Citation: 2012 TCC 104
Date: 20120425
Docket: 2010-737(IT)G
BETWEEN:
ISABELLA SOKOLOWSKI ROMAR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1]
On May 30, 1996, the appellant
was assessed $949,999 under section 160 of the Income Tax Act (the Act)
following a transfer of property (the family residence) on June 30, 1988,
between her husband, the transferor, and the appellant, the transferee. The appellant
and her husband were married on June 20, 1975, under the partnership of
acquests regime.
[2]
The family residence in
question was purchased on June 4, 1986, and title to the property was in the
name of the appellant's husband. In 1986 and 1987, expecting their family to
grow, the couple made extensive renovations to the home. Applications for
adoption had been submitted in 1985-1986 and, in 1990, the couple adopted two
children. The market value of the family residence is not being challenged in
this litigiation.
[3]
In May 1986, Revenue Canada representatives contacted the appellant's husband concerning his income tax return
for the 1985 taxation year. They then proceeded to audit his 1985 tax return and
on July 17, 1987, he received a letter from Revenue Canada informing him that,
following the audit, Revenue Canada planned to adjust his 1985 tax return,
rejecting the losses of approximately $3 million he had claimed in connection
with a partnership and other expenses and giving him 30 days to make
representations before it issued a new notice of assessment. Revenue Canada continued the audit and ultimately rejected the losses in question claimed by the appellant's
husband.
[4]
At the time of the adoption
applications and the renovations, the appellant stated she wanted greater
financial security and stability since her husband was a businessman. She
wanted to be sure that the family residence would not be exposed to her husband's
business risks. Although no date is provided, the evidence shows that the
couple consulted a notary who was a family friend to ask for advice about their
situation.
[5]
The proposed solution
was for the couple to change their matrimonial regime. The notary then asked
them to draw up a list of their assets. According to the appellant's husband,
the notary prepared a deed of sale on June 30, 1988, in which the husband
transferred the family residence to the appellant. To this end, the notary used
the information he had in his files. The deed of sale was published on July 4,
1988. Paragraph 5 of the deed of sale under the "Declaration" heading
is worthy of reproduction:
[TRANSLATION]
5 - That his civil status has not changed since he became owner
of the location contemplated by this deed of sale, that he is married under the
partnership of acquests regime to buyer Isabella Sokolowski, in accordance with
the laws of the province of Quebec, where they were domiciled when they were
married, on June twenty, nineteen hundred and seventy-five (1975).
[6]
The sale price is $1
and [TRANSLATION] "other good and valuable consideration that the buyer
paid in cash to the seller and that the seller acknowledges receiving from the
buyer, to whom he grants a general and final discharge." The document ends
as follows [TRANSLATION] "after due reading, the parties have
signed…"
[7]
According to the appellant's
husband, when the deed of sale was signed, he had not had time to prepare the
list of their respective assets, which would explain the delay in what subsequently
occurred.
[8]
The notary who prepared
all the relevant documentation died in 1990. The notary who took over his firm
testified that he found two files in the name of the appellant's husband. The
first concerns the husband's purchase of the family residence in 1986 and the
second concerns the change in matrimonial regime, a file that was opened on
February 1, 1989. The latter file contains an undated handwritten note from the
husband listing the assets being partitioned but not their value. The notary found
no file regarding the deed of sale of June 30, 1988, transferring the family residence
to the appellant.
[9]
According to the husband,
the handwritten note was given to the notary in early 1989 and, on April 20,
1989, the appellant and her husband signed an agreement to change their matrimonial
regime before the notary and whereby they adopted the regime of separation as
to property. In a document bearing the same date, the appellant and her husband
proceeded to partition the assets comprised in the partnership of acquests,
which existed until then, and each party transferred to the other assets held
in undivided co-ownership that were not part of their respective lists of
assets to partition. The family residence was part of the list of assets that was
passed to the appellant.
