REASONS FOR JUDGMENT
Boyle J.
Overview
[1]
These six informal appeals were heard together
in Quebec City. All of the taxpayers were investors in schemes that resulted in
the stripping of funds out of an RRSP (or other registered plan) through the
use of non‑qualified investments in self‑directed RRSPs.
[2]
The only issue in these cases is whether the
Respondent was permitted to assess outside the normal reassessment period.
These transactions occurred in 2001. The normal reassessment periods expired in
2005. The notices of reassessment were issued in 2009. Consequently, the
Respondent’s evidence must be such as to satisfy the Court that the Canada
Revenue Agency (“CRA”) could reassess outside the normal three‑year reassessment
period. That in turn requires that there have been a misrepresentation that was
attributable to neglect, carelessness or wilful default.
The Scheme
[3]
The principal rogue promoter of the scheme proposed
to these taxpayers was Claude Lavigne. He was not acting alone, but worked
with fellow scoundrels. Mr. Lavigne has been found guilty of tax evasion,
sentenced to prison for 21 months and fined almost two million dollars
(2014 QCCQ 6891 and 2015 QCCQ 923) by the Court of Quebec.
The Court of Quebec had earlier found him guilty of violations of the Quebec Securities
Act as it applied to such schemes, including one involving one of the investment
clubs herein (2007 QCCQ 8). This Court has several reported decisions,
including two involving Mr. Lavigne, dealing with similarly structured
RRSP schemes peddled by scoundrels. This Court has also recently heard other
RRSP-stripping cases: see Demers v. Canada, 2014 TCC 368 (Justice Jorré);
Gougeon v. Canada, 2010 TCC 359 (Justice Tardif); Bonavia v. Canada,
2009 TCC 289 (Justice Favreau), affirmed 2010 FCA 129;
Astorino v. Canada, 2010 TCC 144 (Justice C. Miller);
Noiseux Estate v. Canada, 2016 TCC 51 (Justice Paris);
and Filiatrault v. Canada, 2016 TCC 58 (Justice Paris).
[4]
The Appellants and the Respondent filed a
Partial Agreed Statement of Facts, a copy of which is attached to these reasons.
In addition, two CRA auditors testified, as did all six taxpayers. One of these
CRA auditors was responsible for the audit of all of the structures set up by Mr. Lavigne.
The other was one of three auditors responsible for auditing the taxpayer
investors. That auditor audited two of these six taxpayers; two other auditors
audited the other four of these taxpayers. Both counsel referred to the court
decisions concerning Mr. Lavigne personally and to the other RRSP-stripping
tax cases in which Mr. Lavigne was involved and which deal in particular
with how Mr. Lavigne’s investment club schemes were structured and
promoted.
[5]
It is sufficient for the purposes of these
reasons to provide a general outline based on the Agreed Statement of Facts and
on the other evidence showing how this investment club scheme worked. Not
surprisingly in cases such as those herein, potential “investors”
who participate in such a scheme range from seemingly willing participants to
less sophisticated persons who appear to have been conned. Not everyone says
they were offered, or that they accepted, the same deal, or that they were told
the same thing, or that they had tried to reconcile what they were told with
the documents. However, the following is a general summary of how the three
investment clubs operated:
1. The
participant transferred his/her pre‑existing registered plan to a new
self‑directed RRSP at B2B Trust, a subsidiary of the Laurentian Bank.
There is no suggestion that B2B Trust or Laurentian Bank was complicit in
Mr. Lavigne’s scheme.
2. B2B
Trust was instructed by the participant’s financial advisor, with whom the
participant had never dealt previously, to invest in one of three different
investment clubs: Investment Club HT104, Investment Club HT106 and Investment Club
GPS. This advisor was connected with Mr. Lavigne and friends and was designated
in the documents signed at the commencement of the taxpayer’s participation. All
or substantially all of the money transferred into the new self‑directed
RRSP was then invested in Investment Club A shares, B shares or C shares.
The A shares were all issued for the dollar amount invested by the self‑directed
RRSP. This resulted in B2B Trust recording the entire amount as the cost and value
of these shares on the taxpayer’s RRSP statement.
