[OFFICIAL ENGLISH TRANSLATION]
Date: 20020625
Docket: 2000-4441(GST)I
BETWEEN:
CARAVANE TASCHEREAU INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
P. R. Dussault, J.T.C.C.
[1] This is an appeal from an
assessment made under Part IX of the Excise Tax Act
(the "ETA") for the period from July 1,
1996, to September 30, 1997, notice of which is dated
July 28, 2000, and bears number GG20331.
[2] By that assessment, the Minister
of National Revenue (the "Minister") made adjustments
of $22,394.89 to the computation of the net tax reported and
assessed a penalty of $915.83 and interest of $551.80, for a
total of $23,862.52. By that assessment, the amount of net tax
was established at $16,757.26.
[3] For the purpose of making the
assessment, the Minister relied, inter alia, on the
findings and assumptions of fact stated in subparagraphs (a)
to (j) of paragraph 24 of the Reply to the Notice of Appeal
(the "Reply"). Those subparagraphs read as follows:
[TRANSLATION]
(a) the facts
admitted above;
(b) the appellant is
registered for the purposes of Part IX of the Excise Tax
Act, R.S.C. (1985), c. E-15, as amended
(hereinafter "E.T.A.");
(c) the appellant
operates a business selling trailers, caravans and other
recreational vehicles of the kind, motorized and unmotorized, new
and used (hereinafter "recreational vehicles");
(d) in operating its
business, the appellant also sells on consignment used
recreational vehicles belonging to third parties (hereinafter the
"owners"), mainly individuals not registered for the
purposes of Part IX of the E.T.A.;
(e) during the
period concerned, the appellant made the taxable supply by sale
of 46 used recreational vehicles belonging to owners as agent of
the owners;
(f) the owners
of the used recreational vehicles were not required to collect
the GST in respect of the supply of their vehicle to a
recipient;
(g) however, the
appellant, acting as agent of the owners in the course of its
commercial activities, failed to collect on behalf of the owners
the GST on the taxable supplies that it made to recipients of the
said 46 recreational vehicles at the rate of 7% of the value
of the consideration of the supplies payable by the said
recipients to the appellant and, consequently, did not include
the said amount of GST in computing its net tax;
(h) the amount of
GST payable that the appellant failed to collect was $24,881.50,
the whole as appears in Schedule A forming an integral part
of the Reply to the Notice of Appeal from the worksheet prepared
by an agent of the Minister;
(i) however,
the appellant did calculate an amount of GST on the value of the
consideration of the supply of agency service that it made to the
owners (GST included in the amount paid by the owners), an amount
of GST that it included in computing its net tax;
(j) the amount
of GST that the appellant collected on the supply of agency
service to the owners totals $2,486.61, the whole as appears in
Schedule B forming an integral part of the Reply to the
Notice of Appeal from the worksheet prepared by an agent of the
Minister.
(The schedules are omitted.)
[4] Counsel for the respondent admits
that a transaction described in Schedule A involving a
Viking 96 trailer sold for $6,550, resulting in tax of $458.50,
should not be on the list of transactions assessed. Accordingly,
total taxes stated in that schedule as $24,881.50 should be
reduced to $24,423.00. Furthermore, in subparagraph 24(g)
and paragraphs 25, 27, 28 and 29 of the Reply, the
number 46 should be replaced by the number 45. In
subparagraph 24(h) and in paragraphs 29 and 32 of the
same document, the amount of $24,881.50 should be replaced by
$24,423.00. Lastly, the amount of $22,394.89 stated in
paragraph 32 should be replaced by $21,936.39.
[5] The sole point at issue in this
appeal concerns the application of
paragraph 177(1)(b) of the ETA. That paragraph
reads as follows:
177(1)
Supply on behalf of person not required to collect tax
Where
(a) a person
(in this subsection referred to as the "principal")
makes a supply (other than an exempt or zero-rated supply)
of tangible personal property to a recipient (otherwise than by
auction),
(b) the
principal is not required to collect tax in respect of the supply
except as provided in this subsection, and.
(c) a
registrant (in this subsection referred to as the
"agent"), in the course of a commercial activity of the
agent, acts as agent in making the supply on behalf of the
principal,
the following rules apply:
(e) in any other
case, the supply of the property to the recipient is
deemed, for the purposes of this Part, to be a taxable supply
made by the agent and not by the principal and the agent is
deemed, for the purposes of this Part other than section 180, not
to have made a supply to the principal of services relating to
the supply of the property to the recipient.
...
[6] The respondent contends that the
appellant acted as agent of the owners of the used recreational
vehicles sold, whereas the appellant claims that this was not the
case.
[7] Yvan Gauvreau, the president
of the appellant, testified for the appellant.
Stéphane Deshaies testified for the respondent.
