Docket: A‑229‑15
Citation: 2016 FCA 62
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CORAM:
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NADON J.A.
TRUDEL J.A.
SCOTT J.A.
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BETWEEN:
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GAÉTAN LAQUERRE
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Appellant
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and
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HER MAJESTY THE
QUEEN
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Respondent
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and
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9011‑1345
QUÉBEC INC.
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Mis‑en‑cause
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REASONS FOR JUDGMENT
NADON J.A.
I.
Introduction
[1]
This is an appeal of an Order
(2015 FC 440) made by Mr. Justice Harrington of the Federal Court
(the Judge) on April 10, 2015, dismissing the motion filed by the mis‑en‑cause
Société 9011‑1345 Québec Inc. (Société 9011) and Gaétan Laquerre (the
appellant) under Rule 462 of the Federal Courts Rules, SOR/98‑106
to quash an absolute charging order on an immovable owned by Société 9011.
[2]
For the reasons that follow, I conclude that the
appeal should be dismissed.
II.
The facts
A.
The parties
[3]
Mario Laquerre, the appellant’s brother,
invested in the real estate industry in his own name, as well as through trusts
and companies that he controls. Over time, Mario Laquerre, his trusts and
companies (the tax debtors) have collectively accumulated a significant amount
of tax debt owed to the Minister of National Revenue (the Minister).
[4]
Société 9011 was created on November 4,
1994, and has been active in the real estate development industry since then.
This company owns a commercial rental property located at 1095 de la
Canardière in Québec City (the property) and owes no money to the Minister.
[5]
In an affidavit signed on November 25,
2014, the appellant professed to be the president of Société 9011, to own 52%
of said company’s shares and that his brother, Mario Laquerre, owned the rest
of the shares.
B.
The imposition of a charge on the property
[6]
On an ex parte motion dated October 3,
2007, from the Crown (the respondent), as a judgment creditor seeking an
interim order to, inter alia, charge five properties held by
Société 9067‑6388 Québec Inc. (Société 9067) and the property
held by Société 9011 on the grounds that [translation]
“several companies connected to [Mario Laquerre] were
started in order to allow some of them and himself to avoid paying taxes,” Madam Justice
Gauthier, then a Federal Court judge, rendered an interim order on October 11,
2007 under Rule 458 to impose a charge on said properties for the purpose
of enforcing an order for the payment of a sum of money owed by the tax
debtors. On page 3 of her order, Gauthier J. stated the following:
[translation]
WHEREAS at least prima facie and unless the contrary is shown, the
corporate veil should be lifted and the holdings of 9067‑6388 Québec Inc.
and of 9011‑1345 Québec Inc. should be considered part of the holdings of
the following judgment debtors: Mario Laquerre, 9122‑9831 Québec
Inc., 9075‑3153 Québec Inc., 9015‑7769 Québec Inc. and 9029‑0065 Québec
Inc. An interim charging order should therefore be made until it is conceded
that an absolute order be made in this respect only for purposes of allowing
the applicant to take steps to collect the taxes owed by these judgment debtors
[my emphasis].
[7]
On April 9, 2008, on a motion filed by the
respondent for an absolute charging order on properties owned by Société 9067
and on the property owned by Société 9011, Mr. Justice Martineau of the Federal
Court rendered an order (2008 FC 460) imposing an absolute charge on
said properties under Rule 459. It is to be noted that Société 9011, the
mis‑en‑cause in this proceeding, and represented by its legal
counsel, opposed the piercing of its corporate veil and the imposition of an
absolute charge on its property.
[8]
Despite Société 9011’s opposition,
Martineau J. found that this company was Mario Laquerre’s alter ego and
that he used the separate juridical personalities of his companies, including
Société 9011, in order to avoid paying taxes. In view of the evidence
before him, including a counter‑letter dated December 29, 1994
between the appellant and his brother, Mario Laquerre, which states that Mario
Laquerre remained the absolute owner of Société 9011, Martineau J. ruled
that Société 9011’s corporate veil should have been pierced in view of the
criteria propounded by the case law and the doctrine pertaining to article 317
of the Civil Code of Québec, CQLR c. C‑1991 (CCQ). The Judge said
that he was of the opinion that non‑payment of a tax debt may constitute
a contravention of public order. Société 9011 did not appeal from
Martineau J.’s order.
C.
Facts on which is based the present motion
[9]
A fire that broke out on March 23, 2014
caused the appellant to perform work on the property, which is still owned by
Société 9011. According to the appellant, the company insuring the property
would not cover his expenses or continue to cover the property because of the
charge held by the respondent. It appears that this event prompted the appellant
and Société 9011 to commence this proceeding before the Federal Court in order
to have the charge on the property stricken out.
[10]
On August 6, 2014, the appellant bought
back the mortgage on the property from the Caisse de Gentilly‑Lévrard‑Rivière
du Chêne, which registered it in 2005, thereby becoming a mortgagee having priority
over the respondent, which registered its charge on the property in 2008.
D.