3. The
issuance of the A shares to the taxpayer’s RRSP gave the taxpayer the right to
receive B shares, which were income shares, and C shares, which were voting
shares (Agreed Statement of Facts, paragraph 16). The participants understood
that their B shares would be purchased from them by a related group, the “Club des Présidents”, heading the investment clubs, and that the purchase amount would
be received as a prepayment or incentive for allowing the investment clubs to
invest the funds transferred from their RRSP or other registered plan. The
participants would receive, a number of weeks later, between 40% and 50% of the
amount transferred as an incentive or as prepayment of the anticipated returns
on the funds transferred out of their RRSP or other registered plan to their
new self-directed RRSP and then invested with the investment club. Participants
were told that in several years this amount would be taxable in their hands as
a capital gain that qualified for the capital gains exemption. There are two
different B share purchase option agreements in evidence. The transaction
documents appear to describe the payment received as being the advance minimum
exercise price in respect of the option granted by the appellant to the Club
des Présidents on the B shares and for the ceding of the C share voting
rights to the Club des Présidents. Both of the documents in evidence relate to
Mr. Vallée; one states that Mr. Vallée sought and obtained advice
concerning the option. In addition, one of the documents provides that the appellant
was allowed to thereafter organize and plan the sale under the option as he/she
wished for his/her legal and fiscal benefit. One of them addressed the matter
of capital gains exemption planning.
4. The
C shares were the only voting shares and no one seems to have paid much attention
to them (beyond the fact of their being addressed in Mr. Vallée’s option
agreements).
5. The
RRSP statements issued by B2B Trust to the investors continued to show the A
shares in the investment club at a book value and market value equal to their
original purchase price.
6. Participants
did not report in the year received amounts received in respect of their B
shares, whether the participants received them personally or within their RRSP.
No T4RSP slip was issued to them in respect of these amounts.
7. Shortly
after the investment was made in an investment club, the investment club transferred
money by cheque to one or more Quebec numbered companies associated with
Mr. Lavigne. The cheques referred to the redemption of B shares (Agreed
Statement of Facts, paragraph 22). These Quebec numbered companies appear to
have been the source of the amounts paid to participants in respect of the B
shares.
[6]
I am satisfied on the evidence that it is more
probable than not that the 40% to 50% payment was offered to all investors. The
fact that, according to the audit notes, not all investors were reassessed may
well be attributable to some having died or retired to another country before
the audits or reassessments were done, or to Mr. Lavigne’s scheme having
ended before they received or cashed their cheque for their B shares. This last
group may well also include the persons referred to in the Court of Quebec’s
general introductory paragraphs.
The Issue
[7]
For the Respondent to validly reassess outside
the normal reassessment period, the Income Tax Act (the “Act”) requires
both (i) that a “benefit” have been received by an appellant “out of or under” the B2B Trust RRSP, which should have been reported in the year
received, and (ii) that it was not reported due to neglect, carelessness or
wilful default.
[8]
While the French version of the Act provides
“est comprise dans une prestation
toute somme reçue dans le cadre d’un régime d’épargne-retraite” (emphasis added), the English version uses what might arguably be somewhat
less broad language than the French in providing that “benefit includes any amount received out
of or under a retirement savings plan”
(emphasis added). This Court considered this issue in Lavoie v. The Queen,
2009 TCC 293. Justice Bowie wrote:
16 The answer to
Charron J.’s second question, then, must depend on the tax treatment that would
be applied to a part of the Registered Plan if during the year it were to be in
the hands of the annuitant rather than the trustee. Subsection 146(8) brings
into the taxpayer’s income for the year
... the
total of all amounts received by the taxpayer in the year as benefits out of or
under registered retirement savings plans ...
For purposes of this section, the word “benefit”
is defined in subsection 146(1).
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“benefit” includes any amount received out of or under a
retirement savings plan other than
[exceptions are inapplicable]
and without restricting the generality of the foregoing includes
any amount paid to an annuitant under the plan
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« prestation » Est comprise dans une prestation toute somme
reçue dans le cadre d’un régime d’épargne-retraite, à l’exception :
[les exceptions sont inapplicable[s]]
sans préjudice de la portée générale de ce qui précède, le terme
vise toute somme versée à un rentier en vertu du régime :
|
|
(d) in accordance with the terms of the plan,
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d) soit
conformément aux conditions du régime;
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|
(e) resulting from an amendment to or modification of the
plan, or
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e) soit
à la suite d’une modification du régime;
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(f) resulting from the termination of the plan;
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f) soit
à la suite de l’expiration du régime.
