Citation: 2006TCC655
Date: 20061206
Docket: 2005-665(GST)G
BETWEEN:
FRÉDÉRIC LAVIE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Lamarre J.
[1] Mr. Lavie is
appealing from an assessment made by the Minister of Revenue of Quebec
("the Minister") in the amount of $197,899.73
(including interest and a penalty) in respect of Goods and Services Tax
(GST) that the Minister determined the Appellant should have collected upon
allegedly supplying cocaine in the course of the year 2000 in consideration of
$2,143,626.
Preliminary question
[2] The first
preliminary point is that the assessment dated April 20, 2004, and bearing the number
4135013, states that the assessment period is from May 1 to
December 31, 2000, instead of stating the actual period on which the
amount of $197,899.73 was computed, namely January 1 to December 31, 2000. As far as this
first point is concerned, if it is established that the assessment is warranted
and that the amount of the assessment is validly computed on the period from
January 1 to December 31, 2000, the mistake in the notice of
assessment with respect to the beginning of the period in issue will be of no
benefit to the Appellant. Indeed, subsections 299(2), (4) and (5) of the Excise
Tax Act ("ETA") read as follows:
299. (2) Liability not affected –
Liability under this Part to pay or remit any tax, penalty, interest or other
amount is not affected by an incorrect or incomplete assessment or by the fact
that no assessment has been made.
. . .
(4) Assessment deemed valid – An
assessment shall, subject to being reassessed or vacated as a result of an
objection or appeal under this Part, be deemed to be valid and binding,
notwithstanding any error, defect or omission therein or in any proceeding
under this Part relating thereto.
(5) Irregularities – An appeal from an
assessment shall not be allowed by reasons only of an irregularity,
informality, omission or error on the part of any person in the observation of
any directory provision of this Part.
[3] The ETA is clear: it is not the
assessment, but the application of the statute, that creates the tax
liability.
Main issue
[4] The Appellant
denies selling cocaine during the period in issue, and submits that the
assessment under appeal was based on information obtained during police
investigations that did not tie the Appellant directly to cocaine sales, much
less sales of a magnitude of $2,143,626. Furthermore, the Appellant challenges
the penalty imposed under section 280 of the ETA.
Analysis of the evidence
[5] The Minister based this
assessment on the assumptions of fact set out in paragraph 13 of the Reply to
the Notice of Appeal:
[TRANSLATION]
(a) During the period
covered by the assessment in issue, the Appellant was a "registrant"
for the purposes of Part IX of the ETA even though he did not submit any application to the Minister in this
regard.
(b) The Appellant
filed no return of net tax in respect of the period covered by the assessment
in issue.
(c) On October 25,
2000, police officers with the Montréal‑based
"Escouade Régionale Mixte" [joint regional task force]
(hereinafter "ERM") searched an apartment located at 7415 Beaubien Street East in Anjou as part of the "Projet Océan" operation.
(d) In addition, on November 6, 2000, the ERM searched an apartment located at 8101 Montoire Place in Anjou.
(e) The apartments
described in subparagraphs (c) and (d) were used by a criminal organization
known as the Hells Angels Nomads for the purpose of trafficking in
narcotics, and, in particular, to account for and store the money generated by
such trafficking.
(f) On March 28,
2001, the officers searched the Appellant's residence at 338A Vallée Street in Laval, where they
seized, inter alia, firearms, narcotics, clothing marked "Rockers
Montreal" and "Support South", and $52,000 in cash.
(g) During the
searches referred to in subparagraphs (c) and (d), the ERM officers seized
accounting books kept by the Hells Angels Nomads with respect to the supply of
cocaine and hashish.
(h) The Minister
proceeded to analyze these accounting books and determined that, between May 1, 2000 and December 31, 2000, a person nicknamed
"Bilav" purchased cocaine from the Hells Angels Nomads in consideration
of $1,786,355.
(i) The Minister
determined that the pseudonym "Bilav" designated the Appellant and
that the Appellant carried out a commercial activity consisting of the sale of
cocaine.
