French v. The Queen - court rejects bijuralism argument in defining gifts under the ITA

February 17, 2015 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, Ethics and Canadian Charities, Avoiding 'Charity' Scams

In a recent case French v. The Queen, 2015 TCC 35, the CRA asked that certain arguments related to defining a gift be struck as they had no hope of success. Campbell J. Miller of the Tax Court of Canada agreed with CRA.   The argument made by a group that had invested in an abusive charity gifting tax scheme (Ideas Canada Foundation) relates to bijuralism or that within Canada there are two legal traditions (namely common law and civil law) and that they have slightly different views on a gift and that there was ambiguity in the common law definition and that the civil law definition should be used to interpret what is a gift.. The court concluded that the bijuralism argument is not novel and that it is hopeless.   "I find reliance on Québec laws to interpret common law, when the common law is clear, is not arguable."  TCC continued "I find no basis upon which the Appellants can mount any argument that would extend the civil law definition of gift to the advantage of taxpayers in common law jurisdictions for purposes of the Charitable Donation Tax Credit. Their position with respect to this argument is hopeless."  The TCC found that with respect to the definition of a gift "There is no confusion. There is no ambiguity."   

Interestingly "None of the Appellants made the purported donations in Québec."

Here are some quotes from the decision:

[2]             These Appeals all relate to the same issue, being the Appellants’ entitlement to tax credits in connection with purported donations to Ideas Canada Foundation, a registered charity. Such entitlement to a similar donation made by Ms. Kossow to Ideas Canada Foundation was denied by the Tax Court of Canada, which decision was affirmed by the Federal Court of Appeal (Kossow v R, 2013 FCA 283) (“Kossow Appeal”). The Appellants have added arguments in their Appeals which were not made by Ms. Kossow, and they wish to be given an opportunity to make them. One of the arguments is what the Respondent wishes to have struck on the basis it is plain and obvious it has no chance of success.

...

[17]        The Appellant’s argument is premised on a principle that when there is confusion in the common law one can look to civil law. I have been provided no authority to suggest that. In any event, this is based on the Appellants’ perception that “gift”, while clearly defined in civil law, is ambiguous in common law. Again, with respect, I disagree with that notion. Simply because the common law system has no codified definition of gift, that does not mean the expression has not been clearly defined. There is a plethora of common law jurisprudence which has very clearly established what is required for a common law gift, most succinctly put in The Queen v Friedberg, 92 DTC 6031 (FCA), which was adopted in the more recent case of Maréchaux v R, 2010 FCA 287:

… a gift is a voluntary transfer of property owned by a donor to a donee, in return for which no benefit or consideration flows to the donor.

[18]        There is no confusion. There is no ambiguity. There is no need to seek assistance from civil law jurisdictions, Québec or elsewhere, even if such a principle existed. Again, I see no argument to be made.

[19]        The Appellants suggest that common law has acknowledged the concept of split receipting for a long time (see for example Woolner v Canada, [1997] T.C.J. No. 1395). I presume this is raised to convince me that the common law concept of gift is murky. Reliance on Woolner does not justify looking to Québec law, but goes more to the Appellants’ view of the correctness of the Maréchaux, Kossow and R v Berg, 2014 FCA 25 decisions. Again, it certainly does not sway me that there is any confusion with respect to the common law meaning of “gift”.

...

[22]        I find no basis upon which the Appellants can mount any argument that would extend the civil law definition of gift to the advantage of taxpayers in common law jurisdictions for purposes of the Charitable Donation Tax Credit. Their position with respect to this argument is hopeless.

The full decision is located at:  French v. The Queen 2015 TCC 35

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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

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