Date:
20020904
Docket:
2000-3557-IT-G
BETWEEN:
WESLEY
CHAMBERLIN,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Reasonsfor Judgment
Beaubier,
J.T.C.C.
[1]
This appeal pursuant to the General Procedure was heard at
Regina, Saskatchewan on August 26, 2002. At the outset
counsel for the parties agreed that judgment should issue in
favour of the Appellant and that this matter is referred to the
Minister of National Revenue for reconsideration and reassessment
to allow the Appellant to deduct the following amounts as
additional business expenses for the years hereafter
described:
|
1995
|
$23,984.59
|
|
1996
|
$
9,626.00
|
|
1997
|
$49,470.49
|
That is so
adjudged.
[2]
In addition, at the conclusion of evidence, the Appellant moved
that his Notice of Appeal be amended respecting his 1997 taxation
year to allow him to claim the following amounts as losses for
1997:
1.
Misappropriated by Iona Chamberlin, $137,968.85
2.
Double-entered by the Appellant's chartered accountant,
$10,664.84
The amending
motion was granted.
[3]
The double-entry by the chartered accountant was established in
evidence by Darren Schaan, C.A.; and that error is referred to
the Minister of National Revenue for reconsideration and
reassessment accordingly respecting the $10,664.84 which was
reported twice.
[4]
The hearing respecting the Appellant's claim for a loss in
1997 of $137,968.85 proceeded. The Appellant called Jacqueline
Ferraton, the lawyer for Iona Chamberlin respecting her divorce
from the Appellant; Darren Schaan, C.A., the
Appellant's chartered accountant; and the
Appellant.
[5]
At all material times the Appellant was a farmer in the district
of Raymore, Saskatchewan. In 1974 he started Chamberlin
Transport, a trucking firm. It always remained his sole
proprietorship and he registered
"Chamberlin Transport" ("CT") as a trade
name. CT expanded to become a long distance heavy hauler with
seven drivers and various semi-trailers and tractors. It was
operating at that level in 1997.
[6]
In 1983 the Appellant, who was born in 1943, met Iona. They
married in 1985. They lived in a house in Raymore out of which
the farm and CT were operated. In 1988 Iona became CT's
office manager, did its accounting, did its bank deposits and by
1997 she also had cheque signing authority and paid its bills and
did its collections. Wesley operated the physical aspects of
CT's trucking business. Iona was paid $500 per week by CT,
which she simply withdrew from its cash or its bank
account.
[7]
Iona filed for divorce from Wesley three times:
January,
1996;
August,
1997; and
October 22,
1997.
She
proceeded with the last one.
[8]
Wesley had two bank accounts. The main one, respecting which Iona
also had signing authority, was at the Bank of Montreal in
Wynyard, Saskatchewan. It received the great majority of CT and
farm account deposits. It also had a line of credit for $200,000.
Wesley's smaller account (out of which the household was
operated) was at the Credit Union in Raymore.
[9]
On October 27, 1997 Wesley and one of his sons opened a new bank
account into which Wesley deposited some of his farm grain
cheques. This account was preparatory to Wesley and his sons
beginning a Case Implements farm equipment dealership "West
Central Sales Incorporated".
[10] In
December, 1997 Iona was in Moose Jaw. Wesley changed the locks on
the house in Raymore and notified Iona of this. Within 2.5 hours
Iona was back in the house. On January 1, 1998 Iona obtained a
court order which jailed Wesley and took possession of the house.
Without Wesley's authority she notified CT's debtors that
they were to pay CT's accounts to Iona's lawyer,
Jacqueline Ferraton in Wynyard. Iona deposited over $38,000
of CT cheques into the Ferraton trust account on December 30,
1997 (Exhibit A-1) and deposits of CT cheques to the Ferraton
trust account continued until March 16, 1998, inclusive, for a
total of $164,010.89.
