BCCA 65Areas of Law: Civil litigation; Constitutional Issues; Costs; Court Fees

~Hearing fees that unconstitutionally impeded access to justice saved by scheme read in by Court in form of expanded power to grant exemptions from fees~

BACKGROUNDCLICK HERE TO ACCESS

THE JUDGMENT

qualify for an exemption under Rule 20-5, the hearing fees for this family matter would have approached her family’s net income for a month. Such fees constituted an unacceptable barrier on access to justice for those who were not ‘impoverished’ yet for whom payment of hearing fees would nonetheless materially hinder their ability to have their case heard before a superior court. The trial judge ruled that the hearing fees were unconstitutional, and were not saved by the exemption in Rule 20-5.


http://www.courts.gov.bc.ca/jdb-txt/CA/13/00/2013BCCA0065cor1.htm

http://www.courts.gov.bc.ca/jdb-txt/CA/13/00/2013BCCA0065cor1.htm

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The appeal was allowed and the Court held that

rather than striking down the court hearing fees, an enlarged exemption should be read in to Rule 20-5. The Court considered the Supreme Court of Canada’s statement on access to justice in B.C.G.E.U. v. British Columbia (Attorney General), [1988] 2 S.C.R. 214 (“BCGEU”) (at 200): “There cannot be a rule of law without access, otherwise the rule of law is replaced by a rule of men and women who decide who shall and who shall not have access to justice.” In BCGEU, the Supreme Court of Canada also adopted the following statement of the British Columbia Court of

APPELLATE DECISION Appeal’s ruling in that case: “Any action that interferes with such access [to justice] by any person or groups of persons will rally the court’s powers to ensure the citizen of his or her day in court” (BCGEU at 200).

Despite this strong statement, British Columbia (Attorney General) v. Christie, 2007 SCC 21 (“Christie”), affirmed that the legislature had the power to impose some conditions on access to the courts:

“The legislature has the power to pass laws in relation to the administration of justice in the province under s. 92(14) of the Constitution Act, 1867. This implies the power of the province to impose at least some conditions on how and when people have a right to access the courts. Therefore [BCGEU] cannot stand for the proposition that every limit on access to the courts is automatically unconstitutional.”

(Christie at paragraph 17.)

Vilardell v. Dunham, (cont.)


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In the case of court hearing fees, the Court noted that they were designed to act as a barrier to the use of the courts, as an ‘incentive for efficient use’. The Respondents provided expert economic evidence that there was a large group of people who were not exempt from hearing fees, but who would not reasonably be able to pay them. Furthermore, it was likely that identifiable minorities, including First Nations people, immigrants, and the disabled, were over-represented among this group and therefore disproportionately affected by the imposition of hearing fees. The Court held that:

“[w]hat makes hearing

fees constitutionally suspect is in their potential to impede persons who cannot afford them. Wealthy individuals and corporations may not like paying the fees but they are unlikely to alter their litigation strategy because of them. In that sense, the government efficiency objective is invidious because the fees impinge only on the economically disadvantaged. Only they, not the well-to-do, will be discouraged from pursuing their rights in a hearing of sufficient length to do justice to the issues. However, an effective exemption defeats the invidious purpose but allows the cost recovery objective to be achieved.”

(At paragraph 26.)

Hearing fees impeded many from access to justice, beyond those who qualified for an exemption under Rule 20-5. The constitutionality of hearing fees depended on an exemption which effectively removed that barrier to access.


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The indigency exemption was insufficient in that regard and could not save the fee scheme. However, the Court did not affirm the trial judge’s decision to strike down the fees altogether. Rather, Rule 20-5 was read in to include people who were ‘in need’: “not destitute or impoverished, [but] still in need of relief or assistance in order to have their case heard before a superior court” (at paragraph 31). This exemption respected

the applicant’s dignity by considering their ability to afford the fees, rather than proceeding from an ‘archaic’ focus on their social status as ‘impoverished’ or ‘indigent’. The Court also considered that steps should be taken to make parties aware that “hearing fees will not obstruct their pursuit of justice if they cannot afford them” (at paragraph 39). In particular, the Court suggested that court forms be amended to specify the exemption from fees where parties make undertakings to pay them.


