Date:
20061222
Docket:
T-1169-06
Citation:
2006 FC 1548
Ottawa, Ontario, December 22, 2006
PRESENT: The Honourable Mr. Justice Blanchard
IN THE MATTER of
Assessments issued by the Minister
of national
revenue in virtue of the Income Tax Act,
Canada
Pension Plan and Employment Insurance Act
BETWEEN:
HER MAJESTY THE
QUEEN
Respondent
AGAINST:
MICHAEL (MALEK)
CHAMAS
Applicant
REASONS FOR
ORDER AND ORDER
1. Introduction
[1]
The Applicant, Mr. Michael Chamas, seeks a review
pursuant to subsection 225.2(8) of the Income Tax Act, R.S.C.
1985, c.1 (5th Supp.) (the ITA), of the July 12,
2006 order by this Court authorizing the Minister of National Revenue (the Minister)
to take forthwith any of the actions described in paragraphs 225.1(1)(a)
to (g) of the ITA in respect to notices of assessment dated July 10,
2006, hereinafter referred to as the jeopardy order.
2. Facts
[2]
On September 16, 2005, the Applicant received a
registered letter from the Canada Revenue Agency (the Agency) dated September
15, 2005, requesting that he meet with Mr. Martel, an auditor with the
Agency to discuss his residency status in Canada and his different commercial
activities in Canada. The letter also stated that failing a response by the
Applicant within 30 days the Agency would proceed to determine his status based
on the information it had and then apply the provisions of the ITA.
[3]
Upon receipt of the letter the Applicant
contacted Mr. Martel by telephone and claims that he informed him that because
of his business dealings abroad he was rarely in Canada during weekdays and
when here it was to visit with his children on weekends. He stated that he
would be back in a few weeks and would arrange for a meeting at that time.
[4]
Mr. Martel’s evidence is that during the
conversation it was agreed that they would meet upon his return on October 5,
2005. The Applicant, being in his car at the time and unable to write asked
that Mr. Martel confirm the meeting in writing. Having attempted to do so
unsuccessfully by fax, Mr. Martel proceeded to confirm the meeting by letter to
the Applicant on September 19, 2005.
[5]
Upon receiving the second letter, the Applicant
allegedly contacted Mr. Martel and informed him that fixing a date was
premature and contrary to their discussion. The applicant contends that at the
time he also informed Mr. Martel that he was a resident of Dubai in the United Arab Emirates and not a
resident of Canada during the five
taxation years in issue. He also claims that Mr. Martel requested that he produce
evidence of his residency in Dubai. The Applicant alleges that he sent a copy of his Dubai residency card to the Agency and
filed proof of the fax transmission. The applicant also claims that he had a subsequent
phone conversation with Mr. Martel to confirm that the fax had been received.
Mr. Martel allegedly stated that the card was not only satisfactory, but would
have permitted quicker resolution had it been provided earlier.
[6]
The Applicant further contends that at no time
did Mr. Martel communicate in any manner that there were any outstanding issues
or tax debts, and he left the Applicant with the impression that matters
relating to the investigation had been favourably resolved. The Applicant
states that prior to July 17, 2006, he had no indication that the Agency intended
to claim any amounts from him and he was never given an opportunity to respond.
[7]
The respondent has a different version of the
facts relating to the meeting and the fax transmission. When the auditor, Mr.
Martel, sought to discuss residency with the applicant, the latter was
unavailable to meet. According to Mr. Martel’s evidence four attempts were made
to set up a meeting. The Applicant offered the following reasons for failing to
attend. On the first occasion he did not attend because he was going back to
Dubai; the second time, he was ill; the third time he was celebrating a Jewish
holiday; and on the fourth attempt the Applicant could not meet because he was again
leaving to Dubai and Zurich. Following the fourth attempt, Mr. Martel attests
that the Applicant promised to call back to set up an appointment but did not.
Mr. Martel further attests that he did not receive the Applicant’s residency
card from the United Arab Emirates and that his records show that his fax
machine did not receive a fax on September 23, 2005, matching the
description and time of the fax transmission allegedly sent by the Applicant.