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Rowe D.J.
pointed out in Kaiser v. The Queen the breadth given to this
definition by the inclusion of the word “under” in the English version, and the
expression in the French version “dans le cadre” has a similar effect.
Applying the surrogatum principle to the payments leads me to conclude
that when the Appellant cashed the cheques and applied the funds to purposes
other than restoring the value of the fund holdings in his RRSPs then those
amounts fell to be treated as amounts received by him in the year as benefits
out of or under his RRSPs, and so were taxable in his hands.
[Emphasis added.]
The Appellants do not argue that the phrase
“dans le cadre de” is to be interpreted in some more restrictive or limitative
fashion as a result of the use of the phrase “out of or under” in the English
version.
[9]
The taxpayers in these appeals were not assessed
penalties for failing to report the amounts they received personally. Nor were
any of the taxpayers or their RRSPs assessed for having their self‑directed
RRSPs buy investments that were not qualified investments for an RRSP.
Law
[10]
The relevant provisions of the Act are as
follows:
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[Paragraph 56(1)(h)]
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[Alinéa 56(1)h)]
|
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Amounts to be included in income for year
56(1) Without restricting the generality
of section 3, there shall be included in computing the income of a taxpayer
for a taxation year,
. . .
(h) amounts required by section
146 in respect of a registered retirement savings plan or a registered
retirement income fund to be included in computing the taxpayer’s income for
the year;
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Sommes à
inclure dans le revenu de l’année
56(1) Sans
préjudice de la portée générale de l’article 3, sont à inclure dans le calcul
du revenu d’un contribuable pour une année d’imposition :
[…]
h) toutes sommes
relatives à un régime enregistré d’épargne-retraite ou à un fonds enregistré
de revenu de retraite et qui doivent, en vertu de l’article 146, être incluses
dans le calcul du revenu du contribuable pour l’année;
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|
[Subsection
146(1)]
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[Paragraphe
146(1)]
|
|
Definitions
146(1)
In this section,
“benefit”
includes any amount received out of or under a retirement savings plan other
than
. . .
and
without restricting the generality of the foregoing includes any amount paid
to an annuitant under the plan
(d) in
accordance with the terms of the plan,
(e)
resulting from an amendment to or modification of the plan, or
(f)
resulting from the termination of the plan;
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Définitions
146(1)
Les définitions qui suivent s’appliquent au présent article.
prestation
Est comprise dans une prestation toute somme reçue dans le cadre d’un régime
d’épargne-retraite, à l’exception :
[…]
Sans
préjudice de la portée générale de ce qui précède, le terme vise toute somme
versée à un rentier en vertu du régime :
d) soit
conformément aux conditions du régime;
e) soit à la suite
d’une modification du régime;
f) soit à la suite
de l’expiration du régime.
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|
[Subsection
146(8)]
|
[Paragraphe
146(8)]
|
|
Benefits
taxable
(8) There shall
be included in computing a taxpayer’s income for a taxation year the total of
all amounts received by the taxpayer in the year as benefits out of or under
registered retirement savings plans . . . .
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Prestations
imposables
(8) Est inclus
dans le calcul du revenu d’un contribuable pour une année d’imposition le
total des montants qu’il a reçus au cours de l’année à titre de prestations
dans le cadre de régimes enregistrés d’épargne-retraite […].
|
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[Subparagraph
152(4)(a)(i)]
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[Sous-alinéa
152(4)a)(i)]
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Assessment and
reassessment
(4) The Minister
may at any time make an assessment, reassessment or additional assessment of
tax for a taxation year, interest or penalties . . . except that an
assessment, reassessment or additional assessment may be made after the
taxpayer’s normal reassessment period in respect of the year only if
(a) the taxpayer or person filing
the return
(i) has made any misrepresentation that
is attributable to neglect, carelessness or wilful default or has committed
any fraud in filing the return or in supplying any information under this
Act, or
. . .