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“This case is about access to justice – and whether it is constitutionally protected right that is violated by the charging of hearing fees in civil cases. At stake

for Ms. Vilardell was whether she, an unemployed professional immigrant woman, was required to pay the hearing fees; at stake for public policy (and consequently, for future litigants and for taxpayers) was the future of government fees charged for each day of court time.

The trial court was innovative in its constitutional approach, locating a violation in the intersection between ss.92(14) and 96 of the Constitution Act of 1867. Although overturned on appeal, the lower court decision in this case will, in my view, remain significant for future decisions because it broke new ground in its analysis of the constitutional protections for access to justice.

In B.C.G.E.U. v. British Columbia (Attorney General), [1988] 2 S.C.R. 214, the Supreme Court of Canada found that rule of law necessarily included a right to access justice. In British Columbia (Attorney General) v. Christie, [2007] 1 S.C.R. 873, the SCC further examined the content of the constitutional principle of rule of law, and found that the rule of law did not support a general right to counsel. In Vilardell, McEwan J of the BC Supreme Court located the right to access justice in the Constitution Act of 1867, by finding that the access to s.96 courts – that is, federally appointed superior courts – was a fundamental premise of Canada’s constitutional arrangement. The provincial authority under s.92(14) to maintain the courts could not be used to impair the court in its ability to fulfill its proper role, which is what hearing fees did by imposing a financial deterrent to use of the courts. McEwan J. found that the indigency exemption could not cure the constitutional violation.

The Court of Appeal decision did not overrule much of this reasoning, despite granting the appeal. The Court of Appeal found that, were it not for the power of the courts to grant exemptions from paying hearing fees, the fees would be an “unconstitutional impediment to justice.” This is because of their potential to exclude from the courts those people who cannot afford them. While the exact locale of the constitutional violation is not named, the violation appears to be rooted in the constitutional principle articulated

COUNSEL COMMENTS

Comments provided by Kasari Govender, Counsel for the Intervenor, West Coast Women’s Legal Education and Action Fund

Kasari Govender

Vilardell v. Dunham




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COUNSEL COMMENTSin both BCGEU and Christie – that is, the right to access justice encompassed by the rule of law. The Court departs from the Court below to find that an enlarged, functional approach to the indigency exemption cures the constitutional violation.

As the most recent foray into the constitutional origins of rule of law and access to justice, this decision leaves much to future interpretation. A constitutional protection for unimpeded access to s.96 courts remains to be probed. The depth of the protection for access to justice contained in the rule of law also remains unplumbed. And the potential to ground a right to access in s.7 of the Charter was left entirely off the map and holds much fertile ground for later exploration.

However, as a practical step in improving access to justice, this decision will result in more people – in particular, women, disabled people, First Nations people and immigrants, who are less likely be able to afford hearing fees – gaining access to the justice system without having to compromise their everyday cost of living. Ultimately, it is a victory for access to justice; an incremental step, no doubt, but still a step in the right direction towards an accessible justice system for all.”


March 2013


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“First and foremost, our client was delighted to be finally granted

relief from paying some $3,600 in accumulated hearing fees. For over four years, she lived with the daunting prospect of paying for fees that would essentially render her penniless as a single, immigrant mother. She now has peace of mind in knowing that her pursuit of greater care and custody of her daughter through the courts did not—in

and of itself—jeopardize her ability to provide such care.

In the broader perspective, we were disappointed in the ultimate result on the constitutional issue raised on appeal. We had hoped that the Court of Appeal would give greater consideration and weight to the reasoning in Pleau v. Nova Scotia, where the Supreme Court of Nova Scotia declared hearing fees unconstitutional because they put an escalating price on court time and are purposefully designed to hinder or impede access to the courts. In our view, it is difficult to reconcile the Supreme Court of Canada’s 1988 decision in BCGEU v. British Columbia (Attorney General), confirming that every Canadian citizen has the fundamental right to unimpeded access to the courts, with the notion of Canada’s superior courts operating as a default user-pay system of justice, subject to an individual establishing an entitlement to an exemption from court fees.

We are pleased, however, that the Court of Appeal agreed with the trial judge that hearing fees have the potential to interfere with the court’s core judicial function and that the existing indigency exemption was under-inclusive. The Court’s constitutional remedy has enlarged the scope of the Rule 20-5(1) indigency exemption to include not just those who are “impoverished” but also those who are “in need”. The exemption is thus now available to anyone who could not meet their everyday expenses if required to pay court fees. Since the enlarged exemption applies to all court fees and not only

COUNSEL COMMENTS

Comments provided by Jamie Maclaren and Ryan Parsons, Counsel for the Respondent, Montserrat Vilardell

Ryan Parsons

Vilardell v. Dunham

Jamie Maclaren




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hearing fees, we see this practical outcome as a significant step forward in access to justice for low- and middle-income litigants.

