Citation: 2010 TCC 359
Date: 20100702
Docket: 2007-24(IT)I
BETWEEN:
MARIE-CLAIRE GOUGEON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1]
This is an appeal from
an assessment based on section 3,
subsections 56(2), 146(1), 146(8), 146(16), 147.1(11), 152(9)
and 248(1) and paragraph 56(1)(h) of the Income Tax Act
(the Act).
[2]
The issues are as
follows:
(a)
Whether, in determining the appellant’s income
for the 2001 taxation year, the Minister was justified in adding the amount of
$58,206 as income from a registered retirement savings plan;
(b) Alternatively, whether, in determining the appellant's income for
the 2001 taxation year, the amount of $58,206 was correctly added as an
indirect payment.
[3]
In explaining and
justifying the assessment under appeal, the respondent relied on the following
assumptions of fact:
[Translation]
1.
She denies the allegations of fact in the Notice
of Appeal that are not consistent with the following.
2.
The notice of original assessment in respect of
the 2001 taxation year was sent to the appellant on
April 8, 2002.
3.
In a reassessment, notice of which was sent to
the appellant on March 5, 2005, in respect of the 2001 taxation year,
the Minister of National Revenue (the Minister) added, in computing said
appellant's income, the amount of $58,206 as income from a registered
retirement savings plan.
4.
On April 18, 2005, the appellant
served a notice of objection on the Minister in respect of the 2001 taxation
year.
5.
On September 25, 2006, the Minister
confirmed the reassessment dated March 3, 2005, in respect of the
2001 taxation year.
6.
On May 17, 2007, the Honourable
Justice Alain Tardif of the Tax Court of Canada allowed the appellant's
application to extend the time for appealing in respect of the 2001 year,
and the Notice of Appeal attached to the application was considered to be valid
and deemed to have been filed with the Tax Court of Canada on the same day.
7.
In making and confirming the reassessment dated
March 3, 2005, in respect of the 2001 taxation year, the
Minister relied on the same assumptions of fact, specifically:
(a)
The company called Canadian Corporation Creation
Center (CCCC) was incorporated on February 23, 2000, under Part II of
the Canada Corporations Act, and its head office was in Ottawa.
(b)
The company called National Business Investment
in Trust Inc. (NBI) was incorporated on November 15, 1999, under the Ontario
Business Corporations Act, and its head office was in Ottawa.
(c)
On June 21, 2000, as part of a trust agreement,
CCCC appointed three trustees to administer the pension plan set up by
CCCC under the name of “Régime de retraite pour les employés et membres de
Canadian Corporation Creation Center".
(d)
On July 18, 2000, the CCCC pension
plan filed with the Canada Customs and Revenue Agency (now Canada Revenue
Agency) an application to register a pension plan in respect of the CCCC
pension plan.
(e)
On December 19, 2000, the Canada
Customs and Revenue Agency (now Canada Revenue Agency) approved the application
to register a pension plan for CCCC. The registration of the “Régime de
retraite pour les employés et membres de Canadian Corporation Creation
Center" took effect retroactively on July 24, 2000.
(f)
During 2000 and 2001, advertisements were placed
in local papers promoting a tax scheme in which CCCC proposed to holders of
locked-in pension plans or RRSPs to transfer their pension funds into the CCCC
pension plan in exchange for a loan from NBI or another company of the same
group.
(g)
CCCC had no activities other than receiving
money from financial institutions and remitting it to NBI or to other companies
of the same group.
(h)
On September 28, 2001, following an
investigation concerning CCCC, the Financial Services Commission of Ontario
revoked the provincial registration of the CCCC pension plan.
(i)
On December 11, 2001, the Minister
issued a notice of intent to revoke the registration of the pension plan known
as the “Régime de retraite pour
les employés et membres de Canadian Corporation Creation Center”, having
registration number 1062363 RREMCCCC of the company CCCC, mainly for the
following reasons:
(i)
The primary purpose of the CCCC pension plan was
not to provide periodic payments to individuals after retirement and until
death in respect of their service as employees of CCCC.
