An individual, by virtue of being part of a group of class action claimants, was awarded damages in 2004 of $1,200 for each of the eight winter seasons in which she had endured snowmobile noise. In 2010 she received damages pursuant to Article 1619 of the Quebec Civil Code of $8,400 (capital) and $6,148 (interest). Whether the interest was taxable under the Taxation Act turned on when her damages were considered to have become “liquidated.”
This liquidation date did not occur until October 1, 2009, being the later of the date on which the Attorney General of Quebec and the relevant Municipality had abandoned their appeals which had been launched in December 2004 - so that only the awarded interest that was referable to the period after that date was taxable to the individual, and even though the precise quantum of the amount payable to that individual was not established until the judgment of the Court Clerk issued on March 3, 2010. Gagné JCA stated (at paras. 41-43, 48-49, TaxInterpretations translation):
[O]ne cannot speak of interest in the strict sense unless the debt is both certain and liquidated. These two qualities arise at the time when the judgment becomes res judicata, that is, when it is not, and is no longer, subject to appeal. As long as the validity and/or the amount of the debt is the subject to debate on appeal, it cannot constitute a debt that is certain and liquidated or, in other words, a capital sum on which interest may accrue.
On the other hand, the debt does not have to be due and payable to bear interest. It is sufficient (and here I paraphrase Rand J. in … Farm Security …) that there be a use or retention by one person of a sum of money belonging to or owed to another. This, in my view, is a debt that is certain and liquidated.
I conclude that interest and additional compensation become interest proper, and therefore taxable interest, at the time the judgment awarding it became res judicata. In most instances, this will be the time when the debt is due. But not here … .
Once the November 30, 2004 judgment became res judicata, there was a definite sum owing (a liquidated and certain debt) on which actual interest could accrue.
The fact that [the Quebec Attorney General] was unaware of the extent of the members' claims at the time is irrelevant. …[T]he determination of whether an amount received or receivable is interest income must be made from the perspective of the taxpayer.