Finally, we were also pleased that the Court of Appeal explicitly recognized that the burden of hearing fees falls disproportionately on women in family litigation, Aboriginal persons, disabled persons and new immigrants, and notified such persons that the courts will not permit unaffordable hearing fees to obstruct their pursuit of justice.”

COUNSEL COMMENTS

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The Appellants were Sga’nisim Sim’augit

(Chief Mountain), also known as James Robinson, suing on his own behalf and on behalf of all the members of the House of Sga’nisim, Nisibilada, also known as Mercy Thomas, and Wilp-Lth Git Gingolx suing on its own behalf and on behalf of all its members. The Respondents were the Attorney General of Canada, Her Majesty in Right of British Columbia, the Attorney General of British Columbia, and the Nisga’a Nation.

In 1998, the Nisga’a Final Agreement (the “Treaty”) was completed

by the Nisga’a Tribal Council, Canada and British Columbia. The Appellants were members of the Nisga’a Nation who contended that the Treaty was constitutionally invalid. In particular, the Appellants argued that the provisions granting Nisga’a self-government were inconsistent with the federal and provincial distribution of powers in sections 91 and 92 of the Constitution Act, 1867, and were also an invalid delegation of legislative power because the delegated powers could not be withdrawn and purported to prevail over federal or provincial jurisdiction. The Appellants argued that the Treaty was also unconstitutional in that Nisga’a laws did not require royal assent, and the Nisga’a Government had been given

BACKGROUND

Sga’nism Sim’augit (Chief Mountain) v. Canada (Attorney General), 2013 BCCA 49Areas of Law: Aboriginal Law; Treaties and Agreements; Constitutional Law; Separation of Powers~The self-government powers granted to the Nisga’a Government in the Nisga’a Final Agreement were not improper delegations of legislative power, and were not contrary to the division of powers in the Constitution Act, 1867~

CLICK HERE TO ACCESSTHE JUDGMENT

jurisdiction over taxation and the administration of justice. Similar issues had been previously raised by others in Campbell et al v. AG BC/AG Cda & Nisga’a Nation et al, 2000 BCSC 1123 (“Campbell”). The trial decision in Campbell held that the Treaty was consistent with the division of powers, and an appeal was not pursued. In this case, the trial judge, followed Campbell on the issues it decided, and also held that the Treaty was a valid delegation of authority to the Nisga’a Government by federal and provincial legislation.


http://www.courts.gov.bc.ca/jdb-txt/CA/13/00/2013BCCA0049.htm




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Sga’nism Sim’augit (Chief Mountain), (cont.)

The Court dismissed the appeal and found that

the Treaty was constitutional and its delegation of powers was valid. The Court declined to consider whether there was an Aboriginal right to self-government: in this case, all that was necessary was to determine whether the governmental powers in the Treaty had been validly delegated to the Nisga’a Government. The Treaty was a contract among the parties and its terms should be interpreted pursuant to standard principles. The Court held that in addition to principles of contract, “a treaty must be interpreted within the constitutional framework that governs the rights and obligations of the parties” (at paragraph 69). This meant that any ambiguity should be resolved by interpretation consistent with the Treaty’s constitutionality. The Court noted that section 35 of the Constitution Act, 1982, contemplated that treaty rights could be acquired

APPELLATE DECISION

through land claims agreements, and that treaty rights were not absolute and could be infringed where it was constitutionally justified. This power to infringe or modify treaty rights, in a manner consistent with section 35 of the Constitution Act, 1982, meant that the Treaty did not grant absolute rights which could be said to fetter the Crown’s legislative discretion. The Court approved the Province’s submission that “the possibility of legislation that justifiably infringes treaty rights under s. 35 of the Constitution Act, 1982, is a complete answer to the suggestion that the delegation of legislative authority effected by the Treaty and the Settlement Legislation is an abdication of federal and provincial legislative authority” (at paragraph 80).

