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Citation: 2004TCC786
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Date: 20041201
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Docket: 2003-4152(GST)I
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BETWEEN:
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DOMINIQUE FOURNIER,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
ArchambaultJ.
[1] Dominique Fournier suffers
from rampant proceduritis bordering on harassment. First, on July
29, 2003, he appealed pursuant to the informal procedure
from assessments made under the Excise Tax Act
(Act). Unfortunately, the notice of appeal does not
specify the period at issue; however, in the Respondent's reply
to the notice of appeal, the following periods are given: (1)
from April 1, 1996, to June 30, 2000; (2) from October 1 to
December 31, 2000; (3) from April 1 to June 30, 2001; and
(4) from July 1 to September 30, 2001 (relevant
periods).
[2] As often happens when taxpayers
represent themselves, the notice of appeal filed with respect to
the assessments made by the Minister of National Revenue
(Minister) provides little information regarding the
issues. If Mr. Fournier had stuck to this notice of appeal,
the situation certainly would not have been unusual; however, he
saw fit to file, on July 7, 2004, an amended motion[1] in which he requested,
in addition, that the penalties and interest for the period from
January 1, 1996, to September 30, 2001, be cancelled; that
he be allowed all of the input tax credits (ITC) the
Minister had disallowed; and that the Respondent be ordered to
pay an amount of $32,624,276.62 as well as $100,000 in exemplary
damages for death threats, harassment, and a legal mortgage that
allegedly destroyed his business.[2] The $32,624,276.62 amount is broken down as
follows:[3] a claim
for a refund of an overpayment of $90; a counter-claim
(case 450-73-000208-11) of $31,474,172.00;
loss of foster family work
(case 450-05-005168-022) in the amount of
$778,258.04; a request for input credit damage loss
(case 450-17-000650-029) in the amount of
$33,463.20; and wage
bill 22601 (case 450-05-005094-020)
in the amount of $348,293.38.[4]
[3] It is important to note that the
wage request was filed at the registry of the Superior Court of
Québec on September 23, 2002. Mr. Fournier claimed fees
from the Respondent that he said were fully justified at a rate
of $600 per week for the collection of taxes and for management,
calculations, accounting, research, and the collection of GST and
QST. On February 14, 2003, Fournier J. of the Superior Court
allowed a motion to dismiss on the grounds that the claim had not
been correct in law, even if the alleged facts are true.[5] The amount of $778,258
had been claimed in proceedings against the Centre
Notre-Dame de l'Enfant Sherbrooke inc., Centre
Jeunesse de l'Estrie, and the Attorney General of Quebec. The
amount was for damages, particularly for the purported breach of
the contract under which Mr. Fournier had provided foster family
services and for injury to reputation. The claim for $31,474,172
had been made in another suit for damages for the loss of his
property, for having diverted justice in the suits initiated
against the Hôpital de Sept-Îles, and for the
forced loss of objection with the C.S.S.T.,[6] etc.
[4] After filing the Respondent's
amended reply to the notice of appeal, on June 3, 2004, the
Court sent a notice of hearing setting the hearing date as
August 19, 2004. In response, Mr. Fournier
informed the registry that the hearing could last approximately
10 days because he wanted to present a dozen witnesses. During
the conference call held on July 14, 2004,[7] which lasted more than two hours, I
explained to Mr. Fournier that this court did not have
jurisdiction to hear damage claims made against the Attorney
General of Canada, let alone such claims made against the
Attorney General of Quebec and other administrative bodies.
[5] In respect to his eligibility for
ITCs, Mr. Fournier had stated that he had
4,950 invoices to present. As it is not appropriate to
conduct an audit at a hearing before the Court because this work
should have been done before attending court, and as the parties
should have identified which invoices were problematic prior to
attending the hearing, I strongly encouraged the parties to meet
so as to resolve their differences amicably or, at the very
least, to properly define the issues at hand. For example, the
parties could have sorted the invoices according to the problems
they identified.
[6] Even though counsel for the
Respondent was reluctant to participate in that meeting,
particularly because Mr. Fournier was not represented by a
lawyer, I insisted that she participate, because I believed the
parties would then have a better opportunity to attain the
objectives I had set for them. Unfortunately, that hope was not
fulfilled, owing to Mr. Fournier's fussy and quibbling attitude.
Indeed, before the meeting even took place, Mr. Fournier had
insisted that the Respondent provide him with information on his
statement of account so that he would know what amounts the
Ministère du Revenu du Québec
(MRQ), as an agent for the Minister, had withheld as a
set-off against the amounts Mr. Fournier owed.
[7] Since counsel for the Respondent's
letter responding in part to his request had not been sent to him
within the timeframe he himself had set, Mr. Fournier had
refused to participate in a meeting with counsel for the
Respondent. As a result, nothing or virtually nothing had been
accomplished prior to the hearing of Mr. Fournier's
appeal.
