Tremblay
T.C.J.:
Point
at
issue
According
to
the
Notices
of
Appeal
and
the
Replies
to
the
Notices
of
Appeal,
the
question
is
whether
under
ss.
160(1)
and
160(2)
of
the
Income
Tax
Act
(“the
Act”)
the
appellant
is
jointly
and
severally
liable
for
a
debt
of
$3,341.65
owed
by
Les
Placements
Gaber
Inc.
for
non-remitted
source
deductions
(case
96-2688(IT)I),
and
whether
she
is
also
responsible
for
a
tax
debt
of
$20,685.06
owed
by
Les
Placements
Gaber
Inc.,
the
whole
as
a
consequence
of
a
transfer
on
November
12,
1993
of
a
property
located
at
3145
Route
du
Lac
Ouest
in
Alma,
Quebec,
whose
a
value
according
to
the
respondent
was
$71,500,
while
the
appellant
claims
to
have
only
paid
$22,000
for
the
property.
However,
the
appellant
argued
that
she
had
assumed
a
number
of
the
transferor
company’s
liabilities
and
that
this
should
be
taken
into
account.
Burden
of
proof
The
appellant
has
the
burden
of
showing
that
the
respondent’s
assessments
are
incorrect.
This
burden
of
proof
results
from
several
judicial
decisions,
including
the
judgment
of
the
Supreme
Court
of
Canada
in
Johnston
v.
Minister
of
National
Revenue)
In
that
judgment
the
Supreme
Court
held
that
the
facts
assumed
by
the
respondent
in
support
of
the
assessments
or
reassessments
are
presumed
to
be
true
in
the
absence
of
proof
to
the
contrary.
In
the
instant
case
the
facts
assumed
by
the
respondent
are
set
out
in
subparagraphs
(a)
to
(g)
of
paragraph
8
of
the
Reply
to
the
Notice
of
Appeal.
That
paragraph
reads
as
follows:
[TRANSLATION]
8.
In
making
assessment
No.
08
720
of
May
2,
1995
pursuant
to
s.
160
of
the
Income
Tax
Act,
the
Minister
of
National
Revenue
assumed
inter
alia
the
following
facts:
(a)
on
or
about
November
12,
1993,
by
notarial
deed,
Les
Placements
Gaber
Inc.
transferred
[denied]
to
the
appellant
a
property
located
at
3145
Route
du
Lac
Ouest
in
Alma;
[admitted
as
to
the
remainder)
(b)
the
said
notarial
deed
stipulated
that
the
consideration
given
by
the
appellant
to
the
transferor
[“transfer”
denied),
Les
Placements
Gaber
Inc.,
was
$22,000;
[admitted
as
to
the
remainder
I
(c)
the
fair
market
value
of
the
said
property
on
November
12,
1993
was
not
less
than
$71,500;
[denied)
(d)
the
transfer
[denied]
on
November
12,
1993
of
the
property
located
at
3145
Route
du
Lac
Ouest
in
Alma
conferred
on
the
appellant
a
benefit
of
at
least
$20,685.06;
[denied]
(e)
the
appellant
is
the
spouse
of
Ghislain
Bergeron,
who
is
the
brother
of
Gaétan
Bergeron,
the
sole
shareholder
in
Les
Placements
Gaber
Inc.,
the
transferor
[denied];
[relationship
admitted
I
(f)
on
May
2,
1995,
the
date
of
assessment
No.
08
720
issued
to
the
appellant
pursuant
to
s.
160
of
the
Income
Tax
Act,
Les
Placements
Gaber
Inc.
had
a
tax
liability
of
$20,685.06
for
the
taxation
years
1986
to
1988
and
1990,
as
confirmed
by
Notices
of
Assessment
in
1991
and
1993;
[admitted]
(g)
on
May
2,
1995,
the
date
of
assessment
No.
08
720
issued
to
the
appellant
pursuant
to
s.
160
of
the
Income
Tax
Act,
Les
Placements
Gaber
Inc.
had
a
tax
liability
of
$3,341.65
from
non-remitted
source
deductions....
[denied]
The
respondent
admitted
that
following
the
bankruptcy
of
Les
Placements
Gaber
Inc.,
the
trustee
paid
the
respondent
the
sum
of
$1,811.19.