Regarding delegation, the Court held that there were few restrictions on the scope of permissible delegation of legislative powers, and delegates could be authorised to make laws which took precedence over existing legislation of the delegator: Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3. The rule against inter-delegation of legislative powers, set out in Attorney General of Nova Scotia v. Attorney General of Canada, [1951] S.C.R. 31, did not apply to delegation of powers to a third party such as the Nisga’a Government. Nor was there any need for the Treaty to specify the source of each delegated power, even when jointly delegated by a province and the federal


March 2013


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Sga’nism Sim’augit (Chief Mountain), (cont.)

government. The Court also held that Nisga’a laws were not subject to the requirement for royal assent, which applied only to federal and provincial laws.

Regarding taxation, the Court found that only “only Parliament (or the Legislature) may impose a tax ab initio, but that taxing authority may be delegated if Parliament or the Legislature does so clearly and unambiguously” (at paragraph 127): Confédération des syndicats nationaux v. Canada (Attorney General), 2008 SCC 68 (“Syndicats Nationaux”). In

this case, the Nisga’a Government had received a delegation of the power to “make laws in respect of direct taxation of Nisga’a citizens on Nisga’a Lands in order to raise revenue for Nisga’a Nation or Nisga’a Village purposes”. The Nisga’a Government was empowered to implement the details and mechanism of that authority. This was within the limits on delegation of taxing authority set in Syndicats Nationaux.

Regarding the power to establish courts, the Court declined to decide as the issue was wholly hypothetical and therefore not justiciable. There was at the time no Nisga’a court, and to consider the matter would have been speculative.

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BACKGROUND

Tang v. Zhang, 2013 BCCA 52Areas of Law: Real Property Law; Sale of Land; Forfeiture of Deposit~ A five-judge panel overturned the previous decision of the Court of Appeal in Agosti v. Winter and held that on a buyer’s failure to complete, sellers were entitled to retain deposits which were ‘forfeited on account of damages’ without proof of damage ~

The Appellants were Min Chih Tang and

Mei Kuen Tsang. The Respondents were Tong Zhang and West Coast Realty Group Ltd., carrying on business as Sutton Group-West Realty. The Appellants had entered into an agreement to sell their property, in the standard form contract (the “Contract”) used by the Greater Vancouver Real Estate Board. Their realtor held in trust a deposit of $100,000, but the buyer failed to complete the purchase. The Appellants sought a declaration that the deposit was non-refundable and forfeited to them without proof of damage, and an order that the agent release it to them. They later sold the property at a higher price. The Contract provided that:

“Time will be of the essence hereof, and unless the balance of the cash payment is paid and such formal


agreement to pay the balance as may be necessary is entered into on or before the Completion Date, the Seller may, at the Seller’s option, terminate this Contract, and, in such event, the amount paid by the Buyer will be absolutely forfeited to the Seller in accordance with the Real Estate Services Act, on account of damages, without prejudice to the Seller’s other remedies.”

[Emphasis of the Court of Appeal.]

Two previous decisions of the Court of Appeal came to conflicting conclusions regarding whether similar language rendered the deposit non-refundable without damage to the seller: Williamson Pacific Developments Inc. v. Johns, Southward, Glazier, Walton and Margetts (1997), 35 B.C.L.R. (3d) 180 (“Williamson”), and Agosti v.

Winter, 2009 BCCA 490 (“Agosti”). In Williamson, the contract explicitly provided that the deposit was non-refundable, and the court held that the statement that it was forfeited “on account of damages” did not require proof of damage or that deposit in excess of such damage be returned to the buyer. In Agosti, as in this case, there was no specific statement in the contract that the deposit was non-refundable. There, the Court of Appeal held that if the sale did not complete, the seller was entitled only to claim against the deposit for actual damages, and was not entitled to any excess. The trial judge noted these two lines of authorities, and found that the language in the contract in Agosti was more similar to this case. Accordingly, the trial judge ordered the return of the deposit to the buyer.




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Tang v. Zhang, (cont.)

The Court overturned Agosti and allowed the appeal,

permitting the seller to retain the deposit. The Court characterised the issue narrowly: “where a buyer fails to complete the purchase as required (thus effectively repudiating the contract), and has paid a ‘deposit’ that the contract states is to be forfeited to the seller ‘on account of damages’, must damages be proven in order for the seller to retain the deposit?” (at paragraph 1).

