Fréchette (Re), docket ITA-225-98

                                                                                                                                   Date: 20000417

                                                                                                                            Docket: ITA-225-98

MONTRÉAL, QUEBEC, THE 17^TH DAY OF APRIL, 2000

PRESENT:     MR. RICHARD MORNEAU, PROTHONOTARY

IN THE MATTER OF THE INCOME TAX ACT

- and -

IN THE MATTER OF AN ASSESSMENT OR ASSESSMENTS DETERMINED

BY THE MINISTER OF NATIONAL REVENUE UNDER ONE OR MORE OF

THE FOLLOWING STATUTES: THE INCOME TAX ACT, THE CANADA PENSION PLAN AND THE EMPLOYMENT INSURANCE ACT

Against:

MICHEL FRÉCHETTE

Judgment debtor

AND

LÉVESQUE BEAUBIEN GEOFFRION

Garnishee

AND

FIDUCIE D'INVESTISSEMENT SINOSA

and

MICHEL FRÉCHETTE, in his capacity as Trustee

of the FIDUCIE D'INVESTISSEMENT SINOSA

Third parties

REASONS FOR ORDER AND

GARNISHEE ORDER ABSOLUTE

(Rules 451 and 455(1) of the Federal Court Rules, 1998

and article 625 of the Code of Civil Procedure)

MR. RICHARD MORNEAU, PROTHONOTARY:

[1]         HAVING HEARD the parties' counsel and read the affidavits of Ghislain Émond, an authorized official in the Department of National Revenue, filed in support of the motion by Her Majesty the Queen, to which was appended a Certificate filed January 19, 1998 in the Registry of this Court under the authority of section 223 of the Income Tax Act, bearing number ITA-225-98 in the records of this Court;

[2]         WHEREAS pursuant to the Certificate, which has the same value and same effect as a judgment of this Court, it was certified that the judgment debtor is indebted to Her Majesty the Queen in Right of Canada in the amount of $1,285,473.09, plus interest compounded daily as prescribed in the Income Tax Act on the said sum for the period running from the 13^th day of January, 1998 to the day of payment;

[3]         WHEREAS the sum of $1,285,473.09 and the interest remain due and unpaid;

[4]         WHEREAS it appears that an interim order of seizure by garnishment was rendered on June 8, 1999 by which it was ordered that:

-            All sums due or that become due by Lévesque Beaubien Geoffrion to Michel Fréchette and/or Fiducie d'Investissement Sinosa, Michel Fréchette in his capacity as trustee of the Fiducie d'Investissement Sinosa and more particularly to the following securities:

or any balance in regard to the said securities or amount receivable from the said securities, be garnished in favour of Her Majesty the Queen in Right of Canada, to satisfy up to and including the sum of $1,285,473.09 plus interest compounded daily at the prescribed rate under this Act or the Income Tax Act on the said sum for the period running from January 13, 1998 to the day of payment plus the costs of these garnishment proceedings, which sums are owing to Her Majesty the Queen in Right of Canada under the Certificate filed in the proceeding January 19, 1998 against the judgment debtor pursuant to section 223 of the Income Tax Act;

-            The garnishee, Lévesque Beaubien Geoffrion, attends before this Court to declare under oath:

1.          All of the sums that the garnishee owes, will owe or might owe to Michel Fréchette and/or Fiducie d'Investissement Sinosa, Michel Fréchette in his capacity as trustee of the Fiducie d'Investissement Sinosa and more particularly to the following securities:

or any balance in regard to the said securities or amount receivable from the said securities; and

2.          All movable items belonging to the judgment debtor and in the possession of the garnishee;

-            The garnishee shall not dispossess itself of the said securities, sums or movable items until the court has pronounced upon the matter;

-            The Fiducie d'Investissement Sinosa and Michel Fréchette in his capacity as trustee of the Fiducie d'Investissement Sinosa shall be made third parties in these garnishment proceedings;

-            The Fiducie d'Investissement Sinosa and Michel Fréchette in his capacity as trustee of the Fiducie d'Investissement Sinosa shall attend before this Court to explain the reasons they might have as to why this Court should not render a garnishee order absolute by which the garnishee would be ordered to pay to Her Majesty the Queen in Right of Canada the securities contemplated by this garnishee order or the proceeds of the securities to be realized by the garnishee;

[5]         WHEREAS by a declaration dated June 23, 1999, the garnishee Lévesque Beaubien Geoffrion Inc., through its representative Ms. Lucie Brunet, stated that:

[Translation]

3.              We hold the following securities for and on behalf of Michel Frénette and/or Fiducie d'Investissement Sinosa, Michel Fréchette in his capacity as trustee of the Fiducie d'Investissement Sinosa:

4.              There is owing to us the sum of $23,350 in principal, interest and reasonably incurred costs, which sum is secured by a broker's first legal hypothec under the Civil Code of Québec and Lévesque Beaubien Geoffrion Inc. is entitled to exercise its rights as a hypothecary creditor in priority to anyone;

5.              The garnishee is entitled to sell or to take in payment a sufficient number of securities to pay the debt owing to it before delivering the residue of the said securities to whom it may concern;

6.              On June 1, 1999, we received notification of a second legal hypothec in regard to the securities described in paragraph 3 of this declaration, as witnessed by the deed of hypothec attached hereto as Schedule B;

[6]         WHEREAS the third parties have not filed any declaration in the record of this Court;

[7]         WHEREAS, since the third parties have not filed any declaration, the seizing creditor could not examine them;

[8]         WHEREAS article 625 of the Quebec Code of Civil Procedure reads as follows:

625. Seizure by garnishment is effected by the service on the garnishee and on the judgment debtor of a writ of seizure by garnishment. The writ orders the garnishee to appear on the day and at the hour fixed to declare under oath what sums of money he owes to the debtor or will have to pay him and what movable property he has in his possession belonging to him, and not to dispossess himself thereof until the court has pronounced upon the matter. The writ also summons the debtor to appear on the day fixed and show cause why the seizure should not be declared valid.

