Citation: 2009 TCC 442
Date: 20090903
Dockets: 2008-1242(IT)G
2007-3503(IT)G
2007-3623(IT)G
BETWEEN:
6149812 CANADA INC.,
VINCENT BOIVIN,
MAURICE BOIVIN IN HIS CAPACITY AS
LIQUIDATOR OF THE SUCCESSION OF THE LATE GABRIELLE GAUTHIER,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Paris J.
[1]
These appeals are from
three assessments made by the Minister of National Revenue under section 160 of
the Income Tax Act (the Act). The assessments relate to a transfer of
$203,075.54 from Maurice Boivin to the succession of Gabrielle Gauthier (the
succession) and to two subsequent transfers from the succession: one to Vincent
Boivin of $40,000 and one to 6149812 Canada
Inc. (the company) of $30,000. The Minister
assessed the succession on the basis that the transfer from Maurice Boivin was
made without consideration at a time when he had a tax
liability.
[2]
Vincent Boivin and the company were assessed on the basis that the
transfers made to
them by the succession were made
without consideration at a time when the succession
was liable under section 160 of the Act as a
result of the transfer from Maurice Boivin to the succession.
[3]
The appellants are challenging
the assessments on the ground that the property initially transferred to
the succession was "exempt from seizure"
under the relevant provision of the Civil
Code of Québec (the Civil Code) and that
section 160 of the Act does not apply to property that is "exempt from seizure".
[4]
In the
alternative, should the Court find that the property transferred to the
succession by Maurice Boivin was not exempt from seizure, the company submits
that the payment it received from the succession was a loan rather than a
transfer without consideration.
[5]
The facts of this case
are for the most part not disputed.
[6]
Gabrielle Gauthier was
the spouse of Maurice Boivin and the mother of Vincent Boivin.
Ms. Gauthier and Maurice Boivin were
shareholders of the company. Ms. Gauthier died on November 4, 2003.
Maurice Boivin was her testamentary
executor and was named the sole heir in her will. According to Ms. Gauthier's will, all property bequeathed by her in
it as well as all property acquired with the proceeds from that property was
exempt from seizure.
[7]
Article 8 of the will reads as follows:
Article Eight
All the property bequeathed herein as well as
that acquired by reinvestment and the proceeds and income from it are
bequeathed as support and will be exempt from seizure for any debt whatsoever
of my legatees unless they consent to have it seized in whole or in part.
This exemption from seizure is given for the
purpose of keeping the legacy in the family for the duration of the life of my
legatee or legatees.
[8]
At the time of her
death, Ms. Gauthier was the sole registered owner of the family residence.
[9]
On November
16, 2004, Maurice Boivin made a proposal under section 50 of the Bankruptcy
and Insolvency Act.
[10]
On March 1, 2005, the succession
transferred the family residence to
Maurice Boivin as the heir named in
Gabrielle Gauthier's will. The same day,
Maurice Boivin sold the residence to
arm's-length purchasers. He deposited the proceeds
from the sale, namely, $203,075.54 in his personal account. On
April 5, 2005, he withdrew that amount from his account and deposited
it in the succession's account.
[11]
On April 6, 2005, the succession issued a $40,000 cheque to
Vincent Boivin, and on June 15, 2005,
it issued a
$30,000 cheque to the company.
[12]
On April 5, 2005, Maurice Boivin had a tax liability of at least
$160,257.91. On July 12, 2005, the succession was assessed for that amount under
subsection 160(1) of the Act. Vincent Boivin was assessed under the same subsection for
$40,000 on December 1, 2005, and the company for $30,000 on July 25, 2007.
[13]
The appellants submits
that the amount received by Maurice Boivin from the
sale of the residence is exempt from seizure pursuant to Article 8 of
Ms. Gauthier's will and that, as a result, subsection 160(1) of the Act
does not apply.
[14]
The respondent does not dispute that the property
bequeathed by the late Ms. Gauthier to her
spouse was exempt from seizure under to Article 8 of the will. The respondent submits,
however, that that exemption did not extend to
the proceeds from the sale of the property (the
property acquired through reinvestment). According
to the respondent, after the residence was sold, the proceeds from its sale themselves were
not exempt from seizure.
