Citation: 2008TCC66
Date: 20080129
Dockets: 2005-3343(IT)G
2005-3344(GST)G
BETWEEN:
GILLIAN N. DARTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb J.
[1]
The issue in these appeals is
whether the Appellant had any interest in or any right to any interest in the
property located at 317 - 319 Fitzroy
Street in Charlottetown, Prince Edward Island (the “Property”) at the time
that it was transferred to her by Danny MacAdam, her common‑law partner,
and therefore whether the assessments issued against her under section 160 of
the Income Tax Act and section 325 of the Excise Tax Act should
be reduced.
[2]
Danny MacAdam has been the common‑law
partner of the Appellant for the past 20 years. The Appellant moved in with him
approximately two months before she gave birth to their first child. At that
time she was 19 years of age and in grade 10. She later received her GED
from Holland College. Danny MacAdam’s highest level of education
was possibly grade 10. The Appellant and Danny MacAdam now have two
children.
[3]
In 1989, Danny MacAdam had an
agreement to acquire the Property. The deed to the Property however was not executed
until November 3, 1992. The deed conveyed the title to the property to Danny
MacAdam as the sole grantee. The Property was acquired without either Danny MacAdam
or the Appellant making any down payment toward the purchase price of the Property.
The consideration for the purchase of the Property consisted entirely of an assumption
of an existing mortgage on the Property in favor of Royal Trust Corporation of Canada in the
amount of $74,906.87 and a second mortgage granted to the vendor of the Property
in the amount of $26,433.25. The mortgages that were on the Property were paid
in full before the Property was transferred to the Appellant. The Appellant
stated that she paid the mortgages. Based on the evidence presented at the
hearing, I conclude that the mortgage payments were made from the rents that
were collected.
[4]
The Property had five units and
required substantial renovations. The original plan, which was followed after
the Property was renovated, was that the Appellant and Danny MacAdam would occupy
one of the units and would rent the other four units. The Appellant and
Danny MacAdam initially moved into one of the one‑bedroom units until the
unit that they would be occupying was renovated.
[5]
The renovations that were
completed were substantial, including ripping up the flooring and replacing it with
new carpet or tile, painting, renovating the bathrooms, tearing down plaster
walls and replacing the plaster with gyproc, adding new walls, installing a new
backdoor and adding a parking lot. The Appellant performed many of the tasks
herself including building walls and a partition, crack filling the gyproc and
then sanding and painting, and cutting and installing all of the trim and
mouldings around the windows, baseboards and along the ceiling.
[6]
Only the Appellant testified
during the hearing. It was clear from her testimony that the renovations were
completed as a result of her efforts and not as a result of the efforts of
Danny MacAdam. Danny MacAdam also did not provide any assistance in looking after
the children while the Appellant worked on the Property. During this period of
time Danny MacAdam was working outside the home and had very little, if any,
involvement with the renovations that were being done to the Property. The
Appellant also testified that Danny MacAdam was an alcoholic and was violent,
although no specific acts of violence were mentioned. There was no evidence
that the Appellant received any compensation for her work that she did in
relation to the Property, other than the transfer of the Property to her in
2001.
[7]
There were items that were donated
by the Appellant’s mother and father, and the Appellant’s father and his friend
helped with the labour required to complete the renovations. The Appellant also
contributed some of her money to the materials acquired for the renovations
although no actual amount was established. The only sources of funds for the
renovations were the Appellant’s paycheques from her work, family allowance
payments, and the rental income generated by the renting of the units in the Property.
[8]
Danny MacAdam was involved in a
car business and he encountered some problems with his business. He was
assessed for unremitted GST and unpaid income taxes. As well, Danny MacAdam was
incarcerated for a period of time in relation to certain offences related to
provincial sales tax and, as part of his probation, he was prohibited from
being involved in the car business. The total amount of Danny MacAdam's
outstanding liabilities under the Excise Tax Act and the Income Tax
Act, including penalties and interest, at the time that the Property was
transferred to the Appellant was $59,143.92 under the Excise Tax Act and
$78,791.76 under the Income Tax Act for a total of $137,935.68. The fair
market value of the Property, as agreed upon by counsel for the Appellant and counsel
for the Respondent, was $140,000. The Appellant was assessed $78,791.76
pursuant to section 160 of the Income Tax Act and $59,143.92 pursuant to
section 325 of the Excise Tax Act.
