GIBRALT CAPITAL CORPORATION Appellant v. HER MAJESTY THE QUEEN, 2003 FCA 165

Date: 20030326 Docket: A-243-02 Neutral citation: 2003 FCA 165 CORAM: DÉCARY J.A. NOËL J.A. SHARLOW J.A. BETWEEN: GIBRALT CAPITAL CORPORATION Appellant and HER MAJESTY THE QUEEN Respondent Heard at Vancouver, British Columbia on March 26, 2003. Judgment delivered at Vancouver, British Columbia on March 26, 2003. REASONS FOR JUDGMENT BY: SHARLOW J.A. Date: 20030326 Docket: A-243-02 Neutral citation: 2003 FCA 165 CORAM: DÉCARY J.A. NOËL J.A. SHARLOW J.A.

BETWEEN: GIBRALT CAPITAL CORPORATION Appellant and HER MAJESTY THE QUEEN Respondent REASONS FOR JUDGMENT SHARLOW J.A. [ 1 ] This is an appeal from a judgment of the Tax Court dismissing an appeal of an income tax assessment for 1995: Gibralt Capital Corp. v. Canada , 2002 CanLII 937 (TCC) , 2002 D.T.C. 1601, [2002] 2 C.T.C. 2873 (T.C.C.). The only issue is whether the Tax Court Judge was correct in concluding that

section 80 of the Income Tax Act , R.S.C. 1985 (5 th supp.), c. 1 , applies to the January 1995 forgiveness of a debt of $9,064,900 owed by Provincial Credit Corp. Ltd. (Provincial), a corporate predecessor of the appellant. [ 2 ] This appeal can succeed only if we accept the argument of the appellant that the $9,064,900 debt came into existence by novation resulting from an agreement dated August 1, 1993.

Pursuant to that agreement, Provincial was released from its joint and several obligation for approximately $36 million of debt but remained solely liable for part of that debt in the amount of $9,064,900. [ 3 ] In this Court, counsel for the appellant argued that a novation always occurs when a joint and several debt becomes the sole liability of one of the debtors. We need not deal with that point. The relevant question, in our view, is whether the $9,064,900 debt after August 1, 1993 is part of the same debt for which Provincial was jointly and severally liable before that date.

That question was answered by the Tax Court Judge in the Crown's favour.

[ 4 ] The Tax Court Judge found as a fact that the $9,064,900 debt represents in substance what was always Provincial's share of the joint and several debt. He also found that the August 1, 1993 agreement was not intended to substitute one debt for another, or to substitute debtors. There is evidence to support those findings of fact, and the record discloses no basis for interfering with them. [ 5 ] The appellant raised an alternative argument that if

section 80 applies, it should apply only to a portion of the $9,064,900 debt. This argument was not raised in the Tax Court. We are not satisfied that the record provides a sufficient factual foundation for this argument. [ 6 ] For these reasons, this appeal will be dismissed with costs. (Sgd.) "Karen R. Sharlow" J.A. FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-243-02 STYLE OF CAUSE: Gibralt Capital Corporation v. Her Majesty The Queen PLACE OF HEARING: Vancouver DATE OF HEARING: March 26, 2003 REASONS FOR Judgment : SHARLOW J.A.

CONCURRED IN BY: DATED: March 26, 2003 APPEARANCES : Mr. Joel Nitikman FOR THE APPELLANT Ms. Lynn Burch FOR THE RESPONDENT SOLICITORS OF RECORD : Fraser Milner Casgrain LLP FOR THE APPELLANT Vancouver Mr. Morris Rosenberg FOR THE RESPONDENT Deputy Attorney General of Canada