Motion giving rise to the appeal
[11]
On or around November 25, 2014,
Société 9011 and the appellant filed a motion under Rule 462, asking
the Federal Court to render an order setting aside in part Martineau J.’s
order imposing an absolute charge on the property. In other words, Société 9011
and the appellant requested the cancellation of the legal hypothec on the
property pronounced by Martineau J.’s decision. More specifically, Société
9011 argued that the conditions warranting the piercing of its corporate veil [translation]
“were not and are still not met.” In support of this motion, Société
9011 and the appellant filed the appellant’s affidavit, wherein, inter alia,
he states the following:
1.
That he was in no way part of the proceedings
instituted by the respondent against his brother, Mario Laquerre, and his
trusts and companies;
2.
That Société 9011, unlike the companies owned
and/or controlled by his brother, owed no money to the respondent;
3.
That Société 9011 had not been used to hide a
fraudulent act and that there was no confusion between his brother’s and
Société 9011’s property;
4.
That he held 52% of the shares in
Société 9011 and that he was its CEO, adding that he had always been
involved personally in Société 9011 and that he had always acted as its
representative.
5.
With respect to the counter‑letter dated
December 29, 1994 between him and his brother, Mario Laquerre, that [translation] “…
I do not deny having signed that counter-letter, I am saying that I do not
remember signing it.” (Appeal Book, Vol. 1, Tab 2, page 38, at paragraph
21);
6.
That he was not a party to the respondent’s
recovery proceedings and that [translation]
“I wrongly believed that these proceedings would have
no impact on me or on 9011‑1345 Québec Inc. because it was just
a mis‑en‑cause” (ibidem at paragraph 47);
7.
That he was in no way interested in how the
proceedings before Martineau J. would play out.
III.
Federal Court Order
[12]
The motion filed by Société 9011 and by the
appellant was heard by the Judge on March 26, 2015. On April 10,
2015, the Judge dismissed the motion.
[13]
To begin with, the Judge noted that the motion
before him had been filed almost seven years after Martineau J.’s decision
and that it was based on three grounds: 1) Martineau J. had erred by ruling
that Société 9011’s corporate veil had to be pierced, 2) Martineau J.
would have ruled otherwise had Société 9011 and the appellant submitted
evidence, which they did not, and 3) the appellant, as principal shareholder in
Société 9011, should have been personally served, which he was not. In
addition, the Judge noted that Société 9011 and the appellant cited new
circumstances that warranted the filing of their motion: the facts stated in
paragraphs [9] and [10] above.
[14]
The Judge dismissed the motion for the following
reasons: With regard to the appellant, the Judge said he was of the opinion
that a corporation had a legal personality separate from that of its
shareholders. They had an interest in the corporation, but not in its assets.
Consequently, the Judge concluded that the appellant, as a shareholder in
Société 9011, had no standing in this case because it was Société 9011 that
owned the property. With regard to the appellant’s standing as a mortgagee, the
Judge stated the following in paragraph 15 of his reasons:
[translation]
He may have standing as a mortgagee, but absolutely nothing allows a mortgagee
to maintain that a legal hypothec registered after his should have been paid.
[15]
As for Société 9011, the Judge stated that it
could have used Rule 462 to have Martineau J.’s order set aside in certain
special circumstances (e.g., if the tax debtors had successfully disputed their
assessments or it was proven that the respondent held more securities than
necessary). Because there were no such circumstances in this case, the Judge
found that he was bound by Martineau J.’s absolute charging order, under
the res judicata doctrine. In addition, the Judge stated that
Société 9011 should have appealed from Martineau J.’s decision or
filed a motion to reconsider under Rule 397.
[16]
The Judge stated that nothing prevented the
appellant, as CEO of or principal shareholder in Société 9011, from filing
an affidavit in the proceedings before Martineau J. The appellant was well
aware of those proceedings, but he simply did not think that it was worth his
while to appear. The Judge added that there was no obligation on the respondent’s
part to serve the appellant with the motion that led to Martineau J.’s
decision because the appellant was only a shareholder in Société 9011.
[17]
Lastly, the Judge said he was of the opinion
that Martineau J.’s decision stood under the doctrine of res judicata.
In paragraph 20 of his reasons, citing Rostamian v. Canada (Minister of
Employment and Immigration), 129 N.R. 394 [1991], F.C.J. No. 525 (QL), the
Judge stated that “[t]here is an important public
interest to be served in the finality of judgments.”
IV.
Appellant’s submissions
[18]
The appellant raises five issues:
A.
Audi alteram partem;
B.
The Judge’s refusal to reconsider the piercing
of the corporate veil;
C.
Interpretation of Rule 462;
D.
Occurrence of unreasonable seizure, and
E.
The unconstitutionality of rules 458 and
462.
A.
Audi alteram partem
[19]
The appellant submits that the decision appealed
from violates the principles of fundamental justice because it was the Judge’s
opinion that Martineau J.’s order was res judicata as for him
whereas he was not a party in that case. The Judge wrongly refused to examine
his argument that the corporate veil could not be pierced without the
appellant, who saw his rights affected because he was not a party in the
proceedings. The appellant said that the Judge’s actions are contrary to the
doctrine propounded by the Supreme Court in Bowen v. City of Montreal,
[1979] 1 S.C.R. 511, [1978] CanLII 114, and by the Quebec Court of Appeal in Cousineau
v. Stephenson, [2001] J.Q. No. 461, [2001] CanLII 14356.