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Cotisation et
nouvelle cotisation
(4) Le ministre
peut établir une cotisation, une nouvelle cotisation ou une cotisation
supplémentaire concernant l’impôt pour une année d’imposition, […]. Pareille
cotisation ne peut être établie après l’expiration de la période normale de
nouvelle cotisation applicable au contribuable pour l’année que dans les cas
suivants :
a) le contribuable
ou la personne produisant la déclaration :
(i) soit a fait une présentation erronée
des faits, par négligence, inattention ou omission volontaire, ou a commis
quelque fraude en produisant la déclaration ou en fournissant
quelque renseignement sous le régime de la présente loi,
[…]
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[11]
In these appeals it is the Respondent who bears
the burden of satisfying the Court on a balance of probabilities that an
assessment was justified under subparagraph 154(2)(a)(i), that is, of
satisfying the Court (i) that a misrepresentation was made, and (ii) that such misrepresentation
was attributable to neglect, carelessness or wilful default.
[12]
Negligence will be established if it is shown
that a taxpayer has not exercised reasonable care in preparing his/her return;
see Venne v. Canada, [1984] F.C.J. No. 314 (QL). Whether a taxpayer was
reasonable in completing his/her income tax return will be very much dependent
upon the particular facts of each case. Generally, taxpayers are expected to be
thoughtful, deliberate and careful and to act in good faith in the preparation
of their tax returns. This will include how taxpayers choose to characterize
amounts received by them.
Analysis and Conclusions
Benefit
[13]
Any and all amounts received by these taxpayers
personally in respect of their B shares, or as an incentive to have their RRSP
funds invested in an investment club, or as a prepayment or other payment in
recognition of the earnings that would be generated as a result of having their
RRSP funds invested in an investment club, are clearly benefits that were
required to be included in income in the year received.
[14]
The phrase “out of or under” has a scope and
breadth that is sufficient to clearly include the relationship or nexus between
the amount received by each of the Appellants herein and the investments through
their self‑directed RRSPs in the investment club.
[15]
The failure to report such an amount was clearly
a misrepresentation.
Neglect, Carelessness or Wilful Default
[16]
For each of the six individual appellants, it
therefore has to be decided if he/she in fact received such an amount and, if
so, whether the misrepresentation in his/her income tax return for the year of
receipt of the amount was the result of neglect, carelessness or wilful
default.
Yvon Bédard
[17]
Mr. Bédard maintains he never received any
such amount personally. Upon receipt of his notice of reassessment, he phoned
the CRA to complain on the basis that he had never received any amount in his
personal capacity nor had he endorsed a cheque. He had not answered the audit
questionnaire the CRA had sent him earlier, which of course was voluntary. It
must be noted that his above-stated position is not even mentioned in his
notice of objection. That notice of objection, prepared by his former lawyer,
acknowledges receipt by Mr. Bédard of the amount in question.
[18]
I have further concerns with respect to
Mr. Bédard’s credibility in this regard. He testified that he had only one
bank account when he put into evidence select banking records to support his
testimony that he had made no unusually large deposits in the period in
question. In cross‑examination, however, it turned out that he also had a
corporate account and that funds flowed back and forth somewhat regularly
between his personal and corporate accounts. He only admitted this in cross‑examination
after I observed that a proper review of the bank statements he had introduced showed
that they included statements for both his personal bank account and his line
of credit. Read together carefully, these showed quite the opposite of what he
thought, as the debit and credit columns are reversed on the two statements. There
had in fact been a significant deposit, of the order of magnitude of a payment
for B shares or about 50% of his RRSP investment, within the time frame of his
commitment to participate in Mr. Lavigne’s investment proposal. This
happened several weeks after he signed the documents to open his B2B Trust self‑directed
RRSP. The amount was used to pay down his personal line of credit. His explanation
that it might have been, it could have been, it must have been a dividend or a
tax payment from his corporate account did not sound very credible. The payment
on the line of credit was not recorded as coming from his corporate account.
Mr. Bédard’s counsel did not take him back to this large deposit in
redirect examination.