(j) The Minister also
determined that the Appellant was at the second-highest level of the cocaine
distribution hierarchy, and, consequently, supplied cocaine for no less than
1.2 times the value of the consideration that he paid to purchase it.
(k) The Minister
therefore determined that the value of the consideration for the Appellant's
supplies of cocaine during the period covered by the assessment was $2,143,626.
(l) The Minister
determined that the Appellant did not collect the 7% GST on the value of the
consideration for the cocaine supplies that he made during the period in issue,
that he did not include this GST in computing his net tax, and that the
net tax was not reported to the Minister as required by the ETA.
(m) The Minister
therefore assessed the Appellant for $150,053.82 ($2,143,626 x 7%), the net tax
that he should have reported and remitted for the period from May 1 to
December 31, 2000.
(n) In that
assessment, the Minister also included the interest and penalty contemplated in
subsection 280(1) of the ETA.
[6] The Appellant
specifically challenges subparagraphs (a), (f), (h), (i), (j), (k), (l), (m)
and (n).
[7] With respect to
subparagraph 13(f) of the Reply to the Notice of Appeal, the Appellant
claims that it was not he, but, rather, Derrick Demers, who lived at 338A Vallée Street in Laval on
March 28, 2001. Indeed, according to the lease tendered in evidence
as Exhibit I‑11, Mr. Demers was a tenant at that location commencing
October 1, 2000. Simone Lavie, the
Appellant's grandmother, owned the building. The Minister determined that the Appellant
lived at that location because of the seizure, during the search on March 28,
2001, of an unpaid cable bill issued by Vidéotron Ltée on March 9, 2001, to Frédéric Lavie of 338 Vallée Street, Apt. A, Laval. In addition, according
to a document bearing the name Louise Poitras and the title [TRANSLATION]
"M.R.Q. Individual User Identification" (Exhibit I‑14),
the Appellant's address from September 23, 1996, to December 12, 2002, was 338A Vallée Street in Laval. Apparently, the
document (Exhibit I‑14) is from the Société de l'assurance‑automobile
du Québec ("SAAQ"); this is what Revenu Québec auditor Pascale
Hébert testified to. However, I should note that there is no indication to this
effect on the document, and that no witness from the SAAQ came to testify that
it issues such documents. For his part, the Appellant produced a letter from
Hydro‑Québec stating that Frédéric Lavie held the account based at 349 Lulli Street, Apt.
6 in Laval from August 31,
2000, to August 28, 2002 (Exhibit A-2). The
Appellant testified that he was living with his wife Sophie Sorel on Lulli Street in 2001, as he had been
since late 1999. However, upon redirect by counsel for the Respondent,
Ms. Hébert said that Sophie Sorel gave the SAAQ the address 338A Vallée Street from July 14, 1999
to April 11, 2001. No document was
adduced in this regard. In addition, according to Ms. Hébert, a police
officer went to 338A Vallée Street in March 2001 with a photograph of Frédéric
Lavie and saw him leave that address and enter a car. She does not know
precisely when the police officer made this visit, and the officer did not come
to testify about it before this Court. In his submissions, counsel for the
Appellant stated that the search took place on March 28, 2001 at 6:00 a.m. and that Derrick Demers
was the person awakened by the police. The Appellant was not there at that time
of the morning. Indeed, counsel for the Appellant emphasized that, according to
the lease tendered as Exhibit I‑11, 338A Vallée Street is a two‑and-a-half
room apartment in which it would be difficult for three people
(Derrick Demers, the Appellant and his wife) to live. This was not
revealed by counsel for the Respondent in his submissions.