[9]
In the written submissions of
counsel for the Respondent the issue is described as follows:
15. The
sole issue in these cases is whether the Appellant is liable to pay the amounts
of $78,791.76 and $59,143.92 with respect to the transfer of the Property from
Danny MacAdam pursuant to section 160 of the ITA and section 325 of the ETA,
respectively.
16. A
determination of whether the Appellant had any right, title or interest in the
Property, at the time it was transferred, aids in resolving this issue.
[10] The Appellant claims that she had an interest in the Property
based on her claim that there was a constructive trust. In Peter v. Beblow,
[1993] 1 S.C.R. 980, McLachlin J. (as she then was), stated the following on
behalf of the majority of the Supreme Court of Canada:
3
The basic notions are simple enough. An action for unjust
enrichment arises when three elements are satisfied: (1) an enrichment; (2) a
corresponding deprivation; and (3) the absence of a juristic reason for the
enrichment. These proven, the action is established and the right to
claim relief made out. At this point, a second doctrinal concern arises: the
nature of the remedy. "Unjust enrichment" in equity permitted a
number of remedies, depending on the circumstances. One was a payment for
services rendered on the basis of quantum meruit or quantum valebat. Another
equitable remedy, available traditionally where one person was possessed of
legal title to property in which another had an interest, was the constructive
trust. While the first remedy to be considered was a monetary award, the
Canadian jurisprudence recognized that in some cases it might be insufficient.
This may occur, to quote La Forest J. in Lac Minerals Ltd. v. International
Corona Resources Ltd., [1989] 2 S.C.R. 574, at p. 678, "if there is reason
to grant to the plaintiff the additional rights that flow from recognition of a
right of property". Or to quote Dickson J., as he then was, in
Pettkus v. Becker, [1980] 2 S.C.R. 834, at p. 852, where there is a
"contribution [to the property] sufficiently substantial and direct as to
entitle [the plaintiff] to a portion of the profits realized upon sale of [the
property]." In other words, the remedy of constructive trust arises, where
monetary damages are inadequate and where there is a link between the contribution
that founds the action and the property in which the constructive trust is
claimed.
(emphasis
added)
[11] In this case, it seems clear that Danny MacAdam was
enriched as a result of the labour provided by the Appellant as well as the
materials purchased by her and the labour and materials supplied by the
Appellant’s parents and the labour provided by the Appellant’s father and his friend.
There was also a corresponding deprivation to the Appellant and the absence of
any juristic reason for the enrichment.
[12] In Peter v. Beblow, supra McLachlin J.
(as she then was), also stated the following on behalf of the majority of the Supreme
Court of Canada:
6 I share
the view of Cory J. that the three elements necessary to establish a claim for
unjust enrichment -- an enrichment, a corresponding deprivation, and the
absence of any juristic reason for the enrichment -- are made out in this case.
The appellant's housekeeping and child-care services constituted a benefit to
the respondent (1st element), in that he received household services without
compensation, which in turn enhanced his ability to pay off his mortgage and
other assets. These services also constituted a corresponding detriment to the
appellant (2nd element), in that she provided services without compensation.
Finally, since there was no obligation existing between the parties which would
justify the unjust enrichment and no other arguments under this broad heading
were met, there is no juristic reason for the enrichment (3rd element). Having
met the three criteria, the plaintiff has established an unjust enrichment
giving rise to restitution.
…
12 This
Court has held that a common law spouse generally owes no duty at common law,
in equity or by statute to perform work or services for her partner. As
Dickson C.J., speaking for the Court put it in Sorochan v. Sorochan, supra, at
p. 46, the common law wife "was under no obligation, contractual or
otherwise, to perform the work and services in the home or on the land".
