Pantalons Star Laurierville Ltée v. Minister of National Revenue, [1992] 2 CTC 2454, 92 DTC 2182

Tremblay, T.C.CJ.:—This appeal was heard at Québec City on July 12, 1989.

1. The point at issue

The point at issue is whether the appellant, the company Pantalons Star Laurierville Ltée, is entitled to claim the deduction for the employer's special contribution as provided in paragraph 20(1)(s) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") for its fiscal year ending on December 31, 1984.

2. The burden of proof

2.01 The burden of proof is on the appellant to show that the respondent's assessments are incorrect. This burden of proof results from several judicial decisions, including the judgment by the Supreme Court of Canada in Johnston v. M.N.R., [1948] S.C.R. 486, [1948] C.T.C. 195, 3 D.T.C. 1182.

2.02 In that judgment, the Court held that the facts used by the respondent as the basis of the assessments or reassessments are also presumed to be true until proved otherwise. In the case at bar, the facts on which the respondent rely in assessing the appellant are described in subparagraphs (a) to (f) of paragraph 9 of the statement. This paragraph reads as follows:

9(a) In 1984, the appellant, the company Pantalons Star Laurierville Ltée, operated a business manufacturing pants; [admitted]

9(b) The appellant's 1984 fiscal year ended on December 31, 1984; [admitted]

9(c) The appellant claimed a deduction of $225,915 in 1984 as an employer's special contribution to the management pension plan; [admitted]

9(d) The appellant did not make the $225,915 contribution in 1984; [denied]

9e) The $225,415 [sic] contribution was paid by the appellant only during January 1985; [denied]

9(f) The cheques issued by the appellant in payment for the $225,915 contribution were issued only during January 1985; [denied]

[Translation.]

3. Legislation, cases at law, legal texts

3.01 Legislation

3.01.1 Income Tax Act (hereinafter I.T.A.)

Section 20: Deductions permitted in computing income from business or property.

(1)(s) EMPLOYER’S SPECIAL CONTRIBUTION. where the taxpayer is an employer, the aggregate of all amounts each of which is the amount of a payment made by him in the year under a registered pension fund or plan in respect of current or past services of his employees or former employees pursuant to a recommendation by a qualified actuary in whose opinion the resources of the fund or plan are required to be augmented by an amount not less than the aggregate of those payments to ensure that the obligation of the employer to the fund or plan and all the obligations of the fund or plan to the employees and former employees may be discharged in full, if the recommendation of the actuary was made in the year or in one of the three immediately preceding years on the basis of assumptions that remain valid in the year of payment and if the payment was made so that it is irrevocably vested in or for the fund or plan and has been approved by the Minister on the advice of the superintendent of insurance, and, for greater certainty and without restricting the generality of this paragraph, it is hereby declared that this paragraph is applicable where the resources of a fund or plan are required to be augmented by reason of an increase in the superannuation or pension benefits payable out of or under the fund or plan;

3.01.2 Civil Code of Lower Canada

Art. 1139. By payment is meant not only the delivery of a sum of money in satisfaction of an obligation, but the performance of any thing to which the parties are respectively obliged.

3.02 Cases at law

1. Ouellette v. Lépine, [1953] C.S. 244

2. Traders Finance Corp. v. Norray Distributing Ltd. (1967), 2 D.L.R. (2d) 466, 60 W.W.R. 129

3. Lynch & Co. v. U.S. Fidelity & Guaranty Co., [1971] 1 O.R. 28, 14 D.L.R. (3d) 294

4. Lévesque v. Comeau, [1970] S.C.R. 1010, 16 D.L.R. (3d) 425,432

5. Cléophas Chapados v. Service de cuisine commerciale Ltée, [1976] C.P. 173, 174

6. In Re Richard Kinsella; H.H. Silver and Economic Laboratories, [1977] C.S. 466,467

7. Nicholas A. Enns v. M.N.R., [1987] 1 C.T.C. 2256, [1987] D.T.C. 208, 210

3.03 Legal texts

1. Baudoin, Jean-Louis, Les obligations, 1989, 3rd ed., Editions Yvon Blais

2. L'Heureux, Nicole, Le droit bancaire, 1988, Legal monograph series, Éditions Revue de droit, Université de Sherbrooke

3. Jobin, Pierre-Gabriel, Traité de droit civil : le louage de choses, 1989, Editions Yvon Blais

4. Canadian Tax Reporter, Don Mills: CCH Canadian Ltd., 1990, paragraph 5115, page 7238

5. Sopinka and Lederman, The Law of Evidence in Civil Cases, Canadian legal text series, Toronto: Butterworths, 1974

4. The facts

4.01 The appellant company entered into negotiations with Sun Life of Canada in September 1984. These discussions were for the purpose of establishing a pension plan for the president of Pantalons Star Laurierville Ltée, Mr. Roger Beaudoin.