[19]
Further, the debate around whether or not it was
his signature endorsed on the B share payment cheque made payable to him and
cashed at a cheque‑cashing centre focused only on whether there were
three lines through his signature, which he maintains he always used when he
signed his name. The Respondent’s assumption oo) in the Reply was that
Mr. Bédard cashed this cheque. Mr. Bédard provided copies of his will
and his driver’s licence in support of his position that he did not. While he brought
select bank records, he did not produce his signature on either side of any
cheques drawn or endorsed by him, which would have provided support for the
comparison. I certainly cannot conclude in these circumstances that forgery was
involved. Neither side called a handwriting expert. However, I have serious
reservations about Mr. Bédard’s position given that he did not choose to
show the Court a sample of a single cheque drawn or endorsed by him in the
relevant period or at any other time for that matter.
[20]
Mr. Bédard is an experienced and successful
businessman. He has owned a number of businesses. In particular, he has real
estate holdings in Saint‑Hyacinthe that he values in the millions of
dollars. He has owned and operated an automobile auction business. He has owned
other commercial buildings. It makes little sense that, when all of the other
taxpayers seem to have been offered 40% to 50% incentive amounts, notably in
respect of the B shares, in recognition of the investment through their RRSP in
an investment club, Mr. Bédard alone was quite satisfied with the merits
of the A share investment, and this, as he recalls, after a single meeting with
one or two other people in a restaurant. He said that he was given no documents
and that he took no notes at the meeting. He said he asked no questions at the
half‑hour meeting. He appeared to know very little about the structure of
the investment plan or the merits of the investment club. I do not accept as
correct and complete his testimony that he was not offered the B share payment.
He appears to have done no verification or analysis, nor does he seem to have given
much thought to the proposed investment. He says he was satisfied mostly by two
things: claims that the underlying investments of the investment club would
snowball and the fact that the promoter arrived in a black Lincoln Continental.
That does not sound at all like the approach that a successful business person
such as he would have taken. Further, even if his testimony is true and
complete, it cannot be considered reasonably sufficient in any event.
[21]
My credibility concerns with Mr. Bédard
result in the Court not accepting his evidence on any material point that is
not corroborated by other evidence. It is not sufficient that his testimony is
not inconsistent with the other evidence.
[22]
In the circumstances, I conclude on a balance of
probabilities that he was a wilfully blind, willing participant in what he recognized
as a risky and questionable investment scheme. Further, I find on a balance of
probabilities that he did receive a benefit in the form of a payment to him in
respect of his RRSP investment and that he did not report this benefit. His
failure to report it in his tax return was a misrepresentation and a voluntary
omission. For these reasons, the appeal of Mr. Bédard is dismissed.
Cléo Vallée
[23]
Mr. Vallée is an experienced businessman.
In his professional capacity with a major multinational company he reviewed,
purchased, sold and placed financial and insurance products. He was experienced
with his own retirement financial planning as he moved from one employer to
another. At the time he participated in Mr. Lavigne’s scheme, he was an
intern at a major insurance company, completing his qualifications for professional
registration and designation as a financial advisor. He clearly understood the
basic tax results of holding an RRSP, was capable of reading the documents he
signed and understanding what they said and did not say, and knew that everyone
telling him about the product would be benefiting financially from his RRSP’s
investment in the investment club.
[24]
Mr. Vallée would have easily recognized
that none of the presenters were independent of the promoter. He said that the
involvement of B2B Trust, Laurentian Bank and the promoter’s tax lawyers were important
to his decision to invest. That is hard to believe given that he effectively released
each of them in the documentation he signed. In his letter of indemnity to B2B
Trust, he expressly indemnified B2B Trust, acknowledged that he alone would be
responsible for satisfying himself that these specific investments were
qualified investments, and declared that he would obtain legal, fiscal and
financial advice from independent sources as he felt appropriate. In his statements
to the lawyers, he said he did not have any agreement with the investment club
or related persons other than the agreement for the issuance of the shares to
him, notwithstanding that he also had two B share option agreements.
[25]
The amounts in the option agreements were about
four thousand dollars more than the amount of the cheque he received. He said
he did not remember if he had asked about this, nor did he remember if in fact he
received the difference separately.
