Lussier v. R., [1999] 3 CTC 2213, 99 DTC 435

Tardif T.C.J.:

These are appeals from assessments for 1990, 1991 and 1992. The facts are relatively easy to summarize. Jean-Jacques Lussier, who trained as a psychologist, worked in that capacity at Pavilion Albert Prévost at the Hôpital Sacré-Coeur. He has a licentiate in psychology and has also done doctoral studies, and he was employed as a psychologist at Albert Prévost from 1969 to 1984.

Alongside that work, he started a private practice in 1972. He soon became interested in psychoanalysis, an unregulated field which anyone interested can enter without having to meet any prerequisites. However, there are various self-regulating groups in Canada and Quebec, and in Montréal in particular. For example, there is a corporation and an institute to which practitioners of psychoanalysis are admitted after completing a very elaborate training program involving both practical and theoretical activities.

Psychoanalysis is not a profession under Quebec’s Professional Code (R.S.Q., c. C-26); as a result, there is no recognized professional corporation for psychoanalysts.

After completing all the required steps and undergoing five years of training, the appellant was recognized as a qualified psychoanalyst. He was also directly and actively involved as a member of the executive committee from 1978 to 1981 and as president of the Montréal group from 1988 to 1991.

He said that, starting in 1984, he made a significant shift toward psychoanalysis and gave up the traditional practice of psychology. However, he acknowledged that psychoanalysis can be a means of practising psychology.

He described psychoanalysis as the art of identifying through communication the causes of and reasons for a problem. The goal of psychoanalysis is for those in therapy to ultimately be able to evaluate themselves without help from a third party and thus to find solutions to their problems themselves.

The appellant said that, when 2744-3480 Québec Inc. was created in 1990, he was no longer practising as a psychologist in the traditional sense; he also stated that he was completely and exclusively engaged in psychoanalysis.

On the advice of experts, he founded the company, transferred to it certain assets needed to operate it and registered the firm name “Jean-Jacques Lussier, psychanalyste enr.”

He owned all of the shares issued by the company, whose fiscal year ended on April 30 of each year. The company reported the following income for the years at issue:

1990 = $99,590

1991 = $100,850

1992 = $99,778

The respondent argued that the appellant had to declare as his own the income generated by his psychoanalysis practice in 1990, 1991 and 1992.

The appellant argued that the income in question should be included in computing the income of 2744-3480 Québec Inc., which carried on business under the firm name “Jean-Jacques Lussier, psychanalyste enr.”

In support of the reassessments, the respondent stated inter alia the following:

[TRANSLATION]

12.(a) during the periods at issue, the appellant was a member of the Ordre des psychologues du Québec;

(b) during the periods at issue, the appellant was the sole shareholder of 2744-3480 Québec Inc. (the corporation);

(c) from the time he started practising psychology until April 1990, the appellant reported the income from the practice of his profession as professional income in his personal income tax return;

(d) as of May I, 1990, the appellant began to report his professional income in the tax return of “the corporation” even though he continued to practise as a psychologist;

(e) psychoanalysis is merely a method used by the appellant to practise psychology;

(f) the appellant’s clients during the years at issue dealt with him directly, without going through his corporation;

(g) there was no relationship of subordination or contract of employment between the appellant and the corporation;

(h) it was the appellant and not the corporation that earned the professional income resulting from the practice of his profession of psychologist during the years at issue;

(i) the Minister made the following changes in the appellant’s income for the years at issue:

Statement of adjustments:

		1990		1991		1992
Professional income	$53,425		$101.580		$108,845
rent	$11,680		$ 17,620		$ 18,520
professional dues	$	1,100	$	1,588	$	1,563
depreciation	$	556	$	723	$	578
entertainment expenses	$	100	$	140	$	0
office expenses	$	169	$	1,500	$	0
professional training	$	0	$	3,085	$	0
insurance	$	0	$	200	$	200
pay bonus	$	O	$	6,035	$	8,142
Total of changes
(professional income)	$39,790		$ 70,689		$ 79,842

Counsel for the respondent argued first that the appellant always practised as a psychologist: he totally ignored the evidence establishing that the appellant had given up psychology for psychoanalysis, especially during the years at issue. The only evidence that could warrant counsel’s interpretation is the fact that the receipts he issued at the request of some clients stated that he was a psychologist. The evidence showed that anyone can call himself a psychoanalyst and use that title or claim to be qualified as such, since the profession is not regulated. Moreover, there is no professional corporation that is specifically for psychoanalysts or that has any authority over them. As for training, once again there is none that is recognized. All rules that may exist in this field basically result from a kind of self-regulation by a certain number of psychoanalysts.

The total lack of rules governing the practice of psychoanalysis could have enabled the appellant to disguise or camouflage his psychology practice so that he could carry it on while benefiting from corporate status, which was prohibited by the psychologists’ corporation. However, the evidence showed that the appellant had demonstrated a keen interest in psychoanalysis. He had taken an interest in it and made a significant commitment to it in terms of preparation and development.

The evidence also showed that the appellant’s change of direction and shift toward psychoanalysis happened gradually as he acquired training over a period of about five years. He said that he practised only psychoanalysis in 1990, 1991 and 1992, although this did not mean he was renouncing his primary training in psychology. The Court has no reason not to believe the appellant’s statement that he gave up the practice of psychology for psychoanalysis. Accordingly, the balance of the evidence shows that the appellant did indeed practise psychoanalysis in 1990, 1991 and 1992.