The Contract was a standard form and the deposit term had not been negotiated by the parties. In such a case, the agreement was to be construed according to its meaning at common law: Hundley v. Garnier, 2012 BCCA 199, at paragraph 74. The Court considered the historical treatment of deposits, including Howe v. Smith (1884), 27 Ch. D. 89, and Workers Trust & Merchant Bank Ltd v. Dojap Investments Ltd., [1993] 2 All E.R. 370 (“Workers Trust”). The Court adopted the statement in Workers Trust that:

“One exception to this general rule [against penalties] is the provision for the payment of a deposit by the

APPELLATE DECISION purchaser on a contract for the sale of land. Ancient law has established that the forfeiture of such a deposit (customarily 10% of the contract price) does not fall within the general rule and can be validly forfeited even though the amount of the deposit bears no reference to the anticipated loss to the vendor flowing from the breach of contract.

Ever since the decision in Howe v. Smith the nature of such a deposit has been settled in English law. Even in the absence of express contractual provision, it is an earnest for the performance of the contract: in the event of completion of the contract the deposit is applicable towards payment of the purchase price; in the event of the purchaser’s failure to complete in accordance with the terms of the contract, the deposit is forfeit, equity having no power to relieve against such forfeiture.”

[Workers Trust at 373, emphasis of the Court of Appeal.]

Therefore, unless a deposit was in fact a part payment of the purchase price (as in Conner v. Bulla, 2010 BCCA 457), or was actually a penalty, it was non-refundable by definition. The use of the words “on account of damages” did not mean that the deposit was to be forfeited because of damages. Rather, it meant that the deposit was to be applied against any damages suffered by the seller, and the seller could not recover both the deposit and damages in respect of the same loss. Where no loss was proven, the seller could nonetheless retain the deposit.




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“It was generally understood that a deposit in a contract of purchase and sale would

be forfeited to the vendor if, in breach of contract, the purchaser failed to complete (subject to the vendor being ready, willing and able to do so at the closing date). The Court’s decision in Agosti v.

Winter1, a brief oral decision, displaced the general understanding. The Court of Appeal found that the language of the standard form contract of purchase and sale, which had been in use in various iterations for years, mandated that the vendor prove damages in order to claim entitlement to any of the deposit. This was contrary to the Court’s earlier decision in Williamson.

The practical effect was, in a rising market, purchasers could default on their obligations with impunity, or at least a good chance of getting some of the deposit back. This undermines the rationale for a deposit.

In Tang v. Zhang2, the Court of Appeal was presented an opportunity to clarify the conflict between Williamson and Agosti and, more generally, clarify the nature of a deposit and the legal consequences of characterizing a payment as a deposit.

Interestingly, the summary trial judge in Tang v. Zhang commented that this matter was destined for the Court of Appeal.

The appellants requested a five-member panel of the Court, which was initially denied. Approximately one month before the hearing the Court decided that a five-member panel needed to be convened.

1 2009BCCA4902 2013BCCA52

COUNSEL COMMENTSTang v. Zhang

Comments provided by Joel Morris and Wesley McMillan, Counsel for the Appellants

Wesley McMillanJoel Morris


March 2013


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COUNSEL COMMENTSRelying heavily on the English Court of Appeal decision, Howe v. Smith3, the Court traced the legal history of deposits to ancient Roman law. It found that a deposit is, as a matter of definition, a payment to be forfeited should the purchaser fail to complete the contract. The Court then set out a helpful summary of the legal principles to be applied when a payment is identified as a deposit.

Importantly, the Court’s decision is in accord with the implicit understanding of participants in the real estate market. Vendors evaluate offers not only on price, but also on the amount of the deposit to be paid. The greater the deposit, the better the offer. Similarly, purchasers may include a more significant deposit to show their commitment to the contract and to entice a vendor to accept one offer over a similar (or better) offer that contains a lesser deposit.

The Court’s decision cleared up an important area of confusion in the residential real estate industry. A vendor faced with a defaulting purchaser has to make a choice whether to accept the repudiation and sue for damages, or refuse to accept the repudiation and keep the contract alive. It is critical for a vendor in that position to know exactly his or her rights to the deposit in order to make a sound decision. Similarly, a purchaser who may default on a purchase needs to know his or her rights in relation to the deposit. Tang v. Zhang provides clarity for both vendors and purchasers.”

