Part 1 of 2
[Translated by Google Translate from French to English]
Reference: 2022 CCI 66
Date : 20220621
Dossier : 2018-1782(IT)G
BETWEEN :
JONATHAN DUHAMEL, and HER MAJESTY THE QUEEN,
Pursuant to the attached reasons, appeals from reassessments made under the Income Tax Act (the "Act") for the 2010, 2011 and 2012 taxation years are allowed, with costs to the appellant, and the reassessments are referred to the Minister of National Revenue for reconsideration and reassessment on the understanding that the net earnings from Mr. Duhamel's poker gambling activities should not be included in the calculation of its income under sections 3 and 9 of the Act for the 2010, 2011 and 2012 taxation years.
Page : 2
The parties have until July 22, 2022 to reach an agreement on costs. Failing an agreement within this period, the parties must file their written observations of no more than 10 pages with the Court no later than August 26, 2022.
Signed at Montreal, Quebec, this 21st day of June 2022.
“Dominique Lafleur” Judge Lafleur
BETWEEN :
JONATHAN DUHAMEL,
appellant,
and
HER MAJESTY THE QUEEN,
respondent.
REASONS FOR JUDGMENT
Justice Lafleur
I. CONTEXT
The appellant, Jonathan Duhamel, won the No-Limit (" No-Limit ") Texas Hold'em type poker tournament at the World Series of Poker ("WSOP") Main Event held in Las Vegas during the months of July and November 2010, pocketing millions of dollars, when he was 23 years old. By winning this tournament, Mr. Duhamel was crowned world poker champion. Over the next few years, Mr. Duhamel continued to play poker and make net winnings from his poker gambling activities.
Following Mr. Duhamel's victory in the WSOP Main Event , Rational Entertainment Enterprises Limited, doing business as PokerStars (“PokerStars”), entered into an agreement (the “PokerStars Agreement”) whereby it undertook to pay the sum of US$1 million to Jonathan Duhamel Consulting Inc. (“JD Co.”) incorporated by Mr. Duhamel in October 2010. In return for the payment of this sum to JD Co., Mr. Duhamel agreed to act as a spokesperson for PokerStars and participate in promotional events as well as a number of online and face-to-face tournaments. This sponsorship agreement was renewed annually until 2015, in return for lesser amounts paid by PokerStars.
The Minister of National Revenue (the “Minister”) concluded that Mr. Duhamel was carrying on a business through his poker gaming activities, and thus issued notices of
Page : 2
tax reassessments to that effect under the Income Tax Act (RSC (1985), c. 1 (5th supp.)) (the “Act”). The Minister therefore added the following amounts in the calculation of Mr. Duhamel's income, for the 2010, 2011 and 2012 taxation years, as business income: $4,867,138, $568,017 and $849,788 , respectively. According to the Minister, these amounts reflect the net winnings of the poker tournaments in which Mr. Duhamel participated during the years in question.
At the start of the hearing, the parties filed a consent to judgment dated November 1 , 2021 pursuant to which they agree to the amount of net poker winnings earned by Mr. Duhamel during the taxation years in question, that is, $4,866,117 for the 2010 taxation year; $383,916 for 2011 and $106,775 for 2012. Thus, the quantum of net poker winnings is not in dispute before the Court. The parties have therefore agreed that if the Court concludes that Mr. Duhamel's poker gaming activities constitute a source of business income for him for the purposes of the Act, he must then include in the calculation of his income the net earnings derived from poker gaming activities as set forth in the Consent to judgment.
Mr. Duhamel testified at the hearing, as did his accountant and the Canada Revenue Agency auditor responsible for auditing Mr. Duhamel's file. The respondent called journalists as well as a friend of Mr. Duhamel to testify.
In addition, the parties called expert evidence on whether the game of No-Limit Texas Hold'em poker is a game of chance or skill.
The expert presented by the appellant is Professor Matthieu Dufour, PhD (Mathematics), ASA (Associate of the Society of Actuaries) and professor of actuarial science in the mathematics department of the Université du Québec à Montréal ("M. Dufour "). The Court recognized Mr. Dufour as an expert in mathematics, actuarial science and game theory.
The expert presented by the respondent is Mr. Randal D. Heeb, PhD (Economics), consultant economist and partner of the economic consulting firm Bates White LLC. The Court recognized Mr. Heeb as an expert in economics and game theory.
In these reasons, when the Court refers to the game of poker, it is referring to the game of no-limit Texas Hold'em type poker. Also, any provision
Page : 3
legislation to which reference is made is a provision of the Act, unless otherwise specified.
II. ISSUE
The only issue before the Court is as follows: whether the net winnings derived from Mr. Duhamel's poker gaming activities must be included in the calculation of his income as income from a source that is a business under sections 3 and 9, for the 2010, 2011 and 2012 taxation years.
As indicated above, the quantum of net winnings from Mr. Duhamel's poker gaming activities is not in dispute before the Court. Furthermore, the income of JD Co., including the sums paid by PokerStars under the PokerStars Agreement, as well as the sums paid by JD Co. to Mr. Duhamel as dividends or otherwise, are not in dispute before the courtyard.
III. THESES OF THE PARTIES
3.1 Appellant
According to the appellant, since poker is a game of chance, the winnings from poker gambling activities are not taxable under the Act since there could not then be carrying on a business, even if it had been demonstrated that Mr. Duhamel had a serious business plan and was employing strategies to minimize his risks. The Court does not have to determine whether chance prevails over skill in poker, but simply to establish that there is an element of chance in the game of poker.
Page : 4
Furthermore, if the Court concludes that the game of poker can constitute an activity consisting of the carrying on of a business despite the element of chance inherent in this game, the game of poker was a hobby and a leisure for Mr. Duhamel. Thus, the winnings that Mr. Duhamel made from this game should not be taxed as income from the operation of a business.
In such a case, given the factors enshrined by the Supreme Court of Canada in Stewart v. Canada, 2002 SCC 46 (“ Stewart ”), as well as the principles flowing from Cohen v. The Queen, 2011 CCI 262 (“ Cohen ”), Luprypa v. The Queen, [1997] 3 CTC 2363, [1997] ACI no 469 (TCC) (“ Luprypa ”), Leblanc v. The Queen, 2006 TCC 680 (“ Leblanc ”) and Radonjic v. Canada (Revenue Agency), 2013 FC 916 (“ Radonjic ”), winnings from poker gambling activities will only be considered business income for Mr. Duhamel if he had the predominant subjective intention to profit from the activity and that this activity was carried out in accordance with the objective standards of a serious businessman.
According to the appellant, it is apparent from an examination of these factors that Mr. Duhamel was not carrying on a business through his activities as a poker game: he has no training in this game; he has no plan and has not devised any system to defy chance in the game of poker; he does not employ any particular strategy and does not hold any insider information allowing him to win and thus challenge the odds in the game of poker; he has not devised any system to circumvent chance or to minimize risk. In addition, the exercise of such a gambling activity does not give rise to any expectation of profit in the medium or long term.
Thus, according to the appellant, the net earnings from Mr. Duhamel's poker gaming activities should not be included in the calculation of his income for the purposes of the Act.
3.2 Respondent
According to the respondent, the two-step method described by the Supreme Court of Canada in Stewart should be used to determine whether Mr. Duhamel carried on a business through his poker gambling activities during the years in cause.
According to the respondent, it is apparent from an examination of the factors enshrined in Stewart that Mr. Duhamel operated a poker gaming business during the
Page : 5
years in question. The Stewart intention test must be based on objective factors, namely the objective standards of serious business conduct. The Court must also come to this conclusion even if it concluded that poker is not a game of skill but rather a game where chance prevails over skill.
Thus, according to the Respondent, the evidence shows that Mr. Duhamel employed strategies to minimize his risks and implemented strategies to improve his technique, in particular by studying his opponents' plays. Further, there is evidence from the evidence of a reasonable expectation of profit from poker gaming activities since skill can impact poker gaming outcomes. It is within the consideration of this factor that the question of whether poker is a game of chance or a game of skill is relevant. Although the Respondent also acknowledges that luck was decisive for Mr. Duhamel in 2010 in his victory in the Main Event tournament of the WSOP, the question of the impact of chance and skill in the game of poker must however be examined over a long period. According to Mr. Heeb, it is true that during the first hands, luck prevails in poker, but in the long run, it is rather skill that prevails over chance.
