[OFFICIAL ENGLISH TRANSLATION]
Date: 19980422
Docket: 97-2435(IT)I
BETWEEN:
RAYNALD MICHAUD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Guy Tremblay, J.T.C.C.
Issue
[1] According to the Notice of Appeal
and the Reply to the Notice of Appeal, the issue is whether or
not, in computing his tax for the 1995 taxation year, the
appellant is required to pay $10,664.83.
[2] The respondent argued that the
appellant was the sole shareholder of Gestion Sarck Inc. In
1993, that company sold Sylvain Michaud, the appellant's
son, an immovable property in
St-Étienne-de-Lauzon for $127,000.
According to the notarial contract, the purchaser paid $67,000
and assumed the existing $60,000 mortgage.
[3] By resolution of the board of
directors, $67,000 was transferred to the appellant in discharge,
according to the respondent, of an alleged promissory note dating
back to 1989.
[4] The respondent also argued that no
evidence has been adduced to show the existence of the alleged
$67,000 claim and that, at the time of the 1993 transaction,
Gestion Sarck Inc. was liable to the Minister of
National Revenue for taxes for 1988, 1989, 1990 and 1991. In
1996, that liability (principal, interest and penalties)
apparently amounted to $10,664.83.
[5] The appellant argued that
Gestion Sarck Inc. did not derive any advantage or benefit
from a preferential payment. As for the appellant, he merely paid
the debts of Gestion Sarck Inc., which was insolvent at the time.
The real estate slump was what caused the company's
illiquidity, making it impossible for it to pay taxes.
Burden of proof
[6] The appellant bears the burden of
showing that the respondent's assessments are incorrect. This
burden of proof derives from a number of judicial decisions,
including the Supreme Court of Canada's judgment in
Johnston v. Minister of National Revenue.[1]
[7] In Johnston, the Court held
that the facts assumed by the respondent to support assessments
or reassessments are also presumed to be true until proven
otherwise. In the case at bar, the facts assumed by the
respondent are described in subparagraphs (a) to (i) of
paragraph 11 of the Reply to the Notice of Appeal. That
paragraph reads as follows:
[TRANSLATION]
11. In making this
assessment, the Minister assumed the following facts, inter
alia:
(a) according to a
notarial contract dated July 16, 1993, Gestion Sarck
Inc. sold Sylvain Michaud an immovable property at
185 Rue Principale in
Saint-Étienne-de-Lauzon for $127,000;
[admitted]
(b) according to the
said notarial contract, Sylvain Michaud assumed the existing
$60,000 mortgage; [admitted]
(c) through
resolutions adopted by the board of directors of
Gestion Sarck Inc., it was resolved that the $67,000 balance
of sale payable to the said corporation by Sylvain Michaud
would be paid to the appellant to discharge an alleged
promissory note dated 1989; [admitted with an
explanation]
(d) at all relevant
times, the appellant was the sole shareholder of
Gestion Sarck Inc.; [admitted]
(e)
Sylvain Michaud is the appellant's son;
[admitted]
(f) the
Minister has never been given the document proving the claim that
the appellant allegedly had against Gestion Sarck
Inc.; [admitted with an explanation]
(g) the $67,000
claim that Gestion Sarck Inc. had was transferred to the
appellant on July 16, 1993, at fair market value without the
appellant being able to prove that any consideration was
provided; [admitted]
(h) on July 16,
1993, when the claim was transferred, Gestion Sarck
Inc. was liable to the Minister for taxes;
[admitted]
(i) on
May 16, 1996, Gestion Sarck Inc. owed the Minister
$10,664.83 in unpaid taxes for the fiscal years ending on
December 31, 1988, December 31, 1989, December 31,
1990, and December 31, 1991:
(i) federal
tax
$3,616.54
(ii)
interest
$6,178.27
(iii)
penalties
$870.02
Facts in evidence
[8] The appellant argued that he was
never paid the $67,000. He also said that a clause had been added
stating that the purchaser, his son, would look after his father
until his death. The appellant's L4 and L5 vertebrae are
fractured as a result of an accident in 1978, and he is currently
on welfare.
[9] The appellant argued that he had
had the company's tax returns partly prepared by an
accountant but that, at one point, the accountant had demanded
substantial fees that he could no longer pay. According to the
appellant, the company had a lot of debts and could not be
taxable. He also stated that Revenue Quebec had vacated the
assessments.
[10] Yves Côté, an appeals
officer, testified that he had met with the appellant's
accountant concerning 1988 and 1989. He had accepted the returns
on the basis of the documents and figures provided by the
accountant. The witness revoked the assessments. The company had
about $130,000 in debts. The 1990, 1991 and 1992 tax returns were
not filed. Mr. Côté said that, if the situation
had been the same, he would have made the same decision.
[11] The Court gave the appellant 24 hours
to file a document from Revenue Quebec.
[12] The appellant filed the following
document within that time frame:
[TRANSLATION]
Sainte-Foy, April 15, 1998
Raynald Michaud
185 Rue Principale
Saint-Étienne-de-Lauzon, Quebec
G6J 1E8
Ref. No.: QR 9601643 and Map 0963866
Subject: Gestion Sarck Inc.
Dear Sir:
Further to your request, we are sending you the following
information.
The ministère du Revenu du Québec has suspended
collection in the above-mentioned file because of the
corporation's financial inability to pay.
However, the ministère reserves the right to reactivate
the file if the financial situation returns to normal.
We trust that this information will be satisfactory.
Yours truly,
(s) Jean-Luc Côté
Jean-Luc Côté
Tel.: (418) 577-0103
1 888 543-7539 (ext. 10103)
Fax: (418) 644-1442
[13] According to that document, the basis
for the decision was not necessarily the invalidity of the
assessments but rather the financial inability of
Gestion Sarck Inc., a situation that has not
changed.
[14] This Court has no jurisdiction to
determine whether Gestion Sarck Inc. or the appellant is or
is not able to pay, but it does have jurisdiction to consider
whether the assessments were correctly made on the basis of the
evidence adduced. As a result of the admissions and the documents
adduced in evidence, the Court must confirm the assessment.
Conclusion
[15] The appeal is dismissed.
Signed at Québec, Quebec, on April 22, 1998.
J.T.C.C.
Translation certified true
on this 10th day of June 2003.
Sophie Debbané, Revisor
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