Date: 20080508
Docket: T-2160-07
Citation: 2008 FC 589
Ottawa, Ontario, May 8, 2008
PRESENT:
The Honourable Mr. Justice Beaudry
BETWEEN:
INCOME
TAX (HER MAJESTY THE QUEEN)
Respondent
and
KAREN
ABERGEL
Applicant
REASONS FOR ORDER AND ORDER
[1]
On
December 13, 2007, the respondent obtained a jeopardy order under
subsection 225.2(2) of the Income Tax Act, 1985, c. 1
(5th Supp.) (Act), against applicant Karen Abergel (applicant). The
applicant filed this application seeking a review of that order pursuant to
subsection 225.2(8) of the Act.
FACTS
[2]
The
applicant has a tax debt of $186,909.60, as indicated in three notices of
reassessment dated December 11, 2007, based on section 160 of
the Act. The notices were the result of transfers of property from the applicant’s
father, Ralph Amiram Abergel (Mr. Abergel), who himself had a total amount
owing to the Canada Revenue Agency (CRA) of $2,320,258.03 as at
November 29, 2007. The transfers involved $149,000 in securities and
a cash transfer of $48,409.60 on January 31, 2001. A total of $89,500
was allegedly also transferred to the applicant in four cheques dated
February 25, 2003, and September 29, 2003.
[3]
Instead
of sending the three notices of assessment to the applicant, the respondent
decided to file an ex parte application under
subsection 225.2(2) of the Act with the Court on
December 12, 2007, fearing a delay would jeopardize collection of the
debt.
[4]
The
respondent recently sent the applicant two other notices of assessment
totalling $92,341.18 (March 17, 2008: $18,641.18;
March 26, 2008: $73,700).
ANALYSIS
Standard of review
[5]
The
initial burden of proof and the degree of intervention by the Court under
subsection 225.2(8) have been addressed in many decisions. According to the
case law, the initial onus is on the applicant to show reasonable grounds for
believing that the condition prescribed in subsection 225.2(2) was not
satisfied. If the applicant is successful, the Court must consider the evidence
before the authorizing judge and any other evidence and determine whether, on a
balance of probabilities, a delay would jeopardize collection (Canada v.
Satellite Earth Station Technology Inc., [1989] F.C.J. No. 912
(F.C.T.D.), at paragraph 16; Canada (Minister of National Revenue –
M.N.R.) v. Services M.L. Marengère Inc., [1999] F.C.J. No. 1840
(F.C.T.D.), at paragraph 63(5)).
[6]
In
Canada (Minister of National Revenue) v. 144945 Canada Inc.,
2003 FCT 730, [2003] F.C.J. No. 937, Blanchard J.
wrote the following at paragraph 9:
[9] In Canada (Minister of National Revenue) v. Moss, [1997]
F.C.J. No. 1583 (QL), Muldoon J. stated, at para. 10-11,
that (i) the taxpayer has the initial onus to show reasonable grounds the
Minister did not satisfy her onus before the Court in the ex parte
hearing; and (ii) if so, the Court must consider the evidence before the
authorizing judge and additional evidence to find whether on a balance of
probability the collection would be jeopardized by the delay.
[7]
In
the case at bar, having considered all the evidence, that is, the application
record, the respondent’s application record, the applicant’s reply record, the
transcripts of the examinations of the applicant and of Susan Auchu, her solemn
affirmation and the supporting documents, I am satisfied that the applicant has
completed the first step.
[8]
The
Court must therefore consider the evidence before Mr. Justice Shore
and the evidence adduced with this application.
[9]
In
Canada (Minister of National Revenue – M.R.N.) v. Thériault-Sabourin,
2003 FCT 124, [2003] F.C.J. No. 168, Madam Justice
Layden‑Stevenson very aptly summarized the case law, referring to
paragraphs 62 and 63 of Marengère Inc, supra:
[13] The law regarding review of a jeopardy order was summarized by
Lemieux J. in Canada (Minister of National Revenue) v. Services M.L.
Marengère Inc. (1999), 176 F.T.R. 1:
62. The current jeopardy collection
provisions in the Income Tax Act were introduced in 1988 and are a refinement
to what previously existed in that the authorization and supervision of this
Court is provided for. The legal principles applicable to a
section 225.2(8) review of an ex parte jeopardy order are
clearly established by this Court as illustrated in Danielson v. Canada (Deputy
Attorney General), [1987] 1 F.C. 335 (T.D.), 1853-9049 Québec Inc. v.
The Queen, [1987] 1 C.T.C. 137 (T.D.), Canada v. Satellite Earth
Station Technology Inc., [1989] 2 C.T.C. 201 (T.D.) and Her Majesty
the Queen v. Robert Duncan, [1992] 1 F.C. 713 (T.D.).
63. From this jurisprudence, I take
the following principles:
(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 Québec 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.
[10]
At
paragraph 14 of her decision, Layden‑Stevenson J. added the
opinions of other judges:
[14] I would add to the principles articulated by Lemieux J., the
propositions that follow:
(a) The sale of assets alone
does not justify a jeopardy order: Canada (Minister of National Revenue)
v. Landru (1993), 1 C.T.C. 93 (Sask. Q.B.).