[8] Not only did Mr. Fournier attend
court without having accomplished the tasks the Court had set out
for him, but he also saw fit to submit a motion to dismiss[8] dated August 2,
2004. In paragraph 2 of that motion, Mr. Fournier states
that the notices of assessment of the Deputy Attorney General of
Canada, represented by Ms. Ginette Breton, are ill-founded
in fact and in law, even if the alleged facts are true. The
relevant passages of the motion are as follows:
[TRANSLATION]
3.- $28,148.90 is
claimed from Mr. Fournier in a statement of arrears[9] dated[10] July 13, 2004. See
Exhibit P1.
4.- In the statement
under P1 dated June 7, 2004, the Deputy Attorney General of
Canada claims unbelievable and unacceptable
penalties and interests. Looking at what is highlighted, it is
$3,632.66 + $5,089.23 = $8,721.89 of penalties and interests
for $1,698.52 in tax, which is more than 800% more. This is
fraudulent and unacceptable.
5.- Also, in his
statements the Deputy Attorney General of Canada does not take
into account the amounts forcibly withheld from the inputs
allowed for the past four years. There is a row missing that
should show the amounts withheld; this is essential in
accounting. All Canadian citizens have the right to know
all amounts that are forcibly withheld - completely relevant
information - so that there is honesty and transparency. The fact
that these amounts are hidden is unacceptable. SEE
P1.
(( 2 ))
6.- In actual fact,
if you look at P1, dated June 7, 2004, you will see a total
amount for tax for all of the periods: $14,580.04. The one dated
July 13, 2004, three weeks later, states $21,602.83. The question
is, why was this amount changed? This is fraudulent and
unacceptable.
7.- Astronomical
interest and penalties have been withheld for more than
four years but charged on more than nine, the Deputy
Attorney General's computer goes back only seven years, and the
Fournier family has been bothered for the past four years. This
is a war of nerves, a war of attrition, and in this manner
SECTION 11(b) of the Canadian Charter of Rights
and Freedoms ("Any person charged with an offence has the
right to be tried within a reasonable time.") is being
violated.
Four years is unreasonable and therefore
unacceptable.
8.- With regard to
legal rights, SECTION 11(g) states, "Any person
charged with an offence has the right not to be found
guilty on account of any act or omission unless, at the time of
the act or omission, it constituted an offence under Canadian or
international law or was criminal according to the general
principles of law recognized by the community of nations." The
Deputy Attorney General of Canada cries out to whomever will
listen that the work done by Mr. Fournier is completely free,
forced volunteering, but our worker has received no training, and
when his papers are checked, everything or nearly everything is
accepted, yet two years later he is told that penalties and
interest are being claimed for the past four years. This is
completely unfair and unacceptable.
[...]
11.- In the conference call
before the Honourable Justice Pierre Archambeault of the Tax
Court of Canada, the Deputy Attorney General of Canada,
represented by Ms. Ginette Breton and
Ms. France Brazeau, Auditor, agreed to provide
Mr. Dominique Fournier with all of the amounts for the
input credits withheld for the past four years as soon as
possible, but they lied again; they did not give him anything.
This is unacceptable.
[9] This motion to dismiss was to be
submitted on August 19, 2004, the date set for the hearing of Mr.
Fournier's appeals. After hearing the arguments presented by Mr.
Fournier at the beginning of the hearing, I dismissed the motion
because I found it to be ill-founded and premature.
[10] First, it must be remembered that Mr.
Fournier's appeal is pursuant to the informal procedure. The
underlying principles of this procedure imply that these types of
appeals must be heard quickly and with the least amount of
proceedings possible; in particular, no list of exhibits is to be
filed, and no examinations for discovery are to be conducted. For
this reason, it is rarely appropriate to submit motions of the
type that Mr. Fournier submitted, and they must be discouraged.[11] In any case,
even if it were appropriate to hear it, I would have had to hear
all of the evidence to be able to determine whether the notices
of assessment establishing the amount of net taxes, interest, and
penalties were to be vacated.
[11] After I had made my decision, Mr.
Fournier informed me that he wanted to appeal and that we could
not begin the hearing of his appeals, so I informed him that he
could appeal from my decision regarding the motion to dismiss,
but he would have to wait until the hearing of his appeals had
finished.[12]
Because Mr. Fournier had told me he wanted to leave the
courtroom, I warned him that, if he did so, he ran the risk that
counsel for the Respondent would request that his appeal be
dismissed in his absence. I allowed him five minutes to decide
what to do. When I returned, Mr. Fournier said he was prepared to
proceed with the hearing of his appeals.
Facts
[12] In making the assessment with regard to Mr. Fournier, the
Deputy Minister relied primarily on the following conclusions and
assumptions of fact:
a) The
Appellant is a registrant for GST purposes. (admitted)
b) The
Appellant operates a business named Tracto Diesel enr. in
the field of selling, trading, and repairing heavy machinery.