A
balance
of
$1,530.46
remained
in
case
No.
96-2688(IT)I.
The
balance
remained
unchanged
at
$20,685.06
in
case
No.
96-2829(IT)G.
The
respondent
filed
as
Exhibit
1-]
a
book
of
16
exhibits,
including
contracts,
judgments
and
so
on,
which
will
be
referred
to
below.
The
real
estate
appraisal
report
on
the
property
located
at
3145
Route
du
Lac
Ouest
in
Alma,
Quebec,
was
filed
as
Exhibit
I-2.
The
value
arrived
at
by
the
chartered
appraiser
Gaston
Laberge
was
$69,000
at
November
11,
1993.
The
appellant
admitted
this
was
the
property’s
value
on
that
date.
Following
the
foregoing
admissions
([5],
[6]
and
[7]),
the
evidence
was
completed
by
the
testimony
of
Ghislain
Bergeron,
the
appellant’s
husband,
of
Gaétan
Bergeron,
the
appellant’s
brother-in-law,
and
of
the
appellant
Colombe
Martel
Bergeron
herself.
The
appellant’s
husband
Ghislain
Bergeron,
a
fur
salesman
for
35
years,
testified
that
in
1978,
together
with
his
wife,
he
bought
the
land
(Exhibit
I-
1,
tab
6)
on
which
the
building
whose
civic
number
is
3145
Route
du
Lac
Ouest,
Alma,
was
built,
the
whole
for
the
sum
of
$40,000.
At
that
time
he
had
to
borrow
$37,875
from
the
Caisse
de
Dépôt
et
Placement
du
Québec
(Exhibit
I-1,
tab
7).
On
November
28,
1988,
for
the
purpose
of
paying
certain
tax
and
other
liabilities,
Ghislain
Bergeron
and
the
appellant
borrowed
from
Les
Placements
Gaber
Inc.
the
sum
of
$22,000
at
14'/2%,
repayable
in
periodic,
equal
and
consecutive
instalments
of
$512.82
on
the
first
day
of
each
month
starting
on
January
I,
1989,
until
payment
was
made
in
full
(Exhibit
I-1,
tab
9).
A
series
of
22
cheques
or
receipts
for
$512
each
was
filed
as
Exhibit
A-
I.
They
are
dated
from
January
7,
1992
to
December
20,
1993,
the
cheques
being
made
out
to
Gaétan
Bergeron
and
the
receipts
signed
by
Gaétan
Bergeron.
Gaétan
Bergeron
is
the
sole
owner
of
the
shares
in
Les
Placements
Gaber
Inc.
A
series
of
photocopies
of
three
drafts
and
a
cheque
for
$535.40
each,
all
payable
to
General
Trust
of
Canada,
all
signed
by
Ghislain
and
Colombe
Bergeron
and
debited
to
their
account,
was
filed
as
Exhibit
A-2.
These
doc-
uments
were
dated
September
5,
October
1,
November
I
and
December
1,
1992.
They
were
repayments
to
the
National
Bank
on
the
loan
taken
out
on
the
residence.
The
merger
of
General
Trust
and
the
National
Bank
and
others
brought
about
the
change
in
the
payee.
A
request
to
the
Town
of
Alma
for
information
as
to
the
amounts
paid
in
school
and
municipal
taxes
from
August
1992
to
the
end
of
November
1993
was
filed
as
Exhibit
A-3.
Those
amounts
came
to
$1,300.09.
A
document
from
Martin
&
Gagnon,
Assurances
générales,
in
Alma,
was
filed
as
Exhibit
A-4.
It
showed
that
a
total
of
$419.66
in
monthly
premiums
of
$27.98
had
been
paid
from
August
31,
1992
to
November
31,
1993.
The
April
29,
1993
Hydro
Quebec
bill
for
the
residence,
in
the
amount
of
$573.90,
payable
on
May
20,
1993
and
paid
on
May
26,
1993,
was
filed
as
Exhibit
A-5.
The
statements
with
respect
to
the
appellant’s
account
at
the
Caisse
populaire
St-Luc
d’Alma
for
the
period
from
October
20,
1992
to
November
30,
1993
were
filed
as
Exhibit
A-6.
