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Citation: 2003TCC811
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Date: 20031112
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Docket: 2002-3442(IT)I
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BETWEEN:
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JANICE L. KINCH,
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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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REASONS FOR JUDGMENT
(delivered
orally from the Bench at
Regina,
Saskatchewan on October 3, 2003)
Beaubier,
J.
[1] This
appeal pursuant to the Informal Procedure was heard at Regina, Saskatchewan on
October 2, 2003. The Appellant and her husband testified. Both the Appellant
and the Respondent called the Auditor on the file.
[2] At
the opening of the hearing, Appellant's counsel withdrew the Appellant's claims
except in respect to a claim for an allowable business investment loss
respecting a shareholder's loan to Tobin Lake Resort Ltd., ("TLRL") a
corporation formed by her father which operated a fishing and holiday camp,
cabins and marina at Tobin Lake near Nipawin, Saskatchewan.
[3] TLRL
was an amalgamation on June 3, 1996 of two Saskatchewan corporations, namely:
1. Tobin Lake Store
Ltd. which at that time had the following members and interests:
(a) two-thirds,
Connie Anklovich, the Appellant's sister;
(b) one-sixth,
Marlene Larson, the Appellant's sister;
(c) one-sixth,
the Appellant.
2. TLRL, of which
each of the three sisters owned one-third.
All of the sisters are
directors of TLRL.
[4] After
the fiscal year of TLRL ending December 31, 1995, TLRL did not have accountants
do its financial statements or income tax returns. The two sisters, other than
the Appellant, operated TLRL and Marlene Larson did whatever financial work was
done respecting TLRL.
[5] In
the subsequent years the Appellant commenced two actions in the Saskatchewan
Court of Queen's Bench, the first for financial reports which the Court
ordered. This Order was not complied with. The second was to allow the
Appellant to take control of TLRL which the Court denied on the basis that the
Appellant's interest was as prejudicial as her sisters'.
[6] The
Appellant claimed her allowable business investment losses in 1998 and the
Court is satisfied that all of the prerequisites respecting an allowable
business investment loss existed. In particular, any debt owed to her at that
time was bad (and remains in the same state today). Further, the accumulative
evidence respecting creditor proceedings, unpaid municipal taxes, mortgages, accounting
bills, loans and various debts established that in 1998 any of TLRL's debts
were likely doubtful or bad. Given the state of the relationship between the
sisters, any debt owed to the Appellant appears to be not only unsecured, it
was bad. On this basis, she would be entitled to an allowable business
investment loss. Based upon the Appellant's and her husband's testimony, TLRL
was unable to meet its liabilities as they came due in 1998. It was insolvent
and could have been placed in bankruptcy in 1998.
[7] However,
there are a series of major legal entanglements that arise in this case.
Chronologically they are:
1. 1985 – The Appellant's mother's
estate;
2. 1985 – The
Appellant's alleged one-sixth interest in Tobin Lake Store Ltd. which she
inherited from her mother;
3. September 12,
1990 – Exhibit A-1, the Appellant's father's transfer of his "capital
stock" in TLRL;
This does not refer to any
loans or debts.
4. November 18, 1990
– The death of the Appellant's father and the bequest of a 25 per cent interest
in his estate to the Appellant (Exhibit A-2).
5. December 31, 1995
– An accountant's last financial statement for TLRL (Exhibit A-8), dated June
24, 1996.
6. June 3, 1996 –
The amalgamation of Tobin Lake Store Ltd. and TLRL (Exhibit A-5).
[8] All
of these are serious and, especially in the case of the amalgamation, very
sophisticated. The Appellant testified to her version of events which included
the allegation that the September 12, 1990 transfer included her father's
shareholder's loan. On the face of Exhibit A-1, it did not. Mr. Kinch gave
accounting testimony which, in particular, is not verified or is contradicted
by the following:
1. Exhibit A-1.
2. The amalgamation
which he simply failed to face for any legitimate accounting purposes;
3. Exhibit A-24, the
1995 accountant's printouts which contradict his testimony and raise
innumerable questions as to the accounting arising from the estates, both
corporations and the effect of the amalgamation;
4. The fact that
since the amalgamation any so-called accounting for TLRL has been non-existent,
or sporadic at the very best, or on an alleged and obviously erroneous
so-called cash basis.
[9] The
result is that the Appellant and her family are involved in serious legal
matters, family litigation and sophisticated legal situations which were
created by her parents for their own advantage, topped off by an amalgamation
in which the Appellant participated and which should have created major
accounting adjustments. (Often, that is why amalgamations occur.) The
amalgamation was followed by litigation between the sisters, business failings
and various self-advantageous actions.
[10] Exhibit A-24 demonstrates the preliminary work for a set of
adjustments following amalgamation. But of itself, it does not establish
anything. Nor are the years since accounted for by any of the evidence. In
particular, the testimony for the period since amalgamation is clearly
inaccurate, pro Appellant, and at best, speculative and without foundation.
[11] It is in light of this and a complete failure of any reliable
accounting before the Court that the Appellant has failed to prove any loss or
if in fact she has a loss.
[12] For this reason the appeal is dismissed.
Signed at Ottawa,
Canada this 12th day of November 2003.
Beaubier,
J.
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