[8]
The Agency proceeded to prepare Notices of
Assessment for taxations years 2001 through 2005 using the “net worth method”
totalling $952,355.36 plus interest. The Notices were all dated July 10, 2006
and on July 12, 2006, the Respondent was granted the jeopardy order which
authorized the immediate seizure of movable and immovable property for the
purposes of collecting and/or guaranteeing payment of the amount assessed
against the Applicant pursuant to the Notices of Assessment. The jeopardy order
was served on the applicant on July 17, 2006.
[9]
On the basis of a Writ of Seizure, the following
collection procedures were initiated by the Respondent against the Applicant’s
assets, on or after July 17, 2006:
(a) seizure of a residence situated at 205 de Gaulle Boulevard, Lorraine, belonging to Ms. Garas, the
mother of the applicant’s children;
(b) seizure of the majority of the moveable
property within the above property;
(c) seizure of two leased vehicles;
(d) seizure of the contents of a bank account
with the CIBC situated at 299 Labelle Boulevard, Rosemère, a U.S. dollar account held by the Applicant;
(e) seizure of the contents of a bank account with
the CIBC situated at 299 Labelle Boulevard, Rosemère, held jointly in the names of the applicant and Ms. Garas;
(f) seizure of real property situated at 24 Elm Street, Laval;
(g) seizure of real property situated at 282 Kenna Boulevard, St-Colomban;
(h) seizure of real property situated at 5 Légaré Street, St-Eustache;
(i) seizure of real property situated at 41 Blainville Street West, Ste-Thérèse.
3. Issue
The following
issue arises on this review:
A. Has the applicant established on a balance of probabilities
that there are reasonable grounds to doubt that the test required by subsection
225.1 (2) of the ITA has been met?
4. The Law
[10]
Factors to be considered in the conduct of a
review of jeopardy order pursuant to subsection 225.1(2) of the ITA were dealt
with by Mr. Justice François Lemieux in Canada (Minister of National Revenue - M.N.R.) v. Services M.L. Marengère, [1999] F.C.J. No. 1840 (QL). At paragraph 63 of his reasons for
decision the learned Judge wrote:
(1) The perspective
of the jeopardy collection provision goes to the matter of collection jeopardy
by reason of delay normally attributable to the appeal process. The wording of
the provision indicates that it is necessary to show that because of the
passage of time involved in an appeal, the taxpayer would become less able to
pay the amount assessed. In other words, the issue is not whether the
collection per se is in jeopardy but rather whether the actual jeopardy arises
from the likely delay in the collection.
(2) In terms of
burden, an applicant under subsection 225.2(8) has the initial burden to show
that there are reasonable grounds to doubt that the test required by subsection
225.2(2) has been met, that is, the collection of all or any part of the
amounts assessed would be jeopardized by the delay in the collection. However,
the ultimate burden is on the Crown to justify the jeopardy collection order
granted on an ex parte basis.
(3) The evidence
must show, on a balance of probability, that it is more likely than not that
collection would be jeopardized by delay. The test is not whether the evidence
shows beyond all reasonable doubt that the time allowed to the taxpayer would
jeopardize the Minister's debt.
(4) The Minister
may certainly act not only in cases of fraud or situations amounting to fraud,
but also in cases where the taxpayer may waste, liquidate or otherwise transfer
his property to escape the tax authorities: in short, to meet any situation in
which the taxpayer's assets may vanish in thin air because of the passage of
time. However, the mere suspicion or concern that delay may jeopardize
collection is not sufficient per se. As Rouleau J. put it in 1853-9049
Quebec Inc., supra, the question is whether the Minister had reasonable
grounds for believing that the taxpayer would waste, liquidate or otherwise
transfer its assets, so jeopardizing the Minister's debt. What the Minister has
to show is whether the taxpayer's assets can be liquidated in the meantime or
be seized by other creditors and so not available to him.
(5) An ex parte
collection order is an extraordinary remedy. Revenue Canada must exercise utmost good faith and insure full and frank disclosure.
On this point, Joyal J. in Peter Laframboise v. The Queen, [1986] 3 F.C. 521 at 528 said this:
The taxpayer's counsel might have an arguable point were the evidence
before me limited exclusively to that particular affidavit. As Counsel for the
Crown reminded me, however, I am entitled to look at all the evidence contained
in the other affidavits. These affidavits might also be submitted to
theological dissection by anyone who is dialectically inclined but I find on
the whole that those essential elements in these affidavits and in the evidence
which they contain pass the well-known tests and are sufficiently demonstrated
to justify the Minister's action.