(admitted)
c) During the
period from April 1, 1996, to September 30, 2001, the
Appellant was an agent of the Deputy Minister for GST collection
and remission. (admitted)
d) Although
the audit began on April 1, 1996,[13] the representatives of the Deputy
Minister of Revenue nevertheless analyzed an invoice issued prior
to the audit period, since it had been submitted by the
Appellant, only to find that it was not consistent in a number of
areas, namely,
- It involved a
purchase made in Ontario, for which the seller was an
individual.
- The purchase
invoice had been prepared by the purchaser, who in that case was
the Appellant.
- The invoice did
not have any record of the seller's identification as a
registrant.
- No tax had been
invoiced.
(admitted, except for the parts that are
underlined)
e) At the time
of the purchase of the motor vehicle, (GMC Savannah van) a
1998 Chevrolet Chevy van, in 1998, the Appellant had
claimed an ITC, the total of which was disallowed by the Deputy
Minister because, according to the Appellant's own admission, it
had not been used 90% of the time for business purposes.
(denied)
f) As a
result of the representations made by the Appellant that the
information originally given to the Deputy Minister's auditor was
erroneous and the motor vehicle had actually been used 95% of the
time for business purposes, the Objections Directorate vacated
the assessment in order to allow the said ITC, but specified that
the Deputy Minister reserved the right to re-assess the amount
should a future audit reveal that the facts on which this
decision was based were not accurate. (admitted)
g) In
connection with the audit conducted for the period from
April 1, 1996, to June 30, 2000, the Appellant was unable to
establish, using documentary exhibits, that the motor vehicle had
been used exclusively for his commercial activities.
(denied)
h) Via a
decision on the objection, the Deputy Minister upheld the notice
of assessment as issued. (admitted)
j) On
September 13, 2000, two representatives of the Deputy Minister
went to the Appellant's place of business, located at 172 112
Route, Bishopton, to begin the audit. (admitted)
k) The audit
showed that the Appellant's accounting was inadequate,
particularly with regard to his keeping of books and records.
(denied)
l) On
September 18, 2000, two representatives of the Deputy
Minister returned to the Appellant's place of business to
complete the audit, but the Appellant informed them he would no
longer allow them to continue their audit. (denied)
m) On or around
November 20, 2000, the Deputy Minister sent a requirement by
process server ordering the Appellant to file certain information
and documentation with the Ministèredu Revenu du
Québec within 15 days. (no knowledge)
n) The
Appellant did not act on the requirement. (no
knowledge)
o) Further to
the Appellant's failure to comply with the requirement, the
Appellant was fined $1,000.00 in file
no. 450-73-000208-011 under
section 326(1) of the Excise Tax Act (R.S.C., 1985,
c. E-15) (hereinafter called "the Act").
(admitted)
p) For failing
to provide the information and documentation required, the Deputy
Minister assessed the Appellant and denied the total input tax
credits the Appellant had claimed. (no knowledge)
q) Only after
being assessed did the Appellant provide the information and
documentation to the representatives of the Deputy Minister.
(no knowledge)
r) The
analysis carried out by the representatives of the Deputy
Minister established that there were reconciliation discrepancies
between the amounts claimed and the amounts that were eligible
according to the invoices provided and the amounts claimed.
(no knowledge)
s) As a result
of their analysis of the documentation and information provided,
the representatives of the Deputy Minister found that the
majority of the documentation and information was illegible,
altered, incomplete, inconsistent, unrelated to the
Appellant's commercial activities, or of a personal nature.
(no knowledge)
t) The
Appellant had claimed input tax credits for personal
expenditures. (no knowledge)
u) The
Appellant had claimed input tax credits for expenditures that had
no connection to his commercial activities. For example,
u.1) The Appellant claimed input
tax credits in order to receive compensation of $132,508.00 for
work related to the collection of GST and Quebec sales tax (QST)
during the period from January 1, 1996, to December 30, 2000, to
which he added interest at 2% capitalized monthly. (no
knowledge)
u.2) For the period from October
1 to December 31, 2000, the Appellant overclaimed input tax
credits equivalent to (an ITC withheld by the Deputy Minister
with interest at 2% capitalized monthly) 2% capitalized
monthly on input tax credits withheld by the Deputy Minister,
even though the withholding was justified by the Appellant's
failure to co-operate in providing his supporting documents
when the audit was conducted. (no knowledge)
v) The
Appellant claimed input tax credits for expenditures the
supporting documents were not consistent with. (no
knowledge)
[13] It is important to describe the events
that took place during the Minister's two separate audits. First,
in 1998 the Minister carried out a summary audit of the period
from April 1 to June 30, 1998. Under credit balances, a
major increase in the ITCs claimed by Mr. Fournier had been
noticed, so he had been asked to provide additional information.
One of the purchases that had come to the auditor's attention was
the purchase of a van (van) for which business use had
been described as being between 70% and 90% of the time, based on
the time of year. On September 18, 1998, Mr. Fournier was
informed that he was being disallowed the ITCs of $2,317 for the
purchase of that vehicle. According to the auditor's testimony,
no comprehensive examination had been done of the other ITCs
claimed by Mr. Fournier.