[8] Mr. Gauvreau holds
50 percent of the shares of the appellant's capital
stock. The remaining 50 percent is held by his spouse,
Sylvie Lavigne. Mr. Gauvreau and Ms. Lavigne
acquired the shares of the appellant in 1996. The appellant's
activities, that is, the sale of new recreational vehicles and
what Mr. Gauvreau characterized as the sale of used
recreational vehicles "on consignment", were carried on
at the time, although it stopped selling on consignment.
[9] In his testimony,
Mr. Gauvreau explained that the appellant put part of its
property at the disposal of persons wishing to sell their used
recreational vehicles. A consignment agreement was then signed
between those persons and the appellant (Exhibit A-1).
When a potential buyer appeared, an employee of the appellant
handed that person the keys to the recreational vehicle that he
or she wished to examine or see, which that person did, according
to Mr. Gauvreau, without the help of an employee of the
appellant. If the potential buyer made an offer, usually written,
the seller was informed of the fact by an employee of the
appellant. If the seller accepted the offer, the two parties met
to finalize the transaction and an invoice was issued.
Exhibit A-2, filed in evidence to illustrate a typical
transaction, contains the consignment agreement, the offer to
purchase and the invoice or contract. Payment could be made by
cheque or in cash. If the buyer paid by cheque, the cheque was
made out to the appellant to ensure that it was paid what it was
owed. If the buyer paid cash, the seller received the money and
handed over to the appellant the share that it was owed.
Mr. Gauvreau stated that the seller and buyer met in all
cases to complete the transaction and then to go to the office of
the Société d'assurance automobile du
Québec ("SAAQ") to transfer the
registration.
[10] In cross-examination, Mr. Gauvreau
acknowledged that the contract drawn up on a numbered invoice
forming part of Exhibit A-2 appeared on the
appellant's letterhead. He stated that this was a mistake and
was not usually done. Although only the buyer had signed the
document, Mr. Gauvreau stated that the handwritting on the
document had been done by the seller. The invoice states the date
and the buyer's name and telephone number. The document reads
as follows:
[TRANSLATION]
I (seller's name) agree to sell my trailer (description)
for the sum of ($ ).
This trailer is sold as seen, inspected, examined and accepted by
the buyer.
Amount of the
sale
$( )
Deposit
received
$( )
Paid by
cheque
(date)
Outstanding balance
of
$( )
will be payable in cash or by certified cheque to Caravane
Taschereau Inc. payable upon the closing of the transaction.
Signature
(buyer)
[11] In addition, counsel for the respondent
filed in evidence all the contracts of the recreational vehicles
in issue in the instant case. These are Exhibits I-2
to I-46A. Mr. Gauvreau stated that he did not
recognize the writing of the persons who had drawn up those
contracts. However, an analysis of the documents reveals the
following elements:
(1) Virtually all the contracts
(Exhibits I-2 to I-41) are drafted on identical
invoices numbered sequentially. A number of those invoices bear
the mark of a stamp indicating the name and address of the
appellant.
(2) The other contracts
(Exhibits I-42 to I-46A) are written on new
recreational vehicle sales contract forms on which the words
"Recreational Vehicle Sales Contract" have been struck
out and replaced by the word "Consignment".
Mr. Gauvreau explained that they had been short of invoices
and that the decision had been made to use the other forms and
makes changes to them.
(3) The wording of the contracts, with
the exception of the specific notations, is virtually always the
same or very similar. It almost always contains the following
notation, which is adapted to the vehicle sold and slightly
changed from one contract to the next: "This trailer is sold
as seen, inspected, examined and accepted by the buyer."
(4) Except in four cases
(Exhibits I-18, I-24, I-25 and
I-39), the document always appears to have been written by
the same person.
(5) The contracts are not signed by
the sellers. The signature of Sylvie Lavigne, the
co-shareholder of the appellant, appears on a number of
contracts. Others are signed by the buyers. Lastly, some
contracts bear no signature.
(6) Some contracts bear the letterhead
"Caravane Taschereau Inc. for: (seller's name)"
(Exhibits I-42, I-44A and I-46A).
(7) In one case, a buyer gave the
appellant a deposit on his Visa card. In the cases where a
deposit was given by "certified cheque", the cheque was
evidently made out to the appellant. This fact moreover was
confirmed by Mr. Gauvreau himself.
[12] Thus, as the contracts were drafted on
the appellant's invoices, in most cases by the same person
and, in virtually all cases, using the same wording, it is
difficult to conclude that the appellant was not acting as the
sellers' agent. Moreover it is clearly stated in certain
contracts that the appellant was acting in that capacity.
Furthermore, the absence of any signature by the sellers merely
supports that conclusion. It may simply be inferred that,
contrary to what Mr. Gauvreau stated, the sellers were not
present when the contracts were signed and that the appellant had
acted on their behalf and had been given the deposit by cheque or
in cash.