[26]
I find on a balance of probabilities that there
were enough red flags raised and alarm bells set off by the investment club
promoters’ presentation and documents that it was at least negligent on the
part of Mr. Vallée to proceed without in any way trying to confirm, before
deciding not to report the benefit he received personally in his tax return for
the year in which he received the amount, the claims, representations,
recommendations and advice of the promoters of such a scheme regarding any tax he
would be required to pay.
[27]
Mr. Vallée did not dispute personally receiving
an amount in respect of his B shares that he fully understood was being paid to
him to reflect the anticipated profits from his RRSP investment in the A shares,
which investment would be managed by the investment club. His explanation that
he understood it to be structured as a loan he would not really have to repay
did not help him, though it is somewhat consistent with one of the option
agreements signed.
[28]
For these reasons, his appeal is dismissed.
Linda Desrosiers
[29]
Ms. Desrosiers’s uncontroverted evidence is
that she went to her first presentation by Mr. Lavigne and his cohorts
accompanied by her father, who was an accountant. She kept a copy of the
information package and she took notes at the meeting. When she returned for a
second presentation, she brought with her the tax accountant who had been
preparing her tax returns for nine years. These two accountants also received
the presentation materials and had the documents which were handed out in the
information package at those presentations. She had the same accountant prepare
her tax return for the year in question. He was with her at the second meeting
when she first signed the transaction documents. She did not give him copies of
any other documents she may have signed after that, but there was no evidence
that he had ever asked her for them. Ms. Desrosiers’s tax accountant was
independent of the promoters and appeared to her to be satisfied with their
presentations. Whether or not the accountant was negligently mistaken, I am not
satisfied on a balance of probabilities that this taxpayer was negligent or
careless in these particular circumstances.
[30]
These investment club schemes involved what
would have appeared to potential investors to be genuine transactions. The
fraud was largely happening behind the scenes. The investors were not trying to
portray themselves as being more than one legal person, nor were they claiming
tax recognition for activities they knew they were never involved in. In this
respect, such a Ponzi‑type scheme differs from a detax, Freeman of the
Land or Fiscal Arbitrators type of scheme.
[31]
The issue in Ms. Desrosiers’s case is
whether it was reasonable for her to complete her tax return in the manner that
she did. In her case, the evidence before the Court is that in good faith she
took reasonable steps to have the promoter’s representations about tax
compliance confirmed by a trustworthy, independent accountant who had prepared
her tax returns for years.
[32]
Ms. Desrosiers’s appeal is allowed.
Gisèle Michaud
[33]
The investment opportunity in the investment
clubs was recommended to Ms. Michaud by a friend’s brother who was a
financial advisor. She perceived him to be independent.
[34]
When Ms. Michaud received the cheque in
payment for the B shares from one of the promoters of the confidence scheme, according
to the only evidence I have she signed the back of the cheque and immediately thereafter
was pressured to give it right back to this person, who had to rush to the
airport, so that he could reinvest it on her behalf. She did so and never saw
it again. This amount was never credited to any account of hers. That fact was
not disputed by the Respondent. There was no evidence that the cheque would
have been honoured if presented on the day Ms. Michaud received it, or any time
after that. There was no evidence that her B shares had any real value. Moreover,
there was no evidence that the cheque on the drawer’s account was ever cleared.
[35]
On this evidence, I cannot conclude that the
Respondent has met her burden of proof and established that, for the two minutes
that the taxpayer had the cheque in hand, it had any value to her—or to anyone
else for that matter. A promise to pay an amount, even if by way of a cheque,
cannot be presumed to have value if it is part of an unlawful financial swindle,
scheme or con game. The evidence does not establish on a balance of
probabilities that Ms. Michaud received a benefit out of or under her RRSP.
For this reason, Ms. Michaud’s appeal is allowed.
Cécile Frenette
[36]
Ms. Frenette struck me as a most sincere
and credible witness. Her testimony was candid and did not include any spin.
She was neither proud of what she had done nor defensive about it, but she
certainly did not see herself as one of the culprits in this saga. She
testified simply and straightforwardly as to what happened and how it happened,
who had told her what, what she believed and why she believed it. It appears to
me she was clearly a victim in this scheme and was conned into participating in
it.