So there is no general duty presumed by the law on a common law spouse to
perform work and services for her partner.
…
24 I
doubt the wisdom of dividing unjust enrichment cases into two categories --
commercial and family -- for the purpose of determining whether a constructive
trust lies. A special rule for family cases finds no support in the
jurisprudence. Neither Pettkus, nor Rathwell, nor Sorochan suggest such
a departure. Moreover, the notion that one can dispense with a link
between the services rendered and the property which is claimed to be subject
to the trust is inconsistent with the proprietary nature of the notion of
constructive trust.
(emphasis
added)
[13] Counsel for the Respondent argued that no constructive
trust could arise in the circumstances of this case because the Appellant and
Danny MacAdam were still living together at the time that the Property was transferred
to her. In support of this proposition, counsel for the Respondent relied on
the case of Blackman v. Davison, [1987] B.C.J. No. 200, 12
B.C.L.R. (2d) 24 (BCCA) and Nova
Scotia (Attorney General) v.
Walsh, [2002] 4 S.C.R. 325. The
decision of the British Columbia Court of Appeal in Blackman v. Davison was
based on the Family Relations Act of British Columbia (which is not
applicable in this case) and it was rendered before the decision of the Supreme
Court of Canada in Rawluk v. Rawluk, [1990] 1 S.C.R.
70.
[14] In the Walsh case, the issue before the Supreme
Court of Canada was whether the matrimonial property legislation of the province of Nova
Scotia contravened the Canadian
Charter of Rights and Freedoms because it did not provide common‑law
partners with the same rights that were available to married couples. Counsel
for the Respondent argued that the following excerpts from the Walsh case
supported her position that no constructive trust could arise until there was a
breakdown of the common‑law relationship:
49 …The
general principle is that, without taking some unequivocal consensual action,
these cohabiting persons maintain the right to deal with any and all of their
property as they see fit.
…
59 …In
these cases, the law has evolved to protect those persons who may be unfairly
disadvantaged as a result of the termination of their relationship.
…
61 For
those couples who have not made arrangements regarding their property at the
outset of their relationship, the law of constructive trust remains available
to address inequities that may arise at the time of the dissolution.
[15] The issue before the Supreme Court of Canada in Walsh
was not whether a constructive trust can only arise if there has been a
breakdown in the common-law relationship and none of these statements indicate
that this is the only time that a constructive trust could arise. These
statements simply provide that the law of constructive trust is available to
address inequities that may arise at the time of the dissolution.
[16] In Rawluk v. Rawluk, supra, the Supreme Court
of Canada specifically addressed the issue of when the property interest arises
under a constructive trust. The issue in that case, as summarized by Cory J.,
was:
At issue in
this appeal is whether the doctrine of constructive trust can be applied to
determine the ownership of assets of married spouses under the provisions of
the Family Law Act, 1986, S.O. 1986, c. 4.
[17] Cory J. stated as follows on behalf of the majority of
the Supreme Court of Canada in relation to the question of when a property
interest arises under a constructive trust:
41 It is
important in this respect to keep in mind that a property interest arising
under a constructive trust can be recognized as having come into existence not
when the trust is judicially declared but from the time when the unjust
enrichment first arose. As Professors Oosterhoff and Gillese state, "the
date at which a constructive trust arises ... is now generally accepted to be
the date upon which a duty to make restitution occurs" (Oosterhoff and
Gillese, A. H. Oosterhoff: Text, Commentary and Cases on Trusts (3rd ed. 1987),
at p. 579). Professor Scott has stated in Law of Trusts, op. cit., at pp.
323-24, that:
The beneficial
interest in the property is from the beginning in the person who has been
wronged. The constructive trust arises from the situation in which he is
entitled to the remedy of restitution, and it arises as soon as that situation
is created. ... It would seem that there is no foundation whatever for the
notion that a constructive trust does not arise until it is decreed by a court.
It arises when the duty to make restitution arises, not when that duty is subsequently
enforced.
