Citation: 2005TCC732
Date: 20051108
Docket: 2005-1278(IT)I
BETWEEN:
JEAN-GUY LEBLANC,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
from an assessment made on December 3, 2003 and confirmed on February 9, 2004. The assessment under
appeal is numbered 31312.
[2] The assessment was
made under section 160 of the Income Tax Act ("the Act").
[3] In making and
confirming the assessment bearing number 31312, the Minister of National
Revenue ("the Minister") made the assumptions of fact set out in
paragraph 5 of the Reply to the Notice of Appeal
("the Reply"); they read as follows:
[TRANSLATION]
(a) The Appellant is the brother of Réjean LeBlanc. (admitted)
(b) Réjean LeBlanc made an assignment in bankruptcy on
September 6, 2001. (admitted)
(c) At the time he made the assignment in bankruptcy,
Réjean LeBlanc owed the Canada Revenue Agency $10,858.40 for the 1996
to 1998 taxation years. (disputed)
(d) On January 10,
1996, Réjean LeBlanc
sold the Appellant an immovable located at 8100 des Forges Boulevard in the municipality of Trois‑Rivières
for $250,000. (admitted)
(e) At the time of the transaction, the Appellant paid
Réjean LeBlanc $160,000. (admitted)
(f) According to the contract, a balance of sale of $90,000 had to
be paid to Réjean LeBlanc three years after the
sale of the immovable.
(admitted)
(g) On May 22,
2002, Réjean LeBlanc
issued an acquittance to the Appellant for the balance of sale even though the Appellant
still owed him $37,596.37. (denied)
[4] Under a duly signed
power of attorney, Réjean LeBlanc acted as the agent of his brother, Jean‑Guy LeBlanc,
who was not present. Réjean LeBlanc admitted all of the assumed facts
except those set out in subparagraphs 5(c) and (g) of the Reply, which it
is appropriate to reproduce again:
(c) At the time he made the assignment in bankruptcy,
Réjean LeBlanc owed the Canada Revenue Agency $10,858.40 for the 1996
to 1998 taxation years. (disputed)
(g) On
May 22, 2002, Réjean LeBlanc issued an acquittance to the Appellant
for the balance of sale even though the Appellant still owed him $37,596.37. (denied)
[5] The issue is
whether the Appellant is required to pay $10,858.40, the amount of the
assessment made under section 160 of the Act.
[6] The Court explained to the agent of the Appellant Jean‑Guy LeBlanc
that the burden of proof was on him even though the Appellant had chosen not to
attend.
[7] The agent, Réjean LeBlanc, the person whose tax
liability led to the assessment, became a creditor of the Appellant after
selling him an immovable. The assessment under section 160 of the Act,
which is under appeal here, is based on the renunciation of a substantial part
of the Appellant's debt to his brother Réjean, his agent.
[8] Réjean LeBlanc
explained that his brother had asked him to be his agent because he was fully
aware of all the relevant facts.
[9] After denying the
content of subparagraph 5(c) of the Reply, Réjean LeBlanc attempted
to provide some vague, perfunctory explanations to challenge the correctness of
the original assessment as a result of which the assessment under
section 160 of the Act was made.
[10] The Court pointed
out to him that he had not exhausted all remedies following the making of that
assessment. The Court thus wondered how and why he was now able to challenge
the correctness of the assessment as the Appellant's agent.
[11] In theory, the Appellant,
as a completely different person assessed on the basis of that assessment, was
entitled to raise the issue of the assessment's correctness. However, this
implied challenging the assessment through evidence that was reasonable,
plausible and reliable.
[12] The agent of the Appellant
did not provide such evidence. His vague, incomplete and inadequate
explanations were obviously not sufficient to challenge or invalidate the first
assessment made against the agent prior to his bankruptcy.
[13] The few general
assertions made by the agent of the Appellant were obviously not sufficient to
call into question the correctness of the assessment.
[14] With regard to subparagraph 5(g) of the Reply, the
agent of the Appellant explained that the acquittance referred to in that
paragraph was, so to speak, the formal reproduction of an acquittance made a
few years earlier on September 27, 1999, which he filed as Exhibit A‑1.
The acquittance in question was worded as follows:
[TRANSLATION]
. . .
IN THE YEAR
NINETEEN HUNDRED NINETY-NINE, the twenty‑seventh day of the month of
September 1999.
DECLARATION
Réjean LeBlanc,
residing at 8100 des Forges Boulevard in
Trois‑Rivières G8Y 4W2, declares as follows:
Upon receipt of
several amounts totalling forty‑five thousand dollars ($45,000.00) and
other consideration, the declarant gives the debtor, Jean‑Guy LeBlanc,
a full and final acquittance:
(a) deed of second
hypothec from Jean‑Guy LeBlanc to Réjean LeBlanc executed
before Jean Trépanier, notary, on December 13, 1995, a copy of which
was published at the registry office of the registration division of Trois‑Rivières
on December 13, 1995 as number 435688.
ACCORDINGLY, the
declarant consents to the cancellation of the registration of any hypothec
granted to him by that deed, without any other consideration.