[8] In my opinion, the
evidence is sufficient to establish that the Appellant did not reside at 338A Vallée Street in Laval at the time of the
search. The Appellant has submitted enough evidence to demolish, prima
facie, this allegation by the Minister (the lease signed by Derrick Demers,
and the Hydro‑Québec letter establishing that the Appellant had an
account based at Lulli Street). It is now up to the Minister to rebut the Appellant's prima facie
case and prove the factual assumption that he is making. For his part, the Minister invokes the
unpaid cable account statement issued to the Appellant and the document that
appears to be issued by the SAAQ and states 338A Vallée Street as his address
until 2002. The documents before me are sparse documents from which it can
barely be inferred that the Appellant might have lived either on Vallée Street or Lulli Street at the time of the
search. Ms. Hébert, the Revenu Québec auditor, adds that a police officer
identified Mr. Lavie through a photograph and saw him leave 338A Vallée Street. As stated earlier, it
is not known precisely when the police officer in question observed this fact.
It is pure hearsay, inadmissible from the start. No one disputes that 338A
Vallée Street belongs to Simone Lavie, the Appellant's grandmother, and that
Derrick Demers was there at the time of the search. In my opinion, on balance,
the evidence actually tends to favour the Appellant's case. The fact that
Mr. Demers was on the premises early in the morning during the unannounced
search by the police officers suggests to me that Mr. Demers, not the
Appellant, was the one who resided there at that time. Indeed, Mr. Demers is
the person who was arrested during the search and was found in possession of
everything that was on the premises. Thus, in my opinion, it cannot be inferred
that the property that was on those premises during the search belonged to the
Appellant.
[9] As for the
assumptions of fact at paragraphs 13(h), (i) and (j) of the Reply to the Notice
of Appeal, namely, that the account under the name Bilav in the
Hells Angels Nomads ("Hells Angels") books belonged to the
Appellant and that the Appellant was in the business of selling cocaine, these
are serious allegations of narcotics trafficking by the Appellant. The books
were seized during surreptitious entries into various Hells Angels hideouts by police
officers who had a warrant. In order to incriminate the Appellant, the
Respondent is invoking solely circumstantial evidence. In my opinion, such
evidence is not sufficient to tie the Appellant to the purchase and sale of
cocaine. My finding in this regard is based on the following reasoning.
[10] Lieutenant Pierre
Boucher, a police officer and one of the Respondent's witnesses, entered
surreptitiously into various Hells Angels hideouts as part of
"Projet Océan", which commenced on September 6, 2000.
On October 25, 2000, an address book
(Exhibit I‑8) was found in the electronic scheduling software that
was installed on the computer located at 7415 Beaubien Street, Apt. 403, Anjou, one of the
hideouts in question. (Exhibit I‑8). In it, the code number
500 007 is associated with two telephone numbers: a home number (218-8871)
and a pager number (540‑9949). On November 6, 2000, during another
surreptitious entry — this time, at 8101 Montoire Place, Unit 309 in
Anjou, a document from the electronic scheduling software was found in which
the nickname Bilav is associated with the code 500 007 as well as the
telephone number 218‑8871 (Exhibit I‑9). A plasticized card
from the Laval gang obtained by Lieutenant Boucher (Exhibit I‑7),
associates the name Fred with the telephone number 218‑8871, and the name
Hammer with the telephone number 540‑9949. Stéphane Chagnon, the
person who updated the accounting records concerning drug purchases and drug
payments to the Hells Angels on a daily basis (a sample of these records for
the Bilav account was tendered as Exhibit I‑5) was arrested on
January 30, 2001, and one of his pockets contained a handwritten copy of his
telephone book (Exhibit I‑12) in which Bilav is associated with the
code 500 007 and the telephone number 540‑9949. Since Lieutenant
Boucher only began his investigation in October 2000, and the Bilav
account was closed on July 5, 2000 (Exhibit I‑5), he never
knew who made the purchases or deposits associated with the Bilav account. All
that we know from Exhibit I‑5 and Lieutenant Boucher's testimony is
that the Bilav account was transferred to Grizzly ("Grizzly" is
allegedly Stéphane Plouffe's nickname), who was arrested in connection with
transactions involving that account and was convicted of trafficking in
narcotics.
[11] For her part, Ms.