They
showed
that
each
month
the
sum
of
$535.40
was
transferred
to
General
Trust
of
Canada.
This
was
the
monthly
payment
on
the
loan
on
the
house.
According
to
the
witness
Ghislain
Bergeron,
whose
testimony
was
confirmed
by
that
of
his
brother
Gaétan,
the
loan
payments
to
Les
Placements
Gaber
Inc.
were
made
on
time
in
the
first
years.
However,
in
late
1991
and
early
1992
payments
were
made
two
months
late.
On
August
27,
1981
the
National
Bank
of
Canada
had
registered
a
deed
of
mortgage
in
the
amount
of
$15,000
between
the
bank
and
Ghislain
Bergeron
with
respect
to
the
property
in
question
(Exhibit
I-1,
tab
8).
Further,
in
1989
it
had
registered
a
mortgage
surety
deed
with
an
“event
of
default”
clause
(Exhibit
I-1,
tab
10)
on
the
residence.
Finally,
as
a
legal
mortgage
in
the
amount
of
$12,715.48
(Exhibit
I-1,
tab
11)
had
also
been
registered
by
the
Quebec
Department
of
Revenue,
Les
Placements
Gaber
Inc.,
in
order
to
protect
its
rights,
decided
to
register
the
60-day
notice
with
respect
to
the
property
in
question
on
January
31,
1992.
On
August
12,
1995
a
giving
in
payment
judgment
by
the
Quebec
Superior
Court
declared
Les
Placements
Gaber
Inc.
to
be
the
owner
of
the
property
located
at
3145
Route
du
Lac
Ouest,
Alma
(Exhibit
I-1,
tab
13):
[TRANSLATION]
DECLARES
the
plaintiff
Les
Placements
Gaber
Inc.
to
have
absolute
and
indefeasible
ownership
by
giving
in
payment
retroactive
to
November
29,
1988,
free
of
all
charges,
liens
and
mortgages
registered
after
November
29,
1988,
of
the
following
immovable
property:
A
piece
of
land
or
site
known
and
designated
as
subdivision
ONE
of
original
lot
THIRTY-ONE
B
(31
B-1)
in
range
EIGHT
(rg
VIII)
in
the
official
land
register
of
the
Township
of
Sinai,
Registry
Division
of
Lac
St-Jean
Est.
With
buildings
constructed
thereon
and
appurtenances,
including
the
building
whose
civic
number
is
3145
Route
du
Lac
in
Alma.
DECLARES
the
plaintiff
Les
Placements
Gaber
Inc.
owner
of
the
said
immovable
free
of
any
liabilities
with
respect
to
improvements,
upkeep
or
moneys
paid
as
instalments
on
principal;
DIRECTS
the
Registrar
of
the
Lac
St-Jean
Est
Registry
Division
to
strike
and
delete
the
registration
of
the
debt
to
the
plaintiff
registered
under
No.
178349
as
a
charge
against
the
aforesaid
immovable,
in
view
of
the
fact
that
the
owner
of
and
the
creditor
with
respect
to
the
said
immovable
are
to
become
one;
DIRECTS
the
Registrar
of
the
Lac
St-Jean
Est
Registry
Division
to
strike
and
delete
the
registration
of
the
60-day
notice
given
pursuant
to
art.
1040a
C.C.
and
registered
against
the
aforesaid
immovable
under
No.
191738;
DIRECTS
the
Registrar
of
the
Lac
St-Jean
Est
Registry
Division
to
strike
and
delete
the
registration
of
the
legal
mortgage
registered
by
the
mis-en-cause
the
Quebec
Department
of
Revenue
against
the
aforesaid
immovable
under
No.
187849;
DIRECTS
the
Registrar
of
the
mis-en-cause
Registry
Division
to
register
this
judgment
in
the
Index
to
Immovables
and
wherever
else
may
be
necessary;
DIRECTS
the
defendants
to
vacate
the
said
immovable
within
15
days
of
service
of
this
judgment,
failing
which
the
plaintiff
shall
be
put
in
possession
by
officers
of
the
Court…
According
to
the
testimony
of
Gaétan
Bergeron,
Ghislain
Bergeron
and
the
appellant,
there
was
a
verbal
agreement
between
them
that
when
the
appellant
and
her
husband
had
paid
all
of
the
debt
and
interest
to
Les
Placements
Gaber
Inc.
the
immovable
would
be
returned
to
them.
