Docket: T-1790-11
Citation: 2011 FC 1270
Vancouver, British
Columbia, November 7, 2011
PRESENT: The Honourable Mr. Justice Shore
IN THE MATTER OF FRIENDS OF GOOGOLPLEXION
FOR
HUMAN RIGHTS INC. (SOMETIMES DOING
BUSINESS AS
NELSON’S INTERNATIONAL HOME AUTO DEPOT
INC.
BETWEEN:
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THE MINISTER OF NATIONAL REVENUE
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Applicant
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and
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FRIENDS OF GOOGOLPLEXION FOR HUMAN
RIGHTS INC. (SOMETIMES DOING BUSINESS AS NELSON’S INTERNATIONAL HOME AUTO
DEPOT INC.)
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Respondent
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REASONS FOR JUDGMENT AND
JUDGMENT
I. Introduction
[1]
Robert
Hannes Nelson is currently indebted to the Minister of National Revenue
(the Minister) for personal income tax liability in the amount of
$64,601.80 concerning the 1987, and 1990 to 1993 taxation years. The
reassessments first resulted from unreported income for the 1986, 1987, 1990,
1991, 1992, and 1993 taxation years. His 1986 tax arrears were paid as a result
of collection action taken by the CRA including garnishment by way of
statutory set-offs.
[2]
In
Minister of National Revenue v Cormier-Imbeault, 2009 FC 499, [2009] 6
CTC 45, the Court (at para 7) cited factors that can justify a jeopardy order:
a. There
are reasonable grounds to believe that the taxpayer has acted fraudulently;
b. The
taxpayer has proceeded to liquidate or transfer his or her assets;
c. The
taxpayer is evading his or her tax liabilities;
d. The
taxpayer has assets that could potentially lessen in value over time,
deteriorate or perish; and
e. The
amount of the debt in relation to income and expenses.
[3]
In
the present case, the evidence before the Court on the Standard of Proof is
sufficient in that collection of the Debt would be jeopardized by delay.
[4]
Mr.
Nelson, Mrs. Nelson and the Company’s tax collections histories are also unorthodox.
Over the years, Mr. Nelson has campaigned against the Government of Canada,
including the Minister and the CRA on numerous occasions. This includes
materials which he publishes on his websites, including his medical reports.
Mr. Nelson has also made suicide threats to the CRA unless his demands are met.
[5]
As
well, there is Mr. Nelson’s history with the court system. He has commenced
numerous actions before the Supreme Court and the Court of Appeal in British
Columbia, and also attempted to re-litigate similar issues in Ontario. Mr. Nelson has also initiated
proceedings in the Federal Court and the Federal Court of Appeal. He has
unsuccessfully appealed these cases to the Supreme Court of Canada.
[6]
As a
result of the various proceedings, Mr. Nelson was declared a vexatious litigant
in the British Columbia Supreme Court in 1981, in the British Columbia Court of
Appeal in 2006, and in the Federal Court and in the Federal Court of
Appeal in 2002 and 2003 respectively. He is prohibited from bringing any court
proceeding in these courts without leave of a judge of the specific court that
the action is being brought in.
[7]
In
2004, Mr. Nelson also brought his concerns relevant to the CRA before the
International Criminal Court who declined to hear the case as his complaints
were not within their jurisdiction.
[8]
These
behaviours illustrate that Mr. Nelson, Mrs. Nelson and the Company, as directed
by Mr. Nelson, have taken whatever steps are available to thwart the
collections efforts of the Minister.
II. Background
[9]
Robert
Hannes Nelson (Mr. Nelson) is the sole director of the Respondent, Friends of
Googolplexian for Human Rights Inc. (the Company). Mr. Nelson currently resides
at 3460
McCulloch Road, Kelowna, British Columbia (the McCulloch
Property).
[10]
Mrs.
Nelson Merle Nelson (Mrs. Nelson) is Mr. Nelson’s spouse. She is reportedly a
retired accountant. She also resides on the McCulloch Property.
[11]
The
Respondent Company is a provincially registered corporation having a registered
and records office care of the McCulloch Property. As stated above, Mr. Nelson
is the sole director of the Company, and Mrs. Nelson and Mr. Nelson are
believed to be its shareholders although this is not specifically known because
Mr. Nelson, for the Company, has refused the Canada Revenue Agency (the CRA)
access to the Company’s books and records.