[37]
Ms. Frenette had retired several years
before the year in question. The recommendation that she consider investing her
RRSP funds in the investment club was made to her by someone she knew and
respected. There was no evidence or suggestion that he was not entirely
independent of the promoters of the scheme.
[38]
Ms. Frenette went to two presentations by
the promoters of the scheme. She was reassured by the claims that Laurentian
Bank and Sun Life were involved, along with B2B Trust. She was also reassured
by the oversight of the provincial Inspector General of Financial Institutions,
whose name was on some of the provincial registration documents. She was
impressed by the certification of the investment club by the Canadian
Federation of Investment Clubs. In fact, we now know that Laurentian Bank was
simply the parent company of B2B Trust, that Laurentian Bank was never
affiliated with the new financial advisor Ms. Frenette appointed for her self‑directed
RRSP, despite written representations that it was, and that Sun Life was not
involved. The promoters also provided, in order to mislead potential investors
about the legitimacy of their investment, legal opinions attesting that this
was a bona fide investment opportunity, though we now know that at least some
of those lawyers and law firms had never played any role whatsoever and that
the legal opinions provided to the investors by the promoters were a fraud.
[39]
Ms. Frenette left much of her RRSP where it
was being professionally managed and did not transfer all of it to B2B Trust to
invest with the investment club.
[40]
On the evidence, I am satisfied that
Ms. Frenette was truly a very naïve but innocent victim of very cunning
rogues who won and played on her confidence. They skilfully satisfied all of
her reasonable concerns about the security of the investment, the potential
returns on the investment, the tax consequences of the investment and the
reporting of the investment. They skilfully misrepresented to her that
reputable independent financial institutions, lawyers and others were involved
in the scheme and were satisfied with it.
[41]
There is no doubt that Ms. Frenette
received her personal share, and that she understood that it was directly
related to her investment through her RRSP in the investment club. However, the
reassessment was made outside the normal reassessment period. This is a
borderline case and the Respondent has not met the burden of proof she had to
meet to allow me to conclude on a balance of probabilities that
Ms. Frenette was negligent or careless in her particular circumstances.
For this reason, Ms. Frenette’s appeal is allowed.
Roger Ortiz
[42]
Mr. Ortiz’s testimony is that the
investment opportunity was presented and recommended to him by a friend of his
who accompanied him to a dinner meeting with Mr. Lavigne and another
promoter. Mr. Ortiz realized that his friend was earning his living
selling such products and would receive a commission or other compensation for
an investment made through Mr. Ortiz’s RRSP. Mr. Ortiz understood
that the amount he received was an incentive and that it was supposed to
reflect the returns to be generated by his investment through his RRSP in the investment
club.
[43]
That is sufficient to conclude that he received
a benefit out of or under his RRSP, even though he may not have been aware that
this benefit was structured as a redemption of B shares as described in the
Agreed Statement of Facts.
[44]
Mr. Ortiz worked at Cossette Inc. as a
graphic designer. He said he had long understood how RRSPs worked. From what
Mr. Ortiz knew of the investment club opportunity presented to him, red
flags should have been waving, if only feebly, and alarm bells ringing, if only
faintly. His failure to seek any independent confirmation of anything he was
told over that dinner or at any other time was clearly not sufficient or reasonable
in his particular circumstances. It appears to me that Mr. Ortiz believed
what he wanted to believe and what he hoped was correct, namely, what these promoters
were telling him. He said the documents he signed were so very well explained that
he perhaps did not even bother to read them. His proceeding with such abandon constituted
at least negligence. For this reason, Mr. Ortiz’s appeal is dismissed.
[45]
By way of postscript I make the observation that
it is unfortunate for the fisc and for many Canadians that such schemes to
defraud or bilk the fisc are regularly generated by creative but unscrupulous
rogues and scoundrels. In the context of extensively regulated RRSP and other
registered plans, it appears somewhat surprising that more robust administrative
controls are not put in place to protect the fisc from this sort of thing and
to protect Canadians from themselves, especially since all Canadians are
permitted to self‑direct their RRSPs if they wish. The concept of
eligible investments appears to exist, at least in part, precisely for that
purpose: to enable the monitoring of compliance with the requirements in that
regard. I respectfully suggest that there appears to be a systemic problem that
needs to be addressed or the fisc will continue to lose money to fraudsters,
money that can never be fully recovered from them or others. And all Canadians
end up paying for it.