In Duncan, supra, Jerome A.C.J., after quoting
Joyal J. in Laframboise, supra, viewed the level of disclosure required
by the Minister as one of adequate (reasonable) disclosure.
[11]
In my opinion the views expressed by Justice
Lemieux accurately reflect the proper interpretation of the applicable statutory
provisions and factors to be considered by a court in reviewing jeopardy
orders.
5. Analysis
A. Has
the applicant established on a balance of probabilities that there are
reasonable grounds to doubt that the test required by subsection 225.1 (2) of
the ITA has been met?
[12]
The Respondent contends that recovery of the amount assessed is
jeopardized by a delay in the collection of that amount on the following grounds,
namely:
(1)
The Applicant was delinquent in respect of his
obligations to fiscal authorities;
(2)
The Applicant provided false and misleading
information to banking institutions he dealt with;
(3)
The Applicant habitually expedited the transfer
of large sums of money from his bank accounts; and
(4)
An outstanding judgment against the Applicant
since 2003 in the amount of $37,500 remains unpaid.
[13]
The Applicant takes issue with the Respondent’s versions of the facts
and attempts to explain discrepancies in the evidence. He claims his pattern of
behaviour is not that of a man looking to avoid his responsibilities, and that
the evidence paints a far different picture of his circumstances, than that
advanced by the Agency. He is critical of the way the investigation was
conducted, alleging that the Agency proceeded with a secret investigation in
contravention of the rules of procedural fairness and principles of openness. He
alleges that the circumstances do not support a determination that there are
reasonable grounds to believe that the collection of all or any part of the
amount assessed would be jeopardized by a delay in collection.
[14]
In support of his contention, the Applicant points to the following
factors:
(1) Contrary to the Respondent’s contention, there is evidence
that he is making investments in Canada by purchasing properties and making
significant deposits in Canadian bank accounts.
(2) There is no evidence to suggest that he has attempted to waste
or dispose of property. On the contrary, the Applicant claims that he has
increased his assets in Canada by purchasing properties.
(3) The evidence shows that he made significant deposits in
Canadian bank accounts even after knowing he was being investigated by the
Agency.
This is not, he claims, behaviour consistent
with someone attempting to secretly dispose of his assets.
[15]
The Applicant further maintains that he has
taken definitive steps to establish residency in Canada to spend more time with his daughter, who is 5, and his son, who is
10, both registered in a private Quebec school for the upcoming year. He submits that he intends to
formalize his relationship with Ms. Garas, the mother of his children, and has
undertaken to sponsor her for immigration purposes.
[16]
The Applicant claims that after his final
discussion with Mr. Martel, he was left with the impression that once the issue
of his residency in Dubai was established, the matter would be settled. After
sending, via fax transmission, a copy of his residence card, he maintains that
he could reasonably conclude that the investigation would be ended. Since Mr.
Martel or the Agency made no further attempt to communicate with him before the
notice of assessment was served, he felt no need to make further inquiries.
[17]
I will now review the evidence in relation to the four
grounds relied on by the Respondent in support of the jeopardy order.
[18]
The Applicant did not file a tax return for the period under review
either as a resident or as a non-resident. The evidence also establishes that
the Canadian corporations for which the Applicant was either a director or a
shareholder and which earned revenues in Canada also failed to file returns.
Those same corporations failed to remit to the Agency the requisite payroll
deductions of their employees as required by law. The Applicant does not
dispute his failure to comply with filing obligations under the ITA.
[19]
With respect to the conflicting versions of events which transpired
between Mr. Martel and the Applicant after the initial registered letter was
issued on September 15, 2005, I prefer Mr. Martel’s version. I make this
factual determination for the following reasons.
[20]
The Applicant’s evidence is not consistent with the probabilities
affecting the case as a whole. His explanations for failing to meet with Mr.
Martel were unconvincing, and I find highly improbable that Mr. Martel would
abruptly end such an investigation upon receipt of a faxed copy of a foreign
residency card, as alleged by the Applicant. Further, the evidence to be
reviewed later in these reasons establishes that the Applicant has demonstrated
an ability to mislead and be untruthful in order to achieve an objective.