[15]
In the
event that it is found that
the proceeds were not exempt from seizure, the
appellants also submit that depositing the
proceeds of sale into the succession's bank
account did not constitute a transfer within the meaning of subsection 160(1)
of the Act. Counsel for the appellants stated that
Maurice Boivin had deposited the money in the account in order to be able to
identify the proceeds of sale and that he used the money for his own purposes
rather than for any purpose related to the succession. In addition, after the deposit, the account itself was
never used for any purpose related to the succession. Counsel also submitted
that Maurice Boivin never tried to put his property
out of reach of the Minister to hinder the collection of his tax
liability, because the property in question was already exempt from seizure.
Analysis
[16]
The first
issue is whether Article 8 of Ms. Gauthier's will makes exempt from
seizure the property acquired through reinvestment of the property bequeathed
to Maurice Boivin.
[17]
Article
553(3) of the Quebec Code of Civil Procedure provides that property
declared exempt from seizure is exempt from seizure except by a creditor
posterior to the opening of the legacy with the permission of the judge and to
the extent that he determines.
[18]
Article 553(3) reads as
follows:
553. The following are exempt
from seizure:
3° Property declared by
a donor or testator to be exempt from seizure, which may however be seized by
creditors posterior to the gift or to the opening of the legacy, with the
permission of the judge and to the extent that he determines;
[19]
Article
2649 of the Civil Code sets out three conditions for a stipulation of
unseizability to be valid: it must be made in an act by gratuitous title, be
temporary and be justified by a serious and legitimate interest.
[20]
Article 2649 reads as follows:
2649. A stipulation of
unseizability is without effect, unless it is made in an act by gratuitous
title and is temporary and justified by a serious and legitimate interest.
Nevertheless, the property remains liable to seizure to the extent provided in
the Code of Civil Procedure.
It may be set
up against third persons only if it is published in the appropriate register.
[21]
It is not
disputed that those conditions are met in this case with respect to the
property bequeathed to Maurice Boivin by Ms. Gauthier. The respondent submits,
however, that the unseizability does not extend to the property acquired
through reinvestment, even though Ms. Gauthier stipulated it.
[22]
The appellants
cited cases where it was found that property acquired through reinvestment of a
gift or legacy exempt for seizure was exempt from seizure even without a
stipulation of unseizability regarding that property in the deed of gift or in
the will (see Lacroix v. Corbeil, [1955] C.S. 219). However, that
decision does not contain an analysis of that issue; hence, it may not be very
authoritative.
[23]
More
recently, in Robinovitch v. Bank of Montréal, [1999] R.D.I. 160 (C.Q.), the
Court of Quebec suggested in obiter dictum that, in the case of a
testamentary gift, the property acquired in replacement of the property
stipulated to be exempt from seizure would not be exempt in the absence of a
stipulation of unseizability with respect to the replacement property in the
will. In Robinovitch, the applicant inherited from her uncle $125,000 in
money under a stipulation of unseizability. The
applicant purchased an immovable. She paid for part of the immovable with that
money. The Court held that the immovable was
not exempt from seizure:
[Translation]
. . . It was of her own free will that the
applicant decided to mix it with another sum of money and to purchase an
immovable that was not subject to any particular protection. In doing so, she clearly changed the
nature of the property stipulated to be exempt from seizure, resulting in the
loss of its unseizability. . . .
[24]
The
respondent referred to Poulin v. Serge Morency et associés Inc., [1997]
J.Q. No.
2950 (QL), in which the Court of Appeal for Quebec ruled on an issue of unseizability. The
issue was whether sums of money kept in a pension plan were still exempt from
seizure after they had been transferred into an RRSP. The Court (whose decision
was affirmed by the Supreme Court of Canada: [1999] 3 S.C.R. 351) held that
those sums were not exempt from seizure. According to Justice Deschamps at
paragraphs 44, 52, 57 and 74 of the decision,
[Translation]
Seizability is the rule.