On
November
11,
1993,
Les
Placements
Gaber
Inc.
sold
the
immovable
in
question
to
Colombe
Martel
(Exhibit
1-1,
tab
14).
The
clauses
regarding
the
price
read
as
follows:
[TRANSLATION]
This
sale
is
made
subject
to
the
purchaser
paying
any
balance
owed
on
the
existing
mortgage
with
the
Caisse
de
Dépôt
et
Placement
du
Québec,
registered
on
June
23,
1978
as
No.
130-916,
with
which
the
purchaser
states
she
is
fully
familiar
as
she
herself
granted
it
in
1978
and
has
continued
to
make
the
payments
thereon
since
the
judgment.
The
purchaser
therefore
takes
back
ownership
of
the
immovable
without
having
first
obtained
details
of
the
amounts
owed
to
the
Caisse
de
Dépôt
et
Placement
du
Quebec,
since
she
was
herself
making
the
payments
and
prior
authorization
from
the
said
lender
was
not
necessary
for
the
transfer
of
the
immovable.
This
sale
is
also
made
in
consideration
of
the
repayment
of
money
owed
to
the
vendor,
which
the
said
vendor
acknowledges
having
received
prior
to
this
agreement,
and
general
and
final
release
is
given
therefor.
A
resolution
of
Les
Placements
Gaber
Inc.
on
October
22,
1993
to
sell
the
immovable
to
Colombe
Martel
stipulated
[TRANSLATION]
“that
the
selling
price
shall
be
the
assumption
of
the
mortgage
granted
to
the
Caisse
de
Dépôt
et
Placement
du
Québec
pursuant
to
a
deed
registered
on
June
23,
1978
under
No.
130-916,
and
the
repayment
of
the
amounts
owed
to
the
vendor”
(Exhibit
I-1,
tab
15).
Ghislain
Bergeron
testified
that
the
reason
the
appellant
alone
acquired
the
house
was
that
he
felt
he
was
not
entitled
to
it
because
he
had
declared
bankruptcy
in
1992.
On
April
26,
1994,
as
a
result
of
the
economic
situation,
Les
Placements
Gaber
Inc.
declared
bankruptcy
as
did
Gaétan
Bergeron.
Legislation
The
provisions
of
the
Income
Tax
Act
involved
in
the
instant
case
are
ss.
160(1),
160(2),
160(3)
and
160(4).
Reference
was
also
made
to
the
provisions
of
the
Civil
Code
of
Lower
Canada,
arts.
1212
and
1234,
and
arts.
1451,
1452
and
2863
of
the
new
Civil
Code
of
Quebec.
These
legal
provisions
read
as
follows:
Income
Tax
Act
160.
Tax
liability
re
property
transferred
not
at
arm
’s
length.
(1)
Where
a
person
has,
on
or
after
the
1st
day
of
May,
1951,
transferred
property,
either
directly
or
indirectly,
by
means
of
a
trust
or
by
any
other
means
whatever,
to
(a)
his
spouse
or
a
person
who
has
since
become
his
spouse,
(b)
a
person
who
was
under
18
years
of
age,
or
(c)
a
person
with
whom
he
was
not
dealing
at
arm’s
length,
the
following
rules
apply:
(d)
the
transferee
and
transferor
are
jointly
and
severally
liable
to
pay
a
part
of
the
transferor’s
tax
under
this
Part
for
each
taxation
year
equal
to
the
amount
by
which
the
tax
for
the
year
is
greater
than
it
would
have
been
if
it
were
not
for
the
operation
of
sections
74
to
75.1,
in
respect
of
any
income
from,
or
gain
from
the
disposition
of,
the
property
so
transferred
or
property
substituted
therefor,
and
(e)
the
transferee
and
transferor
are
jointly
and
severally
liable
to
pay
under
this
Act
an
amount
equal
to
the
lesser
of
(i)
the
amount,
if
any,
by
which
the
fair
market
value
of
the
property
at
the
time
it
was
transferred
exceeds
the
fair
market
value
at
that
time
of
the
consideration
given
for
the
property,
and
(ii)
the
aggregate
of
all
amounts
each
of
which
is
an
amount
that
the
transferor
is
liable
to
pay
under
this
Act
in
or
in
respect
of
the
taxation
year
in
which
the
property
was
transferred
or
any
preceding
taxation
year,
but
nothing
in
this
subsection
shall
be
deemed
to
limit
the
liability
of
the
transferor
under
any
other
provision
of
this
Act.
