Denault,
J.:
—[Translation.]
The
plaintiff
is
seeking
rescission
of
a
notice
of
reassessment
issued
against
her
by
Revenue
Canada,
Taxation,
in
the
amount
of
$98,922.53
for
the
1982
taxation
year.
In
her
federal
income
tax
return
for
1982,
the
plaintiff
had
declared
a
total
income
of
$9,280.
Following
an
investigation
into
the
plaintiff's
personal
bank
accounts,
the
Department
of
Revenue
determined
that
those
accounts
revealed
an
“unexplained
source
of
funds,
lent
to
various
companies"
(notice
of
reassessment,
T-5;
translation)
which
justified
an
increase
in
her
income
of
the
order
of
$98,922.53.
The
said
notice
was
dated
December
23,
1985.
The
plaintiff
filed
a
notice
of
objection
against
it,
but
the
latter
was
subsequently
turned
down
by
the
Minister.
She
is
now
seeking
to
have
the
notice
of
reassessment
rescinded
on
the
grounds
that
for
the
taxation
year
in
question,
she
never
received
income
other
than
what
was
indicated
on
her
statement
and
that
she
never
loaned
money
to
companies.
She
contends
on
the
contrary
that
she
was
only
a
tool,
a
"straw
man"
in
the
hands
of
her
then
husband,
Jules
Fafard,
from
whom
she
separated
in
the
fall
of
1986
and
from
whom
she
has
been
divorced
since
November
26,
1987.
According
to
her,
by
founding
companies
and
naming
her
as
the
sole
shareholder
and
administrator
of
them,
he
was
using
her
as
a
straw
man
or
figurehead
to
conceal
irregularities
in
his
own
administration,
among
which
were
the
cash
payment
of
overtime
to
his
employees,
travel
expenses,
etc.
In
such
a
case,
it
is
incumbent
on
the
plaintiff
to
attack
the
foundations
of
the
notice
of
assessment
and
prove
that
they
are
erroneous.
In
the
present
case,
the
plaintiff's
evidence
consisted
in
calling
her
husband
Jules
Fafard
to
witness,
along
with
the
latter's
financial
advisor
and
a
few
representatives
of
caisses
populaires
and
a
bank
with
which
she
had
dealings.
The
plaintiff
also
testified,
as
did
her
daughter
Dixie,
who
replaced
her
at
the
helm
of
Les
Bâtiments
Fafard
Inc.,
the
company
on
which
are
centred
the
facts
in
dispute.
The
defendant
called
no
witnesses.
Basically
the
plaintiff
alleges
that
her
husband,
Jules
Fafard,
a
manufacturer
operating
in
the
steel
structures
sector,
founded
various
companies,
including
Structure
JOG
Inc.,
Construction
Acier-Fard
Inc.,
Les
Bâtiments
Fafard
Inc.
(agent
in
manufacturing
for
export),
Placements
RIO
Inc.
(company
which
specializes
in
the
management
of
children’s
assets,
and
of
which
he
is
the
trustee),
and
142382
Canada
Inc.
(to
pay
the
salaries
of
employees
of
Les
Bâtiments
Fafard
Inc.).
The
evidence
shows,
however,
that
Les
Bâtiments
Fafard
Inc.
was
incorporated
by
the
plaintiff
and
that
she
began
doing
business
in
January
1982;
she
was
that
company's
sole
shareholder
and
administrator.
Having
been
married
to
Jules
Fafard
since
1967,
the
plaintiff
was
employed
by
one
or
another
of
these
companies
from
1972
until,
the
marriage
having
deteriorated,
especially
during
1986,
the
parties
divorced
in
1987.
In
his
testimony,
without
explicitly
acknowledging
that
his
wife
had
acted
as
a
figurehead,
Jules
Fafard
nevertheless
acknowledged
that
she
had
acted
only
under
his
instructions
and
for
all
practical
purposes
had
the
title
of
president
"because
there
had
to
be
one"
[translation].
The
plaintiff
also
tried
to
prove
that
she
had
acted
solely
as
a
figurehead.