[12]
The
Company was first incorporated on February 27, 1959, under incorporation number
0044013. Since that time, its corporate name has changed eleven (11) times.
[13]
Mr.
Nelson’s debt itself was not certified and registered against title to any
property owned by him at any time, including the McCulloch Property. However,
Mrs. Nelson’ debt relevant to one of her section 160(1) assessments (which debt
is relevant to Mr. Nelson’s debt as section 160(1) imposes joint and several
liability upon Mrs. Nelson relevant to Mr. Nelson’s debt) is so certified and
is registered against title to the McCulloch Property.
[14]
Mrs.
Nelson is also currently indebted to the Minister for personal income tax
liability in the amount of $203,927.64 concerning the 1991 to 1994 taxation
years. Her liability initially arose as a result of reassessments for
unreported income for the 1989 to 1994 taxation years. Mrs. Nelson’ 1989 and
1990 tax arrears were paid as a result of collection action taken by the CRA.
This debt (as is relevant to her T1 assessments) has not been certified
and registered against title to any property owned, or previously owned by Mrs.
Nelson, including the McCulloch Property.
[15]
Mrs.
Nelson was assessed pursuant to section 160(1) of the ITA in the amount of
$26,036.50 relevant to Mr. Nelson’s transfer to her of his interest in certain
real property located at 11753 Alderwood Crescent, Delta, British Columbia (the Alderwood
Property) on July 31, 1995. This assessment concerns a non-arms’ length
transfer for no or inadequate consideration when the transferor is indebted to
the Minister. Relevant to this assessment, a jeopardy order was obtained and a
certificate relevant to this debt was obtained and was registered against title
to the Alderwood Property. This judgment was later paid with all of the sale
proceeds when the property was sold.
[16]
In
addition, on August 1, 1996, Mrs. Nelson was assessed pursuant to section
160(1) in the amount of $23,251.25 relevant to Mr. Nelson’s transfer to her of
the McCulloch Property. Pursuant to the aforementioned Jeopardy Order, this
debt was certified and registered against title to the McCulloch Property. It
remains so registered. Only this debt owing by Mrs. Nelson is registered against
title to the McCulloch Property.
[17]
Neither
Mr. Nelson nor Mrs. Nelson has made any voluntary payments with respect to
their debts. Mrs. Nelson recently contacted the CRA in regards to her debts but
no resolution relevant to payment of the debts occurred.
[18]
The
Company is currently indebted to the Minister in the amount of $50,147.85
(the Debt). Assessments were raised against it pursuant to section 160(1)
of the ITA relevant to the transfer by Mrs. Nelson to the Company of her
interest in the McCulloch Property and with respect to certain payments made by
Mrs. Nelson to the Company.
[19]
The
Company has not yet filed a notice of objection in respect of the Assessments.
Nor has it made any payments in respect of its Debt.
[20]
Previous
collection action was taken further to statutory set-offs in regards to Mrs.
Nelson’ and Mr. Nelson’s debts. Only the set-off relevant to Mrs. Nelson
remains in place.
A. The Respondent’s
Financial Matters
(1) Assets
[21]
Based
on CRA’s investigation and through the use of several
Requirements for Information (RFIs), the following assets belonging to the Respondent Company
were identified:
a. The McCulloch Property,
which is the family home of Mr. Nelson and Mrs. Nelson, and which is currently
registered in the name of the Company; and
b. A
bank account with the Canadian Imperial Bank of Commerce (CIBC). CIBC confirmed
in September 2011 that the Company’s bank account has
a balance of $95.22 as of July 31, 2011.
(2) Transfer
of Assets
[22]
The
registered owner of the McCulloch Property was originally Mr. Nelson. As stated
above, he transferred his interest in the McCulloch Property along with the
Alderwood Property to Mrs. Nelson without adequate consideration (Affidavit of
Michael Sundstrom, paras16-17).
[23]
Then,
on or about August 13, 1997, Mrs. Nelson transferred her interest in the
McCulloch Property to the Company for a reported $230,000; however, the
appraised value of the property at the time was $275,000. Since the company did
not give adequate consideration to Mrs. Nelson in order to acquire title to the
property, the Company was assessed in the amount of $28,022.48 (Affidavit of
Michael Sundstrom, paras 25-26).
[24]
In
addition to the transfer of the McCulloch Property, Mrs. Nelson (and Mr.