3 (1884)27Ch.D.89,[1881-5]AllE.R.Rep.201




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BACKGROUND

Edenvale Restoration Specialists Ltd. v. British Columbia (Finance), 2013 BCCA 85Areas of Law: Taxation; Partnership Law; Sales Tax

~Sale of goods by a person to a partnership of which that person was a limited partner was not exempt from sales tax for any portion of the sale value~

The Appellant was Her Majesty the Queen in

right of British Columbia (the “Province”). The Respondent was Edenvale Restoration Specialists Ltd. In 2007, the Respondent sold $35 million of its assets to an Ontario partnership in which the Respondent held a 15% interest as a limited partner. The Respondent paid social services tax on only 85% of the value of the tangible personal property included in the sale.

The Partnership Act, R.S.B.C. 1996, c. 348 (the “Partnership Act”) provided at section 57 that limited partners could not take part in the management of the business, and at section 61 that limited partners shared in the assets of the partnership. The Social Service Tax Act, R.S.B.C. 1996, c. 431 (the “Tax Act”), as it was at the time of the transaction, levied a 7% tax

on the sale price of tangible personal property.

In chambers, the judge considered the decision of the Court of Appeal in Seven Mile Dam Contractors v. British Columbia (1979), 104 D.L.R. (3d) 274 (“Seven Mile”), which held that general partners had a property interest in the assets of a partnership. The chambers judge concluded that limited partners had the same property interest in partnership assets, and


the general partner acted as their agent when it acquired property on behalf of the partnership. Because the Respondent was a 15% limited partner in the purchaser of the assets, that portion of the purchased value was not transferred, but remained with the Respondent as beneficial owner. Accordingly, no tax was payable on that 15% of the value which was not beneficially transferred.




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The appeal was allowed and the Respondent ordered

to pay tax on 100% of the sale price of the transferred property. The Court considered that the different natures of general and limited partnerships distinguished this case from Seven Mile and merited separate consideration of the tax consequences of a sale of property. Seven Mile held that the general partners, and not the general partnership, were the “purchasers” of the transferred property for the purposes of the Tax Act. The Tax Act defined ‘purchaser’ as:

“a person who acquires tangible personal property at a sale in British Columbia

(i) for the person’s own consumption or use,

(ii) for consumption or use by another person at the expense of the person acquiring the property, or

(iii) on behalf of or as agent for a principal, if the property is for consumption or use by the principal or by another person at the expense of that principal...”

In this case, the ability of

APPELLATE DECISION the partners to be involved in the business of the partnership was limited by the partnership agreement, which gave the general partner the right to acquire assets. Accordingly, the limited partners could not be considered purchasers of assets so acquired by the general partner. The general partner, on the other hand, had acquired property on behalf of or as agent for a principal for consumption or use by the principal or by another person at the expense of that principal, as stated in the definition of “purchaser” in the Tax Act. Therefore, the general partner was required to pay the tax levied by the Tax Act in respect of the entire purchase price of the tangible personal property it acquired. The limited partners’ ownership interest in the assets did not affect the matter: the issue was who was considered to be the purchaser as defined in the Tax Act.

Edenvale Restoration Specialists Ltd, (cont.)

Records and DocumentationIf you are carrying on a business, you are required to keep adequate records that provide sufficient details and support to determine how much tax you owe. Estimates and incomplete information are not acceptable to CRA. In this regard, I refer you to CRA’s Guide RC4409 Keeping Records, which can be found on CRA’s Website.

A CompanyAnother way to do business is through a company. A company is a separate legal entity that can undertake to do business and own property in its own name. A company has its own requirements to file tax returns, pay taxes, and meet other obligations. A company pays tax at different rates than does an individual proprietor.

There may be circumstances where it is tax-efficient to do business through a company or where liability issues make incorporation a prudent choice.

There are costs associated with incorporation, however. Before making a decision, you should carefully consider the costs of incorporating and carrying on an incorporated business and compare them to the benefits that would be gained by doing so.

Professional advice is recommended to assist you in making this assessment.

CautionThis article is not intended to provide a complete summary of issues and requirements relating to individuals in business; it highlights a few preliminary considerations. The comments provided herein are based on information available at the time of writing and are general in nature. We recommend that individuals consult their own tax advisors before acting on information contained in this article, to ensure that their own specific circumstances and current tax legislation are taken into account. s

Kathryn G. Edwards, CA, is a Partner with Pagnanini Edwards Lam Chartered Accountants.