Signed at
Ottawa, Canada, this 4th day of August 2016.
“Patrick Boyle”
Translation
certified true
on this 7th day of
December 2016.
Erich Klein, Revisor
2014-2108(IT)I,
2014-2127(IT)I
2014-2140(IT)I,
2014-2149(IT)I
2014-2111(IT)I and 2014-2110(IT)I
TAX COURT OF CANADA
BETWEEN:
YVON
BÉDARD
LINDA
DESROSIERS
CÉCILE
FRENETTE
GISÈLE
MICHAUD
ROGER
ORTIZ
CLÉO
VALLÉE
Appellants
and
HER
MAJESTY THE QUEEN
Respondent
|
PARTIAL
AGREED STATEMENT OF FACTS
|
The parties, through
their respective counsel, agree on and admit the following facts:
SCHEME
1. Claude
Lavigne established investment clubs operating under the names HT 104, HT 106
and GPS, among others.
2. These
investment clubs are limited partnerships and, with the exception of GPS, were
registered on June 14, 2001 and struck from the register on September 24, 2004.
3. The
general partner of the HT 104 and HT 106 investment clubs is 9095‑8448
Québec Inc., whose majority shareholder is the GPS investment club.
4. The
general partner of the GPS investment club is 9106-1002 Québec Inc.
5. The
GPS investment club was registered on July 3, 2001 and struck from the register
on September 19, 2003.
6. The
9095-8448 corporation also operated under the names Service professionnel Haute
Technologie and Banxess S.P.H.T.
7. The
9106-1002 corporation operated under the name Financement GPS.
8. Claude
Lavigne is the director of those two corporations.
9. The
number of investors for each investment club was limited to a maximum of 50
people.
10. The
Appellants each held an investment, primarily in the form of a registered
retirement savings plan (RRSP).
11. In
addition to an RRSP, Ms. Gisèle Michaud held a locked-in retirement account
(LIRA).
12. The
Appellants applied to B2B Trust, the fiduciary designated by the investment
clubs’ promoters, for the opening of a self-directed investment account.
13. The
designated fiduciary, B2B Trust, was a trust company that was a subsidiary of
the Laurentian Bank.
14. The
Appellants transferred to B2B Trust part of the funds held in their RRSPs or
their LIRAs.
15. To
effect the transfers of funds, the Appellants were required to sign the
following documents:
i. an
offer to subscribe for shares in the investment club;
ii. a
direction to B2B Trust;
iii. a
letter of indemnity to B2B Trust with respect to a self-directed investment in
a corporation carrying on a small business;
iv. a
letter of direction to B2B Trust for an investment, to be made within the
framework of a self-directed RRSP, in a corporation carrying on a small
business;
v. a
release clause for the benefit of the brokerage firm with respect to the
investments in the small business.
16. The
issuance of Class A shares entitled the Appellants to receive Class B income
shares as well as voting shares.
17. Upon
receipt of the documents signed by the Appellants, referred to in subparagraphs
15 i to v, B2B Trust issued a cheque to the investment club in which shares
were purchased for the purpose of each Appellant’s investment.
18. These
cheques were deposited in the investment clubs’ bank accounts.
19. The
HT 104 and HT 106 investment clubs held bank accounts with the National Bank of
Canada and the Laurentian Bank.
20. The
GPS investment club held bank accounts with the National Bank of Canada.
21. The
investment clubs transferred the deposited funds to one of the following
corporations: 9095-8448 Québec Inc. and 9106-1002 Québec Inc.; the transfers
were made by cheque to the order of one of those corporations.
22. A
notation on the cheques indicated that they were for the redemption of Class B
shares.
|
QUEBEC CITY,
April 4, 2016
|
QUEBEC CITY,
April 4, 2016
|
|
Joli-Coeur
Lacasse LLP
Counsel for the
Appellants
|
WILLIAM F. PENTNEY, Q.C.
Deputy Attorney General of Canada
Counsel for
the Respondent
|
|
[signature]
Per: Bobby Doyon
Counsel
|
[signature]
Per: Anne-Marie Desgens
Counsel
|
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