4.02 Mr. Richard Ouellet, an accountant with the firm Mallette, Benoit & Assoc. during the period in issue, suggested that Mr. Beaudoin invest a certain amount of money in a pension fund for business managers. The advantageous tax treatment for such a plan was the primary motivation for the recommendation made to Mr. Beaudoin.

4.03 Mr. Richard Ouellet also mentioned to the president of the appellant that the elements underlying the tax deduction being sought would have to be met before December 31, 1984, that is at the end of the fiscal year of Pantalons Star Laurierville Ltée. Otherwise, the moneys invested in the business managers' pension plan could not be deducted from the appellant’s income for the fiscal year ending on December 31, 1984.

4.04 On December 20, 1984, Mr. Robert Lemieux, an agent for Sun Life of Canada in Sherbrooke, presented a pension proposal to Mr. Beaudoin (Exhibit A-5).

Mr. Jean-Marie Guénette, an agent for Sun Life of Canada in Montréal, had been involved earlier in determining the type of pension plan that would meet Mr. Beaudoin's needs (transcript, pages 42-44).

4.05 On December 21, 1984, a Superflex pension proposal was signed by Mr. Beaudoin, through Mr. Robert Lemieux (Exhibit 1-3).

4.06 When the original series of cheques was issued by Pantalons Star Laurierville Ltée (a limited partnership) Mr. Beaudoin's pension plan was established (Exhibit A-1). The cheques had been prepared on December 21, 1984, before the president of Pantalons Star Laurierville Ltée left for Florida (transcript, pages 28).

4.07 Mr. Guénette asserts that the proposal, Exhibit 1-3, as well as a cheque for $219,576, were received at the Montreal offices on December 28, 1984 (Exhibits A-8 and A-9).

4.08 The testimony of Mrs. Denise Lambert, a secretary with Sun Life of Canada in Sherbrooke, establishes that the Superflex pension proposal was received at their offices on December 27, 1984. That proposal was immediately sent to the Montréal branch (transcript, page 108).

The documentary evidence seems to confirm the accuracy of Mrs. Lambert's testimony (Exhibit 1-4).

4.09 The Sun Life of Canada policy on the receipt of investment cheques was clearly established by Mrs. Lambert's testimony: all investment cheques must be stamped on the date they are received (transcript, page 114).

4.10 The series of cheques in Exhibit A-1 was stamped by the Sherbrooke branch of Sun Life of Canada on January 14, 1985 (on the reverses of Exhibit A-1).

4.11 On January 14, 1985, a memorandum was also made out by the Sherbrooke branch to the attention of Mr. Guénette. That memorandum indicates the plan to which the cheques attached to the correspondence related. The data (Exhibit I-5) concerning the cheques issued to Sun Life of Canada in Montréal correspond perfectly to the series of cheques filed as Exhibit A-1.

4.12 Certain administrative inconsistencies necessitated that a second series of cheques (Exhibit A-2) be issued. These cheques, which had to be issued by Pantalons Star Laurierville Ltée, were received by Sun Life of Canada in Montréal on January 14, 1985 (Exhibits A-8 and A-9).

4.13 Mr. Miville Morais, an appeals officer with Revenue Canada, met with Mr. Guénette in order to examine the period when the moneys relating to Mr. Beaudoin pension plan were paid.

Mr. Guénette reiterated the fact that the original payments (Exhibit A-1) were received on December 28, 1984. He again mentioned that the cheques had been returned so that the name of the issuing company could be changed. Finally, Mr. Guénette stated, during this conversation, that the second series of cheques (Exhibit A-2) were received at the Montréal branch on January 14, 1985.

Mr. Guénette was not, however, in a position to explain to Mr. Morais why the numbers of the cheques that were sent by the Sherbrooke branch on January 14, 1985 (Exhibit 1-5) did not correspond to the numbers on the series of cheques filed as Exhibit A-2, presumably received in Montréal on that same date.

Neither did Mr. Morais get any explanation from Mr. Guénette as to the presence of a stamp dated January 14, 1985 on the reverses of the cheques in the series filed as Exhibit A-1 (transcript, pages 148, 149, 151 and 152).

