[OFFICIAL ENGLISH TRANSLATION]
Date: 20021204
Docket: 2002-199(GST)I
BETWEEN:
LUC BERGERON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] This is an appeal from
an assessment numbered 02304009 and dated October 30, 1998, for the period
from January 1, 1995, to June 30, 1998. The appeal concerns the
assessment and the penalties. The assessment, the interest and the penalties
total $18,405.17.
Facts
[2] The appellant, an
engineer by profession and a well-informed businessperson who had worked in the
construction industry for several years, had a good knowledge of management,
administration and the construction industry.
[3] At the end of 1994, the
appellant, who owned a large lot, decided to construct three buildings on the
lot: two with six apartments and a third with two apartments. The buildings
with six apartments were located at 62, rue Larivière and 4, rue Aqueduc
in Victoriaville respectively; the third building was located at number 60,
also on rue Larivière.
[4] The appellant, who was
very familiar with the rules of self-assessment in business matters,
nevertheless stated that he was not aware that he was subject to these rules if
he constructed buildings for himself.
[5] The appellant then
checked with Guy Samson, his brother-in-law, a Revenu Québec employee.
Mr. Samson apparently told the appellant that self-assessment was not
required for the construction of buildings the appellant would own himself.
[6] The appellant, sceptical
of the information he had been given, checked with his accountant who told him
the opposite, that is, that the self-assessment requirement was indeed
applicable to the appellant. The appellant again consulted his brother-in-law,
who confirmed once more that the appellant was not required to self-assess.
[7] In support of his
claims, the appellant adduced as Exhibit A-5 a signed statement from Mr.
Samson, which reads as follows:
[TRANSLATION]
2002-09-16
I the
undersigned, Guy Samson, state that I provided my brother-in-law
Luc Bergeron with information about certain aspects of the law. I did so
in good faith because Mr. Bergeron knows that I am employed by Revenu Québec. I
had told him that persons who construct buildings for themselves and are not
registered must pay their taxes but need not do anything further. That
information was an error on my part, because the law sets out special terms and
conditions for self-builders (self-assessment).
Guy Samson
[8] After the assessment was
made, the appellant made his objection.
[9] Unable to gather within
the prescribed time period all the vouchers, information and figures to support
his claim, the appellant sought leave for additional time; his request was
denied. In some ways, the hearing is the appellant's first opportunity to put
forward his arguments.
[10] The Court must first
determine the fair market value of the buildings subject to the Goods and
Services Tax ("the GST"). The appellant argued that the value of each
of the two buildings with six apartments, located at
62, rue Larivière and 4, rue Aqueduc in Victoriaville, was
$212,000, and that the value of the third building, located at 60, also on rue Larivière,
was $101,500.
[11] In support of the
appellant's claims, the appellant and René Bacon, an appraiser whose services
the appellant requested, briefly explained the steps they had taken. They
provided very little justification for their appraisals of the buildings subject
to the GST. They assumed that their conclusions would be accepted. Rather than
establishing the soundness of their own appraisals, they challenged the
correctness of the appraisals used by the respondent.
[12] Essentially, the
appellant argued that the fair market value used by the respondent was
incorrect. At the objection stage, the respondent called upon
Francyne Bélanger, an appraiser, to analyse the appellant's claims
concerning the fair market value of the buildings at issue. Ms. Bélanger
did not prepare or submit detailed appraisals. In criticizing the appellant's
appraisals, she relied on the price the appellant himself obtained when one of
the buildings was sold some months after construction was completed; in her
opinion, that price was a reliable and indisputable figure.
[13] In appraising the
buildings at issue, Ms. Bélanger did not have a detailed file prepared;
essentially, she analysed and criticized René Bacon's work and checked certain
figures. She drew conclusions from that exercise; she took for granted that
part of René Bacon's work was in order. In justifying a fair market value
higher than the one claimed by the appellant, she expressed reservations about
other aspects of the work and provided reasons for these reservations.
[14] Computing the GST on a
new building subject to this tax should normally be relatively simple—an exercise based
theoretically on construction costs. This approach is all the more acceptable
given that the courts have stated a number of times that construction costs are
a reliable basis for computing the GST on new buildings.
[15] Appraising is not an
exact science. Generally accepted appraisal practices provide for three very
different approaches: the parity method; what is referred to as the income
method; and what is referred to as the replacement cost method.
[16] In this case, after
analysing the evidence and considering the various arguments by the parties, I
conclude that the respondent's appraisals of the three buildings correspond to
the fair market value that should have formed the basis for computing the GST:
$247,500 for [each of] the buildings located at 62, rue Larivière and
4, rue Aqueduc; and $115,000 for the building located at
60, rue Larivière. My conclusion is based on the following reasons.