[14] When the auditor was cross-examined by
Mr. Fournier, it was learned that she had a number of invoices
(approximately 15) in her file for purchases Mr. Fournier was
claiming ITCs for. Some of those invoices had been issued by Mr.
Fournier's suppliers and contained information prescribed by law.
Other invoices, however, had been prepared by Mr. Fournier
himself using his own forms. Other supporting documents provided
by Mr. Fournier were statements of account. According to the
auditor's testimony, little attention had been paid to those
documents.
[15] Mr. Fournier appealed from the 1998
assessment, claiming that he had made an error when he had
replied that he had used the van for business purposes 70% to 90%
of the time. He said that, in reality, his van had been used 93%
or 95% of the time for business. Therefore, at the objection
stage, he had been given the benefit of the doubt, and the
assessment requiring the repayment of an amount of $1,633.31 had
been vacated, although he had been informed that the Minister
could change his mind should a future audit reveal that the facts
on which that decision was based were not accurate
(Exhibit I-1, 1998 van tab, dated July 22,
1999).
[16] The second audit of Mr. Fournier began
on September 13, 2000, when Ms. France Brazeau, of the
external audit service, went to Mr. Fournier's place of
business. She found that Mr. Fournier's bookkeeping was faulty.
This compelled her to draw up a list of approximately
5,000 documents so that she could determine to what extent
Mr. Fournier had remitted the GST amounts collectible and to what
extent he was entitled to ITCs. The difference between the amount
owing according to her calculations and the amount
Mr. Fournier had declared as collectible taxes was $1,400.
Mr. Fournier was unable to justify this difference. With
regard to the ITCs claimed by Mr. Fournier, many of the
invoices did not satisfy all of the conditions required by the
Act for entitlement to ITCs; in particular, the invoices did not
contain all of the information prescribed by regulation.
[17] When the auditor returned a few days
later to complete her audit, Mr. Fournier had refused to
give her access to his business's documents. Even a requirement
sent by the MRQ did not change the situation. Therefore, it is
not surprising that Mr. Fournier was convicted by the Court of
Quebec and fined $1,000 owing to his refusal to respond to
the requirement.[14]
[18] Consequently, Ms. Brazeau disallowed
the ITCs for the expenditures for which she had not obtained
documents containing the prescribed information. At the objection
stage, Mr. Fournier changed his attitude. He provided the appeals
officer with a meticulously prepared file of documents supporting
his ITC claim. Unfortunately for Mr. Fournier, the invoices he
provided represented in large part invoices from suppliers that
he himself had prepared on his own invoice forms, and those
invoices - or in any case, not those dismissed by the appeals
officer - did not provide the information prescribed by the
Act.
[19] It is clear that, in order to be
entitled to ITCs, Mr. Fournier had to provide supporting
documents that contained the prescribed information. The relevant
legislative provisions are as follows:
169(4) Required documentation - A
registrant may not claim an input tax credit for a
reporting period unless, before filing the return in which
the credit is claimed,
(a) the registrant has obtained sufficient
evidence in such form containing such information as will
enable the amount of the input tax credit to be determined,
including any such information as may be prescribed;
and
(b) where the credit is in respect of property or a
service supplied to the registrant in circumstances in which the
registrant is required to report the tax payable in respect of
the supply in a return filed with the Minister under this Part,
the registrant has so reported the tax in a return filed under
this Part.
[Emphasis added.]
[20] Section 3 of the Input Tax
Credit Information (GST/HST) Regulationsprescribes the
information to be provided as follows:
3. Prescribed information - For the purposes of
paragraph 169(4)(a) of the Act, the following information
is prescribed information:
(a) where the total amount paid or payable shown on the
supporting documentation in respect of the supply or, if the
supporting documentation is in respect of more than one supply,
the supplies, is less than $30,
(i) the name of the supplier or the intermediary in
respect of the supply, or the name under which the supplier
or the intermediary does business,
(ii) where an invoice is issued in respect of the supply or
the supplies, the date of the invoice,
(iii) where an invoice is not issued in respect of the supply
or the supplies, the date on which there is tax paid or payable
in respect thereof, and
(iv) the total amount paid or payable for all of the
supplies;
(b) where the total amount paid or payable shown on the
supporting documentation in respect of the supply or, if the
supporting documentation is in respect of more than one supply,
the supplies, is $30 or more and less than $150,
(i) the name of the supplier or the intermediary in respect of
the supply, or the name under which the supplier or the
intermediary does business, and the registration number
assigned under subsection 241(1) of the Act to the supplier
or the intermediary, as the case may be,
(ii) the information set out in subparagraphs (a)(ii)
to (iv),
(iii) where the amount paid or payable for the supply or the
supplies does not include the amount of tax paid or payable in
respect thereof,
(A) the amount of tax paid or payable in respect of each
supply or in respect of all of the supplies, or
(B) where provincial sales tax is payable in respect of each
taxable supply that is not a zero-rated supply and is not payable
in respect of any exempt supply or zero-rated supply,
(I) the total of the tax paid or payable under Division II of
Part IX of the Act and the provincial sales tax paid or payable
in respect of each taxable supply, and a statement to the effect
that the total in respect of each taxable supply includes the tax
paid or payable under that Division, or
(II) the total of the tax paid or payable under Division II of
Part IX of the Act and the provincial sales tax paid or payable
in respect of all taxable supplies, and a statement to the effect
that the total includes the tax paid or payable under that
Division,
(iv) where the amount paid or payable for the supply or the
supplies includes the amount of tax paid or payable in respect
thereof and one or more supplies are taxable supplies that are
not zero-rated supplies,
(A) a statement to the effect that tax is included in the
amount paid or payable for each taxable supply,
(B) the total (referred to in this paragraph as the
"total tax rate") of the rates at which tax was paid or
payable in respect of each of the taxable supplies that is not a
zero-rated supply, and
(C) the amount paid or payable for each such supply or the
total amount paid or payable for all such supplies to which the
same total tax rate applies, and
(v) where the status of two or more supplies is different, an
indication of the status of each taxable supply that is not a
zero-rated supply; and
(c) where the total amount paid or payable shown on the
supporting documentation in respect of the supply or, if the
supporting documentation is in respect of more than one supply,
the supplies, is $150 or more,
(i) the information set out in paragraphs (a) and
(b),
(ii) the recipient's name, the name under which the
recipient does business or the name of the recipient's duly
authorized agent or representative,
(iii) the terms of payment, and
(iv) a description of each supply sufficient to identify
it.