(ii) There was no employer–employee relationship between CCCC and the
members of the CCCC pension plan.
(j)
CCCC did not appeal from the service of the
notice of intent to revoke the registration.
(k)
The Minister then issued a notice of revocation
of registration with respect to the pension plan known as the “Régime de
retraite pour les employés et membres de Canadian Corporation Creation
Center" having registration number 1062363 RREMCCCC, of the company CCCC,
and the revocation was in effect as of July 24, 2000.
(l)
In 2001, the appellant held, among other things,
a locked-in retirement account the market value of which was assessed to be
$58,206.
(m)
On December 20, 2000, the appellant
signed form T2033 authorizing a transfer in the amount of $58,206 from the
locked-in retirement account she held with Financière Banque Nationale inc.
into the CCCC registered pension plan, having number 1062363 RREMCCCC. The
transfer was completed on or around January 16, 2001.
(n)
Following the transfer, the Canadian Corporation Creation Center transferred the appellant's
money to the National Business Investment in Trust Inc.
(o)
In the course of 2001, the appellant cashed a
cheque in the amount of $40,778 issued in her name by National Business
Investment in Trust Inc. and dated January 22, 2001.
(p)
The Minister considered that the amount of
$58,206 that the appellant had transferred from her locked-in retirement
account to the CCCC pension plan, revoked on July 24, 2000, was not a transfer
of funds between registered plans, but that that amount was received by the
appellant in the course of 2001 as a benefit from a registered retirement
savings plan.
(q)
The Minister thus included in the appellant's
income for the 2001 taxation year the amount of $58,206.
Other relevant facts
8.
The appellant was never an employee of CCCC.
9.
CCCC never made employer contributions to the
“Régime de retraite pour les employés et membres de Canadian
Corporation Creation Center" having registration number
1062363 RREMCCCC.
10.
CCCC and the appellant never truly intended for
the CCCC pension plan to provide the appellant with periodic payments after she
retired.
[4]
In support of her
appeal, the appellant read a short text that she herself had prepared. In
addition to her text, she indicated that she did not understand why the various
stakeholders such as the bank had not warned her about the potential tax
consequences of making the transfer requested.
[5]
She stated that there
is a well-known program called HBP, which allows RRSP holders to use their
RRSPs to purchase property. Given the existence of such a program, she believed
that her plan was legitimate. However, she did not take steps to verify with
the competent authorities or a qualified person whether that was true.
[6]
She stated that the
advertisement stating that she could take advantage of the money accumulated in
her locked-in retirement account in order to carry out her plan to buy a home
had piqued her interest. She then contacted the Canadian Corporation Creation
Center (CCCC) having number 1062263 RREMCCC, which had published the
advertisement.
[7]
She met with a
representative who seemed credible and trustworthy to her in a building and
offices that inspired trust. To confirm and validate her perception of the trustworthiness
of the company in question, she stated that she had obtained a business card.
[8]
The business in
question was giving her the opportunity to take advantage of the capital in her
pension plan (locked-in retirement account). She expressly requested, by means
of her signature, that it take all necessary steps with the custodian of her
pension plan, namely, Financière Banque Nationale Inc., in order to transfer
the amount of $58,206.00 on January 16, 2001. Paragraphs (n) and (o) of the
Reply to the Notice of Appeal describe the process very well:
[Translation]
(n) Following the transfer, the Canadian Corporation Creation Center transferred the appellant's money to the National Business
Investment in Trust Inc.
(o) In the course of 2001, the appellant cashed a cheque in the
amount of $40,778 issued in her name by National Business Investment in Trust
Inc. and dated January 22, 2001.