[20]
Although in his opinion, the conditions for piercing
the corporate veil were not met, the appellant further argued that his
connection with his brother, Mario Laquerre, resulted in the creation of a
partnership under article 2186 of the CCQ. It was therefore not possible to change
with a hypothec his share in the assets without his consent, under article 2211
of the CCQ.
[21]
In addition, the appellant submits that, under
subsection 2(e) of the Canadian Bill of Rights, S.C. 1960, c. 44;
section 7 of the Charter of Human Rights and Freedoms, CQLR c. C‑12
(the Charter); section 23 of the Charter and Rule 4 in the Federal Courts
Rules, SOR/98‑106, and under section 5 of the Quebec Code of Civil
Procedure, CQLR c. C‑25, he has a right to a hearing under the audi
alteram partem rule. In summary, the Judge erroneously decided that the
appellant should have taken part in proceedings at which he was not summoned to
appear.
B.
The Judge’s refusal to reconsider the piercing
of the corporate veil
[22]
The appellant further stated that the Judge
erred by refusing to address his argument that the necessary conditions for piercing
the corporate veil were not met. To begin with, piercing the corporate veil is
unheard of when a company has several shareholders; for if it were pierced, the
alter ego concept would not apply. Where there are several shareholders,
it must be proven that there was collusion among them; that has never been proven
in this case.
C.
Interpretation of Rule 462
[23]
The appellant states, inter alia, that
the Judge erred by concluding that he had no standing under Rule 462. The
appellant maintains [translation] “that he is clearly a person with an interest in and a right
to the property charged by the order because he bought back the mortgage from
the Caisse populaire and the law sets out no time criteria regarding holding a
right” (appellant’s memorandum at paragraph 62). In Minister of
National Revenue v. McDonald, 2010 FC 340, [2010] F.C.J. No. 1047, the
concept of “real property” must be broadly interpreted
(appellant’s memorandum at paragraph 63).
[24]
In addition, the Judge failed to consider the
appellant’s true legal interest as a majority shareholder in Société 9011.
Martineau J.’s order pierced the corporate veil with respect to all
shareholders, not just Mario Laquerre. The Judge was therefore wrong to conclude
that Société 9011’s separate juridical personality ensured that the appellant
had no standing.
[25]
The appellant also argues that the Judge wrongfully
limited the scope of Rule 462. This rule is flexible enough to give the
appellant standing at any time. The appellant could not appeal from Martineau J.’s
order because he was not a party in the case at the time.
D.
Occurrence of unreasonable seizure
[26]
Should our Court answer in the negative
questions A, B, and C, the appellant submits that the order under appeal
constituted unreasonable seizure and contravened section 8 of the Charter.
[27]
The appellant submits that the test of
section 8, [translation] “. . . which consists in assessing, in all cases, whether an
individual’s right not to be inconvenienced by the Government should be
superseded by that of the Government to interfere in citizens’ private lives
for the public good,” was satisfied (appellant’s memorandum at paragraph
90).
[28]
From the time that Martineau J. pierced the
corporate veil, the property was considered part of the Laquerre brothers’
holdings. The appellant should therefore have been deemed to be the direct
owner of 52% of the property. As such, he had an expectation of privacy with
regard to the property. The seizure was illegal because the law does not
authorize the imposition of a charge on a property that is owned by a third
party.
E.
The unconstitutionality of rules 458 and
462
[29]
Should this Court answer questions A, B and C in
the negative, the appellant was of the opinion that rules 458 and 462 are
unconstitutional because they violate the rule against unreasonable seizures found
in section 8 of the Charter.
V.
Issues
[30]
In my opinion, the appeal raises the following
two questions:
1)
Did the appellant have the necessary standing to
act under Rule 462?
2)
Was the imposition of a charge on the property
unconstitutional?
VI.
Standard of Review
[31]
The appellant makes no submissions in his
memorandum regarding the applicable standard of review. For its part, the respondent
submits that the correct standard of review applies to the issue regarding Rule 462
and the deadlines for filing an appeal because these are questions of law. The
issue of standing should, as a question of mixed fact and law, fall under the
standard of palpable and overriding error. The respondent also submits that no
standard of review applies to the constitutional issues raised for the first
time in this appeal.
[32]
In my opinion, the applicable standard of review
is that propounded by the Supreme Court in Housen v. Nikolaisen, 2002
SCC 33, [2002] 2 S.C.R. 235. Consequently, the Judge’s rulings on questions of
fact are reviewable on a correctness standard. Findings of fact are subject to
the palpable and overriding error standard. Questions of mixed fact and law are
also subject to the palpable and overriding error standard, absent an isolated
error in law, in which case the standard of correctness applies.
VII.
Analysis
(a) Did the appellant have
the necessary standing under Rule 462?