[21]
Mr. Martel, an auditor with the Agency, has no financial or personal
interest in the outcome of this case. There is a ring of truth to his version
of events and I find it to be consistent with the nature of the investigation
and the request contained in the initial letter sent to the Applicant. Put
differently, Mr. Martel’s story is in harmony with the preponderance of
probabilities which a practical and informed person would readily recognize as
reasonable in that place and in those conditions.
[22]
I am of the opinion that the evidence supports the Respondent’s
contention that the Applicant was evasive when initial attempts were made to
contact him and that the residency card allegedly sent by the Applicant was
never received by the Agency.
[23]
The evidence in support of the Respondent’s second ground for the
jeopardy order, namely, the provision by the Applicant of false and misleading
information to a financial institution in order to secure credit, is compelling.
The record shows that the Applicant provided false information
to “la Banque Laurentienne” in order to secure a line of credit in March 2005.
He submitted a letter from one of his companies C=B02 Inc. to confirm that he
was an employee since 1997 earning $93,600.00 per annum. He also provided a
fabricated Statement of Remuneration Paid (T-4 form) allegedly issued by C=B02
Inc. for the year 2004, which is found to be inconsistent with employment
records of the company filed with the Agency.
[24]
Later in the same month, the Applicant applied
to the same bank for a “Visa” credit card application. With this application he
alleges to be employed with “MCCA Zurich” as an administrator since 2002,
earning $93,600.00 per annum. The application makes no reference to his earlier
declared employment with C=B02 Inc. during the same period. These conflicting
versions of the Applicant’s employment history serve to impugn his credibility.
[25]
Finally, on April 6, 2006, the Applicant applied
for a mortgage loan with “Les Caisses Populaires Desjardins”. In the credit
application, he claimed to be a manager with “MCCA Ltée” earning $328,000.00
per annum. This Canadian corporation never filed a return with the Agency. The
evidence also establishes that contrary to information contained in the credit
application, the Applicant does not hold a registered retirement savings plan (RRSP).
[26]
With respect to the March 2005 application to
secure a line of credit, the Applicant does not deny that he obtained credit by
submitting the impugned documents to the Bank. He explains that he was unaware
of the contents of the application for credit even though he had signed and had
personally delivered the document to the Bank. The applicant’s explanation is
simply not credible.
[27]
I find that the above evidence regarding the
Applicant’s credit and loan applications supports the Respondent’s contention
that the Applicant is capable of falsifying documents and misrepresenting his
circumstances in order to achieve an end.
[28]
Regarding the Respondent’s third ground in
support of the jeopardy order, the evidence shows that the Applicant has many
bank accounts through which he transacted large sums of money. While the
transfer of large sums of money is not necessarily unusual, certain banking
practices of the Applicant can only be characterized as unorthodox. For
instance, the Applicant personally cashed large cheques made payable to his
company. Indeed, the record shows that “ La Banque Laurentienne” sent the Applicant a letter in
respect of a bank account for which he was the authorized signatory. The letter
informed him that this account with the Bank would be closed at all branches
because the Bank was unhappy with the nature of transactions in the accounts and
that recent audits had revealed unorthodox transactions (“des opérations
inhabituelles”).
[29]
Further, the record also establishes that when
questioned about a $300,000.00 withdrawal in one month, the Applicant explained
that most of the money went for “property purchase or purchase of another car”.
The evidence, however, reveals that all of the applicant’s real estate
acquisitions occurred prior to the withdrawal and that all of his luxury cars
were on lease.
[30]
The record also establishes that the Applicant
used the services of “L’Agence Arylo”, a short term credit provider, to
negotiate the transfer of large sums of cash from foreign accounts. These
transfers exceeded $600,000.00 in total.
[31]
I therefore find that the evidence supports the Respondent’s
contention that the Applicant was capable of expediting the transfer of large
sums of money. The evidence also demonstrates that the Applicant engaged in
unorthodox banking practices.