Nelson) also made certain transfers to the Company for no consideration as
follows:
a) On or about October 27,
2003, Mrs. Nelson and Mr. Nelson transferred the sum of $33,485 to the
Company for no apparent consideration. The funds concerned insurance proceeds.
As a result the Company was assessed in the amount of $16,742.50 relating to
Mrs. Nelson’ portion of the insurance monies pursuant to section 160(1) of the
ITA. No assessment was raised relevant to Mr. Nelson’s portion of the monies
given that his debt is already secured relevant to the McCulloch Property (by
virtue of the certificate concerning Mrs. Nelson’ section 160(1) assessment);
and
b) Between
December 2001 and April 2006, $5,382.87 was transferred by Mrs. Nelson to the
Company relevant to Mrs. Nelson’ Old Age Security and CPP benefits, and various
personal cheques initially made out to Mrs. Nelson. As a result, the Company
was assessed pursuant to section 160(1) of the ITA in respect of the transfers.
(3) The Company’s Income
[25]
The
exact nature of the Company’s business is unknown. It previously acted as a
landlord relevant to the McCulloch Property, but no longer appears to act in
this regard.
(4) The
Company’s Liabilities
[26]
Because
access to the Company’s records has not been provided, it is unknown what its
liabilities are, with the exception of the mortgages registered against title
to the McCulloch Property.
[27]
The
McCulloch Property is currently appraised at $622,000. It has the following
financial encumbrances registered against title to this property:
a) A
mortgage in favour of CIBC is registered against the McCulloch Property.
The current balance owing with respect to this mortgage is $136,177.67 as
of August 15, 2011;
b) A
mortgage in favour of the Nelsons’ deceased son, Mr. Nelson John Garth Nelson
(Garth) is also registered against title to the McCulloch Property. However, it
is not considered to be legitimate given the state of the mortgage
documentation. Should the mortgage be legitimate, it is considered that no
funds are owed under the mortgage. The mortgage, which appeared to be secured
for an amount of $40,000 at an interest rate of 10%, was to be repaid by way of
monthly payments of $400.00 with the balance due some 13 months later on
November 1, 1997. On May 24, 2007, CRA issued an RFI to Garth (prior to
his death) concerning the amount owing under the mortgage. Mr. Nelson,
purportedly as agent for Garth, responded and advised that the balance of the
mortgage was ‘nil’ as of May 1, 2007; and
c) A
mortgage in favour of RBC is also registered against title to the McCulloch
Property with a face value of $25,000, but has fluctuated over the years and
has reached amounts in excess of $181,000. Although the RBC mortgage was
registered on the same day as Garth’s mortgage and notarized by the same notary
public, the RBC mortgage appears on title in priority to Garth’s mortgage. On
or about September 27, 2010, an RFI was issued to RBC. On October 26, 2010, RBC
responded and indicated that it currently does not have any mortgage accounts
registered under Mrs. Nelson, Mr. Nelson or the Company. It appears there is no
money owing under this mortgage, but the Company has failed to have it
discharged (Affidavit of Michael Sundstrom, para 32).
[28]
As a
result, it is estimated that the Company’s interest in the McCulloch Property
is valued at approximately $485,000.
B. Business
Transactional Behaviour Analyzed
[29]
Mr.
Nelson, Mrs. Nelson and the Company have been conducting their affairs in an
unorthodox manner. This is illustrated by their dealings with the McCulloch
Property which has been the subject of several non-arm’s length transfers for
no or inadequate consideration. In addition, Garth’s mortgage registered
against title to this property is not believed to be a legitimate mortgage.
Accordingly, it is reasonable to assume, especially given the recent
Assessments against the Company, that Mr. Nelson, on behalf of the Company,
will take steps relevant to the McCulloch Property to thwart the Minister’s
collection efforts, unless the requested jeopardy order is granted.
[30]
This
is especially likely given that Mr. Nelson is the director of three (3) other
corporations, and Mrs. Nelson is a director of two (2) corporations. Therefore,
it would be relatively easy for Mr. Nelson to cause the McCulloch Property
to be transferred to another family corporation.
[31]
In
addition, the assessments themselves, by their very nature, are unorthodox.