[33]
In my opinion, the appellant did not have the
necessary standing under Rule 462, which reads as follows:
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Federal Courts Rules SOR/98‑106
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Règles des Cours fédérales DORS/98‑106
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Discharge or variance of charging order
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Annulation ou modification de
l’ordonnance
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462 The
Court may, on the motion of a judgment debtor or any other person with an
interest in property subject to an interim or absolute charge under rule
458 or 459, at any time, discharge or vary the charging order on such terms
as to costs as it considers just.
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462 La Cour peut, sur requête du débiteur
judiciaire ou de toute autre personne ayant un droit sur les biens grevés
par une charge provisoire ou définitive, annuler ou modifier l’ordonnance
constituant la charge, aux conditions qu’elle estime équitables quant aux dépens.
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[my emphasis]
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[mon soulignement]
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[34]
The appellant claims to have a right in the
property and, accordingly, has standing under Rule 462 in two different
ways: as a mortgagee and as owner of 52% of the property.
[35]
The Judge’s decision regarding the appellant’s
standing as a mortgagee is from paragraph 15 of his reasons, where he states:
[TRANSLATION] [15] He may have standing as a
mortgagee, but absolutely nothing allows a mortgagee to maintain that a legal
hypothec registered after his should have been paid.
[36]
Indeed, a mortgagee’s rights are not affected by
mortgages registered after their own securities (articles 2645, 2646, 2647 and
2945 of the CCQ stated hereafter):
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Civil code of Quebec, C.Q.L.R. c. C‑1991
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Code civil du Québec, R.L.R.Q. c. C‑1991
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2644. The
property of a debtor is charged with the performance of his obligations and
is the common pledge of his creditors.
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2644. Les biens du débiteur sont affectés à
l’exécution de ses obligations et constituent le gage commun de ses
créanciers.
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(…)
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[…]
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2646.
Creditors may institute judicial proceedings to cause the property of their
debtor to be seized and sold. If the creditors rank equally, the price is
distributed proportionately to their claims, unless some of them have a legal
cause of preference.
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2646. Les créanciers peuvent agir en justice
pour faire saisir et vendre les biens de leur débiteur. En cas de concours
entre les créanciers, la distribution du prix se fait en proportion de leur
créance, à moins qu’il n’y ait entre eux des causes légitimes de préférence.
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2647. The
legal causes of preference are prior claims and hypothecs.
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2647. Les causes légitimes de préférence sont
les priorités et les hypothèques.
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(…)
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[…]
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2945.
Unless otherwise provided by law, rights rank according to the date, hour
and minute entered on the memorial of presentation or, if the application
concerning them is presented for registration in the land register, entered
in the book of presentation, provided that the entries have been made in the
appropriate registers. Where publication by delivery is authorized by law,
rights rank according to the time at which the property or title is delivered
to the creditor.
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2945. À moins que la loi n’en dispose autrement,
les droits prennent rang suivant la date, l’heure et la minute inscrites sur
le bordereau de présentation ou, si la réquisition qui les concerne est
présentée au registre foncier, dans le livre de présentation, pourvu que les
inscriptions soient faites sur les registres appropriés. Lorsque la loi
autorise ce mode de publicité, les droits prennent rang suivant le moment de
la remise du bien ou du titre au créancier.
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[my emphasis]
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[mon soulignement]
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[37]
Although it is indisputable that the appellant
has a right in the property as a mortgagee, this right alone, in my opinion, is
not sufficient to grant him the required standing to file a motion under
Rule 462 to have discharged a charge that in no way affects said mortgage.
[38]
As the Judge states in paragraph 16 of his
reasons, in addition to Martineau J.’s order, only two decisions have been
rendered under Rule 462: Canada v. Malachowski, 2011 FC 413, [2011]
F.C.J. No. 529 and Income Tax Act (Re), 2010 FC 340, [2010] F.C.J. No.
1047. This very limited case law is of no help in this case for determining the
right to the property that is required for standing under Rule 462.
[39]
It seems to me that the rationale behind Rule 462
is to create a procedural mechanism allowing people affected by a charging
order to ask the Court to discharge or vary it in the appropriate
circumstances. In this case, the security held by the appellant on the property
is in no way affected by the charging order. Indeed, the appellant wants to
benefit from wearing two hats as mortgagee and as shareholder in Société 9011,
which owns the building, to offset the possibility of Société 9011 not being
able to fight the charging order.
[40]
For that reason, I am of the opinion that the
appellant does not have standing as a mortgagee.
[41]
The appellant also submits that he has standing
as a shareholder in Société 9011 and owner of the building and that the
company’s corporate veil was pierced, thereby making his property part of the
holdings of the company’s shareholders again. The Judge rejected this argument,
invoking a company’s separate legal personality.
[42]
In my opinion, the Judge’s finding is
irrefutable in that the appellant, as a shareholder in Société 9011, has no
property rights in the building. This property right clearly belongs to Société
9011. The appellant is not a “person with a right in
the collateral” within the meaning of Rule 462. Consequently, I
cannot find that the Judge erred.