[10]
For the purposes of the
trial, the appellant's husband attached a value to each of the partitioned
assets. The values were reconstructed from documents available at the time. It is
obvious that, according to these values, the partition clearly favoured the husband,
to whom 70% of their combined assets were attributed. The husband's explanation
for this difference was that, for the appellant, what was important was the
family residence and a sailboat that served as a summer residence for the
family. For his part, he wanted to hold on to the cash assets so he could
invest them in his companies. According to the husband and the appellant, the
other valuable consideration to which the deed of sale of the family residence refers
are assets that the appellant conveyed to her husband as part of the asset partitioning
and the value of such assets is sufficient to constitute consideration equal to
the fair market value of the family home.
[11]
On December 13, 1990,
the appellant and her husband, before a notary and in accordance with article
42 of the Act to amend the Civil Code of Québec and other legislative
provisions, declared they did not want to be governed by the provisions of articles
462.1 to 462.3 of the Civil Code of Québec regarding family patrimony
which favour economic equality between spouses. In adopting the provisions
concerning family patrimony, the legislator allowed spouses who were married
before the Act came into effect (July 1, 1989) to make a choice in the
following 18 months, i.e. by December 31, 1990. The concept of family
patrimony, therefore, does not apply in this case.
[12]
The appellant's husband
was reassessed for the 1985, 1986, 1987, 1988, 1989 and 1990 taxation years.
The fact that the husband had a debt to pay under the Act at the time the
family residence was transferred is not being challenged nor is the fact that
the market value of the transferred property at the time was approximately $950,000.
The appellant's position
[13]
The appellant submits that
the transfer of the family residence on June 30, 1988, was completed by
the deed of partition signed by the spouses on April 20, 1989, and that
the consideration given by the appellant for this transfer was equal to or
greater than the fair market value of the family residence based on the values
established by the husband. Based on these values, the husband received
consideration that exceeded the fair market value of the home. In fact,
according to the appellant, this is what she meant when she stated that the
consideration indicated in the deed of sale included [TRANSLATION] "and
other valuable consideration."
[14]
The appellant further
submits that, even if the transfer took place on June 30, 1988, the
consideration is equal to or greater than the fair market value of the family residence
given that the deed of sale indicates consideration of $1 and other good and
valuable consideration. The appellant submits that the value of her husband's
estate was not diminished by the transfer of the family residence to the appellant
and that there was no unjust enrichment of the appellant's estate due to this transfer.
The respondent's position
[15]
The respondent submits
that the deed of sale of June 30, 1988, constitutes a transfer of the
family residence and this deed of sale was published on July 4, 1988, thus
becoming valid against third parties, including the Minister of National
Revenue, in accordance with article 2941 of the Civil Code of Québec (articles
2082 and 2083 of the Civil Code of Lower Canada). On this date, the husband's
tax liability was more than $949,999.
[16]
The respondent submits
that, in the deed of sale of June 30, 1988, the appellant and her husband
declared that there was no draft agreement at the time concerning a change of
matrimonial regime such that this transfer could not be part of the partition
resulting from a change in matrimonial regime on April 20, 1989.
[17]
The respondent further
submits that the change in matrimonial regime was in no way intended to give
any consideration whatsoever to the husband for the transfer of the family residence
on June 30, 1988. The respondent argues that the change in matrimonial
regime is a conventional change of regime according to paragraph 2 of article
465 of the Civil Code of Québec (article 497 of the previous version) and
that, according to this provision, the effects of the dissolution are immediate
such that, in this case, for the appellant and her husband, the effects of the
change in matrimonial regime occurred on April 20, 1989, and not before.
Lastly, the respondent submits that the terms of section 160 of the Act are
clear and that the consideration must be determined at the time of the transfer.
The issues
[18]
Was there a transfer of
the family residence on June 30, 1988, within the meaning of section 160
of the Act and, if so, was the conveyance made for a consideration equal to the
fair market value of the property transferred?