[13] But there is more. The legal
relationship between the seller of a used recreational vehicle
and the appellant is above all established in a contract that the
appellant had each seller sign at the outset. That document,
which appears as Exhibit A-1 and, in an earlier
version, as part of Exhibit A-2, is entitled:
"Consignment Agreement". The most relevant clauses of
that agreement, which provides first for the identification of
the owner and the description of the vehicle, are quoted word for
word below, with the specific references omitted:
[TRANSLATION]
...
I, identified above and declaring that I am the owner of the
vehicle described above, declare that the vehicle is registered
in my name and that the said vehicle is free and clear of any
lien, right of seizure or forfeiture and/or charge and is subject
to no contract of sale with certain reservations. I authorize
Caravane Taschereau Inc. to sell the vehicle subject to
certain clauses, conditions, amendments or reservations stated
above and below in this agreement.
******************************************************************
CLAUSES, CONDITIONS AND RESERVATIONS BETWEEN THE TWO
PARTIES TO THE AGREEMENT
A. Throughout this
agreement, the word "company" in all cases shall mean
and designate Caravane Taschereau Inc. described above,
and the word "seller" shall in all cases mean the
owner of the vehicle for sale described above, and the
word "buyer" shall in all cases mean and designate
the person acquiring the vehicle.
B. The
clauses, conditions and reservations stated above and below shall
apply to both sides of this agreement.
C. Caravane
Taschereau Inc. and its representatives will act solely as
sales agents for the owner and will at no time, in any way or in
any circumstance before the courts [sic] for false
statements by the seller for certain hidden defects in the
seller's vehicle not reported in this agreement.
D. To avoid any
misunderstanding between seller and buyer, the name of the seller
will always be kept confidential from the buyer and the name of
the buyer from the seller. There is therefore no point in
requesting it; we will protect the confidentiality of both
parties.
******************************************************************
CLAUSES:
1. The seller
agrees to accept the amount of
$ -
dollars
accepts $
.00
dollars
on /
/
accepts
$
.00
date /
/
.
2. A
commission of $
. 00 dollars
shall be deducted from the amount accepted by the seller for the
seller's vehicle at the time payment is made by the company
to the seller for the seller's vehicle.
3. The company
will consider it a duty to transmit to the seller all offers
lower than the one described above, and the seller may accept or
reject the offer. And if the option of a lower offer is accepted
by the seller, the commission will remain the same as the one
described in this agreement.
4. The
commission shall be the same even if the vehicle is sold in a
record period of time.
5. The
commission shall also remain as described above in the agreement
should the seller make the sale himself to one of our customers
to whom the vehicle has been shown or to a buyer whom the seller
himself has found during the time that the seller's vehicle
is for sale on our lot.
6. The seller
grants Caravane Taschereau Inc. the exclusive right to
sell the vehicle described above in the agreement until such time
as the owner of the vehicle repossesses that vehicle.
[14] Those provisions of the agreement, more
particularly clause 6, leave little room for interpretation.
The appellant indeed had a mandate to represent the sellers for
the purposes of proceeding with the sale of their vehicles. The
mandate is specific and expresses the essence of this contract,
as stated in article 2130 of the Civil Code of
Quebec, contrary to what counsel for the appellant claimed.
That provision reads as follows:
Art. 2130. Mandate is a contract by which a
person, the mandator, empowers another person, the mandatary, to
represent him in the performance of a juridical act with a third
person, and the mandatary, by his acceptance, binds himself to
exercise the power.
The power and, where applicable, the writing evidencing it are
called the power of attorney.
[15] It may also be helpful to recall that
the Petit Robert defines the commercial meaning of the
French term "consignation" ["consignment in
English"] as the [TRANSLATION] "handing over of goods
to a merchant (consignee) for sale".
[16] Counsel for the appellant also argued
that the sale of a recreational vehicle was not complete unless
the seller and buyer went together to the SAAQ to change the
registration. This statement is utterly false from the civil law
standpoint. That control measure in no way affects the validity
of the transaction between the parties. Furthermore, for the
purpose of completing that formality, the seller may direct
anyone, the buyer or even the appellant, to represent him. The
SAAQ has even provided a specific power of attorney form for that
purpose, a copy of which, obtained from the appellant by the
auditor, was filed in evidence as Exhibit I-47.
[17] Having regard to the foregoing, I find
that the assessment made under paragraph 177(1)(b) of
the ETA is correct. However, the appeal is allowed and the
assessment is referred back to the Minister for reconsideration
and reassessment on the basis that the amount assessed shall be
reduced by $458.50 as a result of the respondent's admission
that the transaction indicated in paragraph 4 of these
reasons was assessed in error.
Signed at Montréal, Quebec, this 25th day of June
2002.
J.T.C.C.
Translation certified true
on this 17th day of September 2003.
Sophie Debbané, Revisor
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