C. Collection Action
[32]
It
is the intention of the CRA, further to an order of this Court, to effect
service of the Jeopardy Order on the Company by personally serving it care of its
sole director, Mr. Nelson; or by leaving a copy of the Order directed to the
Company both on its own and care of Mr. Nelson, with an adult person at the
McCulloch Property; or by posting it to the door of that property; and by
sending a copy of the Jeopardy Order by ordinary mail addressed to the
Company in its own right and care of Mr. Nelson to the McCulloch Property.
As noted above, the Company’s registered and records office is located at the
McCulloch Property.
[33]
It
is also the intention of the CRA, further to a court order, to certify the
amounts owing by the Company with respect to the Debt and to register the
corresponding judgment against title to the McCulloch Property. The CRA would,
however, like to take any of the collection measures available under section
225.1 of the ITA, if so permitted.
III. Issue
[34]
Are
there reasonable grounds to believe that the collection of all or any part of
the $50,147.85 in income tax assessed in respect of the Company would be
jeopardized by a delay in the collection of that amount?
IV. Analyses
[35]
The
Court accepts the position of the Applicant that collection of the above amount
is in jeopardy by a delay in the collection of the whole amount, as specified.
A. Re Collection
[36]
Section
225.1 of the ITA limits, with certain exceptions, the Minister’s right to
recover unpaid taxes where the taxpayer disputes his or her assessed amounts
and an impartial hearing has not concluded otherwise.
[37]
Section
225.1(1) of the ITA provides that, with certain exceptions, the Minister shall
not take any of the listed collection actions against a taxpayer until the day
after that is 90 days after the day that a Notice of Assessment (or
Reassessment) is mailed to the taxpayer, or if the taxpayer files a notice of
objection or an appeal of the assessment, until the objection or appeal has
been dealt with finally.
B. Authorization to Proceed
[38]
Section
225.2 of the ITA provides that, notwithstanding section 225.1, a judge
of this Court, on an ex parte application by the Minister, may
grant an order (a Jeopardy Order) authorizing the Minister to take collection
action forthwith if the judge is satisfied that “there are reasonable grounds
to believe that the collection of all or any part of an amount assessed in
respect of a taxpayer would be jeopardized by a delay in the collection of that
amount.”
[39]
A
useful review of the legislative intent and history is found in the case of 1853-9049
Quebec v The Queen (1986), 87 DTC 5093 (FCTD) at 5095, a decision of
Justice Paul Rouleau of the Federal Court, Trial Division. At page 5095,
Justice Rouleau refers to the following excerpts from a speech to the
House of Commons by the parliamentary secretary to the Minister of Finance.
The extracts are taken from the House of Commons debates for September 24,
1985:
In addition, the proposed Bill includes safety
features against possible abuses of the new system. Where there are reasons to
believe that the granting of a delay could jeopardize the collection of the
amounts in controversy, the Bill allows Revenue Canada
to take forthwith recovery action. On the other hand, the taxpayer has a right
to ask a Judge to review the opinion of Revenue Canada
that the collection of the amount in controversy would be jeopardized by such a
delay.
[40]
In
Laframboise v The Queen (1986), 86 DTC 6396 (FCTD) at 6398, Justice
Joyal of this Court commented on the specific wording of paragraph 225.2(1) of
the ITA [with reference to the phrase “…there are reasonable grounds to believe
that the collection of all or any part of an amount assessed in respect of a
taxpayer would be jeopardized by a delay in the collection of that amount”] and
stated (at page 6398):
The expression has sufficiently liberal
qualifications to it that its ambit appears to me of far greater scope than
that found in Mareva injunctions. The word “may” and the expression “reasonably
considered”, when read together, provide considerable latitude to the Minister,
a latitude which I believe is not found whenever one deals with a seizure
before judgment.
[41]
In
1988, the provisions of the ITA were once again revisited and section 225.2 was
amended to require prior authorization by a Court before such jeopardy
collection procedures could be initiated. It is due to this amendment that the
Minister is required to avail himself of the special collection provisions
contained in section 225.2 of the ITA.