[43]
In dismissing the motion before him, the Judge
said that he was also of the opinion that Rule 462 did not apply in this
case. In paragraph 17 of his reasons, the Judge stated the following:
[TRANSLATION] Without going into too much
detail, Rule 462 could have applied if the respondents had successfully
disputed their tax assessments or even if they had paid the balance owing. In
such a case, a motion on consent would likely be filed to have the legal
hypothec discharged. Rule 462 could also apply if it were proven that Her
Majesty had more securities than necessary. Under a procedure similar to
marshalling in common law, quashing the charge on 9011’s assets may have been
enough; the company is not a judgment debtor.
[44]
Similarly, there are Martineau J.’s comments
in his decision of April 9, 2008, where he stated in paragraph 18 of his
reasons:
[TRANSLATION] It may also be useful to
reiterate that Rule 462 provides that respondents may (through a motion) ask
the Court to discharge or vary the absolute charging order if the Tax Court of
Canada allows their appeal and does not uphold the validity of the
reassessments issued by the Minister on August 31, 2006 and on April 25, 2007.
[45]
I fully concur with the respondent’s submission
that the purpose of Rule 462 is not to confer a right to appeal or
reconsideration, but to allow the order to be discharged or varied, for
example, for cause of total or partial extinguishing of the tax debt. In other
words, I am of the opinion that Rule 462 does not have the same meaning or
scope as Rule 399, which allows any interested party to request that an
order be discharged or varied in certain circumstances. Rule 399 reads as
follows:
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Setting aside or variance.
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Annulation sur preuve prima facie
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399(1) On
motion, the Court may set aside or vary an order that was made
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399(1) La Cour peut, sur requête, annuler ou
modifier l’une des ordonnances suivantes, si la partie contre laquelle elle a
été rendue présente une preuve prima facie démontrant pourquoi elle
n’aurait pas dû être rendue :
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(a) ex parte; or
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a) toute ordonnance rendue sur requête ex
parte;
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(b) in the absence of a party who
failed to appear by accident or mistake or by reason of insufficient notice
of the proceeding,
if the party against whom the order is made discloses a prima
facie case why the order should not have been made
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b) toute ordonnance rendue en l’absence
d’une partie qui n’a pas comparu par suite d’un événement fortuit ou d’une
erreur ou à cause d’un avis insuffisant de l’instance.
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(2) On
motion, the Court may set aside or vary an order
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(2) La Cour peut, sur requête, annuler ou
modifier une ordonnance dans l’un ou l’autre des cas suivants :
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(a) by reason of a matter that
arose or was discovered subsequent to the making of the order; or
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a) des faits nouveaux sont survenus ou ont
été découverts après que l’ordonnance a été rendue;
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(b) where the order was obtained by
fraud.
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b) l’ordonnance a été obtenue par fraude.
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(3) Unless the Court orders otherwise, the setting aside or
variance of an order under subsection (1) or (2) does not affect the validity
or character of anything done or not done before the order was set aside or
varied.
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(3) Sauf ordonnance contraire de la Cour, l’annulation ou la
modification d’une ordonnance en vertu des paragraphes (1) ou (2) ne porte
pas atteinte à la validité ou à la nature des actes ou omissions antérieurs à
cette annulation ou modification.
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[46]
In this case, it seems undeniable to me that
what the appellant is seeking is precisely what Rule 399 allows him to do,
if the circumstances stated in the rule are met, of course. For the purposes of
the appeal only, I will consider the appellant’s motion as if it were filed
under Rule 399. I also conclude that the criteria in Rule 399 are not
met and, consequently, the appellant cannot succeed.
[47]
In my opinion, the cornerstone of the appellant’s
submissions is that he holds 52% of the shares in Société 9011, of which he is
the CEO. Consequently, he said that he had a right to be personally served with
the motion that led to Martineau J.’s decision. The appellant stated that there
is the rub. Since he was not a party in the proceedings that are the subject of
Martineau J.’s order, he did not submit any evidence or written or oral representations
regarding the piercing of Société 9011’s corporate veil. The appellant argues
that Société 9011’s corporate veil could not be pierced without his involvement
in the proceedings. Therefore, since he was not a party in the case, he could
not appeal from Martineau J.’s decision.
[48]
The appellant’s argument falls squarely under Rule 399(1)(b),
which allows the Court to discharge or vary any order “that
was made in the absence of a party who failed to appear by accident or mistake
or by reason of insufficient notice of the proceeding.” As for Rule 399(2),
it seems to me that it does not apply in this proceeding because the appellant
in no way submits that Martineau J.’s order was obtained through fraud or
new facts that arose or were discovered following said order. I hasten to add
that the facts related to paragraph [9] of my reasons do not constitute new
facts within the meaning of Rule 399(2).
[49]
Let us now examine the appellant’s arguments in the
light of his affidavit and of the case before us. With respect to the
appellant, the scenario that he submits in support of his arguments is, in my
opinion, not credible. Here is my explanation.
