Date:
20071219
Dockets: A-85-07
A-86-07
Citation: 2007 FCA 408
CORAM: RICHARD
C.J.
DÉCARY
J.A.
LÉTOURNEAU
J.A.
BETWEEN:
A-85-07
MÉTALLURGIE SYCA INC.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
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A-86-07
CARL JOBIN
Appellant
and
HER MAJESTY THE QUEEN
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
Facts and issue
[1]
These are
two appeals from a judgment of Mr. Justice Tardif of the Tax Court of Canada
(judge) in which he upheld the decision of the Minister of National Revenue
(Minister) to add amounts to the appellant company’s income as taxable benefits
and to impose penalties on the appellant, Mr. Jobin. The taxation years in
dispute are 2000, 2001 and 2002. The two appeals were consolidated and heard
together.
[2]
The
appellant, Mr. Jobin, was the sole shareholder and director of the appellant
company during the periods at issue. The appellant, Mr. Jobin, received large
amounts from the appellant company as allowances for the use of his vehicle,
and these amounts are at the heart of the dispute. As the judge did in
paragraph 11 of the reasons for his decision, I am reproducing these amounts,
recorded at $0.34 per kilometer, which are set out in paragraph 19(c) of
the reply to the notice of appeal:
Taxation periods Total
Total distances
ended amounts
paid driven
July 31, 2000 (12 months) $23,628.98 69,497
km
December 31, 2000 (5 months) $14,506.10
42,665 km
December 31, 2001 $33,174.48
97,572 km
December 31, 2002 $34,524.96
101,544 km
[3]
According
to the appellants, the vehicle travelled close to 300,000 kilometres during the
periods in question whereas, according to the Canada Revenue Agency (Agency),
the kilometrage was essentially what the odometer indicated, i.e.,
approximately 30,000 kilometres.
[4]
In support
of his submissions, the appellant, Mr. Jobin, essentially argued that the
odometer was broken, that he had disconnected it several times; he produced
some repair bills, an invoice for the purchase of two sets of tires, one set
for winter and the other for summer, and relied on the testimony of two clients
who stated that Mr. Jobin had visited them a few times and that he had driven a
red Volvo on occasion.
[5]
With
regard to the odometer, the appellant first explained that the odometer
readings taken by the Agency’s auditor were misleading because the vehicle’s
odometer was defective and had had to be replaced.
[7]
The
appellant also produced a bundle of weekly reports in support of his argument about the distance that he drove. He claimed that every Thursday
or Friday he took note of the kilometres he had driven, having reset his
odometer to zero the previous Monday morning.
Analysis of the appellants’ submissions
[8]
In very
detailed reasons for judgment and in summarizing the evidence, the judge made a
number of negative credibility findings against the appellant, Mr. Jobin. At
the hearing, counsel for the appellants acknowledged this fact as well as the
resultant limitations.
[9]
However,
he attempted, quite skillfully I might add, to make a breach in this almost
insurmountable wall that the appellant, Mr. Jobin, erected around himself
through his lack of credibility. For the following reasons, counsel for the
appellants did not succeed in his efforts.
[10]
The first
criticism levelled at the judge is that he misapprehended the evidence. Counsel
for the appellants based his argument on two examples.
[11]
At
paragraph 41 of his reasons, the judge refers to reports of meetings with
clients that he believes were made during or after the Agency’s audit whereas,
according to the appellant, Mr. Jobin, the reports were written
contemporaneous with the meetings, just as the cheques were that accompanied
the reports.
[12]
Second, it
is alleged that the judge gave little weight to the fact that the Agency’s
auditor confused gasoline bills with restaurant bills.
[13]
Even if
these two criticisms are valid, these errors are not sufficient to justify
setting aside the findings of fact based on the weakness of the appellants’
evidence and explanations, which the judge characterized as implausible: see
paragraphs 30 to 39 of the reasons for his decision.