Also, according to the respondent, the financial motivation coming from another source related to gambling activities must be considered by the Court in examining the question. Thus, the Respondent argues that the Court must consider Mr. Duhamel's financial motivation with respect to the sponsorship revenues paid by PokerStars to JD Co. under the terms of the PokerStars Agreement.
Other factors akin to objective standards of behavior for a serious businessman must also be taken into account, such as the existence of a register, the retention of an agent to negotiate the contracts of sponsorships, the writing of gain-sharing agreements following Mr. Duhamel's qualification for the WSOP Main Event final table and the profitability analysis of online poker gaming activities carried out following the end of the PokerStars Convention in 2015.
Page : 6
The Respondent maintains that Mr. Duhamel's poker gaming activities go well beyond mere entertainment and constitute a business of a commercial nature corresponding to the concept of a business, particularly following the conclusion of the PokerStars Agreement obliging Mr. Duhamel to participate in many tournaments in order to guarantee the income of his company.
According to the Respondent, it is clear from all these factors that Mr. Duhamel carried on a business through his poker gaming activities during the years in question. Thus, according to the Respondent, the net earnings from poker gaming activities must be included in the calculation of Mr. Duhamel's income as business income for the years in question.
IV. THE LAW AND APPLICABLE LAW
Paragraph 3(a) provides that, in computing income, a taxpayer must include income from a source in Canada or outside Canada, including income from a business. Subsection 9(1) provides that a taxpayer's income from a business for a taxation year is his or her profit therefrom for that year. In addition, subsection 248(1) provides that the word “business” includes any business of a commercial nature.
The relevant provisions of the Act read as follows:
3 The income of a taxpayer for a taxation year for the purposes of this Part is the taxpayer’s income for the year determined by the following rules:
(a) determine the total of all amounts each of which is the taxpayer’s income for the year (other than a taxable capital gain from the disposition of a property) from a source inside or outside Canada, including, without restricting the generality of the foregoing, the taxpayer’s income for the year from each office, employment, business or property.
[Emphasis added]
Page : 7
9(1) Subject to the other provisions of this Part, a taxpayer's income from a business or property for a taxation year is his profit therefrom for that year.
248(1) business
A business includes any profession, trade, trade, industry or activity of any kind and, except for the purposes of paragraph 18(2)(c), section 54.2, subsection 95(1) ) and paragraph 110.6(14)(f), ventures or affairs of a commercial nature, but does not include an office or employment. (business)
[Emphasis added in original]
Whether the game of poker is a game of chance or a game of skill, or rather a game in which either chance or skill prevails, there will be inclusion in the calculation of Mr. Duhamel's income of the net winnings resulting poker gaming activities, if such activities constitute a source of income that is a business for the purposes of the Act.
The Supreme Court of Canada, in Stewart, set out the general principles for determining whether there is a source of business or property income for the purposes of the Act. To make this determination, a two-pronged method was formulated as follows (Stewart, at para. 50):
Is the activity carried out with a view to making a profit, or is it
1- personal approach?
2- If it is not a personal process, is the source of income a business or property?
Page : 8
In this case, since the issue in dispute is whether the net winnings from Mr. Duhamel's poker gambling activities constitute a source of income that is a business for the purposes of the Act, the second part is not pertinent.
The first part seeks to distinguish between the personal activities and the commercial activities of the taxpayer. It should only be analyzed in cases where the activities in question include personal or recreational aspects (Stewart, at paras. 54-55), such as poker gambling activities. In such a case, the first part of the test was reformulated as follows (Stewart, at para. 54):
“… Does the taxpayer intend to engage in an activity with a view to making a profit and is there evidence supporting this intention? »
The search for the intention to make a profit is both subjective and objective: first, the Court must determine whether the taxpayer has the predominant subjective intention to make a profit and then, it must determine whether this intention is substantiated based on various objective marketability factors (Stewart, at para. 54).
Indeed, the activity carried out in a sufficiently commercial manner constitutes a source of income for the purposes of the Act (Stewart, at para. 52). In order to conclude that there is a source of income, it must therefore be apparent from the evidence that the activity in question was carried out in accordance with objective standards of b of serious businessman. The Court must assess whether, overall, the activity in question is carried on in a commercial manner and there must not be an assessment of the business acumen of the taxpayer (Stewart, at para. 55).
To support the subjective intention of the taxpayer to make a profit, the following objective factors, enshrined by the Supreme Court of Canada in Moldowan v. The Queen, [1978] 1 SCR 480 (page 486) (“ Moldowan ”), were quoted in Stewart (para. 55):
- the profit and loss statement for previous years;
- taxpayer training;
- the path the taxpayer intends to take; and
- the ability for the activities to make a profit.
However, this list of factors is not exhaustive; indeed, these factors may vary according to the nature and importance of the activities in question. Moreover, in considering these factors, not only the years prior to the years in question,
Page : 9
but the years later than the years in question can be considered (see Moldowan, pp. 483-484).
Furthermore, the Supreme Court of Canada has clarified that although one of the factors to be considered in determining whether activities have been carried on in accordance with objective standards of serious business behavior is the reasonable expectation of profit, however, this factor is not determinative in the analysis (Stewart, at para. 55).
More recently, the Federal Court of Appeal concluded that the factors enshrined in Stewart were indeed relevant in determining the deductibility of gambling losses and expenses incurred by the taxpayer in connection with his gambling activities. (which included horse racing, slot machines, casinos and lotteries); this was also the approach taken by our Court at first instance (Tarascio v. The Queen, 2012 FCA 30 (“ Tarascio”)). Thus, according to the Federal Court of Appeal, the trial judge applied the legal test appropriate by determining whether the activity "[is] operated in a sufficiently commercial manner, that is to say with the subjective intention of making a profit supported by objective evidence of serious business behavior . »
(Tarascio, para. 3).
However, given the nature of gambling activities, such as poker, the intention to make a profit is not a determining factor in the study of the commerciality of this type of activity since all players are motivated by the pursuit of profit.1
Thus, case law has developed additional factors that must be examined to determine whether gambling activities are carried on in a sufficiently commercial manner to constitute a source of income for the purposes of the Act.
[1 Balanko v. MNR, [1981] CTC 2977, 1981 CarswellNat 436 (Tax Review Board) (“ Balanko ”), para. 9 (affirmed on appeal in The Queen v. Balanko, [1988] 1 CTC 317, 1988 CarswellNat 282 (Federal Court – Trial Division), para. 16; Leblanc, para. 36.]
Page : 10
First, the risk management or mitigation factor must be examined to answer the question in dispute. Indeed, this factor characterizes the operation of a business (Balanko, at para. 10). The absence of an organized risk management or mitigation system militates in favor of the absence of a source of business income.
This risk management or mitigation factor was subsequently considered in the Luprypa (paras. 10-14) and Leblanc (paras. 33, 36, 43 and 48) cases. More recently, our Court specified that this risk mitigation strategy must also be consistent and demonstrate the seriousness of the taxpayer in his approach (Cohen, at para. 44).
In addition, the analysis of the commerciality of a gambling activity must take into account the skills, knowledge and skills of the taxpayer, as well as the fact that he demonstrates discipline. However, the frequency of gambling activities is of little relevance (Radonjic, at para. 52; Cohen, at para. 47; Leblanc, at paras. 28-29, 46).
V. PRELIMINARY ISSUES
During the hearing, the documents bearing exhibits I-16, I-17 and I-18 were filed in the Court record subject to the Court's decision on the objections raised by the Appellant concerning their filing. in evidence. Moreover, the appellant objected to the testimony of Mr. Martin Fournier-Giguère, one of the respondent's witnesses.
The decision of the Court in this regard must be based on the law of evidence applicable in Quebec, in particular the rules enacted in Book Seven of the Civil Code of Quebec (“CCQ”).2
5.1 Testimony of Mr. Fournier-Giguère and document filed as Exhibit I-16
The document under the symbol I-16 is the blog of November 12, 2010 of Mr. Martin Fournier-Giguère found on the BlueFire Poker site. Since the respondent agreed to withdraw this document from the evidence before the close of the hearing, the Court will not rule on the merits of the objection raised by the appellant. In
2 Section 40 of the Canada Evidence Act, RSC 1985, c. C-5; Canada (National Revenue) v. Hardy, 2018 FCA 103, para. 13.
Page : 11
Moreover, since the appellant withdrew his objection to the testimony of Mr. Fournier Giguère, this testimony will form part of the evidence.