I agree
completely with the position taken on this issue by the authors of these
helpful texts.
42 As well
in Hussey v. Palmer, supra, at p. 1290 (quoted by Dickson J. in Rathwell v.
Rathwell, supra, at p. 455), Lord Denning M.R. noted that a constructive trust
"may arise at the outset when the property is acquired, or later on, as
the circumstances may require". As a result, even if it is declared by a
court after the parties have already separated, a constructive trust can be
deemed to have arisen when the duty to make restitution arose. It should
therefore be considered as part of the property owned by the beneficiary at
valuation date.
43 It must be
emphasized that the constructive trust is remedial in nature. If the Court is asked
to grant such a remedy and determines that a declaration of constructive trust
is warranted, then the proprietary interest awarded pursuant to that remedy
will be deemed to have arisen at the time when the unjust enrichment first
occurred. But, as Professor Scott makes clear, the fact that the proprietary
interest is deemed to have arisen before the remedy was granted is not
inconsistent with the remedial characteristics of the doctrine.
[18] It is clear, based on the comments of the Supreme
Court of Canada in Peter v. Beblow, supra and Rawluk
v. Rawluk, supra, that no distinction is to be made between
commercial situations and family situations in determining whether a constructive
trust exists and the constructive trust, when granted, comes into existence when
the unjust enrichment first arose. The constructive trust does not arise
because of a breakdown in the relationship between common law partners but
because one party has been unjustly enriched. As noted by the Supreme Court of
Canada, in paragraph 12 of the decision in Peter v. Beblow, “a common‑law spouse generally owes no duty at
common law, in equity or by statute to perform work or services for her partner”.
Since the Appellant did not owe any duty to perform work for or provide
services to Danny MacAdam, she had no duty to perform any work on the Property (that
was only registered in his name) and therefore she had a right to be
compensated for her efforts. Since she was not compensated by Danny MacAdam
for her efforts, the unjust enrichment (and the Appellant’s interest in the Property)
would arise when she worked on the Property for no consideration.
[19] There has been no finding by a court of equity that
there is a constructive trust in this case. The British Columbia Court of
Appeal in LeClair v. LeClair Estate, 159 DLR (4th) 638 discussed
the requirement that a constructive trust must be judicially declared. Ryan
J.A., on behalf of the BCCA stated as follows, after quoting the above
paragraphs from Rawluk:
[45] The appellant says that because of the unjust enrichment, the
property in question (one-half of the proceeds of the sale of Clair Manor) was
automatically subject to a constructive trust before the death of John LeClair.
He submitted that it followed from this that the property was not John LeClair's
to devise under his Will.
[46] The flaw
in the appellant's argument lies in its failure to take into account the
remedial nature of the remedy of constructive trust and the requirement that
the trust must be judicially declared. In my view, in the passage I have just
quoted Cory J. addressed the question whether, once a court declares
constructive trust, the interest arises at the time of judicial declaration,
or, as of the time of the unjust enrichment. His answer was that it arises at
the time of the unjust enrichment. However, contrary to the appellant's
argument in this case, this passage does not negate the need for a court to
first determine whether an unjust enrichment occurred and whether the
appropriate remedy would be a constructive trust. The appellant's argument that
a constructive trust arose automatically prior to John LeClair's death is not
supported by Rawluk v. Rawluk.
[47] The Rawluk
case has not displaced the well-entrenched rule that the remedy of constructive
trust does not follow automatically from a finding of unjust enrichment. In
Sorochan v. Sorochan, [1986] 2 S.C.R. 38, 29 D.L.R. (4th) 1, Dickson C.J. said
this, at p. 47:
The
constructive trust constitutes one important judicial means of remedying unjust
enrichment. Other remedies, such as monetary damages, may also be available to
rectify situations of unjust enrichment. We must, therefore, ask when and under
what circumstances it is appropriate for a court to impose a constructive
trust.