Hébert explained that she tied the Bilav account to the Appellant by making
connections between different bits of information obtained during the various
police investigations, especially the information obtained from Lieutenant
Boucher, which is discussed above. Neither Lieutenant Boucher nor Ms. Hébert
checked whether the Appellant's telephone number matched the numbers stated
above. However, I note that according to the documentation found by Lieutenant
Boucher, Bilav can be tied either to Fred or to Hammer, but no link with the
Appellant has been made yet.
[12] At the hearing, Guy
Ouellette, an expert on the structure and operations of criminal motorcycle
gangs, explained the complete structure of the Hells Angels network. He
discussed the successful dismantling of the Nomads, the most important chapter
of the Hells Angels, as part of "Projet Océan" in the spring of 2001.
Mr. Ouellette said that he was personally involved in this operation and that
he knew all the Hells Angels in 2001. However, on cross‑examination, he
admitted that some members remain unknown to him. Indeed, his own expert report
states that some of the individuals are unknown (Exhibit I‑13, at page 3).
Mr. Ouellette said that all the Hells Angels knew that Fred was associated
with the Laval gang, which was renamed the "Connection" gang in
October 2000. However, he admits that there was more than one Fred and
that the gang members did not know the last names of the various Hells Angels
members or the various people affiliated with the organization.
Mr. Ouellette ties the Appellant to the "Hang Around" group,
which is part of the "Connection" gang, because the Appellant was
found on Hells Angels premises on October 16, 2000, and a card tying
Fred to that group was found there. The Appellant was there along with
Danny "Le Suisse" Proulx, and was arrested at that time. Weapons
were found on the premises, but Danny Proulx, not the Appellant, was charged
because the Crown prosecutor did not consider it useful to charge the
Appellant. On that date, Ben Frenette, a senior member in the Rockers Nord
chapter hierarchy in Montréal, apparently delegated his "watch"
(supervision schedule) to Danny "Le Suisse" Proulx.
According to Mr. Ouellette, the Rockers Nord chapter had two godfathers:
Ben Frenette and Stéphane "Grizzly" Plouffe.
[13] Mr. Ouellette said
that he was satisfied that the Appellant goes by the nickname Fred within the
Rockers Nord, and by the nickname Bilav in the Hells Angels accounting books. He
bases this assertion on the Appellant's history.
On March 11, 2000, the Appellant was seen as a bodyguard during
a bar tour by Hells Angels members in Laval. On June 18, 2000, when a certain Eric Morin was
arrested in Laval, a plasticized card was found on his person containing the
names of the Laval-based gang members, including Fred (218‑8871), but
also including Hammer (540‑9949) (Exhibit I‑16, which is, in
fact, the same card as Exhibit I‑7, which was in Lieutenant
Boucher's possession.) On June 28, 2000, the day after Mr. Ouellette
testified as part of "Projet Océan" and revealed the names of the
Laval-based gang members, that gang ceased to exist and was replaced, according
to Mr. Ouellette, by the "Connection" gang, and evidence of this
was found during the police search on October 16, 2000. Mr. Ouellette also noticed
that the Bilav account was closed on July 5, 2000. On October 2, 2000, the Appellant was
apprehended while driving a vehicle in which Jean‑Yves "Chef"
St‑Onge was a passenger; according to Exhibit I‑16, St‑Onge
was a senior member of the Rockers Nord, which was part of the Hells Angels. On
October 16, 2000, the Appellant was on Hells Angels premises along with
Danny "Le Suisse" Proulx. On October 20, 2000, he was seen in a
vehicle belonging to his wife Sophie Sorel on a street near those premises.
In late 2002 or thereabout (at some point between September 2002 and
August 2003), an undercover agent by the name of Martin Roy recorded the
Appellant as he lent him money and referred him to a location where he could
purchase narcotics. The Appellant was arrested on
February 26, 2004, and was charged with conspiracy to traffic in
narcotics and trafficking in narcotics. He was sentenced to 18 months
of imprisonment and three years of probation. It would appear, according
to Mr. Ouellette, that Martin Roy identified the Appellant with Fred,
a "striker" in the Rockers Nord gang.