If the debtor has no known domicile, residence or place of business in the district where judgment was rendered, the writ is served upon him at the office of the court.

[9]         WHEREAS section 56(1) of the Federal Court Act reads as follows:

56. (1) In addition to any writs of execution or other process that are prescribed by the Rules for enforcement of its judgments or orders, the Court may issue process against the person or the property of any party, of the same tenor and effect as those that may be issued out of any of the superior courts of the province in which any judgment or order is to be executed, and where, by the law of that province, an order of a judge is required for the issue of any process, a judge of the Court may make a similar order with respect to like process to issue out of the Court.

[10]       WHEREAS, confronted with the evidence submitted by the seizing creditor, it is reasonable to say that the facts and circumstances set out in the said affidavit of Ghislain Émond are such that Fiducie d'Investissement Sinosa must be considered nothing but the instrument and/or the dummy of Michel Fréchette, to enable him to channel some large sums belonging to him in such a way that he can elude his obligations;

[11]       WHEREAS it is necessary to lift the veil of Fiducie d'Investissement Sinosa, Michel Fréchette in his capacity as trustee, and/or to characterize its existence as fictitious or simulated and accordingly to make it a party to this garnishment proceeding in the same capacity as Michel Fréchette;

[12]       WHEREAS the Fiducie d'Investissement Sinosa was formed on July 18, 1995 by notarial deed, in fraud of the rights of the seizing creditor, and was and is fictitious;

[13]       AND WHEREAS this Court has jurisdiction to make such a determination in the context of these garnishment proceedings within the meaning of the judgment in Le Bois de Construction du Nord (1971) Ltée v. The Queen, [1986] 2 C.T.C. 227;

[14]       ACCORDINGLY, THE COURT DECLARES illegal, fraudulent and absolutely null the deed of trust and the trust relied on by the third party in relation to the seizing creditor;

[15]       THE COURT FURTHER DECLARES good and valid for all legal purposes the seizure by garnishment effected in this proceeding by the seizing creditor in relation to the garnishee and the third parties;

[16]       THE COURT FURTHER DECLARES that the second legal movable hypothec given in favour of Mr. Jean-Claude Bureau on the movable property that is the subject of this seizure is illegal, fraudulent and absolutely null as against the seizing creditor since Michel Fréchette, an undischarged bankrupt since December 6, 1991, is an insolvent person and thus his intention was to commit a fraud against the seizing creditor;

[17]       THE COURT FURTHER DECLARES the securities in the possession of the garnishee, Lévesque Beaubien Geoffrion Inc., as being the sole ownership of Michel Fréchette;

[18]       THE COURT FURTHER ORDERS the garnishee, Lévesque Beaubien Geoffrion Inc., to realize the securities in its possession in the name of Michel Fréchette and/or Fiducie d'Investissement Sinosa, Michel Fréchette in his capacity as trustee of the Fiducie d'Investissement Sinosa, and to pay the proceeds of realization to Her Majesty the Queen in order to discharge a part of the debt owing to Her Majesty the Queen by Michel Fréchette while disregarding an amount of $23,350.00 payable to the garnishee;

[19]       AND THE COURT FURTHER ORDERS that the amount of $545.25 representing the costs occasioned to the seizing creditor by these garnishment proceedings be paid solidarily by the third parties.

Richard Morneau

Prothonotary

Certified true translation

Martine Brunet, LL.B.

Federal Court of Canada

Trial Division

Date: 20000417

                                                   Docket: ITA-225-98

In the matter of the Income Tax Act,

- and -

In the matter of an assessment or assessments determined by the Minister of National Revenue under one or more of the following statutes: the Income Tax Act, the Canada Pension Plan and the Employment Insurance Act,

Against:

MICHEL FRÉCHETTE

Judgment debtor

AND

LÉVESQUE BEAUBIEN GEOFFRION

Garnishee

AND

FIDUCIE D'INVESTISSEMENT SINOSA

and

MICHEL FRÉCHETTE, in his capacity as Trustee of the FIDUCIE D'INVESTISSEMENT SINOSA

Third party

REASONS FOR ORDER AND

GARNISHEE ORDER ABSOLUTE

FEDERAL COURT OF CANADA

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET NO:                         ITA-225-98

STYLE:                                    

In the matter of the Income Tax Act,

- and -

In the matter of an assessment or assessments determined by the Minister of National Revenue under one or more of the following statutes: the Income Tax Act, the Canada Pension Plan and the Employment Insurance Act,

Against:

MICHEL FRÉCHETTE

Judgment debtor

AND

LÉVESQUE BEAUBIEN GEOFFRION

Garnishee

AND

FIDUCIE D'INVESTISSEMENT SINOSA and MICHEL FRÉCHETTE, in his capacity as Trustee of the FIDUCIE D'INVESTISSEMENT SINOSA

Third party

PLACE OF HEARING:            Montréal, Quebec

DATE OF HEARING: March 31, 2000

REASONS FOR ORDER OF RICHARD MORNEAU, PROTHONOTARY

DATED:                                   April 17, 2000

APPEARANCES:

Daniel Beauchamp                                                         for Her Majesty the Queen

Jean-Claude Bureau                                                      for the Third Parties

Gérard Dugré                                                                for the Garnishee

SOLICITORS OF RECORD:

Morris Rosenberg                                                          for Her Majesty the Queen

Deputy Attorney General of Canada

Wingender, Bureau, Savard                                            for the Third Parties

Laval, Quebec

Byers Casgrain                                                  for the Garnishee

Montréal, Quebec