[Emphasis added.]
[21] During the first day of the hearing, I
reminded Mr. Fournier that the Court's role is to enforce the
Act, and the Court would not be able to allow him ITCs unless all
of the conditions decreed by the Act were met. I told him that
negotiations might enable him to obtain more than what the Court
itself could award him. Given Mr. Fournier's awkward relations
with the representatives of the Respondent, I suggested that
together we quickly review the appeals officer's memorandum to
determine what expenditures could actually be discussed before
the Court. The memorandum contained approximately 40 pages of
points regarding ITCs that had been either allowed or disallowed
by the appeals officer, and we reviewed each point, one after the
other. For a number of them, Mr. Fournier was surprised to see
that the appeals officer had already allowed the ITCs he had
claimed. After that, Mr. Fournier was willing to concede that,
for some of the ITCs, he had not satisfied all of the conditions
needed to be entitled to them. So he announced that he was
prepared to abandon a number of the ITCs mentioned in the
memorandum.[15]
Counsel for the Respondent and her agent also recognized Mr.
Fournier's eligibility for some of his ITCs.[16] The review lasted a good
portion of the evening, as the first day of the hearing did not
finish until 9:30 p.m. The review in question, which should
have taken place before the hearing, as had been suggested,
allowed everyone to agree on the points that were to be discussed
the next day, namely (i) Mr. Fournier's eligibility to claim
ITCs for the van and (ii) his eligibility to claim ITCs for an
all-terrain vehicle (ATV).
[22] On the second day of the hearing, Mr.
Fournier presented his version of the facts regarding the
purchase of the van and the ATV. The van in question had been
purchased on May 27, 1998, from a GM dealer for $33,100 to
replace another van. According to Mr. Fournier, the van had been
used more than 90% of the time for his business of purchasing and
trading heavy machinery. However, he acknowledged that it had
been adapted to transport persons with disabilities and he had
received a grant as part of a mobility assistance program for
persons with disabilities. According to him, the van had been
used for personal purposes during the four-year period from 1998
to 2002 for a total of 6,512 kilometres. Since the
kilometrage on the counter indicated 96,549 kilometres, he
said that 93.26% of the kilometrage had been for commercial
purposes. He also said that his wife had a car (a Cavalier) - and
this is corroborated by her testimony - that had been used for
the family's needs, and that his daughter, who had a disability,
did not go out often. Furthermore, since the other trucks
Mr. Fournier used in his business were heavier trucks for
transporting heavy machinery, he used his van mainly when he was
going to auctions to purchase machinery. The transportation costs
for going to the auctions were lower with the van.
[23] In her testimony, the auditor stated
that, owing to the following facts, she had concluded that the
van had not been used exclusively or nearly exclusively for
commercial activities. First, the van had been equipped to
accommodate two wheelchairs, and it had been used to transport
persons with disabilities. It should be added that Mr. Fournier
had had custody of two other persons with disabilities, who lived
with him as his foster children. Also, Mr. Fournier had not
been able to provide the auditor with evidence that the van had
been insured as a vehicle used for commercial purposes. The
checks the auditor made with the Société
de l'assurance automobile du Québec showed that
the van had been registered as a simple family car. She had also
discovered that Mr. Fournier had another vehicle, which he
described as a pickup truck, that had been used for his business.
What is more, she had not been given a kilometrage log to
establish the van's use for business purposes. According to her,
1,000 kilometres could make the difference between 89% use
and 93% use: 89% did not entitle the Appellant to ITCs.