(2)
Minister
may
assess
transferee.
The
Minister
may
at
any
time
assess
a
transferee
in
respect
of
any
amount
payable
by
virtue
of
this
section
and
the
provisions
of
this
Division
are
applicable
mutatis
mutandis
in
respect
of
an
assessment
made
under
this
section
as
though
it
had
been
made
under
section
152.
(3)
Rules
applicable.
Where
a
transferor
and
transferee
have,
by
virtue
of
subsection
(1),
become
jointly
and
severally
liable
in
respect
of
part
or
all
of
a
liability
of
the
transferor
under
this
Act,
the
following
rules
are
applicable:
(a)
a
payment
by
the
transferee
on
account
of
his
liability
shall
to
the
extent
thereof
discharge
the
joint
liability;
but
(b)
a
payment
by
the
transferor
on
account
of
his
liability
only
discharges
the
transferee’s
liability
to
the
extent
that
the
payment
operates
to
reduce
the
transferor’s
liability
to
an
amount
less
than
the
amount
in
respect
of
which
the
transferee
was,
by
subsection
(1),
made
jointly
and
severally
liable.
(4)
Special
rules
re
transfer
of
property
to
spouse.
Notwithstanding
subsection
(1),
where
at
any
time
a
taxpayer
has
transferred
property
to
his
spouse
pursuant
to
a
decree,
order
or
judgment
of
a
competent
tribunal
or
pursuant
to
a
written
separation
agreement
and,
at
that
time,
the
taxpayer
and
his
spouse
were
separated
and
living
apart
as
a
result
of
the
breakdown
of
their
marriage,
the
following
rules
apply:
(a)
in
respect
of
property
so
transferred
after
February
15,
1984,
(i)
the
spouse
shall
not
be
liable
under
subsection
(1)
to
pay
any
amount
with
respect
to
any
income
from,
or
gain
from
the
disposition
of,
the
property
so
transferred
or
property
substituted
therefor,
and
(ii)
for
the
purposes
of
paragraph
(1)(e),
the
fair
market
value
of
the
property
at
the
time
it
was
transferred
shall
be
deemed
to
be
nil,
and
(b)
in
respect
of
property
so
transferred
before
February
16,
1984,
where
the
spouse
would,
but
for
this
paragraph,
be
liable
to
pay
an
amount
under
this
Act
by
virtue
of
subsection
(1),
the
spouse’s
liability
in
respect
of
that
amount
shall
be
deemed
to
have
been
discharged
on
February
16,
1984,
but
nothing
in
this
subsection
shall
operate
to
reduce
the
taxpayer’s
liability
under
any
other
provision
of
this
Act.
Civil
Code
of
Lower
Canada
Art.
1212.
Counter-letters
have
effect
between
the
parties
to
them
only;
they
do
not
make
proof
against
third
persons.
Art.
1234.
Testimony
cannot
in
any
case,
be
received
to
contradict
or
vary
the
terms
of
a
valid
written
instrument.
New
Civil
Code
of
Quebec
1451.
Simulation
exists
where
the
parties
agree
to
express
their
true
intent,
not
in
an
apparent
contract,
but
in
a
secret
contract,
also
called
a
counter
letter....
1452.
Third
persons
in
good
faith
may,
according
to
their
interest,
avail
themselves
of
the
apparent
contract
or
the
counter
letter;
however,
where
conflicts
of
interest
arise
between
them,
preference
is
given
to
the
person
who
avails
himself
of
the
apparent
contract.
2863.