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52 The Society of Notaries Public of British Columbia Volume 19 Number 2 Summer 2010


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This was a civil forfeiture action in

rem. The Appellant was Barry Patrick Crowley as owner of the goods in question. The Respondent was Director of Civil Forfeiture (the “Director”). In a search of the Appellant’s home as part of a criminal investigation, the RCMP discovered almost $100,000 in cash. The Appellant pleaded guilty to possession of controlled substances and prohibited firearms, and the Provincial Court judge ordered the money forfeited to

Canada. Canada retained only a portion, and the Director of Civil Forfeiture sought an order pursuant to section 5 of the Civil Forfeiture Act, S.B.C. 2005, c. 29 (the “Act”), forfeiting the remainder to the Province.

The Director applied to strike the Appellant’s response due to his conduct in the action. The Appellant did not attend the hearing and the chambers judge ordered that the action should proceed as if the Appellant had filed no response. Thereafter, the Director applied for forfeiture of the cash and the Appellant’s home. The Appellant was served

BACKGROUND

British Columbia (Director of Civil Forfeiture) v. Crowley, 2013 BCCA 89Areas of Law: Civil Procedure; Striking Pleadings; Appearance by Non-parties; Civil Forfeiture~In a proceeding for civil forfeiture, Courts were required to consider whether the forfeiture was clearly not in the interests of justice. Where the owner’s pleadings were struck, the interests of justice required the Court to allow them to appear as a non-party ~


as a “person who may be affected” by the order. At the hearing, a second chambers judge refused the Appellant’s requests for an adjournment and to participate in the hearing, and granted the forfeiture orders.

The Appellant argued that the chambers judges erred in striking his pleadings, in failing to provide reasons, in failing to grant the Appellant the right of audience, and in granting forfeiture where it was not in the interest of justice to do so.




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British Columbia (Director of Civil Forfeiture), (cont.)

The appeal was allowed in part: the order striking the Appellant’s

response was upheld, but the orders granting forfeiture and refusing the Appellant’s request to participate in the hearing of those orders were overturned. Striking the Appellant’s pleadings was a ‘draconian’ remedy: Microsoft v. Eurocopter S.A., 2003 BCCA 229 (at paragraph 4). In an application to strike pleadings, a court

APPELLATE DECISION

must take into account any explanations offered by the party, and should grant the order only in extreme cases, after a second chance had been granted to the party to remedy their conduct, where the remedy was proportional to the conduct, and where there was no lesser remedy that would cure the problem: British Columbia (Director of Civil Forfeiture) v. Zacchiana, 2011 BCSC 989 (at paragraph 54). In this case, the Appellant’s repeated failure to comply with court

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British Columbia (Director of Civil Forfeiture), (cont.)

orders and appear at proceedings had prevented the litigation from proceeding. This appropriately grounded an order to strike his pleadings.

The Court reviewed the objectives of the Act, which were “(a) to take the profit out of unlawful activity; (b) to prevent the use of property to unlawfully acquire wealth or cause bodily injury; and (c) to compensate victims of crime and fund crime prevention and remediation”: British Columbia (Director of Civil Forfeiture) v. Onn, 2009 BCCA 402. These objectives were to be balanced with protection from the arbitrary exercise of state power. In this respect, the Court noted section 6 of the Act, which provided that a court could refuse an order for forfeiture where it was “clearly not in the interests of justice”. The Court adopted the Supreme Court’s decision in British Columbia (Director of Civil Forfeiture) v. Rai, 2011 BCSC 186 (at paragraph 113), regarding the requirement to consider section 6 in an application for forfeiture, and the factors that played a part in that consideration.

APPELLATE DECISION

When taking a person’s property, the Court was required to ensure that procedural rights were observed. Where an owner of property to be forfeited did not participate in the hearing, the Court was nonetheless required to consider whether the forfeiture was clearly not in the interests of justice: R. v. Craig, 2009 SCC 23. In this case, the Appellant was a person affected by the orders sought in the application, and had requested permission to appear at the hearing. It was within the discretion of the chambers judge to allow non-parties to participate in the hearing, and the Appellant should have been permitted to appear, in the interest of justice: Ngo v. South Pacific Development, 2006 BCCA 182, and Vancouver (City) v. Maurice, 2005 BCCA 37.


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OnPoint is a law firm of on-call

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BC Take Five March 2013

Documents

Transcript of BC Take Five March 2013