[14] For his part, the
Appellant says that he was on Hells Angels premises because he taught karate to
some Hells Angels members. He says that some of them were his friends. He
claims not to know Jean-Yves St-Onge, but says that he knows Martin Roy.
He acknowledges that he knows some other Hells Angels members.
[15] Although it can be
inferred from the evidence that the Appellant kept company with Hells Angels by
2000, I am not satisfied that the Bilav account, on which the entire assessment
under appeal is based, is to be tied to the Appellant. Even if it is assumed
that Fred is the Appellant, the fact that Eric Morin had a card on his
person tying Fred to the number 218-8871 on June 18, 2000, does not necessarily
prove that the Bilav account, seized from the Hells Angels accounting records,
belonged to the Appellant. In fact, based on the evidence, the Bilav account could
just as easily have been tied to Hammer, a person who was not identified as
being the same as Fred. Moreover, it was established that all activity on the
Bilav account ceased in July 2000 (Exhibit I‑5), and this
account was apparently transferred to the "Grizzly"
(Stéphane Plouffe) account. Lieutenant Boucher said that Mr. Plouffe
was arrested in connection with this account, and Mr. Ouellette
acknowledged that Mr. Plouffe was assessed under the ETA for purchases and
sales attributed to his account, which appears to include the Bilav account.
[16] The Appellant denies
the Minister's assumption that he purchased and resold cocaine in 2000. He
denies being Bilav or Fred. He says that he has no knowledge of the Hells
Angels accounting on which the entire assessment is based. In Les Voitures
Orly Inc. / Orly Automobiles Inc. v. Canada,
[2005] F.C.J. No. 2116 (QL), the Federal Court of Appeal made
the following statements at paragraph 20 with respect to the burden of proof:
20 To sum up, we see no merit in
the submissions of the appellant that it no longer had the burden of disproving
the assumptions made by the Minister. We want to firmly and strongly
reassert the principle that the burden of proof put on the taxpayer is not to
be lightly, capriciously or casually shifted. There is a very simple and
pragmatic reason going back to over 80 years ago as to why the burden is on the
taxpayer: see Anderson Logging Co. v. British Columbia,
[1925] S.C.R. 45, Pollock v. Canada (Minister of National Revenue)
(1993), 161 N.R. 232 (F.C.A.), Vacation Villas of Collingwood Inc.
v. Canada (1996) 133 D.L.R. (4th) 374 (F.C.A.), Anchor Pointe Energy
Ltd. v. Canada, 2003 FCA 294. It is the taxpayer's business. He knows how
and why it is run in a particular fashion rather than in some other ways. He
knows and possesses information that the Minister does not. He has information
within his reach and under his control. The taxation system is a self-reporting
system. Any shifting of the taxpayer's burden to provide and to report
information that he knows or controls can compromise the integrity,
enforceability and, therefore, the credibility of the system. That being said,
we recognize that there are instances where the shifting of the burden may be
warranted. This is simply not one of those cases.
[17] In the case at bar,
the Minister determined, by means of presumptions, that the Appellant
personally trafficked in cocaine. The Minister's assessment is based on
inferences drawn from police investigations. This is not a case involving the
application of the self-reporting tax system. In view of this, it is my opinion
that the Respondent cannot justify her assessment merely by presumptions which
the taxpayer has little or no means to rebut. In Gestion Yvan Drouin Inc. v.
Canada, [2000] T.C.J. No. 872 (QL), Archambault J. of this Court,
at paragraphs 107 to 109 of his decision, adopted, in the following terms, the observations
made by Duff J. in Anderson Logging Co. v. British Columbia, [1925]
S.C.R. 45, 25 DTC
1209:
[107] It
should be noted as well that Duff J. in Anderson Logging (supra)
spoke in similar terms at page 1211 (DTC):
The appellant may adduce
facts constituting a prima facie case which remains unanswered; but in
considering whether this has been done it is important not to forget, if it
be so, that the facts are, in a special degree if not exclusively, within the
appellant's cognizance; although this last is a consideration which, for
obvious reasons, must not be pressed too far.
[Emphasis added.]