At
the
beginning
of
the
hearing,
counsel
for
the
defendant
made
a
general
objection
to
the
plaintiff's
attempt
to
prove
that
she
was
acting
as
a
figurehead
on
the
grounds
that
there
was
nothing
in
writing
establishing
that
Jules
Fafard
had
given
his
wife
a
mandate
to
act
in
such
a
capacity.
The
evidence
was
heard
under
reserve
of
this
objection.
Between
spouses,
the
mandate
to
act
as
figurehead
is
a
civil
matter
for
which
proof
can
be
established
only
by
means
of
a
document
in
writing
or
the
oath
of
the
adverse
party
(article
1233
C.C.).
In
the
present
case,
there
was
nothing
in
writing
between
the
mandator
and
the
mandatary.
The
prohibition
of
the
testimonial
evidence
thus
stands,
unless
the
plaintiff
should
succeed
in
proving
the
existence
of
the
said
mandate
by
means
of
the
oath
of
the
adverse
party,
namely
her
husband.
Counsel
for
the
defendant,
in
his
own
cross-examination
of
Jules
Fafard,
questioned
the
latter
on
the
role
of
his
spouse
in
Les
Bâtiments
Fafard
Inc.
and
had
him
admit
that
for
all
practical
purposes
it
was
he
who
ran
the
said
company
and
that
his
spouse
did
not
count
for
much
in
it.
Mr.
Fafard
did
not,
however,
categorically
state
that
his
spouse
acted
as
a
figurehead.
Vis-a-vis
the
defendant,
who
constitutes
a
third
party
in
relation
to
the
spouses,
proof
of
the
mandate
to
act
as
a
figurehead
was
not
established,
and
the
testimonial
evidence
of
it
is
therefore
not
admissible.
Still
to
be
determined
is
whether,
as
the
statement
of
claim
suggests,
the
plaintiff
was
an
instrument
in
the
hands
of
her
spouse
to
the
extent
that
the
notice
of
assessment
should
be
rescinded.
The
evidence
shows
that
in
1982,
Les
Bâtiments
Fafard
Inc.
obtained
a
contract
in
Saudi
Arabia
worth
approximately
$1,400,000.
To
carry
out
that
contract,
Jules
Fafard
spent
approximately
one
year
in
Saudi
Arabia
over
the
eighteen-month
duration
of
the
contract,
including
eight
months
in
1982
alone.
The
witness
further
stated,
without
elaborating,
that
he
had
spent
three
to
four
months
in
prison
in
Saudi
Arabia.
For
her
part,
the
plaintiff
testified
that
in
the
meantime,
even
though
she
apparently
had
no
experience
in
the
management
of
companies
and
blindly
followed
the
instructions
that
her
husband
gave
her
by
telephone
from
Saudi
Arabia,
she
alone
looked
after
the
administration
of
Les
Bâtiments
Fafard
Inc.,
which
at
the
time
had
some
hundred
employees.
According
to
the
plaintiff's
former
spouse,
the
company
collected
income
from
the
said
contract
in
an
account
that
it
had
opened
at
the
St-Hyacinthe
branch
of
the
Royal
Bank
of
Canada
under
the
name
Fafard
Building
Systems
Inc.,
the
English
name
of
Les
Bâtiments
Fafard
Inc.
Payments
were
also
made
in
cash.
From
June
to
December
1982,
a
statement
of
the
defendant's
personal
account
at
the
Caisse
populaire
St-Joseph
de
St-Hyacinthe,
folio
4022,
shows
that
deposits
were
made
in
amounts
of
at
least
$30,000
and
that
on
July
28,
1982
there
was
even
a
deposit
of
$80,000.
An
employee
of
the
caisse
populaire
confirmed
that
on
each
occasion,
the
plaintiff
had
come
in
with
a
briefcase
containing
the
money
that
she
was
to
deposit
in
her
personal
account.
These
amounts
were
deposited
indiscriminately
in
a
chequing-savings
account,
a
regular
savings
account
and
a
term
savings
account.
At
trial,
the
plaintiff
stated
that
she
was
unaware
of
the
source
of
this
money
and
deposited
it
in
her
personal
account
at
her
husband's
request.