[50]
To begin with, it must be noted that the
evidence before Martineau J. was different from that which is currently
before us. The evidence submitted before Martineau J. by the respondents
(Mario Laquerre, his trusts and his companies, including mis‑en‑cause
Société 9067 and Société 9011) was that only Mario Laquerre held shares in
Société 9011. The December 29, 1994 counter‑letter corroborated that
evidence. The only affidavit filed by the respondents was that of Mario
Laquerre dated January 11, 2008. In paragraphs 55 to 60 of his affidavit,
Mario Laquerre states as followings:
55. [translation]
Société 9011‑1345 Québec Inc. was created on November 4,
1994, as identified in a copy of the statement of information on a corporation
submitted as exhibit R-16 in support of my affidavit.
56. [translation]
Société 9011‑1345 Québec Inc. has its head office at 1392 4th
Avenue in the city of Québec, province of Quebec, as identified in a copy of
the statement of information on a corporation submitted as exhibit 16 in
support of my affidavit.
57. [translation]
Société 9011‑1345 Québec Inc. carries out its activities in the
field of real estate investment.
58. [translation] The sole real estate asset
held by Société 9011‑1345 Québec Inc. is:
a. A property located at 1095 de la Canardière
Road in the city of Québec, province of Quebec.
59. [translation]
I am the sole director of Société 9011‑1345 Québec Inc.
60. [translation]
I am the sole director of Société 9011‑1345 Québec Inc.
(Supplementary Appeal Book, Tab 1, at page
10).
[51]
In addition, on January 11, 2008, the legal
counsel representing Mario Laquerre, his trusts and his companies, as well as
the mis‑en‑cause Société 9067 and Société 9011, filed their written
representations. In paragraphs 55 to 60 of these representations, counsel
described Société 9011 as follows:
55. [TRANSLATION] Société 9011 1345 Québec Inc. was created on
November 4, 1994, as identified in a copy of the statement of information on a
corporation submitted as exhibit 16 in support of Mario Laquerre’s
affidavit.
56. [TRANSLATION] Société 9011 1345 Québec Inc. has its head
office at 1392 4th Avenue in the city of Québec, province of Quebec, as
identified in a copy of the statement of information on a corporation submitted
as exhibit 16 in support of Mario Laquerre’s affidavit.
57. [TRANSLATION] Société 9011 1345 Québec Inc. carries out
its activities in the field of real estate investment.
58. [TRANSLATION] The sole real estate asset held by Société
9011 1345 Québec Inc. is:
a. A property located at 1095 de la Canardière Road in the city
of Québec, province of Quebec.
59. [TRANSLATION] Respondent Mario Laquerre is the sole
director of Société 9011 1345 Québec Inc.
60. [TRANSLATION] Respondent Mario Laquerre is the sole
shareholder in Société 9011 1345 Québec Inc.
(Supplementary Appeal Book, Tab 2, pages 33
and 34) [my emphasis].
[52]
Because it is clear that paragraphs 55 to 60 of
counsel’s written representations only reflect the same paragraphs in Mario
Laquerre’s affidavit, it seems probable that paragraph 60 of Mario Laquerre’s
affidavit is erroneous. In my opinion, it should read [translation] “I am the sole
shareholder in Société 9011‑1345 Québec Inc.”
[53]
It should be noted that counsel’s written
representations make no reference to the appellant as a shareholder in or
president of Société 9011. On the contrary, its entire argument is focused on
Mario Laquerre’s role with respect to all the companies named in the
proceedings, including Société 9011.
[54]
As I stated in paragraph [8] of my reasons, despite Société 9011’s
opposition, Martineau J. concluded that it was appropriate, in the
circumstances, to pierce the company’s corporate veil and to impose an absolute
charging order on the property.
[55]
In addition, before the Judge and before us, the
appellant submitted that he was president of Société 9011 and holder of 52% of
its shares when the respondent’s motion was served to Société 9011 in the
fall of 2007 and when Martineau J. rendered his order on April 9,
2008.
[56]
In addition, in paragraphs 21 to 28 of his
affidavit, the appellant discussed the December 29, 1994 counter‑letter,
which was before Martineau J. when he made his order. The appellant stated
as follows :
21: [TRANSLATION] On or around October 9, 2014, through the
Canada Revenue Agency’s response to the motion to vary and discharge the
charging order, I read the counter letter between Mario Laquerre and myself
dated December 29, 1994, submitted as exhibit R-18 in support hereof, and
although I have no recollection of signing it, I could very well have done so.
22. [TRANSLATION] This counter letter dated December 29, 1994,
was prepared by Mario Laquerre as part of his divorce.
23. [TRANSLATION] The counter letter states that shares were
sold on November 4, 1994, but no shares had yet been issued by Société 9011
1345 Québec Inc., as appears in the issued and paid share capital accounts
filed in support hereof as exhibit R 19 and which prove that 50 shares from
treasury issued in my name bear the date of January 1, 1995.
24. [TRANSLATION] Also on January 1, 1995, a shareholder
agreement was entered into between Mario Laquerre and myself; it sets out that
Mario Laquerre is holder of 50% of the common shares in 9011 1345 Québec Inc.