(b) The taxpayer’s inability
to pay the amount assessed at the time of the direction is not by itself
conclusive or determinative: Danielson, supra.
(c) The nature of the
assessment itself may raise a reasonable apprehension that the taxpayer had not
been conducting [her] affairs in what might be called an orthodox fashion and
can therefore contribute to the reasonable grounds to believe that the
collection of the amount assessed would be jeopardized by delay: Canada
(Minister of National Revenue) v. Laframboise, [1986]
3 F.C. 521 (T.D.); Canada (Minister of National Revenue) v.
Rouleau, [1995] 2 C.T.C. 42 (F.C.T.D.).
[11]
Bearing
those principles in mind, I will briefly analyze the evidence.
Evidence
[12]
It
is important to note at the outset that I find no evidence that casts doubt on
the good faith of Ms. Auchu (the respondent’s agent) and of the applicant.
[13]
Nor
is there any evidence that the applicant committed fraud.
[14]
In
the application for an ex parte order, the respondent alleged close
business ties between the applicant and her father, Mr. Abergel, who has
exhibited delinquent fiscal behaviour. That behaviour is not at issue here. In
support of the allegation of close business ties between Mr. Abergel and
his daughter, the applicant, the respondent adduced the following evidence:
a) The applicant
worked as manager/comptroller of 9086‑8746 Québec Inc., of which
Mr. Abergel is a shareholder and director. The applicant’s duties included
some management, business development and accounts control.
b) The
applicant’s duties were limited to bookkeeping from November 2005 to
May 2006. The applicant’s annual salary for her bookkeeping duties was
supposed to be $100,000, slightly less than the salary she received for her
duties as manager/comptroller. The respondent contends that the only plausible
explanation for the applicant’s large salary was her close relationship with
Mr. Abergel.
c) The
applicant’s employment income between 2001 and May 2006 was from companies
owned by her father, that is, 9086‑8746 Québec Inc. and, before that,
9043‑8243 Québec Inc.
d) The
respondent also contends that the applicant is in debt and that the
precariousness of her financial situation is a relevant fact in determining
whether a delay would jeopardize collection of the tax debt, although it is not
conclusive (Canada (Minister of National Revenue – M.N.R.) v.
Thériault-Sabourin, supra, at paragraph 14(b); Bonnie Ellen
Danielson v. Deputy Attorney General of Canada and The Minister of National
Revenue, 86 DTC 6518 (F.C.T.D.).
[15]
The
applicant acknowledged in her argument that she is currently in personal debt
if the assessments are considered valid. However, she said that she will no
longer be in debt if she succeeds with her notices of objection, as she anticipates
she will.
[16]
The
respondent adduced before Shore J. evidence that much of the applicant’s income
came from her father. The respondent also argued that Mr. Abergel used his
relationship with his daughter to protect his assets from being seized for tax
purposes. Specifically,
a) most of the
$115,000 down payment made when the applicant purchased her house in 2003
came from Mr. Abergel, who contributed $100,000;
b) securities
valued at $197,406.60 were transferred to the applicant’s personal account with
Merrill Lynch in 2001;
c) the applicant
agreed to these transfers of assets even though she knew that her father had a
tax debt.
[17]
The
respondent added that the applicant is not very credible because she allegedly
stated in a telephone conversation with Ms. Auchu that she would not
accept service of an order under subsection 225.2(2) of the Act. Moreover,
she apparently did not have a valid reason for filing her 2006 tax return
late.
[18]
The
Court can easily understand that, before having a telephone conversation with
Ms. Auchu, the applicant was surprised and even frustrated to learn that
her assets had been seized. The fact that she would not accept service of an
order does not mean, however, that she would try to squander her assets or
avoid her tax debts.
[19]
With
respect to the reasons she gave in her January 17, 2008, affidavit
for not filing her 2006 income tax return until 2008, the Court finds
it odd to say the least that she wanted to know the maximum contribution she
could make to her RRSP. Despite that vague explanation, the Court cannot
conclude that a delay would jeopardize collection of the debt to the
respondent.
[20]
Nor
does the evidence support a finding that the applicant, by act or omission,
aided or assisted her father in avoiding payment of his tax debts. The facts of
this matter can easily be differentiated from the facts of the matter in which
Layden‑Stevenson J. was asked to make a determination.
[translation]
18. I have no plans to
sell my house or otherwise protect it from the CRA.
19. I also have no plans
to sell or otherwise dispose of any other asset I own in order to avoid my tax
or other liabilities.
ORDER
THE COURT
ORDERS that the application be allowed. The order dated
December 13, 2007, is set aside, except with respect to the legal
hypothec registered against the residence at 5850 David‑Lewis Street,
Côte St‑Luc, Quebec, which remains in force. On the issue of costs, the
respondent shall pay the applicant a total amount of $2,000.
“Michel Beaudry”
Certified
true translation
Susan
Deichert, Reviser
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