·
The buildings with six apartments, located at
62, rue Larivière and 4, rue Aqueduc in Victoriaville, were
sold for a consideration of $247,500 on December 22, 1995.
·
The appellant argued that the consideration obtained was higher than the
fair market value and, as he contended, was the only reason he had decided to
sell. This explanation is self-interested and unsupported by objective facts.
Why would the purchaser have agreed to pay a consideration that was higher than
the fair market value? The purchaser did not testify, and there is no evidence
that justifies or supports the appellant's interpretation.
·
As for the other arguments relating to the furniture in one of the
buildings, the various clauses regarding the benefits conferred when the
initial leases were signed, and the other outlays involved in and for the
management and sale of a condominium taken in exchange, first, the amounts
involved are marginal with no effect on the fair market value and, second, are
irrelevant in determining the values of the buildings at issue in this case.
·
The appellant criticized the respondent for failing to consider the amount
of a transaction occurring more than three years after the building located at
60, rue Larivière was completed when the same information had been
considered decisive in the case of the other building. A period of more than
three years between construction and sale is sufficient to invalidate this
comparison particularly since real estate values fluctuated during this period.
For a great many reasons, the most important of which is the economic
situation, any property can gain or lose considerable value over a period of a
few years.
·
The first two buildings were sold a few months after construction was
completed. This distinction alone invalidates the appellant's argument that the
respondent's approach was inconsistent.
[17] The onus was on the
appellant. In order to discharge this burden of proof, the appellant had to not
only discredit the quality of the respondent's work but also establish convincingly
and conclusively that his claims were justified.
[18] In this respect, the
appellant instead tried to discredit the respondent's work and failed to show
that his claims were justified. His strategies and tactics failed completely.
The appellant not only failed to undermine the quality of the respondent's
arguments but his strategies enabled the respondent to reinforce and strengthen
the soundness of the basis for her appraisals.
[19] In light of the
respective representations by the parties, I conclude that the arguments,
explanations and reasons submitted by the respondent are more credible and thus
make her conclusions more convincing.
[20] Discharging a burden of
proof indeed means criticizing work that has produced a result with which one
disagrees but also, and most importantly, it means presenting credible,
plausible and convincing evidence that the Court can accept in whole or in
part. In the absence of such evidence, an appellant's appeal may well be
dismissed.
[21] In this case, the evidence
adduced by the appellant had two aspects: the first consisted of an oral
explanation and a written document indicating the reasons he failed to
self-assess; the second consisted of a harsh criticism of the respondent's
position to his claims concerning the fair market value.
[22] I exclude the part of the
evidence regarding the appellant's obligation to provide a defence of due
diligence to avoid assessment of a penalty for the following reasons:
·
The appellant was a well-informed businessperson who had every means of
obtaining the relevant information. He first asked his brother-in-law, whose
employment, I agree, might suggest that he had the necessary qualifications to
provide the appellant with appropriate information.
·
In considering it advisable to discuss the matter with his accountant, who
gave him a contrary opinion, the appellant himself admitted to some scepticism.
At that point, the appellant ought to have done what was needed to obtain the
right information from qualified persons who had the skills to provide it and
was required to do so.
·
The appellant not only did no such thing, he again asked his
brother-in-law for confirmation of his first opinion. It is clear to me that
the brother-in-law's opinion made life simpler for the appellant.
[23] Given the employment of
Mr. Samson, the appellant's brother-in-law, the appellant undoubtedly told
himself that, if a problem arose, that employment would be more than sufficient
as an excuse or an explanation to avoid any unpleasant repercussions.
[24] In ordinary
circumstances, that explanation certainly carries some weight; in this case,
however, the circumstances were entirely different. The appellant, an engineer
by profession, had worked in the construction industry for a number of years;
he was familiar with the rules of self-assessment in commercial matters and
quite obviously had access to or associated with a number of professionals who
worked directly in this field. In addition, the applicable rules had been in
force for a number of years.
[25] In these circumstances, I
do not believe that the appellant's behaviour can be described as reasonable.
He chose to do nothing in order to avoid facing a fact that complicated his
life.
[26] Concerning the fair
market value of the buildings that are the subject of the self-assessment, the
appellant has not discharged the onus on him of establishing, on the balance of
evidence, the merits of his claims. Essentially, he criticized and challenged
the work of the respondent, who took advantage of the questions to justify and
strengthen the reasonableness of her conclusions and, at the same time, to
establish that the grounds for appeal were completely unfounded.
[27] For these reasons, the
appeal is dismissed.
Signed at
Ottawa, Canada, this 4th day of December 2002.
J.T.C.C.
Translation certified true
on this 29th day of January
2004.
Sophie Debbané,
Revisor
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