4.14 A final proposal, in which Sun Life of Canada agreed to manage Mr. Beaudoin's pension fund, was produced on May 9, 1985 (Exhibits A-6 and I-2).

The production of this document can be explained by the fact that, at the time when the Pantalons Star Laurierville Ltée pension plan was established, Sun Life of Canada had no program which was able in administrative terms to manage the moneys paid in by the appellant (transcript, pages 47-49, 79-81 and 84; see also Exhibit 1-6).

4.15 Mr. Guénette recalled in his testimony that the appellant had never suffered from the absence of a specific program which would enable Sun Life of Canada to manage the moneys invested for the purpose of establishing a business managers pension fund: as is shown by Exhibit A-7, interest was paid into Mr. Beaudoin's pension fund as of December 28, 1984 (transcript, page 83).

5. Analysis

5.01 The case at bar raises the problem of the eligibility of the appellant company for the deduction under paragraph 20(1)(s) of the I.T.A. for its fiscal year ending on December 31, 1984.

5.02 The deduction under paragraph 20(1)(s) of the I.T.A. was repealed recently, in 1990. [1] However, that provision was undeniably in effect during the years in issue.

5.03 Paragraph 20(1)(s) of the I.T.A. authorizes the deduction of special payments made by an employer in respect of an employee retirement or pension fund. The retirement or pension fund must be established by the employer in compensation for current or past services of his employees. The moneys paid into it must, however, meet a number of conditions in order for this deduction to come into play. The commentary set out at pages 7238 and 7239 of the CCH collection (paragraph 3.03(4)) presents the elements which must be shown in order for the taxpayer to be able to enjoy this tax advantage:

For contributions made before 1991, a deduction was allowed under paragraph 20(1)(s) provided that the followings [sic] were met:

(1) The payments were made in the year;

(2) The payments were in respect of current or past services of employees or former employees;

(3) The payments were made pursuant to a recommendation of a qualified actuary;

(4) The qualified actuary was of the opinion that the resources of the plan needed to be argumented [sic] by the payments to ensure that the obligations of the employer to the plan and the obligations of the plan to employees and former employees could be discharged in full;

(5) The recommendation of the actuary had to have been made in the year or in one of the immediately three preceding years and the assumptions used by the actuary in making the recommendation had to remain valid in the year in which the payments were made;

(6) The payments must have irrevocably vested in or for the plan; and

(7) The payments must have been approved by the Minister on the advice of the Superintendent of Financial Institutions. Under regulation 900(7), the Director, Registration Division of the Department of National Revenue, may exercise the power of the Minister.

The conditions of paragraph 20(1)(s) had to be complied with in order for a deduction to be claimed for contributions in respect of past services or where the obligation of the employer with respect to current service would exceed the $3,500 limit in paragraph 20(1)(q). Paragraph 20(1)(s) did not impose any maximum limit provided these conditions were met. However, section 67 prohibits the deduction of amounts which are unreasonable in the circumstances.

5.04 The Court has studied the respective arguments of the parties to this case, as well as the testimony of the actuary, Mr. Félix Poulin (transcript, pages 90-107), and is therefore in a position to limit its analysis to one question alone. The issue is whether Pantalons Star Laurierville Ltée paid the moneys which it wished to invest in Mr. Beaudoin's pension fund during its fiscal year ending on December 31, 1984.

5.05 On this point, the argument of counsel for the appellant may be divided into two parts. First, the appellant argues that the testimony of Mr. Jean-Marie Guénette shows that the moneys to be paid into the pension plan were received in Montréal on December 28, 1984. Counsel for the appellant argues that Exhibits A-8 and A-9 clearly show that this claim is true. Moreover, the fact that the interest on the money invested in the pension plan started to run on December 28, 1984 undeniably shows that the payments into the pension plan were made in 1984 (Exhibit A-7).

5.06 Second, counsel for the appellant tried to show that mere receipt of the cheque for $219,576 at Sun Life of Canada in Montréal constituted payment. Accordingly, this Court, having taken the documentary and testimonial evidence into consideration, should find that there was a payment of $219,576 for the purposes of Mr. Beaudoin’s pension plan, during the appellant's fiscal year ending on December 31, 1984.

