Ministre Du Revenu National v. Angers, [1999] 4 CTC 158

Nadon J.:

In the case at bar I have to decide the merits of two motions filed by 9024-2991 Québec Inc. (“9024”) and a motion filed by 9041-1612 Québec Inc. (“9041”) objecting to seizures of movable property made on September 23, 1998 and February 16, 1999 on property located at 27 rue Des Nations and 241 boulevard Labbé Nord in Victoriaville, province of Quebec.

The seizures were made pursuant to writs issued by this Court on March 17 and November 26, 1998 after the Minister of National Revenue filed certificates, prepared pursuant to the Income Tax Act, establishing the indebtedness of the defendant Thérèse Angers (also known as Thérèse Gagné) to Revenue Canada. The amounts owed by the defendant to Revenue Canada were $21,857.33 and $5,885.39.

The objections were heard at Québec on March 18 last. At the close of counsel’s argument I dismissed 9024’s objection. I took 9041’s objection under advisement.

The defendant is the president of and sole shareholder in 9024. In her affidavits filed in support of 9024’s two motions and objection, Ms. Anger stated that 9024 [TRANSLATION] “is the sole owner of all the materials and equipment which were seized”.

It should be noted that on October 9, 1998, Ms. Angers, acting in her own name, filed a motion in objection to the seizure made on September 23, 1998 pursuant to the writ issued on March 17, 1998. Ms. Angers simply withdrew this motion in objection on January 8, 1999, the date scheduled for the hearing of her motion. The motions in objection by 9024 and 9041 which are at issue in the case at bar were served on March 4, 1999, two days before the date scheduled for the sale of the property seized. As I indicated above, I dismissed 9024’s motions in objection on March 18 last. The following are the reasons why I came to that conclusion.

By her affidavit dated October 6, 1998, filed in support of her motion in objection filed on October 9, 1998, Ms. Angers stated that she was the owner of the property seized on September 23, 1998, namely the property listed in Appendix I of the motion in objection dated October 6, 1998. That property was the following:

[TRANSLATION]

All materials from demolition or otherwise, such as:

° used building lumber, metal of all kinds, heating pipes, sheet metal, 2x2, 2x4, 2x6 and so on — photos Nos. 1 and 2

° lots of beams of different sizes and lengths — photo No. 3

¢ lot of doors of all kinds and various sizes — photo No. 4

• several four ft. metal fluorescents, several machines of all types — photo No. 5

• bricks and cement blocks of various sizes — photo No. 6

° one gravel bucket and one steam shovel bucket one Reeves machine and one craft — photo No. 7

• all materials at 241 boulevard Labbé Nord, Victoriaville and all equipment

° one 1990 Ford Escort automobile (RPP) Series No. IFABP9193LT162672 (white) — Licence QHG-488

Except for the Ford Escort automobile, the property listed in Appendix 1 of the motion in objection filed on October 9, 1998 is the same property appearing in the defendant’s affidavit filed in support of 9024’s motion in objection in case ITA-2027-98. Accordingly, on October 6, 1998 the defendant stated that she was owner of this property, while on March 3, 1999 she stated that 9024 was owner of the property. These positions are obviously contradictory.

At the hearing of the motion in objection Ms. Angers testified that 9024 had existed since August 1995 and that she was its sole shareholder and president. She explained that 9024’s business was selling used building materials. She further explained that 9024 had bought the building materials claimed from 9017-7411 Québec Inc. (“9017”). This company was wound up in June 1997,

Ms. Angers further explained that she had operated her business under the trade name “T.G. Enr.” for five years. Ms. Angers testified that T.G. Enr. had ceased operations in late 1995 or early 1996.

She filed as Exhibit 6 invoices from Location T.G. Enr. to establish the sale of building materials to 9017 and 9024. She further filed as Exhibit 5 invoices from Gestion T.G. Inc. as proof of work done by 9024 for Location T.G. Enr. In her cross-examination, the defendant explained that Gestion T.G. was the trade name of 9024 and Location T.G. was the trade name of Thérèse Angers. She conceded that 9024 had never made any payment for the purchase of the building materials claimed.

Ms. Angers’ testimony did not seem credible to the Court. She was either confused about her affairs or was trying to conceal the truth. She could not provide an intelligible and credible explanation of the invoices filed as Exhibits 5 and 6. I hesitate to say that Ms. Angers was lying, but the consequence of her testimony was that 9024 could not persuade the Court that it was the owner of the property claimed. It should be noted that despite the fact that she received service of a subpoena duces tecum, Ms. Angers failed to bring with her most of the documents requested by the plaintiff. That is why I have come to the conclusion that 9024’s objection should be dismissed with costs to the plaintiff.

The Court must now consider the objection of 9041, which is claiming the following property:

[TRANSLATION]

¢ One 1998 Kubota R410 tractor, serial No. 10022, with forward shovel:

• one hydraulic metal dumper trailer, serial No. 163782834, 8-wheeler, licence RN 42276;

• one 1989 Deutz tractor, serial No. 2139A, with buckets...