[20] Therefore a declaration by a court of equity would be
required to find that there was a constructive trust in the Property. Once so
declared, the constructive trust would have come into existence when the unjust
enrichment arose. Sobier J. made the following comments on whether
this Court is a court of equity in Sunil Lighting Products v. Minister of
National Revenue, [1993] T.C.J. No. 666:
18 The jurisprudence clearly
affirms that the Tax Court of Canada is not a court of equity and its jurisdiction is based within its enabling statute6. In addition, the Court cannot grant
declaratory relief given that such relief is beyond the jurisdiction of the
Court7. In an income tax appeal, the Court's
powers are spelled out in subsection 171(1) of the Income Tax Act.
Consequently, these powers essentially entail the determination of whether the
assessment was made in accordance with the provisions of the Income Tax Act8.
[21] As this Court is not a court of equity, the equitable
remedy of constructive trust cannot be granted by this Court.
[22] The issue of whether the application of the equitable
doctrine of constructive trust can affect an assessment under section 160 of
the Income Tax Act has been discussed in earlier decisions of this Court.
There appear to be differing views of the Judges of this Court in relation to
this matter. In Savoie v. The Queen, [1993] 2 C.T.C.
2330, 93 DTC 552, Bowman J. (as he then was) clearly stated that the doctrine
of constructive trust could be invoked in determining, for the purposes of the
application of section 160 of the Income Tax Act, the fair market value
of a property transferred by a tax debtor. In the subsequent cases of Raphael v.
The Queen, 2000 DTC 2434, [2000] 4 C.T.C. 2620 and Burns v. Her Majesty
the Queen 2006 DTC 3383, [2006] 5 C.T.C. 2392, the principle of unjust
enrichment was held to not be applicable in dealing with assessments issued
under section 160 of the Income Tax Act. In neither Burns nor Raphael
was there any reference to the decision of Bowman J. (as he then was) in Savoie
nor were there any references to the Supreme Court of Canada decisions in Peter
v. Beblow and Rawluk v. Rawluk.
[23] The issue before me is whether the existence of an
interest of the Appellant in the Property or any right that the Appellant had
to have an interest in the Property granted to her by a court of equity, can
affect the assessments issued under section 160 of the Income Tax Act and
section 325 of the Excise Tax Act. In my opinion, as a result of the decisions
of the Supreme Court of Canada in Peter v. Beblow and Rawluk
v. Rawluk, since the beneficial interest of the Appellant in the Property,
if the equitable remedy of constructive trust would have been granted by a
court of equity, would have come into existence when the unjust enrichment
occurred (which was when the Appellant improved the Property for no
consideration) the right of the Appellant to have a declaration by a court of
equity of her beneficial interest in the Property as of the time of the unjust
enrichment, is a right that the Appellant surrendered when the Property was
conveyed to her in 2001 and hence would be consideration that she gave for the Property.
[24] Both sections 160 of the Income Tax Act and 325
of the Excise Tax Act are intended to prevent taxpayers from escaping
their liability for taxes by transferring their assets to persons with whom
they do not deal at arm’s length for inadequate consideration. Each section
imposes a liability on a transferee who receives property from a non-arm’s
length tax debtor for inadequate consideration. From the Appellant’s
perspective, the issue, in relation to the application of these sections to the
transfer of the Property to her, is to what extent should she be held liable
for the tax debts of Danny MacAdam? The Appellant earned her right to an interest
in the Property as a result of the substantial amount of work that she
performed to improve the Property and her contributions of her own resources to
the improvements. It would be unfair to not recognize her rights to an interest
in the Property when dealing with an assessment under section 160 of the Income
Tax Act and section 325 of the Excise Tax Act.
[25] Counsel for the Respondent also submitted that the law
of constructive trusts could not be applied when the rights of creditors are
affected. However in Re Roberts Estate, [1998] O.J. No. 1109, the
Ontario Court of Justice (General Division) applied the law of
constructive trust in a bankruptcy situation and found that the wife of the
bankrupt held a constructive trust in part of the proceeds from the sale of
shares and she was only required to return to the trustee in bankruptcy the
portion of the proceeds that was not affected by the trust in her favour. This
case was followed by Registrar Herauf of the Saskatchewan Court of Queen’s
Bench (in Bankruptcy and Insolvency) in the Estate of John Allen Patrick,
[1999] S.J. No. 82. As well a constructive trust was found in a bankruptcy
situation in Ellingsen (Trustee of) v. Hallmark Ford Sales Ltd., 2000
BCCA 458.