5.07 Counsel for the respondent first tried to attack the credibility of the evidence presented by the appellant, on the basis of a trend in the case law (paragraph 3.02(2), 3.02(4) and 3.02(7)) and the legal texts (paragraph 3.03(5)). These authorities generally state that failure to call a person who is essential to the resolution of a dispute to testify raises a presumption that such testimony would be unfavourable to the party on whom the burden of proof rests. The respondent therefore argues that the failure to call Mr. Robert Lemieux and Mr. Roger Beaudoin makes it possible for us to question the credibility of the appellants principal testimony, that of Mr. Jean-Marie Guénette.

5.08 Moreover, the respondent argues that the vagueness and ambiguity of Mr. Guénette's testimony demands that great caution be exercised in assessing that testimony.

5.09 In conclusion, the respondent argues that the probative force of the documentary evidence filed in support of the respondent's argument, as well as the weak credibility of Mr. Guénette’s testimony, should persuade this Court to hold that the original cheques were received at Sun Life of Canada in Montréal only on January 14, 1985.

5.10 In the alternative, the respondent argues that the cheques which were presumably received in Montréal on December 28, 1984 should have been cashed before the end of the appellant's fiscal year, December 31, 1984. The effect of the absence of any such evidence should accordingly be that the appellant company is ineligible for the deduction under paragraph 20(1)(s) of the I.T.A.

5.11 This Court is of the opinion that the balance of evidence and the present state of the law favour the respondent's position.

5.12 Like counsel for the Minister of National Revenue, this Court feels a degree of skepticism with respect to the evidence which the appellant has attempted to adduce. The inadequacy of the evidence presented by counsel for Pantalons Star Laurierville Ltée is, on the one hand, a reflection of the obvious vagueness of the testimony of Mr. Jean-Marie Guénette. It is difficult to understand how the appellant can base a significant portion of its argument on testimony which was so incoherent. For example, Mr. Guénette seems to limit his testimony to asserting that he has seen a cheque for $219,576 in the premises of Sun Life of Canada in Montréal on December 28, 1984. However, Mr. Guénette was never able to establish the date this cheque was received. The circumstances under which he might have come into contact with this cheque were also obscure, nor was it specified to whom this cheque was sent or whence it came. Moreover, it is strange that there seems to have been no established policy for the receipt of cheques in Montréal, while the Sherbrooke branch stamps all cheques on the date they are received (paragraph 4.09). In a case like this, how can the Court assess whether this cheque was processed normally at Sun Life of Canada in Montréal? Yet, the cheques presumably received at Sun Life of Canada in Montréal on December 28, 1984 carry no indication that they were received on that date. Moreover, is it not inconceivable that no memorandum was attached to a cheque of this size? In the absence of such a memorandum, it seems to us that there should have been some sort of communication sent with the cheque. Finally, this Court finds it difficult to understand why only one of the two cheques issued to the order of Sun Life of Canada in respect of Mr. Beaudoin's pension plan seems to have been noticed by Mr. Guénette. Where was the other cheque, in the amount of $5,489.40?

5.13 The absence of any answers to these numerous questions can only raise a doubt in the mind of the Court as to the accuracy of Mr. Guénette’s testimony. Consideration of the case law catalogued in Sopinka's book (paragraph 3.03(5)) under the heading" Effect of Failure to Call Witness or Party” can only diminish further the credibility of the evidence adduced by counsel for the appellant: the principle which is set out in Enns, supra and the authorities cited above (paragraph 3.02(2), 3.02(4) and 3.02(7)) requires that the people who are able to shed some light on the case be called to testify. A presumption that such testimony would have been unfavourable to the party who must discharge the burden of proof may be inferred from failure to do so. In the case at bar, it seems to be admitted that Mr. Guénette was mainly involved in this case at the outset of the negotiations involving Sun Life of Canada and Mr. Beaudoin (transcript, pages 47 and 70). In reality, Mr. Robert Lemieux, a Sun Life of Canada agent in Sherbrooke, was in charge of concluding the transaction. It is undeniable that these two individuals could have provided significant information as to the date when the cheques signed by Mr. Beaudoin were sent to Montréal. In the view of this Court, it is very revealing to note that the two main architects of the creation of Mr. Beaudoin's pension plan were never called to testify.

5.14 Finally, consideration of the documentary evidence can only confirm that the position of the respondent, which is that the series of cheques filed as Exhibit A-1 was received in Montréal on January 14, 1985, is correct.