(50 class A common shares) and that I am holder of the same percentage of class
A common shares, as stated in the agreement submitted in support hereof as
exhibit R 20.
25. [TRANSLATION] On February 3, 1996, Mario Laquerre
transferred 50 class A shares to Fiducie ML, in which he is the sole
shareholder, as stated in the issued and paid share capital accounts (exhibit R
19).
26. [TRANSLATION] On December 31, 2005, Fiducie ML transferred
two class A shares to my share capital account, meaning that I became majority
shareholder in the company (52%) while Fiducie ML was 48% shareholder, as
stated in the issued and paid share capital accounts (exhibit R 19).
27. [TRANSLATION] Therefore, if such a counter letter (R 18)
was really signed by me, it was offset by later acts stated above, and I have
always believed that I was shareholder and full owner of the shares that I
held.
(Appeal Book, Vol. 1, Tab 2, pages 38 and 39).
[57]
To begin with, the appellant does not seem to
deny having signed the counter‑letter. Instead, he states in paragraph 21
of his affidavit that he does not remember having signed the letter. After
having noted that the counter-letter had been prepared by his brother, Mario
Laquerre, in his divorce, he tried to prove, as stated in paragraph 27 of his
affidavit, that if he signed the counter‑letter, it was rendered obsolete
by the events enunciated in paragraphs 23 and 26 of his affidavit. With all due
respect, the appellant’s explanations are in no way credible.
[58]
I reiterate that after the respondent’s motion
was filed, Société 9011 retained counsel’s services to oppose said motion and
that this counsel appeared at the hearing before Martineau J. Despite
these facts, which are not in dispute, the appellant states in his affidavit:
i.
That he was not a party in these proceedings;
ii.
That he thought that the respondent’s recovery
proceedings [translation] “would have no impact on me or on 9011‑1345 Québec
Inc. because it was just a mis‑en‑cause” (Appeal Book, Vol.
1, Tab 2 at paragraph 47).
[59]
It is difficult, if not impossible, to reconcile
this statement from the appellant with the events that occurred in 2007 and
2008. Société 9011 received a copy of the order made by Gauthier J. on
October 11, 2007, which imposed an interim charge on the property. Société
9011 was also served with the respondent’s motion to obtain an absolute
charging order on the property. Société 9011 also appeared at these
proceedings and defended itself through its counsel. How can the appellant say
that he was of the opinion that these proceedings did not concern him or
Société 9011?
[60]
I would even go so far as to say that if it is
true that the appellant was the CEO of Société 9011 and held 52% of the
shares in it, his sworn statement makes no sense. How is it possible for the CEO
of a company, and holder of 52% of its shares, not to react when he is served with
a motion from the Crown to pierce this company’s corporate veil—a company that
owed no tax debt to the Crown—in order to impose an absolute charge on its sole
asset (the property)?
[61]
In addition, the appellant provides no
explanation in his affidavit with respect to counsel whose services were
retained to defend the interests of Société 9011 during the proceedings before
Martineau J. The fact that counsel represented Société 9011 and took
part in the proceedings before Martineau J. is not denied. One would
expect the appellant, who describes himself as CEO of Société 9011 and its
majority shareholder, to provide an explanation regarding the role that counsel
played in 2007 and 2008. Surprisingly, the appellant knows absolutely nothing
about it. He seems to be content with the explanation that he gave in his
affidavit, namely that he was under the impression that the proceedings initiated
by the respondent—proceedings that sought the imposition of an absolute charge
on the property—in no way concerned him or Société 9011.
[62]
Based on the evidence of record, it seems,
without being certain, that Mario Laquerre was in charge of operations
regarding defending Société 9011 before Martineau J. In addition, the
appellant made no allegations of fraud or negligence toward his brother, Mario
Laquerre, with regard to defending Société 9011. He said nothing about this.
[63]
I am of the opinion that the evidence tends to
support the respondent’s version of the events (i.e., in fact, Mario Laquerre
was the only shareholder in Société 9011). That explains why the appellant was
in no way concerned about the respondent’s motion that led to Martineau J.’s
order. As I stated in paragraphs [59] and [60] of my reasons, the appellant’s conduct
cannot be reconciled with his submission that he is CEO of, and majority
shareholder in, Société 9011. This submission is, having regard to the
evidence, does not make sense.
[64]
Consequently, given that the appellant is not a
shareholder in Société 9011, his arguments fail. In other words, he cannot involve
Rule 462 or Rule 399(1)(b).
[65]
Although the appellant did indeed hold 52% of
the shares in Société 9011, I also conclude that he cannot succeed. In TMR
Energy Ltd. v. State Property Fund of Ukraine, 2005 FCA 28, [2005] 3 F.C.R.
111, at paragraphs 31 and 32, our Court stated that a motion under Rule 399
must be brought within a reasonable time after the circumstances on which the
motion is based became known (see also Mr. Justice Lemieux’s decision in Entreprise
A.B. Rimouski Inc. v. Canada, 2005 FC 115, [2005] F.C.J. No. 197, at
paragraphs 16 to 18).