Danielle Janelle is president of 9041. She testified that 9041, the business of which is excavation and demolition, was the owner of the property claimed. In support of her argument Ms. Janelle filed three invoices dated October 14, 1998, showing the sale of the property claimed by 9024 to 9041. Specifically, the invoices showed the purchase of a 1989 Deutz tractor for $1,495.32, the purchase of a Kubota tractor for $2,875.62, and finally the purchase of a trailer-dumper for $5,751.25. Ms. Angers signed the invoices for 9024 and Ms. Janelle signed them for 9041. Ms. Janelle testified that on October 14, 1998 9041 issued three cheques to 9024 (0844, 0840 and 0230).

I note in passing Ms. Angers’ testimony that on October 14, 1998, she sold the property claimed by 9041 to 9024, which as described resold it to 9041. Ms. Angers testified that she received no payment from 9024.

Ms. Janelle also testified on 9024’s indebtedness to 9041. According to Ms. Janelle this indebtedness resulted from work done by 9041 for 9024 and I or Ms. Angers between June and December 1998. The debt also included money advanced by 9041 to 9024 and/or Ms. Angers.

As security for the repayment of its debt of some $40,000 9024, by a deed dated December 7, 1998, mortgaged to 9041 all its present and future claims and all its present and future property described in the mortgage document. Ms. Angers and Ms. Janelle signed the mortgage document for their respective companies. Ms. Janelle testified that at the time the mortgage deed was signed she knew of the seizure which had been made on September 23, 1998.

It should be noted that on December 2, 1998 Ms. Angers sold 9041 two Pieces of immovable property, namely her principal residence at 27 rue Des Nations in Victoriaville and a building located at 241 boulevard L’Abbé Nord in Victoriaville. As the selling price 9041 undertook to pay for and on behalf of the defendant the amounts owed by the latter to the Arthabaska Caisse Desjardins in capital, interest and costs. On December 2, 1998 the balance owed on the immovable property located at 27 rue Des Nations was $33,180.94, and $40,955.48 on the immovable property located on boulevard L’Abbé Nord.

To complete the picture it should be noted that on December 2, 1998 9041 leased Ms. Angers the two aforementioned pieces of immovable property for $400 and $1,000 a month. Finally, on December 4, 1998 Ms. Angers sublet the building located at 241 boulevard L’Abbé Nord to 9024.

Charlotte Lamoureux-Ruelle, a public servant and a recovery officer with Revenue Canada, testified regarding the defendant’s debt. Ms. Ruelle testified that 9024, which was incorporated on August 11, 1995, had filed no tax return since its incorporation. The sum of $21,857.33 owed by the plaintiff concerned the 1993, 1995 and 1996 taxation years, while the sum of $5,888.39 was for the 1994 taxation year.

In her affidavit dated March 3, 1999 in support of 9041’s motion in objection, Ms. Janelle stated, as she did in this Court on March 18 last, that she bought the property claimed in the case at bar, namely a Kubota tractor, a metal dumper trailer and in 1989 Deutz tractor, for and on behalf of 9041. The invoices dated October 14, 1998, filed as No. O-1, confirmed Ms. Ja- nelle’s testimony.

In my opinion there can be no doubt that at the time the property claimed was sold on October 14, 1998 Ms. Janelle was fully aware of the defendant’s financial problems. On that date the defendant and the company owed 9041 at least $40,000. When Ms. Angers and Ms. Janelle went to the motor vehicle bureau to finalize the sale of the vehicles claimed by 9041, Ms. Angers sold the vehicles to 9024, which at once resold them to 9041.

Articles 1631 and 1632 of the Civil Code of Quebec are relevant, and I set them out below:

Art. 1631. A creditor who suffers prejudice through a juridical act made by his debtor in fraud of his rights, in particular an act by which he renders or seeks to render himself insolvent, or by which, being insolvent, he grants preference to another creditor may obtain a declaration that the act may not be set up against him.

Art. 1632. An onerous contract or a payment made for the performance of such a contract is deemed to be made with fraudulent intent if the contracting party or the creditor knew the debtor to be insolvent or knew that the debtor, by the juridical act, was rendering himself or was seeking to render himself insolvent.

In his text Les obligations^ Jean-Louis Beaudoin J., at pp. 375 and 376, says the following regarding Paulian fraud:

[TRANSLATION]

Most academic and judicial authority thus simply requires that the creditor show awareness or knowledge by the debtor at the time the deed is concluded of the negative repercussions it may have on his property and the hardship that it may cause the creditor.

Paulian fraud may be proven by any means. Presumptions of fact resulting, for example, from the timing and nature of the transaction or a relationship between the parties to the deed, may be used to establish it.

On October 14, 1998, at the time of the sale of the property claimed, Ms. Janelle and 9041 knew or should have known that Ms. Angers was seeking to make herself insolvent so as to avoid the payment of her obligations, and in particular the amounts owed to Revenue Canada. Ms. Janelle was aware of Ms. Angers’ financial problems and the fact that some of her property was subject to seizure. In my view, in the circumstances the defendant had only one purpose when she sold property claimed on October 14, 1998, namely evading the payment of her obligations. I can only conclude that Ms. Janelle and 9041 unfortunately tried to help the defendant achieve her objective.

I therefore come to the conclusion that 9041’s objection must be dismissed, with costs to the plaintiff.

Motions dismissed.

^Les obligations, Jean-Louis Beaudoin (4th ed., Les Editions Yvon Blais Inc.), pp. 375-376.