Analysis
[19]
Section 160 reads as
follows:
(1) Tax liability re property
transferred not at arm's length
Where a person has, on or after May 1,
1951, transferred property, either directly or indirectly, by means of a trust
or by any other means whatever, to
(a) the person's spouse or common-law partner or a person who has since
become the person's spouse or common- law partner,
(b) a person who was under 18 years
of age, or
(c) a person with whom the person
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 74.1 to 75.1 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised
Statutes of Canada, 1952, 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 total
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) The Minister may, at any time,
assess a taxpayer in respect of any amount payable because of this section and
the provisions of this Division apply, with any modifications that the
circumstances require, in respect of an assessment made under this section as
though it had been made under section 152.
[20]
The Federal Court of
Appeal in Wannan v. Canada, 2003 DTC 5715 made the following comment
concerning section 160:
[3]
. . . There is no due diligence defence to the application of section 160. It
may apply to a transferee of property who has no intention to assist the
primary tax debtor to avoid the payment of tax. Indeed, it may apply to a
transferee who has no knowledge of the tax affairs of the primary tax debtor.
However, section 160 has been validly enacted as part of the law of Canada. If the Crown seeks to rely on section 160 in a particular case, it must be
permitted to do so if the statutory conditions are met.
[21]
In paragraphs 9, 17 and
18 of Her Majesty the Queen v. Livingston, 2008 DTC 6233, Justice Sexton
of the Federal Court of Appeal laid down the criteria of application of section
160 in connection with the purpose and spirit of subsection 160(1):
[9]
The Tax
Court Judge determined that in
order for subsection 160(1) of the Act to apply, the following four criteria
must be met:
1)
There must be a transfer of
property;
2) The parties must not be dealing at arm's length;
3) There must be no consideration or
inadequate consideration flowing from the transferee to the transferor (I would
note that the trial judge considered the test to be “No consideration or
inadequate consideration flowing from the transferor to the transferee” [emphasis added]: this is a mistaken quotation of the
test as cited in Raphael v.
Canada 2002 FCA 23.); and
4) The transferor must be liable to
pay tax under the Act at that time.
. .
.
[17]
In light of the clear meaning of the words of
subsection 160(1), the criteria to apply when considering subsection 160(1) are
self-evident:
1)
The transferor must be
liable to pay tax under the Act at the time of transfer;
2)
There must be a transfer of
property, either directly or indirectly, by means of a trust or by any other
means whatever;
3)
The transferee must either
be:
i. The transferor's spouse or common-law
partner at the time of transfer or a person who has since become the person's
spouse or common-law partner;
ii. A person who was under 18 years of age
at the time of transfer; or
iii.
A person with whom the
transferor was not dealing at arm's length.
4)
The fair market value of the
property transferred must exceed the fair market value of the consideration
given by the transferee.
[18]
The purpose of subsection 160(1) of the Act is
especially crucial to inform the application of these criteria. In Medland
v. Canada 98 DTC 6358
(F.C.A.) ("Medland") this Court concluded that "the
object and spirit of subsection 160(1), is to prevent a taxpayer from
transferring his property to his spouse [or to a minor or non-arm's length
individual] in order to thwart the Minister's efforts to collect the money
which is owned to him.” See also Heavyside
v. Canada [1996] F.C.J. No. 1608 (C.A.) (QL) ("Heavyside")
at paragraph 10. More apposite to this case, the Tax Court of Canada has held
that the purpose of subsection 160(1) would be defeated where a transferor
allows a transferee to use the money to pay the debts of the transferor for the
purpose of preferring certain creditors over the CRA (Raphael v. Canada 2000 D.T.C. 2434 (T.C.C.) at paragraph
19).
[22]
Therefore, the date the
family residence was transferred must be determined. Was it, as the appellant submits,
part of a larger transaction such that the transfer in question was not
completed until April 20, 1989, or was it a transfer that occurred on June 30,
1988, but with valuable consideration over the fair market value of the family residence?
[23]
The concept of transfer
as used in section 160 of the Act has generated a rich case law in which
Fasken Estate v. the Minister of National Revenue, [1948] Ex. C.