[66]
In my opinion, for the reasons I have just
stated, there can be no doubt that in the fall of 2007, Société 9011 and the
appellant were fully aware of the respondent’s motion for an absolute charging
order on the property. By assuming that filing this motion was not sufficient
to make the appellant realize that his interests and those of Société 9011
could be affected if the order sought by the respondent were rendered, it is
undeniable that sending, through the Federal Court, a copy of the order made by
Martineau J. to Société 9011 could not render the company or its CEO and
majority shareholder indifferent to the effect of the order.
[67]
In my opinion, upon receipt of the copy of
Martineau J.’s order, the appellant should have acted if he wanted to invoke
on Rule 399. Because the appellant let seven years pass before initiating
proceedings, I can only conclude that he did not act within a reasonable time.
The appellant’s explanations that he thought the proceedings filed by the
respondent could have no impact on him or on Société 9011 are not sound.
They are also not credible. In my opinion, this is clearly, at the very least,
a situation of deliberate blindness.
[68]
There is another factor that leads me to find
that the appellant cannot succeed. Because “the rules
of procedure should be the servant of substantive rights and not the master”
(Reekie v. Messervey, [1990] 1 S.C.R. 219 at page 222), I conclude that
the appellant cannot invoke the fact that he was not absence of personally
served in this proceeding before Martineau J. to argue that he was not
bound by the findings of this order, which today is res judicata. In Fiducie
Dauphin (Re) 2010 FC 1144, [2010] D.T.C. 5194 (Fiducie Dauphin), Mr.
Justice de Montigny, then a Federal Court judge, retroactively
validated an irregular service on the grounds that the person involved had not
suffered any harm, was familiar with the proceedings and that form should not
prevail over substance. In paragraph 40 of his reasons,
de Montigny J. stated as follows:
[TRANSLATION] One should not lose sight
of the goal that underlies the rules on service. It must be reiterated that the
purpose of these rules is to prevent a party from not being prepared to defend
its interests because it may not have been informed, or would not have been in
a timely fashion, of the proceedings filed against it. Rule 147 of the Federal Courts Rules also reflects this principle
insofar as it authorizes the Court to validate an irregular service if it is
satisfied that the document came to the notice of the person to be served [my
emphasis].
[69]
In paragraph 41 of his reasons,
de Montigny J. added that [translation] “this rule reflects within a broader principle: form must
not prevail over substance. This principle is mainly expressed in
rules 53, 55 and 56.”
[70]
In addition to de Montigny J.’s words,
there are those of Mr. Justice O’Keefe, who, in the context of the
proceedings filed against the controlling mind of a corporation, concluded that
this action constituted an action against the corporation itself. In
subsections 51 and 52 of his reasons in Rolls Royce v. Fitzwilliam, 2002
FCT 598 (CanLII), he stated the following:
[51] Rule 147 allows the Court to
consider the documents to be validly served if it is satisfied that the
document came to the notice of the person to be served. Mr. Fitzwilliam
admitted that he received a copy of the material, and that he is the
controlling mind of the corporations, and that he seeks to represent the
defendant corporations in this proceeding.
[52] I am satisfied that Mr.
Fitzwilliam is the controlling mind of the defendant corporations and that
service on Mr. Fitzwilliam under these circumstances is sufficient to
constitute service on the defendant corporations.
[71]
In this case, the proceedings that led to
Martineau J.’s decision were indeed served on Société 9011, of which
the appellant claims to be CEO and majority shareholder. I also note that
counsel was retained by Société 9011 and that counsel opposed the collection
measures used by the respondent; these measures included the piercing of
Société 9011’s corporate veil. In these circumstances, it is difficult, as I
stated earlier, to reconcile the information in the appellant’s affidavit with
the events that occurred in 2007 and 2008. As de Montigny J. stated in
paragraph 40 of his reasons in Fiducie Dauphin, the purpose of service
is to allow an interested party in due course to be apprized or proceedings
that may affect him. In my opinion, the appellant knew or should have known in
the fall of 2007 what the Crown’s proceedings were about. Consequently, I
conclude that the fact that he was not personally does not support his argument
that he had a right to request that Martineau J.’s order be discharged or
varied.
(b) Was the imposition of a
charge on the property unconstitutional?
[72]
Briefly, the appellant submits that the charge
on the property, in accordance with Martineau J’s order, constituted
unreasonable seizure because it allowed the Crown to seize an asset that
belongs to him, in part, and he had no opportunity to be heard or even
summoned. In my opinion, given the conclusions I have reached, it is not
necessary to address the appellant’s constitutional arguments. It should also
be noted that the appellant did not raise his constitutional arguments before
the Judge; he raised them for the first time before us. The appellant gave no
explanation why, under the circumstances, we should exercise our discretionary
authority in his favour and hear his constitutional arguments (Guindon v.
Canada, 2015 SCC 41).
VIII.
Conclusion
[73]
For these reasons, I would dismiss the appeal
with costs.
“M. Nadon”
“I concur.
Johanne Trudel J.A.”
“I concur.
"A.F.
Scott, J.A."
Certified true translation
François Brunet,
Revisor
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