C. Test for Granting
an Order under Section 225.2
[42]
This
Court has held that the test on an application by the Minister under section
225.2 of the ITA (a Jeopardy Application) is whether the evidence
before the Court on a balance of probabilities or a “standard of proof
that ‘while falling short of a balance of probabilities, nevertheless connotes
a bona fide belief in a serious possibility based on credible evidence’”
(the Standard of Proof) is sufficient to lead to the conclusion that
collection would jeopardized by delay. This Court has also held that the issue
is not whether the collection per se is in jeopardy but whether the
actual jeopardy arises from the likely delay in the collection (Canada
(Minister of National Revenue – MNR) v 514659 BC Ltd, [2003] FCJ No 207
(TD) at para 6 [514659 BC Ltd]; Danielson v Minister of National
Revenue, [1986] 86 DTC 6518 (FCTD) [Danielson].
[43]
Therefore,
in order for a Jeopardy Application to succeed, the onus is on the Minister
to prove that collection will be in jeopardy as a result of a delay in the
collection efforts of the Minister. Justice McNair in Danielson above,
held (at page 6519):
In my judgment, the issue goes to the
matter of collection jeopardy by reason of the delay normally attributable to
the appeal process. The wording of subsection 225.1(1) would seem to indicate
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.
…
…the mere suspicion or concern that delay
may jeopardize collection would not be sufficient per se. The test of
“whether it may reasonably be considered” is susceptible of being reasonably
translated into the test of whether the evidence on balance of probability is
sufficient to lead to the conclusion that is more likely than not the
collection would be jeopardized by delay…In my opinion 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 thereof.
[44]
In
making its application for a jeopardy order, the Minister has an obligation to
make full and frank disclosure and to exercise the utmost good faith both in
respect of the relevant facts, and the applicable jurisprudence Canada
(Minister of National Revenue) v Robarts, 2010 FC 875, at paras 33 to 35 [Robarts].
[45]
A
lack of
income is not, in and of itself, a sufficient justification for the granting of
a jeopardy order. Nor is the fact that the taxpayer’s assets are entirely
liquid in nature and so can be easily wasted, liquidated or transferred Robarts
above, at paras 72 and 73.
[46]
Further,
where there are additional collections avenues available to the Minister which
would see the debt paid notwithstanding the collections restrictions period, a
jeopardy order is not warranted (Steele (Re) [1995] SJ No 784 (SKQB)
[QL], at para 12).
[47]
If
there is compelling evidence on the part of the Minister as to dissipation of
the taxpayer’s assets or the movement of assets out of the jurisdiction beyond
the reach of the Minister and other potential creditors, this is persuasive.
Speaking of the evidence that must be adduced by the Minister, Justice McNair
in Danielson above, stated (at page 6519):
Cogent evidence on the part of the Minister
as to the dissipation of the taxpayer’s assets or the movement
of assets out of the jurisdiction beyond the reach of the Minister and
other potential creditors could be very persuasive and compelling. A more difficult
borderline case might be the situation where the taxpayer’s assets are of a
wasting nature, or likely to decline in value with the mere passage of time.
[48]
Unorthodox
behaviour which raises a reasonable apprehension that it would be difficult to
trace funds or recover them for the tax debt may provide reasonable grounds
that a jeopardy order is warranted (Deputy Minister of National Revenue v
Quesnel, 2001 BCSC 267 [Quesnel]).
[49]
As
set out by Justice Martineau of this Court in Robarts above (at para
61), ‘unorthodox behaviour’ has not been specifically defined by the
jurisprudence, although it has given examples of what it considers to be
unorthodox behaviour:
a. Keeping
large amounts of cash in places such as one’s apartment, safety deposit boxes,
and a cold storage depot locker (Minister of National Revenue v Andre
Rouleau) (1995), 95 DTC 5597 (FCTD) [Rouleau]);
b. Keeping
large amounts of cash, untraceable through normal banking records, in the trunk
of an automobile (Minister of National Revenue v Arab, 2005 FC 264,
[2005] 2 CTC 107 at para 20);
c. Keeping
double accounts for a restaurant, with one being for entries in the sales
ledger and income tax returns, and the other being for additional sales not
reported by the holding company of the restaurant (Delaunière, re, 2007
FC 636, 2008 DTC 6274 (Eng) at para 4);
d. Keeping
large amounts of cash in a safety deposit box, a filing cabinet in one’s house
and in the pocket of a housecoat (Mann v Minister of National Revenue,
2006 FC 1358, [2007] 1 CTC 243 at para 43); and
e. Advancing
funds to a company about to be dissolved in order to avoid paying income tax (Laquerre,
re, 2008 FC 459, 2009 DTC 5596 (Eng) at para 11 [Laquerre, re]).