[108] Duff
J.'s words inspired one author to write that the burden of proof may fall on
the Minister when the taxpayer has no knowledge of the relevant facts.
In his article "The Burden of Proof in Income Tax Cases," Can.
Tax J., 1978, vol. XXVI, No. 4, p. 393, at page 410, note 86, Charles MacNab
writes:
On the other hand, where a
taxpayer can show that he is not in possession of the facts in respect of which
the onus of proof would in the ordinary course be on him - that they are in the
possession of a third party for example - it may be that the onus would shift
to the Minister, in respect of those facts. This would appear to be consistent
with the limitation on the extent of the onus on a taxpayer indicated by Mr.
Justice Duff in Anderson Logging Company v. M.N.R. supra.
MacNab adds on the same page:
The principle behind the rule
which requires a person to prove a matter when he has particular knowledge is,
it would seem, that it serves the ends of justice, since otherwise the other
party might well be denied in a practical way the opportunity of having a fair
hearing of the matter. Which one is more important may well depend on the facts
of each case.87
_______________
87 In a note to his reasons for Judgment in The Queen v. McKay,
75 D.T.C. 5178, supra, 5185, Mr. Justice Collier said, "... I am not
convinced ... the so‑called "onus on the taxpayer" is a
rigid rule, capable of no exceptions. ... Each action should be looked at on
its own issues and on its own circumstances. ... It is not sufficient, in my
view, to say that tax cases are somehow different from other civil cases tried
in this court".
[109] In First Fund
Genesis Corporation v. The Queen, 90 DTC 6337, Joyal J. of the Federal Court
Trial Division seems to share Mr. MacNab's opinion that the onus rule must be
applied with fairness. At page 6340, he writes:
Numerous have been the
comments by the courts on the application of the onus rule to meet the
exigencies of particular cases. Counsel for the plaintiff is correct in
stating that care should always be taken in its application. Counsel quotes
an article by Charles MacNab in the Canadian Tax Journal, Vol. XXVI, No. 4,
1978, p. 393, where, after the author has referred to the general doctrine with
respect to the burden of proof in civil matters, he remarks with reference to
income tax cases at p. 411:
There will be need for care
in each case, however, to ensure that the considerations of policy and fairness
which underlie all the rules are fully appreciated before a determination of
the onus of proof is made.
[Emphasis added.]
[18] As I have said, the
assessment in the instant case is an arbitrary assessment based on presumptions
made in the wake of police investigations, and in my opinion, a reversal of the
burden of proof is called for here. Since the Appellant denied trafficking in
cocaine and denied being the "Bilav" referred to in the Hells Angels
accounting documents whose contents are unknown to the Appellant, I am of the
view that it is up to the Minister to show, on a balance of probabilities, that
the assessment is well-founded. While all unlawful activity should
understandably not be encouraged, but, rather, denounced, it would also be
improper to arbitrarily attribute sales of illicit substances, without
sufficient evidence, to an individual who is suspected of trafficking in
narcotics but has not been charged with such an offence. The remarks made
by Associate Chief Justice Bowman (as he then was) in Chomica v. Canada,
[2003] T.C.J. No. 57 (QL), at paragraph 16 of his
decision, appear relevant to the instant case:
[16] I start from the observation that
in my view the whole business smells to high heaven. It was operated by
unsavoury characters who, if they were lucky, managed to keep one jump ahead of
the law and, if they were not, got caught. However just because I have or
happen to dislike and distrust people who are involved in these schemes does
not mean that I can totally ignore the rules of evidence and base my decision
on visceral instincts and inadmissible evidence.