[32]
Finally, the fourth ground upon which the
Respondent relies is about a judgment dated April 30, 2003, registered in “La Cour
du Québec” against the Applicant in the amount of $37,500.00 for unearned
professional fees. The amount remains unpaid and the evidence shows that the
judgment creditor, TÉ-BÉ Inc., was unable to collect because it was unable to
locate the Applicant. The Applicant contends that this information is
“insignificant” in the context of the jeopardy order. I disagree. In my view,
this is the most compelling evidence in support of the Respondent’s argument
that recovery of the assessed amount is jeopardized by a delay in the
collection. Notwithstanding the Applicant’s significant property holdings and his
demonstrated ability to access important sums of money, mostly cash, in the
period since the registration of the judgment against him, the Applicant has
nevertheless failed to satisfy the outstanding judgment. Further, the amount of
the judgment is relatively small when considered in the context of the sums
accessible to the Applicant, according to the evidence.
[33]
Having failed since 2003 to satisfy a $37,500.00
debt, in these circumstances, raises doubt as to the Applicant’s intentions
regarding his future financial obligations. In my view, the Applicant’s failure
to satisfy this outstanding judgment demonstrates that he is also likely not to
pay the assessed amount should that amount ultimately be determined to be owing
by him.
[34]
The Applicant’s demonstrated ability to
misrepresent his circumstances, his unorthodox banking practices, his failure
to meet the obligations of the ITA, his lengthy absences from the country
making him difficult to reach, and his behaviour vis-à-vis both the outstanding
judgment registered against him, and his past dealings with the Agency all
serve to demonstrate that on a balance of probabilities it is more likely than
not that collection of amounts assessed for the tax years 2001-2005 would be
jeopardized by delay.
[35]
The Applicant raises two further arguments.
First, he contends that the Agency conducted a secret investigation in
contravention of the rules of procedural fairness and principles of openness. Second,
he alleges that the Agency failed to exercise utmost good faith and ensure full
and frank disclosure to the Court in its application for the jeopardy order. I
will deal with each of these arguments in turn.
[36]
With respect to the conduct of the
investigation, the evidence does not support the Applicant’s contention of a
“secret investigation”. The Applicant was notified by registered mail that an
investigation had been instigated. The initial letter of September 15, 2005,
requested a meeting to discuss his residency status and his different
commercial dealings in Canada.
He was also notified that should he not respond within 30 days matters would be
determined without his input and in accordance with the ITA. Having determined
that Mr. Martel’s version of events is to be preferred over the Applicant’s,
there is simply no evidence to support the Applicant’s allegation. The
Applicant had every opportunity to participate, he simply chose not to. The
Agency did not violate the principles of procedural fairness and openness in
the circumstances.
[37]
With respect to the Applicant’s second argument
regarding the Agency’s disclosure obligation in seeking the jeopardy order. The
law imposes a duty of utmost good faith on the Agency in making such ex
parte applications. It is because of the potentially devastating effects
that could flow from the execution of a jeopardy order on certain types of
properties that the Agency must ensure full and frank disclosure. The
jurisprudence establishes that in the circumstances, the disclosure must be
“adequate” or “reasonable”. See Marengère, supra.
[38]
The applicant alleges that although Mr. Martel disclosed
that he was unable to meet with the Applicant, he failed to disclose important
facts which would have supported the Applicant and contradicted the allegation
that he was uncooperative and evasive. Particularly, the Applicant’s version of
the disputed facts in respect to the conversations with Mr. Martel regarding
his residency status and transmission of his residency card. The applicant
alleges the failure to include this information in the disclosure indicates the
respondent’s lack of good faith and that the disclosure was not full, fair and
frank.
[39]
Earlier in these reasons, I resolved the issue
of the conflicting evidence in respect to the Applicant’s evasiveness and his
residency card in favour of the Respondent’s evidence. I preferred Mr. Martel’s
evidence. Based on the evidence that I have accepted as credible, I find there
to be no basis to support the Applicant’s argument. In the circumstances, I
find that the disclosure to have been adequate and reasonable. The Agency has
met its disclosure obligations in its application for the jeopardy order.
6. Conclusion
[40]
For the above reasons, the motion will be
dismissed.
ORDER
THIS
COURT ORDERS that:
1. The
motion for review, pursuant to subsection 225.2(8) of the Income Tax Act,
of the July 12, 2006 order of this Court is dismissed.
“Edmond P.
Blanchard”
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