The
parties
to
a
juridical
act
set
forth
in
a
writing
may
not
contradict
or
vary
the
terms
of
the
writing
by
testimony
unless
there
is
a
commencement
of
proof.
It
was
admitted
by
the
appellant
that
throughout
the
period
of
the
transfer
no
rental
was
paid
to
Les
Placements
Gaber
Inc.
Case
law
The
case
law
cited
by
the
parties
is
the
following:
I
-
Marlow
Enteprises
Ltd.
v.
M.N.R.,
67
DTC
26;
2-
Angela
Savoie
v.
Her
Majesty
the
Queen,
93
D.T.C.
552
(T.C.C.
91-372(IT));
3-
Mervin
Holizki
v.
Her
Majesty
the
Queen,
95
D.T.C.
5591
(F.C.
T-2296-89);
4-
Céline
Delisle
v.
Her
Majesty
the
Queen,
95
D.T.C.
650
(T.C.C.
94-505(IT)I);
5-
106443
Canada
Inc.
v.
Her
Majesty
the
Queen,
94
D.T.C.
1663
(T.C.C.
91-191
l(IT)G);
6-
Pierre
Montreuil,
Nicole
Montreuil,
Claire
Montreuil
and
Benoit
Montreuil,
Jr.
v.
Her
Majesty
the
Queen,
94
D.T.C.
1821
(T.C.C.
91-2684(IT)G,
9I-2685(1T)G,
9I-2686(IT)G
and
91-
2687(IT)G);
7-
Liliane
Fournier
Jennewein
v.
The
Minister
of
National
Revenue,
91
D.T.C.
600
(T.C.C.
87-1560(IT)).
Analysis
Counsel
for
the
appellant
argued
that
essentially
there
was
a
verbal
agreement
between
Les
Placements
Gaber
Inc.
(the
lender)
and
the
appellant
(the
borrower)
that
when
the
debt
was
completely
repaid,
with
interest,
the
immovable
property
would
be
returned
to
the
borrower.
This
contention
was
confirmed
by
the
testimony
of
the
three
witnesses
([20]).
Additionally,
the
resolution
by
Les
Placements
Gaber
Inc.
([22])
of
October
22,
1993
(Exhibit
1-1,
tab
15)
and
the
clauses
of
the
contract
regarding
the
selling
price
(Exhibit
I-1,
tab
14)
confirm
the
testimony
of
the
witnesses.
Counsel
for
the
appellant
argued
that
there
had
not
been
a
real
transfer
between
the
appellant
and
Les
Placements
Gaber
Inc.,
and
vice
versa.
In
the
submission
of
counsel
for
the
appellant,
what
should
be
considered
is
the
intent
of
the
parties
-
this
was
a
sale
with
an
intention
to
repurchase
or
a
sale
with
a
right
of
redemption.
In
106443
Canada
Inc.
([27]
5-)
at
page
1665
this
Court
said
the
following:
The
transferor
must
not
have
the
intention
of
absolutely
giving
up
ownership
to
the
property
transferred.
He
must
retain
the
power
of
recovery.
It
must
be
possible
to
infer
from
the
circumstances
of
the
transfer
of
ownership
that
the
transferor’s
intention
was
not
to
give
up
the
ownership
of
property
and
that
he
only
gave
it
up
temporarily
and
in
order
to
provide
security
for
a
loan.
According
to
counsel
for
the
appellant,
in
taxation
matters
substance
prevails
over
form.
However,
there
is
nothing
in
the
registration
of
the
mortgage
and
the
transfer
of
the
immovable
to
Les
Placements
Gaber
Inc.,
as
ordered
in
the
Superior
Court
judgment,
to
indicate
the
possibility
of
repurchase
upon
payment
of
the
mortgage
in
full.
The
passage
from
the
judgment
cited
above
in
paragraph
[19]
is
clear.
There
was
a
full
and
final
transfer
making
Les
Placements
Gaber
Inc.
the
sole
owner,
striking
out
other
mortgages
and
directing
the
defendants
to
vacate
the
immovable
within
15
days.
As
the
repurchase
agreement
was
relied
on
by
the
parties
it
may
be
regarded
as
a
counter-letter.