An
analysis
of
folio
4022
shows
that
various
transfers
from
one
account
to
another
as
well
as
withdrawals
were
made,
almost
all
at
the
counter,
by
the
plaintiff
herself.
According
to
her,
that
money
was
turned
over
to
her
husband
on
request
and
might
serve
either
to
pay
the
company's
debts
or
make
loans
to
other
companies.
However,
she
did
not
keep
any
record
of
these
various
loans.
In
the
present
case,
an
analysis
of
the
documentary
evidence
sheds
quite
a
different
light
on
events
from
that
which
the
main
actors
sought
to
project
in
their
testimony
at
the
trial.
Thus,
on
the
one
hand,
the
numerous
documents
filed
over
the
course
of
the
proceedings
undeniably
show
that
(1)
the
plaintiff
was
the
sole
shareholder
and
administrator
of
Les
Bâtiments
Fafard
Inc.;
(2)
she
herself
signed
all
the
documents
necessary
for
the
operations
of
that
company
(bank
transactions,
income
tax
statements,
etc.)
without
her
husband
appearing
to
participate,
either
as
a
mandator
or
otherwise;
(3)
she
made
numerous
deposits,
withdrawals
and
transfers
to
and
from
her
personal
account
(folio
4022
at
the
Caisse
populaire
St-Joseph
de
St-Hyacinthe),
to
which
her
husband
had
no
access;
(4)
during
1982
she
applied
for
two
loans
from
the
Caisse
populaire
St-Joseph
de
St-Hyacinthe,
one
of
which
was
for
$5,000
for
personal
expenses
and
both
of
which
were
repaid
within
several
days;
(5)
on
February
10,
1986
she
herself
signed
the
notice
of
objection
against
the
notice
of
reassessment,
on
the
grounds
that
the
$98,922.53
came
from
her
savings,
gifts,
inheritances
and
loans
from
banks,
caisses
populaires
and
individuals,
knowing
full
well
that
all
these
grounds
were
false,
as
moreover
she
freely
admitted
at
trial;
(6)
she
did
not
dispose
of
her
nominal
share
in
Les
Bâtiments
Fafard
Inc.
until
the
disposition
and
division
of
financial
interests
between
the
parties
during
divorce
proceedings
on
December
9,
1986.
On
the
other
hand,
apart
from
the
employees
of
financial
institutions,
whose
testimony
was
only
for
the
purpose
of
producing
documents,
the
other
witnesses
heard
on
behalf
of
the
plaintiff
sought
to
establish
that
she
was
only
a
pawn
in
the
hands
of
her
former
spouse.
The
plaintiff's
daughter,
Dixie
Fafard,
replaced
her
as
shareholder
and
administrator
of
the
company
after
her
departure
in
1986,
and
her
testimony
sheds
no
light
on
the
events
of
1982
except
to
indicate
that
she
too
served
as
a
front
for
the
activities
of
her
father
until
she
in
turn
walked
out
in
1987.
Jules
Fafard's
testimony
served
to
show
that
he
had
founded
various
companies
on
the
advice
of
his
financial
advisor,
despite
which
some
of
them
(Structures
JOG
Inc.
and
Construction
Acier
Fafard
Inc.)
were
eventually
put
in
receivership
and
their
promoter
in
turn
went
into
personal
bankruptcy
in
1985.
As
to
his
activities
in
relation
to
Les
Bâtiments
Fafard
Inc.,
his
testimony
only
served
to
confirm
what
the
documents
already
showed,
namely
that
the
plaintiff
was
that
company's
sole
shareholder
and
administrator
even
if
he
was
the
“brains”.
Otherwise
his
testimony
was
full
of
vague
recollections
and
did
little
to
support
the
plaintiff's
evidence.
His
version
of
events
for
the
purposes
of
the
present
case
must
moreover
be
taken
with
a
large
grain
of
salt,
considering
that
he
undertook
to
pay,
on
the
plaintiff's
behalf,
the
legal
costs
of
objecting
to
the
notice
of
assessment
addressed
to
his
spouse.
The
plaintiff,
in
her
testimony,
sought
to
show
that
she
was
acting
only
as
the
mandatary
of
her
former
spouse.