5.2 Documents filed as Exhibits I-17 and I-18
The Court must rule on the objections raised by the Appellant regarding the filing of documents bearing Exhibits I-17 – Article by Mr. Jean-François Boily that appeared in the spring 2011 edition of HOMME Magazine and entitled “Un champion comme vous et me” and I-18 – Article written by Mr. Guillaume Cloutier published in Le Courrier du Sud on August 4, 2010 and entitled ““All-In” with Jonathan Duhamel”.
The Respondent wishes to introduce into evidence as testimony the prior statements of Mr. Duhamel reported in writing by Messrs. Boily and Cloutier in these articles; it is not a question of attacking Mr. Duhamel's credibility or of contradicting him with regard to previous statements that he does not remember.
The statements appear in quotation marks in the article written by Mr. Boily (I-17). In the article of which Mr. Cloutier is the author (I-18), it is Mr. Duhamel's answers to the various questions raised in the article which the Respondent wishes to provide evidence of.
Discussion :
For the following reasons, the objections raised by the appellant regarding the filing of the documents filed as Exhibits I-17 and I-18 are upheld since Mr. Duhamel's previous statements reported by the journalists do not present sufficiently serious guarantees to to be able to rely on it, in accordance with article 2871 CCQ Moreover, even if these prior statements had been admissible as testimony under article 2871 CCQ, the conditions set out in the second paragraph of article 2873 CCQ are not met, which excludes the possibility of proving Mr. Duhamel's prior statements by filing these press articles. The documents under exhibits I-17 and I-18 will therefore not be placed in the Court record to prove the content of Mr. Duhamel's previous statements.
Page : 12
Since the appellant did not consent to the production of the articles in question and Mr. Duhamel was appearing as a witness, the out-of-court statements of Mr.
Duhamel appearing in these press articles can only be admitted as testimony if the criterion of reliability provided for in article 2871 CCQ is satisfied.
Article 2871 CCQ reads as follows:
2871. When a person appears as a witness, his previous statements on facts about which he can legally testify may be admitted as testimony, if they present sufficiently serious guarantees to be able to rely on them.
After having concluded that a prior statement presents sufficiently serious guarantees to be able to rely on it and is therefore admissible as testimony, the Court must determine the manner in which the statement can be proven by referring to articles 2872 to 2874 CCQ. In this case, only article 2873 CCQ is relevant: Mr.
Duhamel's prior statements could therefore be proven by the production of press articles, if the conditions set out in article 2873 CCQ are met.
Article 2873 CCQ reads as follows:
2873. A statement recorded in writing by a person other than the declarant may be proved by producing the writing if the declarant has acknowledged that the writing
that he reproduced his declaration faithfully reproduces his statement. The same rule applies where the writing was drawn up at the request of the declarant or by a person acting in the performance of his duties, if there is reason to presume, having regard to the circumstances, that the circumstances, that the writing faithfully reproduces the statement. [Emphasis added]
Page : 13
According to the Respondent, Mr. Duhamel's prior statements as reported by journalists offer a better guarantee of reliability than Mr. Duhamel's testimony given 10 years later. Mr. Boily's testimony allows the Court to presume that the content of the press article faithfully reproduces Mr. Duhamel's prior statements. Similarly, Mr. Cloutier's testimony as to the circumstances of the interview, the audio recording that was made of it and the written notes taken during the interview constitute a guarantee of the reliability of Mr. Duhamel reported in the article.
The Court did not accept the respondent's arguments and concluded that the criterion of reliability provided for in article 2871 CCQ is not satisfied in this case.
First of all, it must be specified that article 2871 CCQ covers both prior compatible statements and prior incompatible statements.3
The Court must determine whether the circumstances surrounding the declarations give them sufficiently serious guarantees to be able to rely on them. A statement is reliable if “[it] was made in circumstances which substantially remove the possibility that the declarant lied or made a mistake […]” (R. v. Smith, [1992] 2 SCR 915, at p. 933). Although these observations were made in a criminal law case, they also apply to Quebec civil law.4
The interview with Mr. Boily took place when JD Co. and PokerStars had already concluded the PokerStars Convention, at which Mr. Duhamel intervened. It appears from the evidence that Mr. Duhamel had to promote PokerStars, and more specifically, promote the PokerStars online poker site in order to encourage poker players to play there. Similarly, Mr. Duhamel was to argue that it was possible to make a living playing poker by practicing and playing on the PokerStars online poker gaming site. Mr. Duhamel had already had public relations training provided by the PokerStars team in order to learn how to pronounce the speech he had to hold according to his obligations towards PokerStars.
[3 Promutuel Drummond Mutual General Insurance Company c. Gestion Center du Québec Inc., [2002] RRA 695, 2002 CanLII 41139 (QC CA), para. 46.
4 Arcand v. Cayer, [2004] JQ no 12126 (CQ), par. 72-75; see also Taperek v. Taperek, 2016 QCCS 5101, par.
134; Nadeau v. Nadeau, [2005] RL 454, 2005 CanLII 24701 (QC CS), par. 4-5, 8; Hardy v. Industrial Alliance, [2002]
RRA 1018, 2002 CanLII 512 (QC CS), par. 43, 47.]
Page : 14
The interview with Mr. Cloutier was conducted following Mr. Duhamel's qualification for the final table of the WSOP Main Event , but before he won this tournament. The PokerStars Convention had therefore not yet been signed. However, the evidence shows that, following his qualification for the final table, Mr. Duhamel was approached by representatives of PokerStars who advised him to give good interviews and give a speech favorable to PokerStars.
Thus, since it is established, given the evidence, that Mr. Duhamel was promoting the interests of PokerStars, and was sticking to a speech that favored the
interests of PokerStars, the reliability of the statements contained in exhibits I-17 and I-18 cannot be assured.
However, even if the Court had concluded that the statements were admissible as testimony under article 2871 CCQ, the press articles could not be produced to prove Mr. Duhamel's prior statements, since the conditions provided for in the second paragraph of article 2873 CCQ are not met. Indeed, the Court concludes that there is “no reason to presume, having regard to the circumstances, that the writing faithfully reproduces the declaration”.
First of all, during their testimony, both Mr. Boily and Mr. Cloutier indicated that they did not remember the content of their respective press articles. They must rely on the content of their article to answer the questions posed to the audience.
Mr. Boily testified that Mr. Duhamel's interview took place at the Montreal Casino about two months before the publication of the magazine. Mr. Boily came to this interview alone, with a notebook. However, this notebook is no longer in his possession. The interview had taken the form of a casual discussion.
He was always careful to note down the statements made during the interview. However, Mr. Boily testified that he had chosen the parts of the statements to insert in his article since the goal was to catch the eye of the target clientele (men) and that everything had to respect the demands of the publisher for commercial purposes.
In his testimony, Mr. Cloutier told the Court that he had met Mr. Duhamel in July 2010, upon his return from Las Vegas following his qualification for the final table of the Main Event of the WSOP, in a Tim Hortons restaurant. from the South Shore (Montreal). The interview conducted by Mr. Cloutier had the formula
Page : 15
questions answers. Mr. Cloutier had a recorder and a notebook to record Mr. Duhamel's words. However, he is unable to produce this recording and this notebook at the hearing. He kept no notes or transcripts or audio recordings of the interview. Mr. Cloutier also testified that most of the topics discussed during the interview can be found in the article, but some parts may have been removed because they would have been deemed irrelevant. Indeed, according to Mr. Cloutier, there is a number of words to respect in a press article and, in this article in particular, cuts were made.
Although the Court does not doubt the journalistic ethics and the professional integrity of the authors of the press articles in question, it concludes that the conditions of faithfulness of the writing with regard to the previous statements imposed by the second paragraph of the 2873 CCQ are not met. It appears from the evidence that editorial choices were made in the writing of press articles so as to offer a product that met various commercial criteria. As indicated above, Mr. Boily's article was written in order to attract the intended readership (men) and everything had to respect the requests of the publisher for commercial purposes. Mr. Boily cannot confirm the accuracy of the statements reported in his article. With regard to Mr. Cloutier's article, cuts were made in order to respect the number of words required by the publisher. Mr. Cloutier also does not recall the content of Mr. Duhamel's statements. Moreover, the two authors were unable to produce for the hearing the notes and recordings taken at the time.