R. 580 has been cited. In that decision, Exchequer Court President Thorsen made
the following comment at paragraph 12:
The word
"transfer" is not a term of art and has not a technical meaning. It
is not necessary to a transfer of property from a husband to his wife that it
should be made in any particular form or that it should be made directly. All
that is required is that the husband should so deal with the property as to
divest himself of it and vest it in his wife, that is to say, pass the property
from himself to her. The means by which he accomplishes this result, whether
direct or circuitous, may properly be called a transfer.
. . .
[24]
And in St. Aubyn v.
Attorney-General [1952] A.C. 15, Lord Radcliffe defined the concept of
"transfer" in almost the same way as President Thorsen did when he
said:
If
the word "transfer" is taken in its primary sense, a person
makes a transfer to another person if he does the act or executes the
instrument which divests him of the property and at the same time vests it in
that other person. (page 53)
[25]
Dunkelman v. Minister
of National Revenue, (1959),
59 D.T.C. 1242, also from the Exchequer Court of Canada, is another relevant authority
concerning the concept of "transfer." In that case, as well as in Fasken
Estate (supra), the issue was whether the attribution rules were
applicable. Another issue in Dunkleman was whether a loan granted to a
trust constituted a transfer within the meaning of subsection 22(1) of the
Income Tax Act, S.C. 1948 chapter 52. After citing St. Aubyn v. Attorney
General, (supra), Justice Thurlow wrote at paragraph 11:
The expression "has
transferred" in s. 22(1) has, in my opinion, a similar meaning. All that
is necessary is that the taxpayer shall have so dealt with property belonging
to him as to divest himself of it and vest it in a person under 19 years of
age. The means adopted in any particular case to transfer property are of no
importance, as it seems clear that the intention of the subsection is to hold
the transferor liable for tax on income from property transferred or on
property substituted therefor, no matter what means may have been adopted to
accomplish the transfer. Nor is the scope of the provision affected or
qualified by expressions such as "as if the transfer had not been made,"
which appeared in the corresponding section of the Income War Tax Act.
Vide McLaughlin v. Minister of National Revenue ([1952] Ex. C.R. 225.). On the
other hand, it is also clear that the subject matter of a transfer that is
within the section must be property of the transferor, not that of some other
person, and if the subsection is to apply, such property must have been vested
by him in a person under 19 years of age.
[26]
Justice Archambault, of
our Court, conducted a case law review on the concept of transfer found in
subsection 160(1) of the Act and added the following concerning the Fasken and
Dunkelman decisions, supra:
The Fasken and Dunkelman decisions indicate, in my
opinion, that in order for there to be a transfer of property for the purposes
of the attribution rules, it is essential that the transferor be divested of
his ownership and that the property has vested in the transferee. The mere
possession of a property that has been loaned with the obligation to return it
does not satisfy this condition. That, I think, is the meaning that must be
given to the expression "pass the property from himself to her.” That is
also the appropriate interpretation of subsection 160(1) of the Act. As Madam
Justice Desjardins said in Medland, supra, at paragraph 14: "… the tax policy embodied in,
or the object and spirit of subsection 160(1), is to prevent a taxpayer from
transferring his property to his spouse in order to thwart the Minister's
efforts to collect the money which is owed to him." …
[27]
Therefore, as of June
30, 1988, there was a notarial deed of sale, duly registered according to the legislation
in force at the time, on July 4, 1988, attesting the transfer of the family residence
to the appellant. According to article 1472 of the Civil Code of Lower
Canada (CCLC) in effect at the time, a sale is a contract by which one
party gives a thing to the other for a price in money which the latter obliges
himself to pay. Still according to the provisions of the CCLC, especially articles
984, 1025, 1472 and 1473, when the sale pertains to a determinate object, which
applies in this case, the property transfer takes place once the contract is
signed. The validity of a contract is recognized when the parties are legally
capable of contracting, their consent is legally given, there is something that
forms the object of the contract and there is a lawful cause of consideration (see
CCLC article 984).
