Court of Appeal of Quebec

Agence du revenu du Québec c. Bernardin

500-09-028183-192

Marcotte, Gagné, Fournier

Appeal from a judgment of the Court of Quebec allowing an appeal from an assessment. Principal appeal allowed in part and incidental appeal dismissed.

The respondent was a member of a class action instituted in the early 2000s. On November 30, 2004, a judgment ordered the individual recovery of the class members’ claims. There was then an appeal, followed by a discontinuance, and an agreement was reached on the terms of execution for the judgment. This agreement was approved on November 9, 2009.

On March 3, 2010, the clerk rendered a decision on the respondent’s individual claim. As compensation, she was awarded $8,400 in capital, with interest and the additional indemnity, for a total of $14,547. In 2012, the Agence du revenu du Québec (ARQ) issued her a new notice of assessment for fiscal 2010 to add to her income the interest she received for the period after the judgment rendered in November 2004, that is, $2,084.

The respondent contested that assessment and the trial judge allowed her appeal. According to him, the judgment rendered in November 2004 determined the indemnity granted to each class member. The judgment rendered in November 2009 approving the agreement on the terms of execution was merely ancillary, and the judgment rendered by the clerk in March 2010 was merely the last step in the execution of the final judgment. That being said, the judge noted that the judgment rendered in November 2004 became res judicata only on July 3, 2009, when the appeal was discontinued. He therefore concluded that interest and the additional indemnity should have been included in the calculation of the respondent’s income only as of that date. The ARQ is instead of the view that for the purposes of applying s. 87(c) of the Taxation Act (CQLR, c. I-3), the starting point for calculating interest is the judicial liquidation of the debt, which occurred when the judgment on the class action was rendered on November 30, 2004, notwithstanding appeal. The respondent claims that the interest was taxable only as of the clerk’s decision on her individual claim, that is, March 3, 2010.

Interest and the additional indemnity become taxable when the judgment awarding them becomes res judicata. In most cases, this time corresponds to the time the debt becomes due, but that is not the case here. The judgment on the class action ordering individual recovery terminates the “collective” aspect of the dispute, but it does not determine the class members’ claims and does not necessarily create a certain and liquid debt in their favour.

In this case, the judgment rendered on November 30, 2004, on the class action liquidated the damages due to the class members and did not provide for any specific means that could be used against them individually. The only issue remaining to be decided at the individual recovery stage was the status of the class members for each period. As soon as the judgment rendered on November 30, 2004, became res judicata, an amount that was determinate and owed (a liquid and certain debt), on which bona fide interest could accrue. The fact that the size of the members' claims was then unknown is irrelevant. The judge therefore did not err in concluding that the respondent had to include in her taxable income the interest accrued and the additional indemnity after the judgment on the class action had become res judicata. That date is October 1, 2009, that is, the date the last appeal was discontinued.

Text of the decision: Http://citoyens.soquij.qc.ca

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