First, this Court finds the fact that the series of cheques filed as Exhibit A-7 was stamped on January 14, 1985 at Sun Life of Canada in Sherbrooke (paragraph 4.10) to be very convincing. This stamp is entirely consistent with the Sun Life of Canada policy on receipt of investment cheques (paragraph 4.09). Moreover, the memorandum filed as Exhibit 1-5 clearly indicates that the series of cheques in A-1 was sent to Montréal on January 14, 1985 (paragraph 4.11). Consideration of this part of the evidence strongly suggests to this Court that the series of cheques in A-1 was received in Sherbrooke on January 14, 1985 and sent to Montréal on the same day. The clarity of the documentary evidence (paragraph 4.12) is, furthermore, inconsistent with Mr. Guénette's claim that the series of cheques in A-2 was received at Sun Life of Canada in Montréal on January 14, 1985 (paragraph 4.12). As noted earlier by Mr. Miville Morais in his investigation, this Court cannot help but notice the difference between the cheque numbers in the A-2 series and the description of the cheques which were issued to Montréal by the memorandum filed as Exhibit 1-5. Mr. Guénette's inability to provide a proper answer to the problem created by this inconsistency can only further persuade this Court of the merit of the respondent's position (paragraph 4.13).

Moreover, this Court also considers it significant that Mr. Robert Lemieux, the Sun Life of Canada agent primarily involved in Mr. Beaudoin’s pension plan, asked to receive his credits for January, 1985. This request was made by the issuance of the memorandum, Exhibit I-5, on January 14, 1985. It is doubtless appropriate to presume that the request of a Sun Life of Canada agent to have certain credits entered on his account coincides with the point at which the transaction has been definitively concluded through his services. On this point, the establishment of Mr. Beaudoin's pension plan as a result of the payment of moneys to be managed by Sun Life of Canada constitutes the definitive conclusion of the transaction in issue here. Given that Mr. Lemieux's request was for credits for January 1985, it is entirely logical to imagine that the payment of the moneys to be used for Mr. Beaudoin's pension plan was made on January 14, 1985. The stamp dated January 14, 1985 and the content of the memorandum filed as Exhibit I-5 can only support this presumption.

5.15 Finally, it is hardly convincing for counsel for the appellant to base his argument with respect to the receipt of the pension fund payments on Exhibits A-8 and A-9. Indeed, these two letters were written by Mr. Guénette in 1987, the period when the Minister of National Revenue decided to investigate the transactions on the basis of which Mr. Beaudoin's pension plan was established. The probative value of the content of these letters is hardly greater than a simple assertion taken from testimony. Moreover, Mr. Guénette drafted these letters with the relevant knowledge that it was to the entire advantage of his customer for the payments in issue to have been made in 1984.

5.16 The payment of interest as of December 28, 1984 on the moneys comprising the pension fund is in no way evidence of the date when these moneys were officially received at Sun Life of Canada. It is therefore not conclusive, from a strict legal point of view, to argue that Mr. Beaudoin was never deprived of interest on the principal invested in his pension fund. In fact, it is obvious that the interest payment could in no way make up for Mr. Beaudoin's failure to have actually paid these moneys before December 31, 1984. The decision by Sun Life of Canada to pay interest must be seen as a purely business decision. If we examine the evidence adduced before this Court, we find that we cannot make any kind of presumption on the basis of the payment of interest in order to determine the date when the moneys in issue were in fact received at Sun Life of Canada.

5.17 Considering the evidence adduced by both counsel, as a whole, this Court is in a position to suggest a chronology of events which appears to us to be entirely satisfactory. Thus it is probable that Sun Life of Canada and Mr. Beaudoin wished to establish a pension plan during 1984. The documentary evidence clearly shows that a draft retirement plan (Exhibit A-5) and a Superflex pension proposal (Exhibit 1-3) were presented to Mr. Beaudoin on December 20 and 21, 1984, respectively. Thereafter, Mr. Robert Lemieux, an agent with Sun Life of Canada in Sherbrooke, sent the Superflex pension proposal to the Montréal branch, on December 27, 1984 (Exhibit 1-4). It should be noted that there is no document, memorandum or other type of correspondence to show that, on December 27, 1984, any moneys had been received for the purpose of setting up Mr. Beaudoin's pension plan. The memorandum filed as Exhibit 1-4 was received in Montréal on December 28, 1984, as indicated by the stamp found on Exhibit 1-3. This Court is thoroughly convinced that there was no cheque with the memorandum of December 28, 1984 (Exhibit 1-4). Mr. Beaudoin's departure on vacation undoubtedly explains why there was no correspondence between Sun Life of Canada and the president of the appellant between December 21, 1984 and January 14, 1985. On January 14, 1985 the series of cheques filed as Exhibit A-1 was received at Sun Life of Canada in Sherbrooke. The stamp bearing that date clearly proves this (Exhibit A-1). This series of cheques, as described in the memorandum filed as Exhibit I-5, was sent to Montréal the day it was received, January 14, 1985. Mr. Robert Lemieux also reminded Sun Life of Canada in Montréal that a transaction had been concluded in January 1985 through his services. This request, which was made the same day as the receipt of the payments in Sherbrooke, is for the purpose of having the commission to which Mr. Lemieux is entitled paid to his credit (Exhibit 1-5). The problems raised by the fact that the series of cheques in Exhibit A-1 had been issued in error by Pantalons Star Laurierville Ltée (a limited partnership) (paragraph 4.12) were undoubtedly noted in Montréal on about January 14, 1985. This series, Exhibit A-1, was returned to the Sherbrooke branch so that the appellant company could issue the cheques to be invested in Mr. Beaudoin's pension fund (Exhibit A-2). Finally, a system which was able in administrative terms to receive the moneys paid by the appellant was created on May 9, 1985 (paragraph 4.14).