[28]
According to CCLC articles
2082 and 2083, the transfer of the family residence in this case became valid
against third parties upon its registration (today referred to as publication).
In the light of the aforementioned cases (Fasken Estate, St.
Aubyn and Dunkelman) and on the basis of CCLC rules in force at the
time concerning obligations and sale, I find that the "transfer" of
the family residence within the meaning of section 160 of the Act took
place on June 30, 1988.
[29]
The notarial instrument
attesting the transfer of the residence is presumed authentic and is proof of
its content. I reproduce articles 1208 and 1210 of the CCLC:
Art.
1208. A notarial instrument received before one notary is authentic
if signed by all the parties.
If the parties or any
of them be unable to sign, it is necessary, to the authenticity of the
instrument, that the consent given to the instrument by the party thereto who does
not or cannot sign be received in the presence of a subscribing witness.
Any
person of full age and sound mind may be a witness if he is not interested in
the act and is not the spouse of the notary receiving the instrument.
This
article is subject to the provisions contained in the next following article
and to those relating to wills. It does not apply to the cases mentioned in article
2380, when a notary alone is sufficient.
A
deed received before a notary in the Province of Quebec, outside of the Province,
is authentic when the object of the deed is an immoveable or real rights within
the Province, or . . .
Art.
1210. An authentic writing makes complete proof
between the parties to it and their heirs and legal representatives;
1. Of
the obligation expressed in it;
2. Of
what is expressed in it by way of recital, if the recital has a direct
reference to the obligation or to the object of the parties in executing the
instrument. If the recital be foreign to such obligation and to the object of
the parties in executing the instrument, it can serve only as a commencement of
proof.
[30]
The next question is what
consideration the appellant gave her husband as consideration for the
transferred property. I reproduce subparagraph 160(1)(e)(i) of the Act,
which reads as follows:
(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.
[31]
Several judges of this
court have commented on the word “consideration” within the meaning of section
160 of the Act. Judge Bonner in Ruffolo et al. v. Her Majesty the Queen,
99 D.T.C. 184, made the following comment at paragraph 7:
… The word "consideration" in subparagraph 160(1)(e)(i)
is to be given its ordinary meaning, namely, something given in payment.
Nothing in the statutory context or in the purpose which underlies section 160
suggests otherwise.
[32]
Judge Bowie, in Logiudice
v. Her Majesty the Queen, 97 D.T.C. 1462, on page 1466, made the following
comments:
The word consideration, as it is used in
the context of section 160 of the Act, in its ordinary sense refers to the
consideration given by one party to a contract to the other party, in return
for the property transferred. The obvious purpose of section 160 is to
prevent taxpayers from escaping their liability for tax, interest and penalties
arising under the provisions of the Act by placing their exigible assets in the
hands of relatives, or others with whom they are not at arms' length, and thus
beyond the immediate reach of the tax collector. The limiting provision in
subparagraph 160(1)(e)(i) of the Act is to protect genuine business
transactions from the operation of the section, to the extent of the fair
market value of the consideration given for the property transferred. It is apparent, therefore, that for a
transferee to have the benefit of this saving provision she must be able to
prove that the transfer of property to her was made pursuant to the terms of a
genuine contractual arrangement.
[33]
And lastly, concerning
the requirement for consideration set out in section 160 of the Act, Justice
Sexton of the Federal Court of Appeal made the following comment at paragraph 27
of Her Majesty the Queen v. Livingston, 2008 DTC 6233:
Under subsection 160(1), a transferee of
property will be liable to the CRA to the extent that the fair market value of
the consideration given for the property falls short of the fair market value
of that property. The very purpose of subsection 160(1) is to preserve the
value of the existing assets in the taxpayer for collection by the CRA. Where
those assets are entirely divested, subsection 160(1) provides that the CRA's
rights to those assets can be exercised against the transferee of the property.
