Raposo – Tax Court of Canada finds that a partnership with an illegal business was void
The taxpayer and the three other members of the “Raposo clan” were involved in the sale of cocaine in the Gatineau area. The Crown took the position that, as a member of a partnership, the taxpayer was solidarily liable under ETA s. 272.1(5) for uncollected GST on the cocaine sales.
In rejecting this position, Paris J referred to Article 1417 of the Civil Code (“A contract is absolutely null where the condition of formation sanctioned by its nullity is necessary for the protection of the general interest”), and stated that under the jurisprudence “a purpose which is contrary to the public order and which contravenes a penal provision, in the current case, of the Criminal Code, engages the absolute nullity of the contract” (here, an alleged partnership contract). No partnership – no s. 272.1(5) liability.
Thus, the taxpayer benefited from the illegality of his venture. As the contract for his engagement was void, would his Part I income be determined under s. 96, 9 (see also Eldridge) or 5 (see also Coicou)?