VI. THE CREDIBILITY OF M. DUHAMEL'S TESTIMONY AND THE BOOK "Cartes sur table: Champion du monde de poker 2010"
6.1 The credibility of Mr. Duhamel's testimony
The Court is of the opinion that Mr. Duhamel's testimony at the hearing was generally reliable, coherent and credible. Several aspects of his testimony are corroborated by the documentary evidence, as well as by the testimony of Mr. Fournier Giguère. Other parts of Mr. Duhamel's testimony, when considered with common sense, are entirely plausible.
First of all, Mr. Fournier-Giguère, a friend of Mr. Duhamel whom he met in the context of exchanges on web forums, called to testify at the hearing for the respondent, confirmed several elements of the testimony of Mr. Duhamel, including the fact that during the years in dispute, Mr. Duhamel partied heavily.
Page : 16
Mr. Fournier-Giguère was also part of the group of Quebec friends who rented a house in Las Vegas in July 2010 at the time of the WSOP Main Event , without however sharing the house where Mr. Duhamel was staying. Mr. Fournier Giguère participated in the Main Event of the WSOP, but did not rank. He had signed a profit- sharing agreement with Mr. Duhamel and thus received 5% of the purse won by Mr. Duhamel. According to Mr. Fournier-Giguère, he and his friends, including Mr. Duhamel, had big parties, played and bet large sums of money on golf and went out a lot. Still according to Mr. Fournier-Giguère, Mr. Duhamel partied even more than him.
Mr. Fournier-Giguère returned to Las Vegas in November 2010 to cheer on Mr. Duhamel as he qualified for the WSOP Main Event final table. This supports Mr. Duhamel's testimony as to his state of mind and as to the reason for signing the sharing agreements, which was to create team spirit among the signatories.
Also, Mr. Duhamel's testimony regarding the PokerStars Convention is consistent with the content of said conventions. The Court will return to this later.
The respondent is of the opinion, however, that Mr. Duhamel's credibility is tainted by his failing memory as to the number of online poker game accounts he allegedly opened and as to the approximate opening dates of his accounts, whereas that he represented PokerStars between the end of November 2010 and 2015. Likewise, he does not recall the number of tournaments played overseas in 2009 and the time of year when he acquired his condo in 2009.
According to the Court, it is quite likely that Mr. Duhamel does not remember the exact dates of the opening of his online gambling accounts, even though he represented PokerStars for several years, as well as the number of online poker game accounts he had in his early adulthood. Mr. Duhamel says he can't remember when he started playing online poker – since it is possible to play for money as an adult or to play without money. He testified that, after obtaining sponsorship from PokerStars, he only played on the PokerStars online poker site, as required by the PokerStars Convention.
Page : 17
In addition, Mr. Duhamel testified that he noted all the results of his tournaments in attendance on an Excel file. When the audit for the years 2010 and 2011 started, he prepared a cleaner document for transmission to the auditor – but as the year 2009 was not in question, he did not do the exercise for that year. It did indeed emerge from the evidence that the auditor did not ask Mr. Duhamel any questions concerning the years prior to 2010 and admitted that he had not requested any information from Mr. Duhamel concerning the years 2008 and 2009. Mr. Duhamel therefore cannot submit a similar document or verify the information for the year 2009 since the data has not been kept.
Moreover, the Court is of the opinion that having difficulty remembering the time of year of the acquisition of his condominium does not demonstrate a lack of credibility with respect to Mr. Duhamel's testimony. On the contrary, Mr. Duhamel gave an approximate purchase price of the condominium which was very close to the price paid; rather, what emerges is a willingness to respond frankly to the questions asked.
The respondent also maintains that Mr. Duhamel's credibility is tainted by his difficulty in calculating the calendar year corresponding to his 15, 16 or 18 years of age, when he is capable of performing certain more complicated calculations such as calculating probabilities from “outs” or certain percentages and other additions/ subtractions within the framework of the game of poker.
However, it is rather clear from the evidence that the calculations to which the respondent refers are quite simple, given that the probabilities in question are calculated approximately according to multiplications by a factor of 2 or 4, and the various percentages are based on a denominator of 10. Mr. Duhamel's credibility was therefore not damaged by these elements.
6.2 The declarations of Mr. Duhamel contained in the Book "Cartes sur table: Champion du monde de poker 2010"
A book on Mr. Duhamel entitled "Cartes sur table: Champion du monde de poker 2010” was published in 2011 (the “Book”) and was entered into evidence at the hearing.
During the hearing, the Respondent attempted to prove Mr. Duhamel's state of mind by cross-examining him on certain statements in the Book. The respondent attempted to demonstrate the skills demonstrated by Mr. Duhamel in the game of poker, including the use of various strategies in his game.
Page : 18
According to Mr. Duhamel, certain parts of the Book faithfully relate the facts as well as his thoughts and his state of mind, while other parts were included according to the requests of his sponsor PokerStars. Given this answer and the other elements raised in the previous section, the respondent asks the Court to infer that Mr. Duhamel is a person who considers himself entitled to mislead his readers and to distort the truth, in return for a lucrative sponsorship contract. Consequently, according to the respondent, the Court should give no credibility to Mr. Duhamel's testimony.
For the following reasons, the Court cannot draw the inference advanced by the respondent since very little probative value must be given to Mr. Duhamel's prior statements contained in the Book.
The evidence shows that friends of Mr. Duhamel told him about the idea of writing a book. As Mr. Duhamel was then sponsored by PokerStars, he had to obtain the permission of his sponsor to undertake this project; thus, he discussed with PokerStars the message which would be conveyed in the Book. PokerStars and Mr. Duhamel have established a plan in this regard. All 18 chapters of the Book were written by a ghostwriter. Mr. Duhamel reviewed the content written by the ghostwriter and gave his approval. PokerStars has not, however, reviewed the contents of the Book.
It seems likely that Mr. Duhamel had an altogether minor involvement in the drafting of the Book since obvious errors slipped into it; for example: Mr. Duhamel would have taken finance courses at university, while he took courses in administration; the WSOP Main Event would have started in May 2010 when it started in July 2010; Mr. Duhamel would have taken a sabbatical year following his 2nd year of university studies whereas the sabbatical year was taken following his first year of university studies.
Moreover, according to the Book, Mr. Duhamel researches his opponents, and uses applications or software giving statistics on poker players. However, the evidence shows that, in the context of tournaments, it is impossible to know your opponents in advance and to choose your gaming table, and that Mr. Duhamel did not use such applications or software because he found them rather disturbing and it interfered with his concentration.
As Mr. Dufour pointed out, the Book is of the “autobiographical” genre. The Book contains basic general principles: discipline, self-control, maintenance
Page : 19
of his passion, concentration, etc., but does not reveal any structured and serious method likely to help the player win a tournament.
Moreover, although the evidence shows that Mr. Duhamel reviewed the contents of the Book, it was written while Mr. Duhamel was a spokesperson for PokerStars. One of the aims of the Book was to entice people to play poker online at the PokerStars gaming site. Indeed, Mr. Duhamel testified to having consulted PokerStars before starting this project. Additionally, PokerStars approved the message to be conveyed in the Book. In addition, thanks are addressed to PokerStars in the last pages of the Book. Thus, several statements appearing in the Book give the image of Mr. Duhamel that he must project for the purposes of sponsorships: to become world champion of poker, one must practice online and study the game; the more a player practices, the more success he will have; you have to read treatises on the game of poker. These statements have been included in the Book to satisfy PokerStars' requests and to carry the message that was to be conveyed by Mr. Duhamel.
Certain statements in the Book were also contradicted by testimony in court. For example, according to the Book, one must maintain a healthy lifestyle to win at poker, while Mr. Duhamel clearly testified that he partied and did not maintain such a lifestyle. In his testimony, as indicated above, Mr. Fournier-Giguère corroborated this testimony of Mr. Duhamel.
Moreover, according to what is indicated in the Book, Mr. Duhamel would have read books devoted to poker, written in English, in order to improve. Contrary to what is stated in the Book, it appears rather from the evidence that Mr. Duhamel did not learn the theory of poker before starting to play, having learned with the older brother of a friend as a teenager. . In addition, Mr. Duhamel indicated that he probably had not read these books and that it had been included in the Book to satisfy PokerStars requests since he was a PokerStars ambassador.