[26] In my opinion, a determination that the Appellant had
a right to apply to a court of equity for a declaration that she had a
beneficial interest in the property under a constructive trust in this case
does not prejudice the Respondent because the Respondent did not become a
creditor of Danny MacAdam based on any assumption or reliance on the fact that Danny
MacAdam was the owner of the Property.
[27] As a result, I find that for the purposes of section
160 of the Income Tax Act and section 325 of the Excise Tax Act,
the Appellant had a right to apply to a court of equity for a declaration that
she had an interest in the Property at the time that the Property was
transferred to her in 2001 and this right was surrendered when the Property was
transferred to her and hence the surrender of this right was consideration that
the Appellant gave for the transfer of this Property to her. The Appellant has
established, on a balance of probabilities, that the elements of unjust
enrichment, as set out above, are present in this case and that there is a
direct link to the Property as the Property was the one on which the Appellant
worked for no consideration. Therefore the Appellant had a right to apply to a
court of equity for a declaration that she had an interest in the Property. The
only evidence was that the Appellant, and not Danny MacAdam, was the person who
did the work needed to improve the Property and who looked after renting the Property,
collecting rents and, when necessary, evicting a tenant. There was no evidence
of any work performed on the Property by Danny MacAdam or of any of his money (other
than his share of the rental income) being used to pay for the Property.
[28] Counsel for the Appellant submitted that the fair
market value of the Appellant’s interest in the Property, at the time that the Property
was transferred to her, was equal to one‑half of the fair market value of
the Property. Counsel for the Appellant did not call Danny MacAdam as a
witness. Although the evidence that was presented was clear that Danny MacAdam
did not make any contribution of labour or capital to the Property and hence
the Appellant may have a right to more than a 50% interest in the Property, without
hearing from Danny MacAdam and with counsel for the Appellant only seeking a
ruling that she had a 50% interest in the Property, I am not prepared to find
that the Appellant had a right to any more than a 50% interest in the Property.
The possibility that the Appellant may have a right to more than a 50% interest
would, in my opinion, negate any discount that should be applied in determining
the fair market value of her right to apply for a declaration that she had a
50% interest in the property. Since there has been no declaration by a court of
equity that the Appellant had a 50% interest in the Property and, since this is
an equitable remedy, there is no guarantee that such remedy would have been
granted by a court of equity. However, this possibility that a court of equity
may not have granted this remedy is, for the purposes of determining the fair
market value of her right to apply for this declaration, offset by the possibility
that she had a right to a declaration that her interest was greater than 50%,
and therefore I find that the fair market value of her right to apply to a
court of equity for a declaration of a constructive trust is equal to $70,000,
which is one‑half of the fair market value of the Property, for the purposes
of sections 160 of the Income Tax Act and 325 of the Excise Tax
Act.
[29] Counsel for the Respondent had also raised the issue
that the Appellant had not reported any of the rental income on her tax
returns. In the Reply filed by the Respondent it is stated that the Respondent
“denies that until April 12, 2001, Danny MacAdam reported all rental income and
expenses relating to the 317 ‑ 319 Fitzroy Street Property
and states that for taxation years 1999 and 2000, he failed to file [sic]
in his income tax returns as required by the Income Tax Act, hence, he
failed to report his income”. Therefore it would appear that Danny MacAdam
did not report the rental income either. The reporting of the rental income is
not the issue in this case. The only issue in this case is the validity of the
assessments issued under section 160 of the Income Tax Act and section
325 of the Excise Tax Act.