The respondent also argued that the appellant did not change, amend or adjust the way he practised his profession after he incorporated the company and that he was therefore basically engaged in a personal professional activity that had nothing to do with the company he had created.

To back up her arguments, the respondent referred to the fact that the liability insurance policy taken out with the psychologists’ corporation covered the appellant’s personal liability. The respondent also submitted that the fact that cheques for the appellant’s fees were payable to him and that his own name and not the company name appeared on the receipts issued was sufficient to prove unequivocally that the practice of psychoanalysis was carried on personally and exclusively by the appellant.

In addition to the appellant’s failure to include the company name on receipts, the respondent raised the fact that the receipts indicated the appellant was a psychologist rather than solely a psychoanalyst.

The respondent therefore argued that what is involved is basically a question of fact that can be summed up as follows: the appellant practised psychoanalysis in 1990, 1991 and 1992 and must allocate all of the income therefrom to himself personally.

Although that interpretation is supported by some of the facts, I do not accept it because it is neither reasonable nor realistic and, above all, because it does not take account of other facts that are also relevant and available and that cannot be ignored. What I am referring to, of course, is the corporate reality; the evidence showed that a company was duly incorporated with the goal and objective of making psychoanalysis a significant economic activity of that company. After obtaining corporate status, the appellant transferred to the company certain assets specific to the practice of psychoanalysis; he also registered a firm name declaration, which read as follows (Exhibit A-2):

[TRANSLATION]

CANADA

PROVINCE OF QUEBEC

DISTRICT OF MONTRÉAL

SUPERIOR COURT

Declaration

2744-3480 QUÉBEC INC. was incorporated in the province of Quebec by certificate of incorporation issued on November 30, 1989, under the authority of Part IA of the Quebec Companies Act.

Its main place of business in the province of Quebec is at 5420 Grovehill Street, city of Montreal, province of Quebec, H4A 1J9.

The company hereby declares that, since May 1, 1989, its intention has been to carry on the business of providing psychoanalysis services under the name “JEAN-JACQUES LUSSIER, PSYCHANALYSTE ENR”, and that no per- son is associated with it for that purpose.

IN WITNESS WHEREOF, this declaration in quadruplicate has been made and signed by me, JEAN-JACQUES LUSSIER, president of the said company, at Montréal this 2nd day of May 1990.

JEAN-JACQUES LUSSIER

The company’s operations were recorded through an accounting system and records that referred to the usual things, such as furniture, rent, books of account, income, bank accounts, cheques and deposits.

Counsel for the respondent admitted moreover that the company was not a sham. However, he described it as a front for the appellant’s practice.

How can he say that the company was not a sham but a front and at the same time argue that professional activity was not a source of income for that company? I find these positions hard to reconcile without completely ignoring the way a corporation generally operates a service business.

It would certainly have been preferable for the appellant to integrate his mode of practice of psychoanalysis into, and bring it into line with, the corporate reality. That lack of exemplary consistency, which may be common and usual in such matters, was nevertheless ill-considered and unwise. Is this enough to ignore the company’s existence? I do not think so. When it comes to professional services, although the corporate reality may, seemingly at least, be harmful to or destructive of the quality of the relationship of trust that ensures the success of interpersonal communication, this is not a valid excuse for denying the company’s existence.

On the other hand, although corporate status may arouse some suspicion among a clientele that is often inclined to anxiety, this is not a justification for concealing the corporate reality from those who make use of the corporation’s services. In the case at bar, the appellant did not do much to inform his clients that his psychoanalysis practice was part of the economic activities of a company.

Does this mean that the appellant failed to meet his minimum obligations? I do not think so, although he certainly failed to observe the rules of transparency. However, he did not orchestrate anything or plan any strategy to deceive his clients. Being concerned about establishing a relationship of trust that was as personal as possible, the appellant obviously did not take any specific steps to tell his patients that he was working for a company.

The legislature has not required psychoanalysts who provide services through a company to reveal the legal structure behind their professional services. The very existence of corporate status together with the registration of a firm name, is a concrete way of publicizing the situation. The ideal is certainly absolute consistency and transparency, as this makes it possible to avoid confusion and ambiguity.

With respect to services to the public, it is normal, common and even recommended to personalize relations with clients to the greatest extent possible, especially in the health field, where a relationship of trust is essential.

It was just as normal for the appellant to make the most of his status as a psychologist. To argue otherwise is unreasonable, particularly since he had very good reasons for doing so: it no doubt reassured some patients. It was also an additional asset in developing his professional activities.

In a world in which charlatanism is unfortunately all too common, it is natural to make every effort to advertise one’s qualifications and skills, especially if this can have a positive effect. Such behaviour is proper, legitimate and irreproachable.

The appellant never made any false or misleading representations; he basically acted as someone who chose to declare that he was engaged in a service activity and to do everything he could to make the business a success.

Anyone can incorporate or create a company in order to engage in their activities. The rule is that everyone can take advantage of the benefits associated with corporate status. Such limits and restrictions as exist are set by the corporations governing certain professions.

In the case at bar, the professional activity engaged in by the appellant was not subject to any prohibition, which meant that he could create a company and integrate his psychoanalysis practice into that company.

For these reasons, I allow the appeal and find that the net income of $39,750 for 1990, $70,689 for 1991 and $79,842 for 1992 arising out of the practice of psychoanalysis must be included in computing the income of 2744-3480 Québec Inc., which carried on business under the firm name “Jean-Jacques Lussier, psychanalyste enr.”, the whole with costs to the appellant.

Appeal allowed.