However, subsection 160(1) will not apply where an amount equivalent in value
to the original property transferred was given to the transferor at the time of
transfer: that is, fair market value consideration. This is because after such
a transaction, the CRA has not been prejudiced as a creditor. Applying such principles to the case at
bar, it is clear that the transaction between Ms. Davies and the respondent
left Ms. Davies without anything equivalent to the property transferred
that could be collected by the CRA, and thus there couldn't possibly be
consideration.
[34]
The appellant submits
that, if the Court were to conclude that the family residence was transferred
on June 30, 1988, the consideration given would then be equal to or
greater than the fair market value of the residence because the appellant and
her husband arranged the transfer to be for $1 and "other good and
valuable consideration." According to the appellant, this other good and
valuable consideration was given as part of the deed of partitioning on April 20,
1989, and, according to the values established, the consideration was greater
than the fair market value of the family home.
[35]
The problem with the appellant's
argument is found in the very wording of the deed of sale of June 30,
1988. Page 3 of the document contains the following paragraph:
[TRANSLATION]
There
is no pending agreement between the spouses concerning the modification of
their civil status or matrimonial regime.
[36]
The same document also stipulates
that the matrimonial regime of the transferor, the appellant's husband, has not
changed since he became the owner of the property and that he is married under
the partnership of acquests regime with the appellant in accordance with the
laws of the province of Quebec.
[37]
Lastly, under the price
heading, the deed of sale reads that final discharge was given for payment of
the consideration:
[TRANSLATION]
This
sale was therefore concluded for the amount of one dollar ($1.00) and other
good and valuable consideration that the buyer has paid in cash to the seller
and that the latter acknowledges having received from the buyer, to whom he
grants a FINAL AND GENERAL DISCHARGE.
[38]
The version of the
facts presented by the appellant and her husband as to the context in which the
transfer of the family residence was made clearly does not correspond at all to
the wording of the deed of sale. The paragraph that most directly contradicts
the appellant's argument is the one stipulating that the parties did not
conclude any agreement with a view to changing the matrimonial regime. Yet according
to the appellant's husband, he consulted his notary to find out how to proceed
to protect himself against his creditors and, at the same time, meet the appellant's
expectations. The proposed solution was to change their matrimonial regime and
to prepare a list of assets to partition to this end. If such was the case on
June 30, 1988, how is it that the notary did not mention it in the deed of
sale? One might also ask why it was necessary to transfer the family residence before
the list of assets to partition was prepared and the matrimonial regime changed.
[39]
The appellant's position
resembles the one found in Allen v. Her Majesty the Queen, 2009 TCC 426.
In that case, although the appellant had admitted that the fair market value of
the property at the time of transfer was $375,000 and that the mortgage balance
was $242,588, she maintained that she and her husband had concluded an oral
contract according to which, following the transfer, she would take the
necessary measures to calculate the net value of her husband's interest in the
property and advance him the funds shortly after the transfer. She therefore
argued that she had paid fair market value consideration for his 50% interest
in the property and that consequently, her liability under section 160 of the Act
was nil. For his part, the Minister had assumed that on the date of
transfer, her husband had conveyed his right to one half of the value of the
property to the appellant for consideration of $2 as indicated in the
documentation. Therefore, the fair market value of the property and the amount
of the mortgage being determined, the Minister had concluded that the net value
of the husband's interest in the property was $66,205.
[40]
Justice Campbell
dismissed the appeal and made the following comments:
32 In
the present appeal, the Appellant testified that their arrangement consisted of
an oral agreement but there was no documentation or other corroborating
evidence to show in fact that there was a promise to pay consideration in the
future. I do not wish this to be taken to mean that I would always require
written documentation. Each case must turn on its own set of facts. However, in
this appeal, I believe there are too many inconsistencies in the evidence to
give any credence to the oral testimony without further corroborating evidence
sufficient to satisfy the onus which rests with the Appellant. Both the
Appellant and her husband were represented by legal counsel who, according to
their testimonies, was fully informed of all material facts surrounding this
transfer. If that were the case, it strikes me as being suspect that the
lawyer, armed with that knowledge, would not have drafted documentation such as
a promissory note to reflect these circumstances. Such a paper trail would have
supported their stated intention respecting the consideration at the time of
transfer.