[30] As a result, the appeal under the Income Tax Act
is allowed and the matter is referred back to the Minister of National Revenue
for reconsideration and reassessment on the basis that the Appellant gave
consideration of $70,000 for the transfer of the Property to her as she
surrendered her right to have a declaration by a court of equity that she had a
beneficial interest in the Property at the time it was transferred from Danny MacAdam
to the Appellant, for the purposes of the assessment issued under section 160
of the Income Tax Act.
[31] In addition to the assessment issued against the
Appellant under section 160 of the Income Tax Act for $78,791.76, the
Appellant was also assessed under section 325 of the Excise Tax Act for
$59,143.92. Section 325 of the Excise Tax Act provides as follows:
325. (1) Tax
liability re transfers not at arm's length — Where at any time a person transfers
property, either directly or indirectly, by means of a trust or by any other
means, to
(a) the
transferor's spouse or common-law partner or an individual who has since become
the transferor's spouse or common-law partner,
(b) an
individual who was under eighteen years of age, or
(c) another
person with whom the transferor was not dealing at arm's length,
the transferee
and transferor are jointly and severally liable to pay under this Part an
amount equal to the lesser of
(d) the amount
determined by the formula
A – B
where
A is the amount, if any, by which the fair market value of the
property at that time exceeds the fair market value at that time of the
consideration given by the transferee for the transfer of the property, and
B is the amount, if any, by which the amount assessed the
transferee under subsection 160(2) of the Income Tax Act in respect of the
property exceeds the amount paid by the transferor in respect of the amount so
assessed, and
(e) the total
of all amounts each of which is
(i) an amount
that the transferor is liable to pay or remit under this Part for the reporting
period of the transferor that includes that time or any preceding reporting
period of the transferor, or
(ii) interest
or penalty for which the transferor is liable as of that time,
but nothing in
this subsection limits the liability of the transferor under any provision of
this Part.
[32] Since the amount that can be assessed under section
325 of the Excise Tax Act is also based on the amount by which the fair
market value of the Property at the time that it is transferred exceeds the
fair market value of the consideration given for the Property, the above
comments on the application of the equitable remedy of constructive trust and
the Appellant’s right to apply to a court of equity for this remedy, apply
equally to an assessment under section 325 of the Excise Tax Act.
Therefore the amount determined for A in the formula in paragraph 325 (1)(d) of
the Excise Tax Act will be $70,000. Since the maximum amount that the Appellant
can be assessed under subsection 160(2) of the Income Tax Act is $70,000
(which is less than the outstanding liability of Danny MacAdam under the Income
Tax Act) and since there was no evidence that Danny MacAdam has paid any of
his outstanding liability under the Income Tax Act, the amount
determined for B in the formula in paragraph 325(1)(d) of the Excise Tax Act
will be $70,000 and the assessment issued under section 325 of the Excise
Tax Act is vacated.
[33] The Appellant, in her Notice of Appeal, did
not ask for costs in this matter nor did the counsel for the Appellant ask for
costs at any time during the hearing. Noël J.A. of the Federal Court of Appeal
in Canada (Attorney General) v. Pascal, 2005 F.C.A. 31, made the following
comments:
After reviewing the record, I note that the notice of motion which
led to the dismissal of the appeal did not claim costs. It is only in
documentation submitted in support of the motion that the phrase [TRANSLATION]
"with costs" is found. Under rule 359(b), the relief sought must
be set out in the notice of motion. A party which fails to set out the relief
sought in its notice of motion should not be surprised when it is not granted.
[34] The Tax Court of Canada Rules (General Procedure),
which are the rules that are applicable in this case, provide that the relief
sought must be specified. The Tax Court
of Canada Rules (Informal Procedure)
do not require that the relief sought must be specified. As a result in Andrews
v. The Queen, 2007 TCC 312, 2007 DTC 901, costs could be awarded
even though the Appellant did not ask for costs. However, in this case since
the applicable rules are the General Procedure Rules and not the Informal
Procedure Rules and since there is no mention in the Notice of
Appeal that the Appellant is seeking costs, I am unable to award costs to the
Appellant.
Signed at Halifax, Nova Scotia this 29th day of January 2008.
“Wyman W. Webb”
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