5.18 On analyzing the evidence, therefore, it is clear that the original series of cheques (Exhibit A-1) was received in Montréal on January 14, 1985. However, can simple receipt of a cheque constitute payment? Clearly the reply to this question is that it cannot.

5.19 The text of paragraph 20(1)(s) of the I.T.A. (paragraph 3.01(1)) clearly establishes that a taxpayer who wishes to benefit from this deduction must prove that payments have been made in law. It is therefore not sufficient to have had the intention to make a payment.

5.20 On this point, the case law and the legal texts have clearly held that a cheque must be cashed in order to constitute payment. It is certainly relevant to recall that the civil law, which must be applied in the case at bar, recognizes payment in cash as the only way of terminating a liability concurrently with delivery of a sum of money or of any other article. This Court cannot interpret Article 1139 of the Civil Code in any other way.

The following comments, taken from legal texts and the case law, indicate the consensus which seems to prevail in respect of the conditions which govern payment.

First, Mr. Jean-Louis Beaudoin states the following at page 371 of his work: 617. Condition relating to quality—With respect to quality, the solvens terminates the liability by paying to the creditor the amount owing in legal currency, that is, in coin and notes issued by the Bank of Canada. For practical reasons, however, payment in silver, nickel or copper coins is permitted only to a maximum of certain amounts determined by law. The creditor is never bound to accept a cheque in place of payment in cash and simply delivering such a commercial instrument does not constitute payment, since in order for the transaction to be completed one must wait for the debtor's bank to actually pay the money.

[Translation.]

In his Traité de droit civil, Mr. Pierre-Gabriel Jobin makes the following equally relevant comments in respect of the lease of things, at pages 209-10 of his work:

76. Payment by cheque. General rules. In strict law, payment of a debt in money is made solely in Canadian currency. It follows that the lessor is never required to accept payment in any form other than that. If the lessor agrees to be paid b

cheque, payment of the debt is not in fact made until the moment when the bank on which the cheque is drawn pays it.

[Translation.]

Mrs. Nicole L'Heureux provides an excellent statement of what delivery of a cheque means in legal terms. She states, at page 267 of her work:

Delivery of a cheque by a debtor to its creditor does not constitute payment within the meaning of the Civil Code, other than conditional payment on the cheque being cashed by the payee.

[Translation.]

There is nothing to be found in the case law beyond the comments set out above. In /n re Richard Kinsella; H.H. Silver and Economic Laboratories, supra, a similar principle is reiterated when Poitras, J. states, at page 467:

A bill of exchange does not in itself operate as a transfer of funds, and so delivery of a cheque cannot be considered as payment. Payment therefore did not take place until the moment when the cheque was cashed.

[Translation.]

It is not necessary to discuss the decisions in Ouellette (paragraph 3.02(1)) and Cléophas Chapados (paragraph 3.02(5)), which contain completely identical comments.

5.21 This review of the state of the law with respect to payments by cheque substantially reflects the argument of counsel for the respondent. Accordingly, the absence of any evidence of cheques presumably received on December 28, 1984 at Sun Life of Canada in Montréal is an additional reason for rejecting the appellant's argument.

5.22 Both the evidence as it has been weighed and the law with respect to the transaction in issue are unfavourable to the appellant's position.

5. Conclusion

For all of these reasons, this Court confirms the validity of the notice of reassessment issued by the Minister of National Revenue and dismisses the appeal by the appellant company.

Appeal dismissed.