[24] Regarding the ATV, Mr. Fournier said he
had purchased it to assist him in transporting certain parts
needed to repair his heavy machinery. Following some difficulties
he had had obtaining ITCs for that vehicle, Mr. Fournier had
decided to sell it and use instead a tractor that was used to mow
the lawn of his residence.
[25] In addition to the penalty set out in
section 280 of the Act, the Minister established a penalty
of $325 under section 285 with regard to the 2% interest
Mr. Fournier was claiming from the Minister for the delay in
paying him the ITCs he had claimed but that had been withheld by
the Minister to offset the amounts owed by Mr. Fournier.
Analysis
[26] As was mentioned previously, Mr.
Fournier suffers from rampant proceduritis. He also described
himself as Me Dominique Fournier in his own
pleadings, while he is neither a lawyer nor a notary! Another
surprising fact is that Mr. Fournier had claimed an ITC for the
purchase of a robe that a judge from the Court of Quebec had
suggested he wear when he appeared before that court. Obviously,
Mr. Fournier is not entitled to that ITC.
[27] Mr. Fournier claims to have been
harassed by the MRQ, and he strongly believes, for all sorts of
reasons, that he is entitled to damages. Regardless of these
reasons and their validity, I tried a number of times to explain
to him that the Tax Court of Canada was not the proper court for
seeking remedy in damages. Furthermore, the evidence revealed
that the attempt to obtain $258,672 in Superior Court as fees for
collecting GST had been dismissed as markedly ill-founded
at the motion to dismiss stage. Notwithstanding this decision of
the Superior Court of Québec, Mr. Fournier stubbornly
continued to claim this compensation, just as he persisted in
claiming damages for damage he had allegedly suffered.
[28] Even though I spent more than two hours
attempting to explain to him that this court was not the proper
court for this remedy in damages, even though the appeals officer
had informed him when he filed his motion to amend the notice of
appeal that he could not claim these damages, and even after Mr.
Fournier had told the representatives for the Respondent that he
would stop harassing the Department by claiming those amounts, at
the end of his pleading Mr. Fournier reiterated his claim
for damages. Tenacity can certainly be a good quality, but Mr.
Fournier's extreme and abusive stubbornness constitutes vexatious
conduct, and it has caused the Court to waste a great deal of
time. The hearing, which should not have lasted more than one
day, required two full 11-hour days. If it had not been an
informal procedure, I would have ordered Mr. Fournier to pay
costs for having needlessly prolonged the hearing of his appeal.
I regret that the Tax Court of Canada Act does not grant
this court the authority to order a taxpayer to pay costs under
these types of circumstances.
[29] With regard to the soundness of the
assessment, I am prepared to grant Mr. Fournier the benefit
of the doubt regarding the purposes for which the van and the ATV
were purchased. The legislative provision set forth by the
Respondent is subsection 202(4) of the Act.[17] But before determining whether
this subsection is applicable, "[n]otwithstandingsubsections (2)
and (3), . . . for the purpose of determining [Mr. Fournier's]
input tax credit," it must be decided whether
subsection 202(2) applies. This is what it states:
202(2) Where a registrant who is an individual or a
partnership acquires or imports a passenger vehicle or
aircraft or brings it into a participating province for use as
capital property of the registrant, the tax payable (other
than tax deemed to be payable under subsection (4)) by the
registrant in respect of that acquisition, importation or
bringing in, as the case may be, shall not be included in
determining an input tax credit of the registrant unless the
vehicle or aircraft was acquired or imported, or
brought in, as the case may be, by the registrant for use
exclusively in commercial activities of the registrant.
[Emphasis added.]
[30] The word "exclusive" is defined as
follows in subsection 123(1) of the Act:
"exclusive" means
(a) in respect of the consumption, use or supply of
property or a service by a person that is not a financial
institution, all or substantially all of the consumption, use or
supply of the property or service, and
(b) in respect of the consumption, use or supply of
property or a service by a financial institution, all of the
consumption, use or supply of the property or service.
[31] The issue to be determined here is
whether the van is a passenger vehicle. According to
subsection 123(1), a "passenger vehicle" is understood
within the meaning of subsection 248(1) of the Income
Tax Act (Tax Act). This subsection
defines a passenger vehicle as follows:
248(1) "passenger vehicle" means an automobile acquired
after June 17, 1987 (other than an automobile acquired after that
date pursuant to an obligation in writing entered into before
June 18, 1987) and an automobile leased under a lease entereed
into, extended or renewed after June 17, 1987.