[50]
Also,
in Laquerre, re above, at para 38, the Court considered the Respondent’s
unorthodox behaviour in addition to that of his non-arm’s length companies and
family trusts.
[51]
Similarly,
in Canada (Minister of National
Revenue) v Services ML Marengère, [1999] Can LII 9004 (CAN LL) [Marengère],
the Court considered the unorthodox behaviour of the Respondent and its
affiliated corporations, and director, in rendering its decision as to whether
the Jeopardy Order was appropriate.
[52]
The
presence of other creditors who could collect on their debts in priority to the
Minister unless the requested jeopardy order is granted may also justify the
making of the order (514659 BC Ltd, above at para 10; Marengère
above, at para 63).
[53]
In
Minister of National Revenue v Cormier-Imbeault, 2009 FC 499, [2009] 6
CTC 45, the Court (at para 7) cited factors that can justify a jeopardy order:
a. There
are reasonable grounds to believe that the taxpayer has acted fraudulently;
b. The
taxpayer has proceeded to liquidate or transfer his or her assets;
c. The
taxpayer is evading his or her tax liabilities;
d. The
taxpayer has assets that could potentially lessen in value over time,
deteriorate or perish; and
e. The
amount of the debt in relation to income and expenses.
[54]
The raising of
the assessments may itself raise reasonable apprehension that the taxpayer has
not been conducting his or her affairs in an orthodox fashion. In Rouleau
above, Judge Gibson held (at page 5598):
These reassessments were based on net worth
statements which the applicant alleges are inaccurate. The net worth statements
were in part developed on the basis of information garnered through search
warrants obtained by the Minister of National Revenue on May 1994 and a later
date, also in May, 1994. In the execution of the search warrants, it was
discovered that the applicant had $25,000.00 in cash in his apartment,
approximately $92,000.00 in cash in safety deposit boxes and over $96,000.00 in
cash in a cold storage depot locker maintained by the applicant.
…
As
I indicated earlier, I am not satisfied that the applicant discharged the
initial burden on him to show that there are reasonable grounds to doubt
that the test for a jeopardy collection order has been met. In Laframboise
v. The Queen [1986] 3 F.C. 521, Mr. Justice Joyal stated at page 524:
I find that the nature of the
Reassessments itself raises reasonable apprehensions that the taxpayer had not
been conducting his affairs in what might be called unorthodox fashion. There
is reasonable apprehension that in placing surplus funds or investment purposes
through the hands of a third party instead of directly, there would be
difficulty in retracing these funds or in recovering them.
I find the foregoing quotation apt to the
circumstances before me. Certainly the nature of the Reassessments against the
applicant indicates a range of income to the applicant quite out of scale with
the incomes disclosed by the applicant in his annual returns to the Minister of
National Revenue. The way in which he held assets certainly disclosed a
conducting of affairs that could be called unorthodox. It also disclosed practices
that would have made it very simple for the applicant to spirit away
substantial assets if he had been so inclined so that there conceivably could
have been difficulty in retracing the assets and in recovering them.
[55]
A
summary of the principles relevant to the making of a Jeopardy Order was set
out by Justice Clancy of the Supreme Court of British Columbia in Deputy
Minister of National Revenue v Quesnel above, at para 27:
Jeopardy
orders have been considered in a number of authorities. A useful summary of the
principles that emerge from those authorities was provided by counsel for Ms.
Quesnel. The principles relevant to the circumstances before me are:
i.
the facts must
provide reasonable grounds for believing the taxpayer will waste, liquidate or
otherwise transfer property so as to make it unavailable to the Minister: Canada
v. Golbeck (1990), 90 DTC 6575 (F.C.A.);
ii.
it must be more
likely than not that collection will be jeopardized by delay: Danielson
v. Minister of National Revenue (1986), 86 DTC 6495 (F.C.T.D.); Satellite Earth Station, supra;
iii.
mere suspicion or
concern is not sufficient to establish reasonable grounds: Danielson,
supra, Satellite
Earth Station, supra;
iv.
where a taxpayer has
never taken any steps to hinder collection proceedings, it suggests that
collection will not be jeopardized: Danielson, supra;
v.
where a taxpayer has
sold real estate that is the only asset to satisfy the cash debt and the cash
received on the sale is still available to satisfy the debt, the sale itself
does not constitute grounds for a jeopardy order: Canada (Minister of National Revenue) v.
