Date:
20010605
Docket:
97-32-IT-G
BETWEEN:
ANDRÉ
POMERLEAU,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Counsel for
the
Appellant:
Jacques Renaud
Counsel for
the
Respondent:
Bernard Fontaine
Reasons
for Judgment
(delivered
orally from the Bench on
April 5, 2001, at Montréal, Quebec,
and revised
on June 5, 2001)
P.R.
Dussault, J.T.C.C.
[1]
Although I made some general comments on the applicability of the
doctrine of estoppel, I never made a ruling in this case. I
merely rejected the argument from the start because it would have
required that the Reply to the Notice of Appeal be amended in the
middle of the hearing, which I refused to allow at that
stage.
[2]
Documents were recently filed in this case, which has been
dragging on for quite a while. A number of pre-trial
conferences were held so that the case could be heard. As a
result of the conference on April 6, 2001, the parties signed a
document stating the following:
[TRANSLATION]
The appellant has made the following admissions of
fact:
A. The following subparagraphs of the Reply to
the Notice of Appeal:
- 8(a), (b), (c), (h), (i),
(j), (r), (s), (t) and (u);
- in subparagraph (v),
"1991" is replaced with "1992".
B. For the purposes of file No. 97-32(IT)G, the
appellant admits that Coffrage Universel Limitée owed the
Minister of National Revenue at least $70,000 in taxes for the
1986 and 1987 taxation years at the time he received a dividend
totalling $70,000 in 1992.
[3]
If one wanted to argue that this was merely a factual admission,
the various facts would have to be separated. The admission that
a liability of at least $70,000 existed was obviously intended to
limit the issues, since that point was no longer in
dispute.
[4] In the view of counsel for
the respondent, the taxpayer was also admitting that he received
a dividend totalling $70,000 in 1992. If one wanted to see the
admission as relating to both a question of law and a question of
fact, the characterization of the amount received as a dividend
is, in my view, a question of law.
[5] When the hearing in this
case began, both parties submitted documents and questioned the
witnesses, and the resulting evidence, which was very clear and
in no way contradicted, was that no dividend was declared or paid
to Mr. Pomerleau in 1992.
[6] The evidence shows that
Mr. Pomerleau received regular paychecks from Coffrage Universel
Limitée ("Coffrage") in 1992 and that the usual
source deductions were made, as was the case for all the other
employees. It was after December 31, 1992, that is, between the
beginning of January and April 1993, and on the advice of
controllers, external auditors and tax experts that the decision
was apparently made to transform what had been a salary into a
dividend after the fact.
[7] The problem is that Mr.
Pomerleau is not a direct shareholder in Coffrage. The documents
submitted make it quite clear that a management company,
Gestion André Pomerleau ("Gestion"), is the
shareholder in Coffrage and that André Pomerleau himself
is the shareholder in Gestion.
[8] What was thus intended was
for Coffrage to declare a $70,000 dividend to Gestion and then
for Gestion to declare that dividend to Mr. Pomerleau. This is
what the only legal documents that exist indicate.
[9] In the two documents
before us - the resolutions dated May 11, 1993 - a
$70,000 dividend is in fact declared, first by Coffrage to
Gestion and, in turn, by Gestion to Mr. Pomerleau (Exhibits
A-11 and A-12).
[10]
Those documents dated May 11, 1993, make no reference to 1992,
and the explanation given by the accountants is that what had
been a salary was magically transformed into a dividend, a
process that was not even directed at the same person since the
recipients of the amounts were not the same. Initially,
Mr. Pomerleau had already received his salary in 1992, and
subsequently, in 1993, it was alleged that a dividend had been
paid by Coffrage to Gestion and then by Gestion to
Mr. Pomerleau.
[11] This
is obviously a fiction that is completely unacceptable. There was
no dividend in 1992. There is no evidence of such a dividend.
Instead, all the evidence tends to show that no dividend was
declared or paid to Mr. Pomerleau in 1992, and the
assessment is based on this.
[12] In
his testimony, and at the request of counsel for the respondent,
Mr. Gagnière said that he knew from his investigation
that the shareholder in Coffrage was Gestion and that the
shareholder in Gestion was Mr. Pomerleau himself.
[13] Mr.
Gagnière also said that he was not the one who decided to
assess the appellant under section 160 of the Income Tax
Act ("the Act"). He said that this was done
by another person, whose name we do not know. That person may or
may not have made the necessary checks. The only documents that
can be found concerning the dividends are the documents dated May
11, 1993, and, as I said earlier, they do not even refer to
1992.
[14]
Thus, the assessment based on the payment of a dividend by
Coffrage in 1992 is wrong, first, because Coffrage never paid a
dividend to Mr. Pomerleau directly. Nor could it have done
so since Mr. Pomerleau is not the shareholder. As for whether an
indirect transfer took place, a dividend would have to have been
paid by Coffrage to Gestion and a second dividend by Gestion to
Mr. Pomerleau.
[15] This
is what the accounting documents indicate, except that they do
not reflect in any way what actually occurred, since a dividend
was never declared or paid to Mr. Pomerleau directly or
indirectly in 1992.
[16] It
is indeed how the financial statements were prepared and how a T5
was issued to Mr. Pomerleau, although there was an error with
respect to the payer. If we refer to Exhibit I-1, which is
Mr. Pomerleau's tax return dated April 29, 1993, with the T5
appended thereto, as well as Coffrage's tax return dated May
31, 1993 (Exhibit A-17), it is clear that the information
is inconsistent, since Exhibit A-17 definitely states that
the dividend was declared to Gestion rather than to
Mr. Pomerleau.
[17] In
any event, no dividend was either declared or paid. The
assessment based on the receipt of a dividend is accordingly
invalid.
[18] The
appeal is therefore allowed and the assessment under
section 160 of the Act is vacated.
[19]
Given the way this case was conducted, the parties will each have
to pay their own costs.
Signed at
Ottawa, Canada, this 5th day of June 2001.
J.T.C.C.
Translation certified
true on this 27th day of November
2002.
Sophie Debbané,
Revisor
[OFFICIAL
ENGLISH TRANSLATION]
Docket:
97-32(IT)G
BETWEEN:
ANDRÉ
POMERLEAU,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
CERTIFICATION OF TRANSCRIPT
Let the attached copy, as revised, of the Reasons for Judgment
delivered from the Bench at the Tax Court of Canada, 500 Place
d'Armes, Montréal, Quebec, on April 25, 2001, be
filed.
Signed at
Ottawa, Canada, this 5th day of June 2001.
J.T.C.C.
Translation certified
true on this 27th day of November
2002.
Sophie Debbané,
Revisor
[OFFICIAL
ENGLISH TRANSLATION]
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