[32] That same subsection of the Tax
Act defined "automobile" in the following manner in 1998:
|
248(1) « automobile »
Véhicule à moteur
principalement conçu ou aménagé
pour transporter des particuliers sur les routes et
dans les rues et comptant au maximum neuf places assises, y
compris celle du conducteur, à
l'exclusion des véhicules suivants:
a) les
ambulances;
a.1)
b)
les véhicules à moteur acquis principalement
pour servir de taxi, les autobus utilisés dans une
entreprise consistant à transporter des passagers et
les fourgons funéraires utilisés dans une
entreprise consistant à organiser des
funérailles;
c)
c)
sauf pour l'application de l'article 6, les
véhicules à moteur acquis pour être
vendus ou loués dans le cadre de l'exploitation
d'une entreprise de vente ou de location de
véhicules à moteur et les véhicules
à moteur utilisés pour le transport de
passagers dans le cadre de l'exploitation d'une
entreprise consistant à organiser des
funérailles;
d)
d)
les véhicules à moteur de type pick-up ou
fourgonnette ou d'un type analogue:
(i) comptant au maximum trois places
assises, y compris celle du conducteur, et qui,
au cours de l'année d'imposition où
ils sont acquis, servent principalement au
transport de marchandises ou de matériel en vue de
gagner un revenu,
(ii) dont la totalité, ou presque, de
l'utilisation au cours de l'année
d'imposition où ils sont acquis est pour le
transport de marchandises, de matériel ou de
passagers en vue de gagner un revenu.
|
248(1) "automobile" means
(a) a motor
vehicle that is designed or adapted primarily
to carry individuals on highways and streets and
that has a seating capacity for not more than the driver
and 8 passengers,
but does not include
(b) an
ambulance,
(c) a motor vehicle
acquired primarily for use as a taxi, a bus used in a
business of transporting passengers or a hearse used in the
course of a business of arranging or managing funerals,
(d) except for the
purposes of section 6, a motor vehicle acquired to be
sold, rented or leased in the course of carrying on a
business of selling, renting or leasing motor vehicles or a
motor vehicle used for the purpose of transporting
passengers in the course of carrying on a business of
arranging or managing funerals, and
(e) a motor
vehicle of a type commonly called a van or pick-up
truck or a similar vehicle
(i) that has a seating capacity for not more than the
driver and 2 passengers and that, in the taxation year
in which it is acquired, is used primarily for the
transportation of goods or equipment in the course of
gaining or producing income, or
(ii) the use of which, in the taxation year in
which it is acquired, is all or substantially all
for the transportation of goods, equipment or passengers
in the course of gaining or producing income;
[Emphasis added.]
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[33] However, the only issue raised at the
hearing that must be responded to here is the following: Was the
use of Mr. Fournier's van purchased in 1998 all or substantially
all for commercial activities?[18] I came to the conclusion that the van had been
purchased for such purposes, since I am accepting
Mr. Fournier's testimony in this respect. The fact that it
had been used 93% of the time for business purposes from 1998 to
2002 supports Mr. Fournier's statement regarding his intent for
purchasing it in 1998.
[34] It is important to point out that the
Act does not state that "all or substantially all" corresponds to
90%. The administrative interpretation that establishes this
number does not bind the courts, who have mentioned several times
that there is no magic number. The following is what the late
Taylor J. of this Court wrote in Wood v. M.N.R., [1987]
1 C.T.C. 2391, 2393, 87 DTC 312, 313:
The Minister's rule (from I.T.-171 (supra)) is that
the Canadian income should be at least 90% of total income -
the "90% rule". Obviously that is just a
departmental assessing policy, and while arbitrary is
undoubtedly a useful and functional mechanism in dealing with a
difficult section of the Act, I would think the Minister might
be hard-pressed to refuse a claim where the percentage was
89%, may be even 85% or 80% or lower - and that brings
up this taxpayer's position which ends up to be about 70%.
($30,000 out of $42,500). [FOOTNOTE: Assumes that the
$12,500 U.S. income has been "converted" into Canadian
funds.] Clearly the term "substantially all"[19] does not
lend itself to a simple mathematical formula. Further it
would seem to me that any particular definition of
"substantially" would be only valid with reference to
the specific context in which it is found. [...]
[Emphasis added.]
[35] In my opinion, the ATV is not a
passenger vehicle because it is not an "automobile," that is, a
motor vehicle designed primarily to carry individuals on highways
and streets. I believe it was designed to carry individuals off
highways and streets.[20] Thus, the general rule set out in
subsection 199(2), which reads as follows, must be
applied:
199(2) Acquisition of capital personal
property - Where a registrant acquires or imports
personal property or brings it into a participating
province for use as capital property,
(a) the tax payable by the registrant in respect
of the acquisition, importation or bringing in of the property
shall not be included in determining an input tax credit of
the registrant for any reporting period unless the
property was acquired, imported or brought in, as the case
may be, for use primarily in commercial activities of the
registrant; and
(b) where the registrant acquires, imports or
brings in the property for use primarily in commercial activities
of the registrant, the registrant is deemed, for the purposes of
this Part, to have acquired, imported or brought in the
property, as the case may be, for use exclusively in
commercial activities of the registrant.
[Emphasis added.]
[36] Here the issue is whether the ATV had
been acquired "for use primarily in [Mr. Fournier's] commercial
activities." In my opinion, the benefit of the doubt may be given
to Mr. Fournier in this respect, as was indicated previously. He
says that he purchased the ATV to transport parts on his property
for the repair of his heavy machinery; therefore, he is entitled
to the ITC for the purchase of the ATV.