Landru, [1993] 1 C.T.C.
93 (Sask. Q.B.);
vi.
unorthodox behaviour
which raises a reasonable apprehension that it would be difficult to trace
funds or recover them for the tax debt may provide reasonable grounds: Laframboise, supra; Rouleau, supra.
See also Minister of
National Revenue v Thériault-Sabourin, CarswellNat 172, 2003 FCT 124 at
paras 13 and 14.
[56]
In
Canada (Minister of National Revenue) v MacIver et al, [1999] 99 DCT
5524 (FCTD) at 5525, Madam Justice Sharlow heard the Respondents’
application for a review of the jeopardy orders that had been made pursuant to
subsection 225.2(2) of the ITA and stated:
The tax dispute will be resolved in another
forum. It is beyond my jurisdiction to consider whether or not the assessments
are correct. For present purposes, I am bound by section 152(8), which deems
the assessments to be valid unless and until they are varied on objection or
appeal.
[57]
Likewise,
in Marengère, above (at paragraphs
67 and 72 (subparagraph 4)), Justice Lemieux said:
[67]… This case does not turn on intent or
on tax planning; it calls to be determined looking at the matter
objectively and realistically on the ground so to speak. In other words, it is
the effect or result of the taxpayer’s action in dealing with its assets that
is important and relevant in the assessment of the appropriateness of a
collection jeopardy order. Tax liability is not an issue in such
proceedings.
[74](4) The Minister does not have to prove
fraud or deceit or bad motive.
D. Evidence
[58]
In
the present case, the evidence before the Court on the Standard of Proof is
sufficient in that collection of the Debt would be jeopardized by delay.
[59]
There
is cogent evidence before the Court of jeopardy in this case, as follows:
a. The Company’s
only known exigible asset available to satisfy the Debt is the McCulloch
Property;
b. With respect to
the underlying debts (being Mrs. Nelson and Mr. Nelson’s debts), only Mrs.
Nelson’s debt concerning the section 160(1) assessment against her in regards
to Mr. Nelson’s transfer to her of the McCulloch Property is certified and
registered against title to the McCulloch Property. The remainder of her debt
is not certified or registered against title to any property and so the CRA is
still unable to collect this debt or secure it by any means without the
requested Order;
c. Accordingly, the
Minister would like to certify the Company’s debt and register the
corresponding certificate against title to the McCulloch Property;
d. There is concern
that, if the Minister is unable to do so immediately, the Nelsons
will cause the Company to encumber or transfer the Property during the
collections restrictions period to prevent the Minister from pursuing these
measures. The collections restrictions period relevant to the Debt will not
expire until January 28, 2011, or later, if the Company objects to or appeals
its Assessments;
e. The Company has
engaged in unorthodox behaviour in the past with a view to thwarting the
collection efforts of the Minister relevant to the Nelsons;
f. The Company is
controlled by Mr. Nelson and is believed to be owned by Mr. and
Mrs. Nelson;
g. Mr. Nelson and
Mrs. Nelson have also engaged in unorthodox conduct with a view to thwarting
the collection efforts of the Minister and avoiding their tax responsibilities.
Mrs. Nelson has previously been the subject of a jeopardy order;
h. The assessments
themselves concerning all of Mrs. Nelson, Mr. Nelson and the Company are, by
their very own nature, unorthodox;
i. Mrs. Nelson and
Mr. Nelson have refused to provide financial disclosure to the CRA, and have
generally been uncooperative with respect to their tax matters for over twenty
(20) years;
j. Mr. Nelson has
been declared a vexatious litigant with the BCSC, BCCA and Federal Court with
respect to various actions targeted against the Canadian Government, including
the Minister, CRA, government lawyers and other government personnel.
