Immunovaccine Technologies Inc. in Federal Court of Appeal September 2014

Date: 20140911

Docket: A-171-13

Citation: 2014 FCA 196

CORAM: NADON J.A.

TRUDEL J.A.

BOIVIN J.A.

BETWEEN:

IMMUNOVACCINE TECHNOLOGIES INC.

Appellant

and

HER MAJESTY THE QUEEN

Respondent

Heard at Halifax, Nova Scotia, on September 9, 2014.

Judgment delivered at Fredericton, New-Brunswick, on September 11, 2014.

REASONS FOR JUDGMENT BY: BOIVIN J.A.

CONCURRED IN BY: NADON J.A.

TRUDEL J.A.

Date: 20140911

Docket: A-171-13

Citation: 2014 FCA 196

CORAM: NADON J.A.

TRUDEL J.A.

BOIVIN J.A.

BETWEEN:

IMMUNOVACCINE TECHNOLOGIES INC.

Appellant

and

HER MAJESTY THE QUEEN

Respondent

REASONS FOR JUDGMENT

BOIVIN J.A.

[1] The appellant appeals from a decision of Lamarre J. (the Judge) of the Tax Court of

Canada, dated April 10, 2013.

[2] The Judge upheld the decision of the Minister of National Revenue that the payments the

appellant received from the Atlantic Canada Opportunities Agency (ACOA) for the tax years

2005, 2006, 2007, and 2008 were “government assistance” pursuant to subsection 127(9) of the

Income Tax Act, R.S.C. 1985, c. 1 (5 th Supp.) (the Act). As government assistance, these sums

reduce the amount of scientific research and experimental development expenses that the

appellant can claim for the tax years in question.

[3] The appellant, a research and development company, develops vaccines against

infectious diseases. ACOA is a federal agency established to support the economic development

of the Atlantic region.

[4] On December 31, 2004, the appellant concluded an agreement with ACOA for close to

$3,8 million in funding over the years 2005-2008 (the Agreement). Altogether, the appellant

received $3,786,474 from ACOA under this Agreement.

[5] In March 2008, the Minister of National Revenue determined that the above amounts

constituted government assistance.

[6] The Judge found that ACOA, in entering into the Agreement with the appellant, was

carrying out its object and exercising its powers under the Atlantic Canada Opportunities Agency

Act (R.S.C., 1985, c. 41 (4 th Suppl.)). Hence, based on the evidence and the context, the

contribution by ACOA constituted “government assistance” within the meaning of subsection

127(9) of the Act and was not a regular loan advanced on reasonable terms for business

purposes.

[7] The appellant contends that the Agreement entered into with ACOA does not amount to a

“forgivable loan” pursuant to subsection 127(9) of the Act but constitutes instead a “regular

loan” which is not part of the definition in subsection 127(9) of the Act. The appellant thus

argues that the Judge erred in law by interpreting the term “government assistance” as defined in

subsection 127(9) of the Act and then applying this interpretation in respect of the Agreement

between the appellant and ACOA.

[8] Finding of facts and mixed fact and law of the Judge are reviewable under the standard of

palpable and overriding error (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235).

[9] In the present case, the Judge thoroughly reviewed the facts and the parties’ arguments.

After careful consideration of the record and of counsel’s written and oral submissions, I propose

to dismiss the appeal. The appellant has not convinced me that the Judge committed a reviewable

error which would warrant the intervention of this Court.

[10] In Canada v. CCLC Technologies Inc., 139 D.L.R. (4th) 765, 96 D.T.C. 6527 [CCLC

Technologies], this Court adopted a test which determines whether payments made by a public

authority, akin to ACOA and pursuant to an agreement, have the attributes of a commercial

venture. In other words, the key question becomes: is the public authority in question acting in a

business rather than a governance capacity?

[11] The Judge made reference to and applied the test developed in CCLC Technologies as to

whether the government body acted “in exactly the same way for exactly the same reasons as

payments made by private business, that is, for the purpose of advancing the [business] interests

of the payor” (Judge’s reasons at para. 46).