A
counter-letter
is
a
private
writing
for
the
purpose
of
recording
the
true
intent
of
parties
who
have
indicated
a
different
intent
to
the
public.
In
the
instant
case,
there
is
no
indication
in
the
deed
of
transfer
to
Les
Placements
Gaber
Inc.
of
such
a
repurchase
agreement
clause.
That
intent
appears
in
the
resolutions
of
Les
Placements
Gaber
Inc.
and
is
not
apparent
to
the
public,
namely
third
parties
([28]).
As
Parliament
has
been
so
strict
in
protecting
the
rights
of
third
parties
against
a
counter-letter,
which
is
a
writing,
the
Court
must
a
fortiori
protect
third
parties
against
a
mere
verbal
agreement,
which
is
in
any
case
regarded
as
a
counter-letter
by
legal
writers.
Articles
1212
of
the
Civil
Code
of
Lower
Canada
and
1451
and
1452
of
the
Civil
Code
of
Quebec
provide
that
counter-letters
have
effect
between
the
parties
to
them
only
-
that
is,
in
the
present
case,
between
Les
Placements
Gaber
Inc.
and
the
appellant
-,
and
not
against
third
parties.
The
respondent
claims
to
be
a
third
party
-
which
is
not
in
dispute
-
as
already
established
by
this
Court
in
Liliane
Fournier
Jennewein
([27]
7-).
The
basis
of
the
rule
in
art.
1234
of
the
Civil
Code
1s,
inter
alia,
the
need
for
legal
stability,
and
hence
economic
and
social
stability,
in
contractual
relations.
Article
1212
of
the
Civil
Code
of
Lower
Canada
and
arts.
1451
and
1452
of
the
Civil
Code
of
Quebec
are
the
counterparts
of
art.
1321
of
the
Code
Napoléon.
The
latter
reads
as
follows:
[TRANSLATION]
Counter-letters
can
only
be
effective
between
the
contracting
parties:
they
have
no
effect
against
third
parties.
In
Liliane
Fournier
Jennewein,
in
paragraph
4.03.5,
the
Court
referred
to
the
following
comment
by
Beaudry-Lacantinerie:
[TRANSLATION]
However,
the
purpose
of
the
lawmakers
in
art.
1321
was
to
prevent
possible
prejudice
to
the
general
public
from
the
application
of
an
unknown
counterletter,
so
their
provision
protects
not
only
those
against
whom
the
act
is
directed
with
a
fraudulent
intention
but
also
all
those
whose
interests,
assessed
from
the
point
of
view
of
the
apparent
situation
of
the
author,
it
happens
to
infringe.
This
purpose
of
protection
enables
third
parties
to
rely
on
the
effects
of
the
apparent
contract.
The
holder
of
the
rights
recognized
in
the
counterletter,
namely
the
appellant,
acted
in
good
faith
but
must
suffer
the
tax
consequences
of
the
simulated
transaction
and
the
indebtedness
of
Les
Placements
Gaber
Inc.
to
the
respondent.
The
terms
of
ss.
160(1),
160(2)
and
160(3)
of
the
Income
Tax
Act
are
clear.
Any
transfer
of
property
between
two
persons
not
dealing
at
arm’s
length,
when
one
of
those
persons
owes
tax,
makes
them
jointly
and
severally
liable
for
the
amount
owed
to
the
Department
of
National
Revenue.
As
the
notarial
deeds
are
proof
of
their
contents
in
the
instant
case
and
establish
the
transfer
of
the
immovable
from
the
appellant
to
Les
Placements
Gaber
Inc.,
the
appellant
is
liable
for
payment
of
the
$22,215.52
($1,530.46
+
$20,685.06)
([5])
in
tax
owed
by
Les
Placements
Gaber
Inc.
It
may
be
asked
whether,
if
the
facts
here
had
occurred
in
another
province
where
the
Civil
Code
and
counter-letters
did
not
exist,
the
appeal
would
have
been
allowed.
The
answer
is
no,
because
the
theory
of
estoppel
by
representation
would
be
applied.
Conclusion
The
appeal
is
dismissed,
without
cost,
for
the
aforesaid
Reasons.
Appeal
dismissed.
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