[9]
She stated that she had
found the withholding of $17,428.00 reasonable, given the usual and well-known
policy of withholding an amount of income tax to which, in this case,
administrative fees and commission had been added. She also stated that she had
not wondered about this and had accepted everything without quesion.
[10]
To the question of why
she had not mentioned her withdrawal in her income tax return that year, the
appellant replied that she had not paid attention to the taxes purportedly
deducted at source given that she had never received a document attesting to
the exact amount deducted.
[11]
The appellant
reluctantly acknowledged that she had been careless on the pretext that the
system allows taxpayers to use their RRSPs in order to purchase property.
[12]
Evidently, she had not
discussed her plan with the person responsible for her file at Financière
Banque Nationale Inc., because she stated that she had had to answer questions
about whether she was satisfied with the service received, thus demonstrating
that the bank did not understand the reason for her transfer request.
[13]
The respondent called
two witnesses: Francine Hamel, from the Fraud Prevention Section, and Gilles
Lalonde from the Registered Plans Directorate. They explained and described all
of the facts the assessment under appeal was based on, which were also very
well set out in the Reply to the Notice of Appeal, reproduced in paragraph 3 of
this judgment.
[14]
The two witnesses
explained the organizational structure of the entities involved in this true
criminal organization, whose ultimate goal was to enrich its founders,
downright unscrupulous swindlers who had the indecency and audacity to apply to
the tax authorities at both the provincial level in Ontario and the federal
level to have the authorization required to receive accreditation to administer
pension funds in order to reassure the pension beneficiaries and managers from
whom they hoped to obtain transfers. Both levels of government accepted the
application for registration.
[15]
After some time, the Ontario tax authorities found out about the fraud. Informed
about the possibility of fraud, the Canada Revenue Agency retroactively
cancelled the registration or accreditation obtained several months earlier.
Consequently, all cases involving the criminal organization, including,
obviously, the appellant's, were dealt with. Several taxpayers were able to benefit
from the class action filed against the province of Ontario, but the
appellant did not qualify.
[16]
Very comprehensive
documentary evidence was gathered and submitted by the Agency; that evidence
made it possible to note that the appellant had indeed received most of her
retirement fund, specifically, $40,778.00.
[17]
This observation is
based on documents that were confiscated during the investigation; there is no
dispute or challenge in that regard since the appellant very clearly admitted
that she had received the amount of $40,778.00 from the organization with which
she had done business.
[18]
The appellant was
careless and rash to contact strangers from a newspaper ad.
[19]
The appellant stated
that she had trusted them, among other things, because of the premises where
the meeting took place and because of a business card that looked bona fide;
she indicated that she lamented the fact that the bank had not warned her
before making the transfer.
[20]
The appellant stated
that the person responsible for her file at the bank had asked her if she was
satisfied with the service she was receiving; evidently, the trustee who
managed the appellant's retirement account helped her make a transfer without
understanding the reason for it. The bank’s reaction demonstrates that the
appellant clearly did not explain or describe her plan; if she had, the bank
would possibly have expressed reservations since it would have appeared that a
competitor was offering a plan that did not exist.
[21]
The evidence
established that the appellant is an intelligent person who is very articulate
and is also able to understand certain nuances of the situation very well. I
believe that she was able to understand the risks and dangers that are inherent
in such a transaction. In addition, the comments to the effect that the people
she had transacted business with seemed trustworthy demonstrate that the
appellant had some reservations as to the legitimacy of the transaction.
[22]
The features of an RRSP
or any other pension plan that benefits from a temporary tax exemption, which
starts when the account is opened and usually ends when the beneficiary
withdraws all or part of the plan’s contents, are known to the general public
and undeniable.
[23]
Income tax, which is
neither paid nor withheld on the principal or on the return, is basically
deferred or carried forward; however, what is certain is that sooner or later
the tax burden must be taken on. Any plan, offer, information or person who
offers the possibility of avoiding the tax burden inherent in a person's retirement
investments should set off alarm bells in those who are being offered such a
thing.