[19] As far as this
matter is concerned, I am not satisfied that the Bilav account belonged to the
Appellant. The main evidence purporting to tie the Appellant to Bilav is the
fact, referred to by Mr. Ouellette, that Martin Roy, the undercover agent,
personally knew the Appellant and had associated him with Fred through court‑authorized
surveillance (assuming that Fred is also Bilav). This was not directly put in
evidence by Martin Roy himself or by incriminating documents. The Respondent's
evidence, seasoned with many dashes of hearsay, is too indirect to tie Bilav to
Fred, let alone the Appellant. I would, once again, follow the remarks of
Justice Bowman in Chomica, supra, at paragraphs 26 to 29:
[26] I do not intend this judgment to be
a discussion of the recent developments in the hearsay rule. That it is an
evolving concept is unquestioned, as is obvious from the discussion in The
Law of Evidence in Canada, supra, at pages 187 to 220. The rule
nonetheless continues to exist and effect must be given to it. Even if I
believed that I could stretch the principles stated in the recent cases, which
require at least reliability and necessity, the assessor's report and the
memoranda would still have to be excluded. For example, no witness was able to
say who prepared the memoranda found at tabs A, B and C of Tab 18. They were
said to be based on material seized by the police from files from the personal
computer of Alan Benlolo by a detective.
[27] Such
material is at best unreliable and at most wholly inadmissible as evidence.
[28] Such
reports of the CCRA (T-20 and T-401 reports) may be put in evidence for the
limited purpose of showing the basis on which an assessment is made but not as
evidence of the truth of their contents. There can be no objection to the CCRA
basing its assessments on hearsay - it must of necessity base its assessing
action on such material as is available, even though such material may be
hearsay. However, when the respondent is called upon to justify an
assessment by calling evidence it must be evidence that is admissible under the
ordinary rules governing admissibility.
[29] Not
only must the rules of evidence be followed, particularly in cases governed by
the General Procedure - but also, where serious allegations of fraud are made
the court must scrutinize such evidence very carefully. Madam Justice
L'Heureux-Dubé alluded to this in the second paragraph of her judgment in
Hickman Motors which is quoted above.
[Footnotes
omitted.]
[20] In my opinion, the
facts which Mr. Ouellette and the auditor Ms. Hébert believed to be
true do not establish, on a balance of probabilities, that the Appellant, who
went by the name Bilav, was the person who purchased narcotics from the Hells
Angels in consideration of $1,786,355 in 2000. As I have said, based on the evidence,
the name Bilav could just as easily be associated with Fred or Hammer. The
Appellant was never seen on the premises where the money generated by cocaine
trafficking was kept or where the Hells Angels' accounting was seized. No
charges were brought against him upon his arrest on the Rockers Nord premises
in Laval. Nor has the evidence
established in a probative manner that the property found in the apartment on Vallée Street in Laval belonged to the
Appellant.
[21] Therefore, it is my
opinion that there is insufficient evidence to tie the Appellant to the sale
associated with the purchase of the narcotics contemplated in Exhibit I‑5.
First of all, we do not even know whether he was the person who purchased these
narcotics. Secondly, we are even less certain whether he collected the proceeds
of the sale. On the contrary, the evidence suggests that the Bilav account
belonged to Stéphane Plouffe (Grizzly), who has apparently already been
assessed on the alleged sales related to this account. The fact that the
Appellant frequented members of the Hells Angels or that he might have been a
member of the Laval gang in 2000 (which has not been actually proven) is not
sufficient to conclude that he sold narcotics for the amount being attributed
to him. The fact that he was charged in 2004, four years later, for
conspiracy and narcotics trafficking has no bearing on my decision either,
because no charges were brought against the Appellant in 2000, the year in
issue here.
[22] In addition, the
Minister did not establish the Appellant's net worth to verify whether he could
have purchased and resold so much money's worth of narcotics. In this regard,
this case is distinguishable from Molenaar v. The Queen,
2003 TCC 468, [2003] T.C.J. No. 465 (QL), in which the net
worth method was used in order to establish that the taxpayer made money
selling illegal drugs. Nothing of the kind has been proven here.
Decision
[23] Based on the
evidence put before me, I am not satisfied, on a balance of probabilities, that
the assessment under appeal is well-founded.
[24] The appeal is
allowed and the said assessment is set aside, with costs.
Signed at Ottawa, Canada, this 6th day of December 2006.
"Lucie Lamarre"
Translation
certified true
on this 19th day
of February 2008.
François Brunet, Revisor
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