. .
.
34 Based on the case law,
to avoid triggering the application of section 160, the Appellant must show
that the FMV consideration was provided to Mr. Allen at the time of the
transfer. This is supported by the wording of subparagraph 160(1)(e)(i).
According to the Respondent, this means that consideration must be given at the
time or date of the transfer, which is March 23, 1999 in this appeal. My view,
however, is that the Respondent's interpretation is too literal an
interpretation. If the facts support the existence of a genuine contractual
agreement that provides for FMV consideration, as per the decision in Logiudice,
then this will be sufficient even though actual payment is not provided on the
date of the transfer. The Respondent seems to later agree with this view in her
submissions (Transcript, pages 267-269).
35 The
Appellant has the onus to prove that there was a valid agreement at the time of
the transfer to pay due consideration at a future date. In the present appeal
there is no written contract only an alleged oral agreement according to the
testimonies of the Appellant and her husband. However, there are simply too
many inconsistencies in the testimony to satisfy the Appellant's onus and
support a conclusion that a genuine contractual agreement existed to pay due
consideration post-transfer. Not only must there be evidence of consideration
but the consideration must be sufficient.
[41]
In another decision of
our Court, i.e. Madsen v. Her Majesty the Queen, D.T.C. 369,
which was affirmed by the Federal Court of Appeal, 2006 D.T.C. 6090, Justice
Little had concluded that the appellant's vague promise to pay her husband the
funds required as consideration for his interest in the transferred property
when these funds became available, without any written agreement between them,
did not constitute consideration at the time of the transfer.
[42]
In the case at bar, it
may be true that the appellant wanted to protect the family residence from her
husband's creditors given that she and her husband had filed an application for
adoption, but this adoption did not take place until 1990. There was therefore
nothing urgent in my opinion that could justify the transfer of the family residence
so quickly if it were not to protect it from the husband's creditors. If I were
to accept the appellant's argument that the transfer of June 30, 1988, was part
of a larger transaction that included the change of matrimonial regime and the
partition of their assets on April 20, 1989, I would have to completely disregard
certain clauses of the deed of sale, stipulated earlier, and not question why
the notary who prepared the documents opened just one file on this transaction
in spring 1989 and not another in June 1988.
[43]
Even if I were to
accept the appellant's argument, it is impossible to set a value on the
consideration given by the appellant at the time of transfer because the
partition of assets between the appellant and her husband had not yet been
formalized. The list of partitioned assets (Exhibit A-4) was only prepared at
the beginning of the year following the transfer of the family home. At the
time of transfer, one must be able to assign a value to the expression "other
good and valuable consideration." In my opinion, at the time of the
transfer of the family residence on June 30, 1988, there was no valid agreement
between the appellant and her husband, the transferor, that could establish the
value of the consideration paid over and above the amount of one dollar.
[44]
No document has been
presented to demonstrate that other consideration would be given in the near
future. While it is not always necessary to present written documents, each
case is unique. The testimony heard did not convince me that the appellant and
her husband had agreed on anything other than the sale of the family residence in
June 1988. There was nothing in the deed of sale concerning the change of their
matrimonial regime or other consideration. At most, there was a moral commitment
between them that was not legally enforceable at the time of the transfer.
[45]
Careful examination of
the notarial documents submitted as evidence ultimately supports the idea that the
amount of one dollar was the consideration paid within the meaning of section
160 of the Act when the family residence was transferred on June 30,
1988.
[46]
The appeal must
therefore be dismissed with costs.
Signed at Ottawa, Canada, this 25th day of April 2012.
“François Angers”
Translation certified true
On this 18th day of October 2012
François Brunet, Revisor
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