Signed at Trois-Rivières
this 27th day of September 1999
Réjean LeBlanc,
declarant
Jean Guy Lethiecq,
witness
[15] When asked to
elaborate on the words "other consideration", given the sizeable
amount of money encompassed by those words, he talked about rent, notes,
advances, bank branch withdrawals, all sorts of small papers, various things
and so on.
[16] When asked to be
more specific, he basically stated that he had no vouchers or specific details
and that his evidence was circumstantial and, as he readily admitted,
incomplete.
[17] In substance, the
explanations were perfunctory, incomplete, very vague and, above all, highly
unreliable.
[18] When the agent of
the Appellant had to explain why all he had in his possession was a single photocopy
of the cheque for $27,000, he stated that this was the only document he had
kept. Yet the evidence showed that he had obtained the copy of that cheque a
few days before the hearing.
[19] Another rather
peculiar detail is that the objection was signed on February 3, 2004 by
Réjean LeBlanc, not the Appellant. The notice of objection reads as
follows:
[TRANSLATION]
. . .
Reference: Notice of assessment dated December 3, 2003 (31212)
. . .
OBJECTION
This statement is
further to the above‑mentioned notice of assessment, which claims that
funds were transferred to the assessed person, Jean LeBlanc, on
May 22, 2002. The notice is based in part on an analysis that is biased
because the transaction was between two members of the same family.
To rectify these
allegations and re‑establish the true facts, the following is the history
of the circumstances related to this assessment.
It is true that,
when the immovable referred to in the notice of assessment was sold on December 19, 1995, the $90,000.00 balance of the sale price, secured
by a second hypothec, was repayable within three years after the contract was
signed. In 1998, the assessed person, Jean Guy LeBlanc, therefore gave the
vendor several amounts totalling $45,000.00. As for the balance of $45,000.00,
on January 19, 1999, at the request of the vendor, who was going to
inquire about a new immovable, the purchaser increased the hypothec on the
immovable at 8100 des Forges by $50,000.00 to repay the vendor, who gave
him a full and final acquittance on September 19, 1999. Needless to say, the vendor first had
to sign a release at the notary's office before registering that hypothec. A
second, more explicit acquittance signed on May 22, 2002 corroborated that of
September 19.
On May 3 of
this year, the immovable at 8100 des Forges will be sold for
$235,000.00, and all the hypothecs will be cancelled.
We therefore ask
that these circumstantial facts be considered as evidence of our good faith in
these transactions, which, in our opinion, were carried out according to the rules.
We do not wish to rely on any case law for the moment. We have all the
documents referred to herein except the holograph receipts, which were not kept
after the final acquittance was signed. This is unfortunate, but we never
imagined that we would inherit the burden of proof.
At no time was
there any question of transferring any amount whatsoever for any reason
whatsoever.
This request is an
integral part of Form T400A (99).
Réjean LeBlanc
[20] In light of the
evidence submitted by Réjean LeBlanc, the Court notes the following:
·
the
notice of appeal was drafted by Réjean LeBlanc;
·
Réjean LeBlanc
was alone during the hearing and acted as the agent of the Appellant;
·
the Appellant
was not present;
·
the
explanations were vague, imprecise and circumstantial, as the agent of the Appellant
himself said, in terms of reliably explaining the presumption that an
acquittance was given in consideration of an amount substantially lower than
the amount of the claim;
·
the
explanations provided to show that the acquittance was given in consideration
of equal value were incomplete, vague and totally insufficient;
·
the
arguments and explanations used to justify the fact that an acquittance was
given for the Appellant's substantial debt to his agent were so weak that it
must be concluded that there was no good and valuable consideration or simply
that the Appellant was unjustly enriched.
[21] The perception that
emerges from the evidence is that the Appellant was used basically as a dummy
in the various transactions for and on behalf of his brother, who is his agent
in this case.
[22] First, there was a
transfer with a $90,000 balance to be paid. That claim was no doubt one
component of the estate in bankruptcy, and an acquittance was given for it so
that it would not be part of that estate.
[23] When the Respondent
expressed some scepticism about the value of the acquittance, a new acquittance
was prepared in May 2002.
[24] The explanations
provided concerning both the first acquittance in 1999 and the one in
May 2002 were certainly not clear, consistent or reliable enough for the
Court to conclude that no claim existed at the time the Minister made the first
assessment on which the assessment under section 160 of the Act was based.
[25] I believe that the Appellant
in this case was involved basically as a dummy and that all the transactions
were initiated by his brother with the Appellant's help. This is why the Appellant's
brother was obviously in the best position to serve as the agent of the Appellant,
who was conspicuous by his absence.
[26] In the belief that
the assignment in bankruptcy would put an end to the assessment, an acquittance
was prepared to avoid enriching the estate in bankruptcy.
[27] Things were going
well until the Respondent found out about the claim.
[28] In the belief that everything was resolved, a second
acquittance was prepared in the hope that it would end the matter. The same
explanations were given to justify the two acquittances; they are
absolutely not sufficient to prove on a balance of probabilities that
Réjean LeBlanc did in fact receive adequate consideration for his
$90,000.00 claim.
[29] For these reasons,
the appeal is dismissed and the assessment is confirmed.
Signed at Ottawa, Canada, this 8th day of November 2005.
"Alain Tardif"
Translation certified
true
on this 5th day of May
2008.
Brian McCordick,
Translator
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