Page : 20
VII. Discussion
According to the lessons of the case law cited above, and in particular the Stewart judgment, the Court must assess whether, overall, Mr. Duhamel's poker gaming activities are exercised in a sufficiently commercial manner to constitute a source of income for business for the purposes of the Act or whether they are more of a hobby or entertainment. It is the commercial nature of the activity that must be assessed and not Mr. Duhamel's business acumen.
Considering the evidence, it is established that Mr. Duhamel participates in poker tournaments and not in free games (or in English, “ cash games ”). It is established that free games usually do not have a predetermined end, and that a player can enter them at will (when authorized to do so) and can withdraw at any time after the conclusion of a hand (or losing all the money in play if he leaves during a hand)
since the chips have a monetary value convertible into money. However, in tournaments, only the last 10% of the players in the competition win a purse, with play continuing
until only one player remains who will be the winner of the tournament; moreover, the chips have no monetary value outside of the tournament. To be able to participate in a poker tournament, a player must pay an entry fee.
The Court will begin its discussion by examining the various objective factors of commerciality enshrined in the case law, in order to determine whether Mr. Duhamel had the predominant subjective intention to profit from his poker gambling activities
and whether he conducted his activities according to objective standards of serious business behavior.
The objective commercial factors examined by the Court will be the following:
i) Mr. Duhamel's training (including skills, knowledge and skills);
ii) The path Mr. Duhamel intends to take (and other factors relevant);
iii) The profit and loss statement;
iv) Mr. Duhamel's ability to make profits through his gambling activities poker; and
v) The existence of a risk management or mitigation system.
Page : 21
The Court will then assess whether, taken as a whole, these factors show that Mr. Duhamel's poker playing activities are carried on in a sufficiently commercial manner to constitute a source of income derived from a business
For the following reasons, the Court finds, on a balance of probabilities, that Mr. Duhamel's poker gaming activities are not exercised in a sufficiently commercial manner to constitute a source of income from business for the purposes of the Act and, consequently, the net earnings from these activities must not be included in the calculation of Mr. Duhamel's income under sections 3 and 9 for the years in question.
7.1 Mr. Duhamel's training
According to the Respondent, the statements in the Book demonstrate that Mr. Duhamel read serious books on poker and spent long hours researching poker game strategies. Similarly, according to the statements in the Book, Mr. Duhamel analyzes the hands he has played after each tournament, spending at least one hour a day on them. He also uses applications or software offering information and statistics concerning the gaming habits of his opponents.
For the following reasons, the Court concludes, on a balance of probabilities, that Mr. Duhamel's training is not a factor demonstrating the commerciality of his poker gaming activities.
The Court rejected the respondent's argument since the evidence presented at the hearing and accepted by it did not support this. As noted above, the Court found that Mr. Duhamel's testimony was reliable and credible and that very little probative value should be given to Mr. Duhamel's prior statements in the Book.
First of all, given the evidence, we see that Mr. Duhamel has no specific training in the game of poker that would be likely to give him an advantage over his opponents and that would give him any advantage whatsoever. Mr. Duhamel has not taken any courses in the game of poker. He started playing around the age of 15-16, being initiated by the older brother of a friend and did not learn the game of poker theoretically.
After obtaining a certificate in administration issued by UQAM in the spring of 2008, Mr. Duhamel decided to take a sabbatical year. In 2008 and
Page : 22
2009, Mr. Duhamel had fun, traveled and participated in poker tournaments. It wasn't until 2010 that he became known – a world star as he became world poker champion after winning the WSOP Main Event .
Although Mr. Duhamel studied administration and has experience as a player through his participation in poker tournaments, these facts are not sufficient to establish any indication of commerciality in the poker gaming activities of Mr Duhamel. Moreover, the fact that Mr. Duhamel sometimes watched the RDS poker information site and videos on YouTube is not sufficient to constitute training in this game.
Although it is noted in the Book that he read treatises on poker, Mr. Duhamel specified during his testimony that he read books on poker for entertainment, but he does not remember not having read treatises on poker to improve his strategies. Since these treatises on poker are written in English, it would be surprising and unlikely that he read these works given his limited knowledge of the English language at that time. The Court accepts this testimony of Mr. Duhamel stating that the mention in the Book of the reading of the various treatises made him look good in relation to the message that he was to convey as spokesperson for PokerStars.
Mr. Duhamel also indicated that he did not use applications or software providing information and statistics on players in the context of online tournaments, since that distracted him. Moreover, in face-to-face tournaments, since the seats at the various gaming tables are determined at random, it is obvious that Mr. Duhamel cannot therefore study his opponents' games in advance.
From the evidence, it is as clear that mathematical knowledge necessary to perfect the technique of the game of poker are not complicated.
Finally, given the evidence, we see that Mr. Duhamel does not give courses or seminars on the game of poker.
7.2 The path Mr. Duhamel intends to take (and other relevant factors)
Occupation, sources of income of Mr. Duhamel and JD Co.:
From 2008 to July 2010:
Page : 23
According to the Respondent, between 2008 and 2010, Mr. Duhamel's only remunerative activities were poker gambling. Ever since Mr. Duhamel won the tournament held in Prague in December 2008 during his sabbatical year, he has made a living playing poker. In the contract for the purchase of his condominium entered into in 2009, it is even stated that Mr. Duhamel is a poker player.
For the following reasons, the Court concludes, on a balance of probabilities, that Mr. Duhamel's occupation and sources of income for the period from 2008 to July 2010 are not factors demonstrating the commerciality of poker gaming activities by M. Duhamel.
First of all, although Mr. Duhamel defined himself as a poker player in the contract for the purchase of his condominium entered into in 2009, the Court concludes that this is not relevant for it to be possible to conclude that the activities poker games constitute a source of business income for the purposes of the Act.
The Court recognizes that, from late spring 2008 until July 2010, given the evidence, the only remunerative activities of Mr. Duhamel were the activities of playing poker. However, it is also shown that Mr. Duhamel has always worked since he was able to do so and that he was probably able to build up a financial cushion allowing him to travel as part of his sabbatical year, extended following winning the poker tournament held in Prague in December 2008. In addition, the few days devoted to poker playing activities tends to make Mr. Duhamel's testimony that he has no fixed schedule or predefined as to the game of poker and that he traveled and partied a lot during this period.
In the spring of 2008, after completing a year of studies at UQAM, Mr. Duhamel obtained a certificate in administration. At the end of spring 2008, at the age of 21, Mr. Duhamel decided to take a sabbatical year of studies in order to determine the field of study in which he wished to engage. He intends to have fun, travel and party with his friends. As he had always worked throughout his studies, having started working at the age of 13 as a strawberry picker, he had a small financial cushion to travel. And this is what he will do in the months that follow.
In 2008, for the first time in his life, Mr. Duhamel left to visit Europe. He travels to Prague, Munich, Amsterdam and Berlin. In a poker tournament held in Prague in December 2008, he won the sum of $70,000, having placed 10th.
Page : 24
Following this gain, Mr. Duhamel did not see the urgency to re-enroll in university and therefore decided to extend his sabbatical year, and took the opportunity to continue to travel, see his friends and have fun.
It is not established the number of tournaments in which Mr. Duhamel took part in 2008. He nevertheless took part in a tournament which was held in Prague in December 2008. As he was studying for half of the year , it is likely that his main occupation was studying, at least for the first part of the year.
In 2009, in addition to participating in online tournaments on various poker sites, including PokerStars, Mr. Duhamel participated in the Main Event of the WSOP, but without success. However, he could not give details on the tournaments in which he participated since he could not trace the information. However, he indicated that he had participated in about twenty online tournaments on the PokerStars site from May to December 2009.
In 2010, Mr. Duhamel is still on a sabbatical. It is established that he took the opportunity to travel, see his friends and party. During the month of July 2010, Mr. Duhamel and friends rented two houses in Las Vegas and partied there. He was then 22 years old and single. Mr. Duhamel re-entered the WSOP Main Event held in July 2010. The evidence established that he made no special preparation for this tournament.