Unseizability is the exception and must be
authorized by law. Persons or parties cannot decide
or agree to put their property out of reach of creditors except to the extent
allowed by law.
. . .
Reinvestment cases are exceptional. They are specifically provided for by law
in the area of family patrimony . . . and succession . . . .
. . .
As reinvestment is an exception, the creditor of
protected rights can rely on an exemption from seizure only as long as the sums
retain the characteristics that are the reason the law protects them. He can no longer do so when their
characteristics have changed.
. . .
Unseizability provisions are restricted to the
property designated by the legislature. When the debt is not entered into the debtor's patrimony,
it retains its identity. If the payment or
remittance is conducted by means of a vehicle or by purchasing property
protected against unseizability, the proceeds of the transaction will also be
exempt from seizure. If property that is
not privileged by the legislature is cashed or transformed, the protection is
lost.
[Emphasis added.]
[25]
The Supreme
Court, affirming the Court of Appeal decision in Poulin, rejected the notion
of a general rule of unseizability in reinvestment and restricted the
unseizability of property acquired through reinvestment to cases where it is
explicitly provided for by law.
[26]
The
following is the conclusion reached by Jacques Auger, full professor at the
faculty of law of the Université de Sherbrooke in his article “Les clauses d’insaisissabilité sous la loupe des
tribunaux” [unseizability
clauses examined by the courts], Revue du notariat, vol. 109, March 2007, 87–106. He
made the following comments at page 96 of his article:
[Translation]
. . . Recalling the principle that property can
be seized and that unseizability is an exception, the court refuses to recognize
the unseizability of transferred amounts unless there is an express legislative
provision to that effect.
Extended to the unseizability clause, the ratio
decidendi of that judgment leads to the same conclusion. Indeed, paragraphs 3 and 4 of article
553 of the Code of Civil Procedure, according to which property declared
by a donor or testator is exempt from seizure or is support, do not provide for
the extension of unseizability to property acquired through reinvestment.
Unseizability being the exception, it can only apply when the legislation
provides for it, and the will of a testator or donor cannot be of any effect in
this respect.
[Emphasis added.]
[27]
In the light
of the Supreme Court's decision in Poulin, I must hold that the
stipulation in Ms. Gauthier's will concerning the unseizability of
property acquired through reinvestment of the property bequeathed to Maurice
Boivin is without legal effect. Consequently, the sum received by Maurice
Boivin from the sale of the property is not exempt from seizure and can be
assessed under subsection 160(1) of the Act.
[28]
In the
alternative, the appellants are also submitting that Maurice Boivin's transfer
to the succession of the proceeds from the sale of the property was not a
transfer provided for in subsection 160(1) of the Act because he did not intend
to try to avoid the claims of the Minister of National Revenue.
[29]
I cannot accept that argument. First,
subsection 160(1) does not require an intention to avoid paying the tax
liability (Addision & Leyen Ltd v.
Canada, 2006 FCA 107; Canada v. Rose, 2009 FCA 93). Second, the evidence did not satisfy me that Maurice Boivin
did not intend to place the property in question out of reach of the Minister.
The reason he gave for the transfer, that is, to keep
the money from the sale of the property separate, does not explain why the
money was transferred to the succession's account and not to a separate account
belonging to Maurice Boivin himself.
[30]
With regard
to the numbered company, Maurice Boivin testified that the $30,000 transfer was
a loan to that company. In support of his testimony, he submitted an excerpt from
the company's records, which shows that the company treated the money received
from Maurice Boivin as a shareholder's loan. That
evidence was not contradicted, and I accept that it was a loan rather than a
transfer without consideration within the meaning of subsection 160(1). It seems to me that amounts advanced to a company would be
either loans or capital advances rather than transfers without consideration.
[31]
For all of
these reasons, the appeal from the assessment regarding the company will be
allowed, and the two other appeals must be dismissed.
Signed at Ottawa, Canada, this 3rd day of September 2009.
"B. Paris"
on this 14th day
of October 2009
François Brunet, Revisor
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