[12] The Judge further considered the line of jurisprudence that resulted in CCLC

Technologies, namely Canada v. Consumers’ Gas Co., [1987] 2 F.C. 60, [1987] 1 C.T.C. 79

(FCA) [Consumers’ Gas] and Ottawa Valley Power Co. v. Minister of National Revenue,

[1969] 2 Ex.C.R. 64, 69 D.T.C. 5166, confirmed on appeal to the Supreme Court in Ottawa

Valley Power Company v. Minister of National Revenue, [1970] S.C.R. 941, [1970] C.T.C. 305.

[13] I note that the appellant does not dispute that the CCLC Technologies test has been

adopted to determine whether a payment constitutes “government assistance” for purposes of the

Act. Rather, the appellant argues that it does not need to satisfy this test as it is in essence a

“judge-made-rule”. Relying heavily on the ejusdem generis rule of statutory interpretation, the

appellant urges the Court to interpret the text of subsection 127(9) as limiting the scope of

“assistance” instead of applying the existing CCLC Technologies test. However, I am of the

opinion that the appellant’s proposed textual interpretation of subsection 127(9) must fail for the

following reasons.

[14] Subsection 127(9) of the Act is a definitions provision. Amongst other terms, it defines

“government assistance” as follows:

“government assistance” means « aide gouvernementale » Aide reçue

assistance from a government, d’un gouvernement, d’une

municipality or other public authority municipalité ou d’une autre

whether as a grant, subsidy, forgivable administration sous forme de prime,

loan, deduction from tax, investment subvention, prêt à remboursement

allowance or as any other form of conditionnel, déduction de l’impôt ou

assistance other than as a deduction allocation de placement ou sous toute

under subsection 127(5) or 127(6). autre forme, à l’exclusion d’une

déduction prévue au paragraphe (5) ou

(6).

[15] It is worthy of note that the phrase “assistance from a government” precedes an

enumeration: grant, subsidy, forgivable loan, deduction from tax, investment allowance.

However, the words “or as any other form of assistance” immediately follow this enumeration.

Contrary to the appellant’s contention -and as the Judge found at paragraph 45 of her reasons –

such phrasing does not restrict the form of assistance included in subsection 127(9). Instead, it

provides a broad meaning to the word “assistance,” capable of encompassing a variety of forms

of government assistance not necessarily limited to the said enumeration. Accordingly, this

definition can include agreements which are not purely gratuitous and unilateral.

[16] Finally, I agree with the Judge that the language of the Agreement entered into by the

parties indicates that their intention was to consider the contribution as “government assistance”

and not as an ordinary business arrangement. Indeed, several substantive provisions in the

Agreement and the schedules clearly point in that direction: the Agreement contains reporting

requirements; the appellant is required to pay the contribution but only to the extent and as a

percentage of gross income earned; the Agreement ends in 2017 whether or not there has been

repayment; and the most ACOA can expect is the return of its contribution without interest.

[17] I cannot detect any error in the Judge’s interpretation of the Agreement.

[18] For these reasons, the appeal should be dismissed with costs.

“Richard Boivin”

J.A.

“I agree

M. Nadon J.A.”

“I agree

Johanne Trudel J.A.”

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-171-13

STYLE OF CAUSE: IMMUNOVACCINE

TECHNOLOGIES INC. v. HER

MAJESTY THE QUEEN

PLACE OF HEARING: HALIFAX, NOVA SCOTIA

DATE OF HEARING: SEPTEMBER 9, 2014

REASONS FOR JUDGMENT BY: BOIVIN J.A.

CONCURRED IN BY: NADON J.A.

TRUDEL J.A.

DATED: SEPTEMBER 11,2014

APPEARANCES:

Bruce Russell, QC FOR THE APPELLANT

IMMUNOVACCINE

TECHNOLOGIES INC.

Daniel Bourgeois FOR THE RESPONDENT

Frédéric Morand HER MAJESTY THE QUEEN

SOLICITORS OF RECORD:

McInnes Cooper FOR THE APPELLANT

Halifax, Nova Scotia IMMUNOVACCINE

TECHNOLOGIES INC.

William F. Pentney FOR THE RESPONDENT

Deputy Attorney General of Canada HER MAJESTY THE QUEEN