A total of 7,319 players were entered into the WSOP Main Event in 2010; there were about 800 tables. Seats at the different tables are assigned randomly. This tournament was spread over a period of 8 days until there remained 9 qualified players for the final table. All tournament participants could sign a contract with PokerStars offering a trip to the Bahamas and entry into a tournament for players who would win a purse. Players had to wear PokerStars badges on their jerseys. Mr. Duhamel signed such a contract. Similar contracts could be signed with Fulton Poker.
In 2010, before he qualified for the WSOP Main Event final table and throughout the month of July, Mr. Duhamel participated in 18 face-to-face tournaments (14 of which took place during the same daytime). Between January and May 2010 he did not participate in any online tournaments and from the end of May 2010 until June 2010 he participated in 14 online tournaments.
Page : 25
After qualifying for the WSOP Main Event final table in July 2010:
The Respondent also maintains that, during the years 2010 to 2012, Mr. Duhamel's main occupation was his poker gambling activities: Mr. Duhamel plays poker full time, he has no other occupations and he has no other source of income. Moreover, according to the Respondent, the number of poker tournaments in which Mr. Duhamel took part during the years 2010 to 2012 is an indicator showing that he wants to earn a living by playing poker.
For the following reasons, the Court cannot conclude, on a balance of probabilities, that the evidence points in this direction. First of all, it is rather established that Mr. Duhamel had sources of income other than winnings from poker tournaments: he received dividends and other amounts from JD Co. and income from his investment portfolio totaling approximately 5 M$ acquired in part by the gain realized in 2010 at the Main Event of the WSOP. It has been established that in 2011 and 2012, Mr. Duhamel did receive interest income and dividends: approximately
$20,000 and $60,000 as interest in 2011 and 2012 respectively, and $300,000 $ as dividends for each of the years 2011 and 2012.
In addition, from the end of 2010 until 2015, in addition to participating in poker tournaments, Mr. Duhamel was also a spokesperson for PokerStars. Thus, he had to, in particular, represent PokerStars throughout the world, attend certain events sponsored by PokerStars and participate in certain tournaments sponsored by PokerStars, by donning the clothing bearing the PokerStars logos, and encourage others to play online. poker at PokerStars online sites. Although as of 2011, Mr. Duhamel participates in many poker tournaments, he performs duties other than playing the game of poker.
Since Mr. Duhamel was a spokesperson for PokerStars, and had certain representational obligations under the PokerStars Agreement, the Court is not satisfied, on a balance of probabilities, that the sole occupation or even the principal Mr. Duhamel's occupation consisted of his poker playing activities. However, even if it had emerged from the evidence that Mr. Duhamel's main occupation was his poker playing activities, which is not the case, the frequency of participation in tournaments is an irrelevant factor. in the analysis of the commerciality of a gambling activity (Radonjic, at para. 52; Cohen, at para. 47; Leblanc, at paras. 28-29, 46).
Page : 26
The Court accepts the following from the evidence.
After qualifying for the WSOP Main Event final table in July 2010, Mr. Duhamel received US$900,000 from the organizers, along with all the other players who qualified for the final table. Mr. Duhamel then felt like a star, and this feeling was even stronger when he was crowned world champion of poker by winning this tournament in November 2010.
Following his qualification for the final table and after his historic victory in November 2010, Mr. Duhamel was caught in a media whirlwind. Overnight, Mr. Duhamel became a public figure. In his testimony, Mr. Duhamel will say that he was overwhelmed by events. You have to remember that at the time, he was only 23 years old.
Mr. Duhamel was then invited to join a group of poker players, which included some well-known people in Quebec and international society, to participate in private games. As part of the private games in which Mr. Duhamel took part, it was understood that a player could not withdraw before the end of the evening. These parties were held at the residence of one or other of the members of the group, accompanied by good food and good wines. Large sums of money were at stake. Following the meetings made within the framework of the private parties, Mr. Duhamel got involved in the One Drop Foundation. During the period from 2010 to 2018, Mr. Duhamel participated in approximately 81 private games, or about ten per year.
In order to manage the media whirlwind resulting from his qualification for the final table, Mr. Duhamel hired two people, who were also friends. The evidence shows that Mr. Duhamel conducted a very large number of interviews. These two people handled the interview requests and everything related to the media, and they were paid for their services. However, they were not involved in the management of Mr. Duhamel's poker gaming activities. Mr. Duhamel managed his own registrations for the various tournaments, as well as the organization of his trips.
During this period, given the evidence, it is established that Mr. Duhamel devoted a great deal of his time to conducting interviews. In addition, it is established that PokerStars was already involved with Mr. Duhamel and gave him advice on the message to deliver in the context of the interviews, even before the conclusion of the PokerStars Convention.
Page : 27
After a four-month hiatus, the Main Event tournament resumed on November 6, 2010. The final game was played between the last 2 players on November 8, 2010. About 2,000 spectators attended the final table on November 6, 2010 November 7, 2010 was a day off from the tournament during which Mr. Duhamel again lent himself to several interviews.
The first PokerStars Convention between PokerStars and JD Co., in which Mr. Duhamel intervened personally, entered into force on November 25, 2010 for a period of one year. Under this agreement, JD Co. undertakes to provide PokerStars with various services of Mr. Duhamel, in return for the payment of an amount of US$1 million, payable as follows:
i) US$280,000 as entry fees to various tournaments in attendance;
ii) US$120,000 as entry fees to various online tournaments on the PokerStars site;
(iii) US$120,000 for expenses incurred by JD Co. for services provided by Mr. Duhamel;
(iv) US$480,000 as an annual fee;
v) US$4,000 to be donated to a charity designated by JD Co.
More specifically, according to the PokerStars Convention, Mr. Duhamel undertakes to promote the PokerStars poker gaming websites to the media (including interviews, books, CDs, blogs, etc.), as well as during public events in which Mr. Duhamel takes part and in which PokerStars sites are promoted. The PokerStars Agreement specifically provides that Mr. Duhamel must work with PokerStars public relations firms to promote himself and “Team PokerStars Pro” (Article 2.4). In addition, the training provided by PokerStars was followed by Mr. Duhamel so that he learns to convey the right message for PokerStars and to give a good image of himself.
Regarding his image, Mr. Duhamel testified that he should be like the rock star of poker players; for example, he signed autographs at events sponsored by PokerStars. In order to fulfill his commitments to PokerStars, Mr. Duhamel had to make the following speech: “Poker is like a sport – the more you practice, the better you get and you win. Do like me: I practiced on the PokerStars site and now I'm the world champion of poker! ". The ultimate goal was to get players to play poker on PokerStars online platforms.
Page : 28
Mr. Duhamel must also participate in certain online poker tournaments exclusively on the PokerStars site (at least 50 hours per month on average) and in certain live poker tournaments. The evidence is silent as to the number of tournaments in which Mr. Duhamel was required to participate under the terms of the PokerStars Convention and the tournaments in which he played of his own volition. However, it is established that Mr. Duhamel played less than 50 hours per month in online tournaments.
All of Mr. Duhamel's public appearances during this period were on behalf of PokerStars. However, Mr. Duhamel cannot determine what portion of his time was devoted to representing PokerStars and what portion was devoted to poker gaming activities. He didn't keep timesheets. He didn't have to account to PokerStars for the time he spent playing online or the time he spent representing PokerStars.
Payments made by PokerStars provide income to JD Co. and allow Mr. Duhamel to participate in poker tournaments around the world, while representing PokerStars. The PokerStars Convention has been renewed annually until the beginning of 2015, with lower financial rewards.
In addition, in May 2011, JD Co. also signed an agreement with Refund Management Services. By this agreement, Mr. Duhamel undertook to wear a badge on his arm representing Refund Management Services during the holding of tournaments in person, subject to a payment of $1,000 upon signature and the payment of a sum of
$2,000 $ per month for a period of one year. An agreement was also signed between JD Co. and Stardust Poker Mansion in effect from August 1 , 2011 to July 30, 2013, providing for the payment of a sum of $50,000 over 2 years, in particular to allow Stardust Poker Mansion to appoint a private room in the name of Mr. Duhamel and to use his image.
During 2010, Mr. Duhamel took part in 23 face-to-face tournaments (or 29 tournaments if we count the tournaments where, after being eliminated, he registered again), 126 online tournaments and 1 private part. Mr. Heeb, the Respondent's expert, estimated that this number of tournaments represents 30 days of face-to-face tournaments and 19 days of online tournaments, or 49 days in total (Heeb Reply (Exhibit I-4), by 83).