[14]
Counsel
for the appellants asserts that counsel for the respondent misled the judge
regarding the burden of proof that lay on the appellants by relying on Pallan
v. Canada (Minister of National Revenue – M.N.R.), [1989] T.C.J. No. 1126
(T.C.C.) and Kiliaris v. Canada, [1996] T.C.J. No. 1015 (T.C.C.), which,
he says, do not apply in this case. He admits, however, that the judge did not
comment on the degree of the burden of proof required of the appellants, so it
is difficult for our Court, in this context, to conclude that the judge made a
palpable and overriding error warranting our intervention.
[15]
As
previously mentioned, Mr. Jobin testified that he would disconnect the odometer
in his Volvo in order to extend his warranty. Clearly, the total of the
kilometers that he submitted and claimed does not by any means correspond to
the odometer reading.
[16]
The judge
expressed doubts as to the feasibility of such a manoeuvre on vehicles equipped
with new technology, although he personally knew that this was much easier to
do in the 70’s.
[17]
Counsel
for the appellants submits that the judge disregarded the evidence arising from
Mr. Jobin’s testimony and instead made a finding on the basis of his
personal knowledge. With respect, I do not believe that the judge did so.
[18]
The
transcript of the proceedings does not support this assertion. It is true that
the judge expressed doubts as to the ease with which Mr. Jobin said that he
could disconnect the odometer, but, on two occasions, the judge emphasized the
fact that this was an important element of the evidence and that he was
expecting more compelling evidence that what he had heard up to that point:
appeal book, volume 5, pages 843 to 846. This evidence was not forthcoming and
the judge based his finding on the weakness of the evidence that was
presented.
[19]
The
appellants complain that the judge refused to allow any of the work-related
kilometers that Mr. Jobin travelled in his personal Volvo. They ask this Court
to [translation] “settle the said
kilometrage”, taking into account the expansion of the appellant company, the
list of clients developed between 2001 and 2003, the list of clients approached
and certain invoices that were provided as samples.
[20]
It is
possible for the Court to allocate, for example, between the taxable and
non-taxable amounts where there is reliable evidence in the record on which an
allocation can be based: see Marc Forest v. Her Majesty the Queen, 2007
FCA 362. But for all practical purposes, this is impossible where the
allocation or settlement must be made with respect to amounts claimed that the
judge believed were not credible and were orchestrated: see paragraphs 42 to 44
of his reasons. The Court would thus be doing indirectly what it cannot do
directly, that is, review and undermine the judge’s findings on credibility and
the resultant findings of fact.
[21]
Last, the
appellants submit that their good faith was abused because the Agency had
obtained a Waiver in Respect of the Normal Reassessment Period from them. They
would have agreed to sign such a waiver once they understood that penalties
would not be imposed. The waiver was only valid for the year 2000.
[22]
The
evidence in the record indicates the following sequence. At 9:21 a.m. on
May 13, 2004, the appellants received a waiver form from Mr. Pierre
Drapeau of the Agency and returned it to him; with respect to the travel
allowance deduction that had been disallowed, Mr. Jobin had crossed out [translation] “with penalty” and written
by hand [translation] “without
penalty” on the form: see appeal book, volume 3, pages 438 to 440.
[24]
The second
form, and this is regrettable, could perhaps have given the appellants the
impression that the Agency had waived the penalties for the travel allowance.
But the notice of waiver itself clearly indicates that, if a waiver were
signed, the Minister could assess and fix the taxes, interest or penalties: see
the form, appeal book, page 442.
[25]
Be that as
it may, the appellants were not prejudiced because they had been informed that
without the waiver, they would be assessed immediately: see Mr. Jobin’s
testimony on this point, appeal book, pages 829 and 832. And in fact, if they
had refused to sign the waiver, they would have been legitimately reassessed,
and, in all likelihood, with penalties: see Karda v. Her Majesty the Queen,
2006 FCA 238, at paragraph 2.
[26]
For these
reasons, I would dismiss the appeals in dockets A-85-07 and A-86-07 with costs,
limited to one set of costs for the hearing.
“Gilles
Létourneau”
“I
concur.
J.
Richard, C.J.”
“I
concur.
Robert
Décary, J.A. ”
Certified
true translation
Mary
Jo Egan, LLB
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