Even
though
she
has
succeeded
in
convincing
me
that
in
1982
she
was
acting
under
her
spouse's
instructions,
the
fact
remains
that
she
has
failed
to
explain
to
the
satisfaction
of
the
Court
how
the
foundations
of
the
notice
of
assessment
issued
by
Revenue
Canada,
Taxation
were
erroneous.
Her
testimony
in
this
matter
has
many
deficiencies.
First,
it
seems
clear
that
sizeable
amounts
were
deposited
in
her
personal
account
because
of
the
execution
of
a
contract
by
a
company
of
which
she
was
the
sole
shareholder
and
administrator,
and
she
has
not
provided
clear,
specific
and
consistent
evidence
regarding
the
withdrawals
of
that
money
and
the
use
to
which
it
was
put.
Second,
nothing
in
the
evidence
indicates
that
at
the
material
time
she
did
anything
or
approached
anyone
to
denounce
her
husband's
attitude
toward
her.
On
the
contrary,
her
actions
in
relation
to
third
parties
indicate
that
she
had
both
de
facto
and
de
jure
control
of
the
business
that
she
was
administering,
and
all
the
transactions
that
she
carried
out
in
her
personal
account
at
the
Caisse
populaire
St-Joseph
de
St-Hyacinthe
bear
her
personal
mark.
At
no
time
did
she
protest
her
innocence
until
her
husband's
businesses
and
personal
situation
had
collapsed
and
the
marriage
had
deteriorated
to
the
point
that
it
was
to
end
in
divorce.
Furthermore
if
it
was
the
plaintiff's
intention
to
prove
that
her
actions
had
been
in
response
to
coercion
or
threats
on
the
part
of
her
former
husband,
the
evidence
offered
in
this
regard
is
entirely
nonexistent.
Counsel
for
the
defendant
referred
the
Court
to
a
decision
of
Marceau,
J,
now
of
the
Federal
Court
of
Appeal,
in
the
Saykaly
case
([1976]
C.T.C.
702;
76
D.T.C.
6440),
in
which
a
spouse
claimed
that
the
notice
of
assessment
should
be
rescinded
because
she
had
never
personally
appropriated
the
proceeds
from
fictitious
payments
made
by
the
company
of
which
she
was
the
president
and
sole
shareholder,
but
of
which
her
husband
was
in
fact
the
sole
administra-
tor.
In
brief,
she
placed
full
confidence
in
her
husband
since
she
herself
had
no
experience
in
business,
and
she
merely
signed
the
documents
that
he
presented
to
her,
without
asking
questions.
On
the
latter
point,
Marceau,
J.
disposed
of
the
appellant's
argument
as
follows
at
pages
706-707
(D.T.C.
6443-44):
It
is
obvious
that
a
normally
wise
and
cautious
taxpayer
would
not
have
acted
the
way
the
appellant
did.
She
claims
that
her
behaviour
was
understandable,
that
it
is
normal
for
a
wife
to
obey
and
trust
her
husband,
''which
is
a
rule
of
public
social
order"
adds
her
counsellor.
I
do
not
think
that
the
so-called
rule
could
prevail
over
the
basic
rules
of
normal
prudence
so
as
to
allow
a
married
woman
to
go
into
business
with
her
husband,
and
then
keep
on
signing
official
papers
as
president
of
a
company,
accepting
a
salary
as
general
manager
of
another,
drawing
personal
cheques
for
many
thousand
dollars
on
a
bank
account
supplied
by
income
derived
from
business
operations
in
which
she
is
officially
involved,
and
finally
attesting
personal
income
tax
returns,
without
even
bothering
to
look
into
what
is
going
on
or
to
try
to
understand
what
she
is
asked
to
certify.
If
such
behaviour
is
socially
understandable,
which
I
doubt,
it
is
certainly
not
excusable
legally.
In
short,
the
plaintiff
has
not
succeeded
in
convincing
the
Court
that
she
acted
with
respect
to
third
persons
as
a
figurehead
or
under
a
mandate
from
her
husband.
Nor
has
she
shown
that
the
foundations
of
the
notice
of
assessment
were
erroneous.
Appeal
dismissed.
Email this Content