Page : 29
Mr. Duhamel re-entered the WSOP Main Event in 2011, 2012, 2013 and 2014, but failed to win anything. In 2015, he ranked 565th and, in 2018, 409th and therefore still earned some sums.
During 2011, Mr. Duhamel took part in 81 face-to-face tournaments, 377 online tournaments and 16 private games: the equivalent of 89 days of face-to-face tournaments and 41 days of online tournaments, i.e. 130 days in total, excluding the 16 private games (Heeb Reply (Exhibit I-4), para. 83).
During 2012, Mr. Duhamel took part in 111 face-to-face tournaments, 271 online tournaments and 14 private games: the equivalent of 128 days of face-to-face tournaments and 28 days of online tournaments, i.e. 156 days in total, excluding the 14 private games (Heeb Reply (Exhibit I-4), para. 83).
During the period from 2013 to 2015, Mr. Duhamel participated in many online tournaments: 128 tournaments in 2013, 356 tournaments in 2014 and finally, 57 tournaments in 2015. When his obligations to PokerStars ceased in 2015, Mr. Duhamel also stopped participating in online tournaments. It therefore appears that Mr. Duhamel participates in online tournaments in part to fulfill his obligations to sponsor PokerStars.
Regarding the tournaments present from 2013 to 2018, their number varied as follows: 102 tournaments in 2013, 90 tournaments in 2014, 82 tournaments in 2015, 40 tournaments in 2016, 26 tournaments in 2017 and 35 tournaments in 2018.
After winning the WSOP Main Event in 2010, Mr. Duhamel has the luxury of not having to work to support himself. He can then invest a lot of his time in the game of poker, if that is his choice. According to his testimony, he can pursue his passion for the game. Also, he benefits from the payment of sponsorship income by PokerStars to JD Co., and he can participate in poker tournaments held around the world.
During this period, Mr. Duhamel was also involved in the One Drop Foundation and played a few face-to-face poker tournaments for the benefit of this foundation. In 2015, he will win $2.5 million at one of these tournaments.
The existence of JD Co.:
According to the respondent, as of 2011, since Mr. Duhamel forced himself to play poker in order to ensure a significant income for JD Co., the poker activities of
Page : 30
Mr. Duhamel can no longer be described as mere entertainment and become purely commercial. JD Co.'s revenues are intrinsically linked to Mr. Duhamel's obligation to participate in numerous tournaments whose etry fees are refunded to JD Co. by PokerStars under the terms of the PokerStars Agreement. Thus, the sponsorship income paid to JD Co. and the dividend income that Mr. Duhamel derives from JD Co. are sufficiently related to Mr. Duhamel's gaming activities for the Court to consider them in order to assess the commercial nature of the Mr. Duhamel's poker playing activities.
In support of its position, the respondent maintains that the Court must take into account, in its examination, an objective factor of commerciality described by the respondent as "financial motivation coming from another source of income related to the activities of the taxpayer" and that, in this case, this factor is important.
The respondent relies on the observations of the Supreme Court of Canada in Stewart that it is possible to consider a discounted capital gain in determining whether the taxpayer's activities are of a commercial nature: "[a]n expected gain may be taken into account in assessing the commerciality of the taxpayer's overall course of action” (para. 68).
For the following reasons, the Court concludes that the existence of JD Co. is not relevant to assess the commerciality of Mr. Duhamel's poker gaming activities.
The respondent is essentially asking the Court to conclude that Mr. Duhamel's poker gaming activities were commercial and therefore that he carried on a business. by Mr. Duhamel in this regard, given that the latter is the representative of a corporation carrying on business. However, the activities of JD Co. should not be confused with those of Mr. Duhamel, JD Co. and Mr. Duhamel being two separate persons (art. 309 CCQ). Mr. Duhamel's financial motivation to act as a representative of JD Co., in the best interests of JD Co., to potentially increase its income from dividends, salaries or otherwise, relates only to the relationship between JD Co. and Mr. Duhamel, and this is not in question. It has been established that Mr. Duhamel incorporated JD Co. to provide a legal separation between the marketing/advertising business operated by JD Co., and Mr. Duhamel's personal poker gaming activities.
As indicated above, under the terms of the PokerStars Agreement, Mr. Duhamel not only undertakes to participate in tournaments (online and in person) sponsored by PokerStars, but he must also act as a spokesperson
Page : 31
of PokerStars and further the interests of PokerStars. Must be available to represent PokerStars at various events. PokerStars thus ensures that it can exploit the fact that Mr. Duhamel was crowned poker world champion in November 2010 to increase attendance at its tournaments, both online and face-to-face. So not only does Mr. Duhamel have to participate in tournaments for PokerStars, but he also has to promote PokerStars. JD Co. is therefore paid by PokerStars for Mr. Duhamel's participation in various tournaments as well as for Mr. Duhamel's promotional activities carried out on behalf of JD Co.
Also, as indicated above, the evidence showed that JD Co. also entered into agreements with Refund Management Services and Stardust Poker Mansion allowing these companies to exploit the notoriety of Mr. Duhamel. The purpose of these agreements is not to govern Mr. Duhamel's personal poker gaming activities.
Moreover, the observations of the Supreme Court of Canada in Stewart are not as broad in scope as the respondent contends and must be read in their context. The Supreme Court of Canada teaches that, in order to assess the commerciality of the taxpayer's overall course of action with regard to the holding of property, one can consider the possibility that a gain may be realized by this same taxpayer on the sale later of this same good. This objective factor of commerciality must be considered in similar situations. In this case, the respondent asks the Court to consider the income paid to JD Co. in the assessment of the commerciality of Mr. Duhamel's personal gambling activities since he would have a financial motivation to ensure the commercial success of JD Co.
This is a completely different situation from that which was the subject of the Stewart decision.
Other marketability clues to consider:
The evidence shows that Mr. Duhamel did not draw up any business plan. Mr. Duhamel does not give courses or seminars on the game of poker. He does not have opened separate bank accounts for his gambling business or requested separate credit cards.
It also appears from the evidence that Mr. Duhamel did not verify the payments made by PokerStars in his online account as a serious businessman would have done. He did not keep records of his winnings and losses, except for the tournaments in attendance, and did not keep any accounting records with regard to his poker gaming activities: he notes in Excel files the results of the tournaments in
Page : 32
presence in which he has participated since 2009. Mr. Duhamel does not change his approach following the conclusion of the PokerStars Convention and other sponsorship agreements.
However, after auditing began in 2013, he took more careful note of tournament results. Since the audit concerned the years 2010 and subsequent years, he did not perform the detailed exercise for the years 2009 and 2008, as he did for the years 2010 and subsequent years.
Furthermore, Mr. Duhamel made no serious preparation before a tournament was held. On the contrary, it is established that he partied a lot. In addition, he played tournaments with high entry fees.
Although it has been shown that Mr. Duhamel had written documents prepared reflecting the profit-sharing agreements concluded with the other participants in the Main Event of the WSOP, this is not sufficient to infer the commerciality of the activities of game in question.
7.3 The profit and loss statement
Years 2008 and 2009:
Although the statement of profits and losses from Mr. Duhamel's poker gaming activities has not been established for the years 2008 and 2009, the respondent asks the Court to infer from the following facts that the activities of Mr. Duhamel's poker game were profitable in 2008 and 2009 and that these gambling winnings allowed him to support himself: in May 2009, Mr. Duhamel purchased a condominium at the cost of $229,000 and assumed the mortgage payments alone; as at June 30, 2010, Mr. Duhamel's cash and available funds amounted to $75,928 and the equity in the condominium was $70,000; the balance in Mr. Duhamel's PokerStars account was $15,089 as of January 1 , 2010 compared to $4,529 as of January 4, 2009. In addition, as of June 30, 2010, Mr. Duhamel had a balance of 19 $837 in his PokerStars account and $41,451 in other online poker gaming accounts.
For the following reasons, the Court concludes, on a balance of probabilities, that it cannot infer from the above facts that Mr. Duhamel's poker gambling activities in 2008 and 2009 were profitable and that he was able to support to his needs through his gambling winnings. Indeed, the evidence has shown that Mr. Duhamel
Page : 33
worked throughout his studies, which allowed him to build up a certain financial cushion.