He has also initiated similar legal actions in Ontario. Mr. Nelson unsuccessfully
appealed many of these decisions to the SCC. Moreover, he initiated legal
action at the International Criminal Court in The Hague, Netherlands, without success;
k. The McCulloch
Property has been the subject of several non-arm’s length transfers for no, or
inadequate consideration. Most recently, the McCulloch Property was transferred
by Mrs. Nelson to the Company. All of the transfers were controlled and
directed by the Nelsons;
l. Additionally, a
mortgage in favour of the Nelson’s deceased son, Garth, is registered against
title to the McCulloch Property. This mortgage is not believed to be
legitimate. There is also a mortgage in favour of RBC registered on title
against the McCulloch Property. Although RBC indicates that the mortgage
account no longer exists, the Nelsons have not taken steps to have the charge
removed from title to the Property;
m. Mrs. Nelson and
Mr. Nelson are the directors of several other related corporations, and so
could cause the Property to be transferred to another related corporation at
anytime, including during the period in which the Minister is under collection
restrictions. As well, the McCulloch Property could be transferred away to
another family member, as has occurred in the past; and
n. Even if
collection avenues relevant to such transfers are available to the Minister, it
is likely that – given the past conduct of the Nelsons and the Company – an
endless ‘cat and mouse’ game could ensue.
[60]
For
these reasons, that there are reasonable grounds to believe that the collection
of all or any part of the Debt assessed in respect of the Company will be
jeopardized by a delay in the collection of that amount.
V. Conclusion
[61]
The
Court agrees to grant the Minister’s request for the following:
(1) An
Order (the Jeopardy Order) under section 225.2(2) of the ITA authorizing the
Minister to take forthwith the actions described in paragraphs 225.1(1)(a) to
(g) with respect to the amounts assessed in respect of the Company, including
the right to certify the amounts owing by the Company with respect to the Debt
and to register the corresponding judgment against title to the McCulloch
Property.
(2) An
Order authorizing the Minister to effect service of the Jeopardy Order on the
Company by personally serving it care of its sole director, Robert; or by
leaving a copy of the Order directed to the Company both on its own and care
of Robert, with an adult person at the McCulloch Property; or by posting
it to the door of that property; and by sending a copy of the Jeopardy Order by
ordinary mail addressed to the Company in its own right and care of Robert
to the McCulloch Property. As noted above, the Company’s registered and
records office is located at the McCulloch Property.
JUDGMENT
UPON
the ex parte application of the Minister of National Revenue (the
Minister);
AND UPON
reviewing the materials filed by the Minister, including the Affidavit of
Michael Sundstrom sworn November 1, 2011, and hearing the submissions of
counsel for the Minister, Nicole S. Johnston;
AND UPON
being satisfied that there are reasonable grounds to believe that the
collection of an amount assessed for tax by the Minister against the Respondent
would be jeopardized by a delay in the collection thereof;
THIS
COURT ORDERS under section 225.2(2) of the Income Tax Act that the
Minister is authorized to take forthwith the actions described in paragraphs
225.1(1)(a) through (g) with respect to the amounts assessed in respect of the
Respondent (the Jeopardy Order); and
THIS
COURT FURTHER ORDERS that the Minister may effect service of the Jeopardy
Order on the Respondent by personally serving it care of its sole director,
Robert Hannes Nelson (Mr. Nelson); or by leaving a copy of the Order directed
to the Respondent both in its own right and care of Mr. Nelson, with an adult
person at the address of its registered and records office, namely 3460
McCulloch Road, Kelowna, British Columbia (the McCulloch Property), which
address is also the personal residence of Mr. Nelson; or by posting it to the
door of that Property; and by sending a copy of the Jeopardy Order by ordinary
mail addressed to the Company in its own right and care of Mr. Nelson to the
McCulloch Property.
THIS
COURT FURTHER ORDERS that the Respondent:
TAKE NOTICE that an ex parte application, filed under
Court file No. T-1790-11, for a jeopardy order was commenced against you
pursuant to subsection 225.2 of the Income Tax Act. The Court Order
authorizes the Minister of National Revenue to take forthwith any of the
actions described in paragraphs 225.1(1(a) through (g) of the Income Tax Act
with respect to your assessed tax debt.
Pursuant to subsection 225.2(8), the Respondent may, upon
six (6) clear days notice to the Deputy Attorney General of Canada, apply to a Judge of
the Federal Court to review the Court Order.
Pursuant to subsection 225.2(9), the Respondent’s
application must be brought within thirty (30) days from the date that the
court Order was deemed to be served on your, or within such further time as a
Judge may allow, provided that you can satisfy the Judge that your application
was made as soon as practicable.
(Copies of the Federal
Courts Rules, information concerning the local office of the Court and
other necessary information may be obtained on request to the Administrator of
this Court at Ottawa (telephone 613-992-4238) or at any local office including
the Vancouver office (telephone
604-666-3232)).
“Michel
M.J. Shore”
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