[11] Although
Exhibit A-1 does not balance respecting these figures,
Ms. Ferraton testified that Iona received the net sum of
$122,968.85 from her trust account and the only source of these
funds which is in evidence is the CT monies. In addition Iona
withdrew from CT's operating loan the sum of $15,000, without
Wesley's authority, on December 17, 1997 and deposited the
$15,000 to her own account.
[12] Wesley
testified that all of the funds placed in the Ferraton trust
account came from 1997 invoices because after Iona's actions
respecting the receivables, CT's hauling business was
effectively destroyed. However the evidence is that the
collections of CT's accounts receivable by Iona continued
until March 16, 1998. Thus CT remained in business at
least until March 16, 1998.
[13] Wesley
testifed that, while CT showed profits, that money always seemed
to go back into CT's business for equipment or other
purposes. Thus, all of CT's income was used for the
business. Moreover Exhibit A-1, prepared by Ms. Ferraton
from her law firm's records, confirms her testimony that some
of the CT funds she received in her trust account were used to
pay wages, the Receiver General, and other CT business
accounts.
[14] The CT
cheques which Iona deposited in Ms. Ferraton's trust account
were CT's funds used for the purpose of carrying on its
business. The last cheques paid from that account for CT wages
and for CT's deductions to the Receiver General were issued
on March 12, 1998 (Exhibit A-1).
[15] Thus Iona
took the cheques totalling $164,010.89 while she was dealing with
them as part of CT's business activities and not by the
exercise of overriding power or control outside those activities
altogether. The nature of her activities in CT's business
affairs gave her the access to do this in the course of her
employment and while collecting CT's receivables in the
course of its profit-making business which continued into
March of 1998.
[16] Moreover,
the $15,000 was withdrawn by Iona from CT's line of credit on
December 17, 1997. That was a business line of credit and the
$15,000 exhausted CT's entire $200,000 line of credit. The
only basis upon which Iona could draw that down was in the course
of CT's business which was ongoing at that time. Thus Iona
wrongfully withdrew it for the ostensible purpose of enabling CT
to gain or produce income and then deposited it to her own
personal account.
[17] In the
foregoing circumstances, the Appellant is entitled to an expense
deduction for the total sum of $137,968.85 misappropriated and
converted by Iona Chamberlin since it was an expense incurred for
the purpose of producing income from Chamberlin Transport and
those funds thereby reduced the profit reportable by the
Appellant.
[18] The appeals
are allowed and these matters are referred to the Minister of
National Revenue for reconsideration and reassessment pursuant to
these Reasons. The Appellant is awarded party and party costs.
However the Appellant is only awarded costs at the hearing for
one counsel.
Signed at Saskatoon, Saskatchewan,
this 4th day of September, 2002.
J.T.C.C.COURT FILE
NO.:
2000-3557(IT)G
STYLE OF
CAUSE:
Wesley Chamberlin v. The Queen
PLACE OF
HEARING:
Regina, Saskatchewan
DATE OF
HEARING:
August 26, 2002
REASONS FOR
JUDGMENT BY: The Honourable Judge D. W.
Beaubier
DATE OF
JUDGMENT:
September 4, 2002
APPEARANCES:
Counsel
for the Appellant: E. F. Anthony Merchant and J. D.
Roberts
Counsel
for the
Respondent:
Angela Evans
COUNSEL OF
RECORD:
For the
Appellant:
Name:
E. F. Anthony Merchant
Firm:
Merchant Law Group
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-3557(IT)G
BETWEEN:
WESLEY
CHAMBERLIN,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Appeals
heard on August 26, 2002 at Regina, Saskatchewan, by
the
Honourable Judge D. W. Beaubier
Appearances
Counsel
for the
Appellant:
E. F. Anthony Merchant
and J. D. Roberts
Counsel
for the
Respondent:
Angela Evans
JUDGMENT
The appeals from the reassessments made under the Income Tax
Act for the 1995, 1996 and 1997 taxation years are allowed
and the matters are referred to the Minister of National Revenue
for reconsideration and reassessment in accordance with the
attached Reasons for Judgment.
Signed at Saskatoon, Saskatchewan,
this 4th day of September, 2002.
J.T.C.C.
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