Other than the $70,000 win from the tournament held in Prague in December 2008, the evidence is silent as to whether Mr. Duhamel made any other gains or losses from his poker gambling activities in 2008. Although evidence that he played in bar and casino tournaments in 2008, he was studying during the first part of 2008. Thus, it is likely that he had little time to devote to the game of poker before the end of spring 2008. Indeed, Mr. Duhamel began his sabbatical year at the end of spring 2008 and thereafter, he traveled a lot and partied a lot.
It appears from the evidence that, during the year 2009, within the framework of the 20 tournaments played online at the PokerStars site, he suffered a loss of $1,403. In July 2009, he also participated in the Main Event of the WSOP, but he won nothing. The evidence is silent as to the gains or losses of other tournaments in which Mr. Duhamel would have participated in 2009.
In 2009, Mr. Duhamel was living in an apartment with one of his friends. In May 2009, he bought a condominium for which his father had to guarantee the purchase and provide part of the down payment. Thus, we can conclude that, in all likelihood, Mr. Duhamel did not have the financial capacity to borrow in his own name and had to have recourse to security from his father in order to be able to obtain the mortgage loan required for the purchase.
Years 2010 and later:
Although the quantum of winnings is not in dispute in this case, Mr. Philippe Renaud, Mr. Duhamel's accountant, established during his testimony the reliability of the financial information compiled by Mr. Duhamel regarding the various tournaments at which he participated, both face-to-face and online tournaments, as well as in private games. Mr. Renaud carried out the verification by applying specified measures (sampling).
For the following reasons, the Court concludes, on a balance of probabilities, that the statement of profits and losses is not a factor demonstrating the commerciality of Mr. Duhamel's poker gaming activities.
It appears from the review of the financial information that there is no consistency or progression in earnings from the poker gaming activities of
Page : 34
Mr. Duhamel during the years 2010 to 2018. He always played at a loss in online tournaments and decided to stop playing in such tournaments in 2015 after PokerStars stopped paying sponsorships. In addition, he suffered losses in the tournaments in attendance (except in 2010, 2015 and 2017). His winnings were made mostly in private poker games held with friends.
During 2010, Mr. Duhamel did not derive any net income from his online tournaments, since he suffered a loss totaling $1,294. For the tournaments in attendance, he made a gain of $4,924,307. However, excluding the gain of $4,969,333 won in the Main Event of the WSOP, Mr. Duhamel suffered a loss of $45,026 in the context of the tournaments present.
In 2011, Mr. Duhamel suffered a loss of $19,025 in online tournaments and a loss of $127,433 in live tournaments.
In 2012, Mr. Duhamel suffered a loss of $7,081 in online tournaments, but gained $1,262 in live tournaments.
In addition to winning the WSOP Main Event in 2010, Mr. Duhamel also made winnings in the private games he participated in in 2011 and 2012: $530,374 and $112,594 respectively. However, he suffered a loss of $56,896 in 2010.
During 2013 and 2014, Mr. Duhamel suffered losses in both online and face-to- face tournaments, and in private games in which he participated. According to his testimony, he lost a lot of money in 2013 (losses of $1,622,946) and in 2014 (losses of $569,970).
In 2015, he made a big win in a face-to-face tournament held for the One Drop Foundation, earning $3,055,224. He suffered a loss in online tournaments and a gain of $247,227 in private games. In 2015, no longer being sponsored by PokerStars, Mr. Duhamel then made the decision to stop playing in online tournaments since he had been playing at a loss since 2010.
Thus, in 2016, 2017 and 2018, Mr. Duhamel will only play face-to-face tournaments and a few private games. In 2016, he suffered a loss of $194,308; in 2018, he suffered a loss of $290,317; in 2017, he made a gain of $286,339.
Page : 35
The evidence shows that, excluding the November 2010 WSOP Main Event winnings as well as the 2015 One Drop Foundation tournament winnings, during the period from 2010 to 2018, Mr. Duhamel suffered a loss totaling $1,364,771 in in attendance tournaments. Similarly, Mr. Duhamel suffered a loss totaling $114,176 in online tournaments. During the same period, however, he made gains totaling $295,705 in private games.
7.4 Mr. Duhamel's ability to make a profit through his gambling activities poker
According to the appellant, Mr. Dufour's expertise showed that the ability to produce a gain in the game of poker is unpredictable and unstable. Luck largely prevails over skill in the game of poker since it would take an abnormally high number of hands for skill to prevail over chance. It is not possible to control the results and, in the end, success in the game of poker is due to chance. All of Mr. Duhamel's gambling activities must be examined, starting from the years 2009 and 2010. In Mr. Duhamel's case, chance strongly prevailed over skill in his poker game results given the order in which tournaments were played. According to Mr. Dufour's analysis, Mr. Duhamel had an 87% chance of being ruined by his poker playing activities if the order of the tournaments in which he participated had been reversed. The success of Mr. Duhamel would therefore be due only to the luck of having won the Main Event of the WSOP among his first tournaments, which allowed him to continue playing poker. Thus, Mr. Duhamel's poker gambling activities do not reveal any ability to generate profits.
According to the respondent, given the lesson taught by the Supreme Court of Canada in Stewart, this Court should not assess Mr. Duhamel's business acumen in examining this criterion, but rather Mr. Duhamel to make profits through his poker gambling activities. The poker winnings, as compiled by Mr. Duhamel and his accountant (Exhibit A-29), are therefore not relevant to the study of this factor (Leblanc, para. 42). The examination must cover all of Mr. Duhamel's poker gaming activities and thus, over several years, whether or not the 2010 WSOP Main Event win was due to chance. In general, skill trumps chance in long-term poker, Heeb says, whether in free play or online or face-to-face tournaments.
Although experts agree that the game of poker is a game of chance and skill, Mr. Duhamel's skill gives him an advantage that grows over the long term. In addition, Mr. Duhamel demonstrates an above-average level of skill in face-to-face tournaments. By performing a probability analysis
Page : 36
of ruin, Mr. Heeb concludes instead that Mr. Duhamel would have had a 50% chance of being ruined if the order of his tournaments had been swapped.
The respondent adds that even if the Court were to conclude that the game of poker is a game in which chance prevails over skill, it will still have to conclude that, given their scope and character, the poker game activities of Mr. Duhamel provide a source of income that is a business, as opposed to a hobby or entertainment.
For the following reasons, the Court concludes, on a balance of probabilities, that given the expert evidence it accepted, chance plays a very important role in the outcome of the game of poker. However, no expert convinced the Court that either chance or skill prevailed in the results of the game of poker generally, although the opinions expressed by Mr. Dufour are more credible and have more probative value than the opinions expressed by Mr. Heeb, particularly with respect to the question in dispute. In addition, the Court accepts the idea that the game of poker is a game with negative expectation, as demonstrated by Mr. Dufour. Moreover, in the particular case of Mr. Duhamel, given the analysis of the probability of ruin carried out by Mr. Dufour, an analysis adopted by the Court (except with regard to the percentage of probability as such), it is demonstrated that Mr. Duhamel's results in the game of poker are due mainly to chance in the distribution of poker winnings and losses. For these reasons, the Court concluded that Mr. Duhamel could not have had the ability to make a profit from his poker gaming activities, in accordance with the objective indicator of commerciality established by the Supreme Court of Canada ( Stewart decision).
Expert opinions presented by the Respondent and consequences of the destruction of the data underlying the Heeb Report:
Expertise presented by the Respondent:
Mr. Heeb's expert report dated December 16, 2020 was filed as Exhibit I-2 (the "Heeb Report"); Mr. Heeb's response to Mr. Dufour's expert report dated January 19, 2021 was filed as Exhibit I-3 (the "Heeb Response") and Mr. Heeb's reply to Mr. Dufour dated February 18, 2021 was filed as Exhibit I-4 (the “Heeb Reply”).
For the preparation of the Heeb Report, Mr. Heeb received a mandate from the Respondent to summarize and elaborate the opinions he had previously expressed in
2012 in the context of litigation proceedings in the United States (United States v. Dicristina, United States District Court of the Eastern District of New York, 2012 U.S. Dist.
LEXIS 118037), to find out whether skill prevailed over chance in the free games of no- limit Texas Hold'em type poker played online.
[continued in next post]
I mean... 