[37] When hearing the arguments of counsel
for the Respondent, I had told her that I believed part of Mr.
Fournier's assessment should be vacated because, with regard to
that particular part, the assessment had been made outside of the
normal assessment period set out in subsection 298(1)[21] of the Act; such was
the case in particular with respect to the period from April 1996
to June 30, 1997. After some reflection, I do not think I
can come to that conclusion for two reasons.
[38] First, the evidence is not sufficiently
clear on this issue. To be sure, the Minister may make a
reassessment, without having to prove that the taxpayer made a
misrepresentation that is attributable to the person's
neglect, carelessness, or wilful default or by committing a
fraud,[22] within
four years following "the later of the day on or before
which the person [in this case, Mr. Fournier] was required
under section 238 to file a return for the period and the
day the return[s were] filed." Yet the evidence did not reveal
when Mr. Fournier had filed his GST returns for the periods at
issue. Therefore, my decision cannot be based solely on the first
date set out in the Act, as I did at the hearing. The two
relevant dates must be known to be able to decide that there is a
limitation. Also, since this issue had not been raised by Mr.
Fournier in his pleading or by me at the beginning of the
hearing, the Respondent did not know that she was to present
evidence regarding circumstances that could have justified an
assessment outside the normal assessment period. Claiming a
limitation to vacate part of the assessment under these
circumstances would therefore constitute a violation of the
principle of procedural fairness.
[39] As concerns the imposition of the
penalty under section 280 of the Act, the case law has
acknowledged that, in order for that type of penalty to be
cancelled, it must be shown that due diligence was used in
fulfilling the obligations set out in the Act. As was
acknowledged in Corporation de l'École
Polytechnique c. La Reine, 2004 CAF 127, [2004]
A.C.F. No. 563 (Q.L.), it is clear that "ignorance of the
law does not excuse"[23] the lack of prescribed information. Furthermore, the
fact that the Minister had been able in the past to conduct an
audit and had not told Mr. Fournier at that time that he was not
entitled to the ITCs owing to the lack of supporting documents
required does not constitute a defence for Mr. Fournier. This is
very far from using the officially induced mistake of law as a
defence. In Corporation de l'École
Polytechnique, Décaryand Létourneau JJ.
referred to the comments made by Lamer, C.J., in R.v.
Jorgensen, [1995] 4 S.C.R. 55, and summarized them as
follows:
[44] Finally, the Chief Justice
concluded that in order to benefit from the defence of officially
induced mistake of law, an accused must show that "she made
a mistake of law, that she considered her legal position,
consulted an appropriate official, obtained reasonable advice
and relied on that advice in her actions": ibid., at
para. 36.
[Emphasis added.]
[40] Mr. Fournier acknowledged a number of
times that his accounting was deficient, and he did not state
that he had made any efforts to inquire of the MRQ as to his
obligations for collecting GST and the conditions he would have
to meet to be entitled to ITCs. Some of the documents issued by
the Minister had been available at that time to provide him with
information, in particular GST
Memorandum 400-1-2, dated November 8, 1990,
entitled Documentary Requirements, which provides the
information that invoices must contain to be eligible for ITCs.
Thus I have no hesitation in concluding that it is out of
indifference that Mr. Fournier did not take the measures needed
to obtain the information he needed to claim ITCs. The penalty
imposed under section 280 is well-founded, but I am
not prepared to conclude that, in these circumstances,
Mr. Fournier's conduct was equivalent to gross negligence by
claiming ITCs. Therefore, I am cancelling the penalty imposed
under section 285 of the Act.[24] However, this conclusion must not
be interpreted by Mr. Fournier as an authorization to
continue claiming ITCs equivalent to 2% capitalized monthly
on input tax credits withheld by the Deputy Minister when he is
not entitled to them. If he were to claim such ITCs in the
future, he may not receive so much clemency from this court.
[41] For all of these reasons, Mr.
Fournier's appeals are allowed, and the assessments are referred
back to the Minister for reconsideration and reassessmentbased on
the following points: (i) the Appellant is entitled to ITCs with
respect to the goods or services set out in headings 1 (1998 GMC
Savannah van ($2,317.00)) and 2 (ATV 4-wheel) of the memorandum
on objection in Exhibit I-1, objection tab; (ii) with
regard to the other ITCs, according to the concessions made by
both parties, the Appellant is entitled to the ITCs set out in
headings 16 (second paragraph), 23, 25, 27 (first
paragraph), 34, 50, 53, 59, 60, 69, 86, 102 (to a maximum of
$68), 121, 122, 123, 125, 129, 135 (to a maximum of $15.87), and
139 and to half of the ITCs set out in headings 112, 113,
and 114 of the same memorandum; and (iii) that the penalty under
section 285 of the Act must be cancelled.
Signed at Ottawa, Canada, this 1st day of December,
2004.
Archambault J.
Translation certified true
on this 10th day of March 2005.
Colette Dupuis-Beaulne, Translator
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