[24]
An informed and careful
person should conduct a thorough investigation with the help of qualified and
competent people when someone offers him or her a scenario with a different end
result.
[25]
In this case, the
situation is a little different, however, because the appellant did not seem to
want to avoid the tax obligations inherent in a withdrawal from her locked-in
retirement account. Rather, she wanted to take out the locked-in funds before
formally retiring, which was what the criminal organization was offering,
while there was no such opportunity at the trust institution holding her
retirement account. That was something that should have alerted the appellant,
especially since a professional organization above reproach rarely advertises
itself in the newspaper.
[26]
Why did the appellant
take a risk without taking any precautions? She wanted the money from her
retirement account at all costs. It is not rare in such a situation to become
less cautious and even somewhat rash in making decisions.
[27]
In that regard, she
said that she felt she could trust the criminal organization because, among
other things, the person whom she met gave her a business card, which she filed
in evidence.
[28]
An organization that
puts an ad in a newspaper would not be afraid to distribute one or more
business cards; that is obviously not sufficient to draw conclusions as to its
trustworthiness.
[29]
A reasonable and
careful person would certainly not be content with such second-rate devices to
meet his or her duty of care and vigilance. Furthermore, why did the appellant
not explain the reasoning behind her plan to her financial advisor at the bank?
[30]
In any case, these
facts are irrelevant to disposing of an appeal in which the assessment is based
solely on the fact that the appellant authorized the transfer of and took out
the funds accumulated in her locked-in retirement account.
[31]
The appellant did
indeed receive money from her locked-in retirement account, which in itself
supported and warranted the obligation to pay the income tax on the amount that
was transferred in accordance with the assessment issued.
[32]
Thus, beyond all other
considerations, the real issue is essentially whether the assessment is well-founded.
The appellant admits that she had expressly done what was needed to transfer
the retirement account so that she could then gain access to most of the
capital it contained. That fact alone proves the merits of the assessment
because she herself chose to end the tax moratorium that was supposed to end
once she started to benefit from the money sheltered from income tax in
accordance with the applicable conditions.
[33]
The Tax Court of Canada
is required, first, to act in accordance with the provisions of the Income
Tax Act and, second, to specifically ensure that all its decisions are
consistent when cases are similar. Two cases were recently decided; one of them
was affirmed by the Federal Court of Appeal. The decisions were as follows:
-
Bonavia v. Canada, 2009 TCC 289, affirmed by Bonavia v.
Canada, 2010 FCA 129.
-
Astorino v. Canada, 2010 TCC 144.
[34]
Those decisions are
relevant because the companies they involve are the same as in this case.
[35]
In fact, the appellant
was swindled. She is the only one responsible for this situation. As for the
assessment, it was well-founded in that the appellant benefited from $58,000;
in fact, she expressly authorized the transfer of the account managed by
Financière Banque Nationale to a company of her own choosing.
[36]
The transfer of the
retirement account was made to her advantage and for her benefit with the
appellant's full knowledge, because she wanted to access the money in order to
carry out her plan of purchasing a residence.
[37]
The fact that she
received $40,778.00 instead of $58,206.00 is absolutely irrelevant since her
decision affected the entire amount.
[38]
The evidence clearly
established that the conditions set out in subsection 56(2) of the Act
were present:
(1)
The payment was made to a person other than the
taxpayer in respect of whom an assessment is made.
(2)
The payment was made pursuant to the direction
of or with the concurrence of the taxpayer.
(3)
The payment was made for the benefit of the
taxpayer.
(4)
The payment would have been included in the income
of the taxpayer in respect of whom a reassessment was made to the extent that
it would have been if the taxpayer had received the payment him- or herself.
[39]
For these reasons, the
appeal is dismissed without costs.
Signed at Ottawa, Canada, this
2nd day of July 2010.
"Alain Tardif"
Margarita
Gorbounova, Translator
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