Landry v. The Queen, docket 96-4196-IT-G

Date: 19990927

Docket: 96-4196-IT-G

BETWEEN:

CLAIRE JEANNE D'ARC LANDRY,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Margeson, J.T.C.C.

[1] This is an appeal from an assessment of the Minister against the Appellant for the year 1992, notice of which was dated January 19, 1996 and numbered 01854. The Minister assessed the Appellant for the amount of $32,190.50, in respect of a transfer, on or about February 24, 1992, of one-half interest in the residence at 824 Radar Road, Hanmer, Ontario, from Leonard Landry to the Appellant, in accordance with section 160 of the Income Tax Act (Act), alleging that the transferor transferred the property to the Appellant for no, or inadequate, consideration at the time when the transferor was liable to pay an amount under the Act.

[2] Several preliminary objections were made to the commencement of the trial by counsel for the Respondent but these were essentially resolved and the trial commenced.

[3] It was agreed that the documents appearing at Tabs 9, 15 and pages 2, 3 and 4 of Tab 8 of the Appellant's Book of Documents (A-1) were prepared on or about the spring of 1995.

[4] An order for exclusion of witnesses was granted. Exhibit R-2, Respondent's Book of Documents, was admitted and Exhibit R-3, Respondent's Book of Supplementary Documents was also admitted into evidence.

[5] In opening the matter, counsel for the Appellant indicated that in 1989 the Appellant acquired a one-half remainder interest in the property in question and her in-laws obtained a life interest in the property. This property was transferred in 1992 with a fair market value of nil, there being no equity in the property as a result of the balance owing on two mortgages registered against the property and the value of the life interest of the Appellant's parents-in-law in the property.

[6] It was counsel's position that the Appellant's husband, in transferring the property, did only what he was legally obligated to the wife to do, as he was indebted to her, at least in an equivalent amount, since she had advanced money to a company which he controlled, and in transferring the property to the Appellant he merely discharged his obligations to her.

[7] Counsel argued that this should not be a 160 assessment.

Evidence

[8] The Appellant was a teacher and the wife of one Leonard Landry. She indicated that Severin and Emma Landry were the parents of her husband. She was living at 824 Radar Road at the time of the trial and earlier resided at 4595 Rita Street. This property had been owned by her in-laws. In Exhibit A-1 at Tab 1 was a purchase and sale agreement between Leonard Landry, Claire Landry and Ronald Gratton and Janice Gratton for the property at 824 Radar Road. The transfer/deed of land to the Appellant and her husband was found at Tab 2. The witness indicated that her parents-in-law had sold their property at Rita Street and had put up $77,500.00 towards the purchase of the Radar Road property. The remainder was financed with a mortgage of $37,000.00. This left a surplus of about $14,000.00 which was used to build new quarters for the in-laws who were 80 and 83 years of age. They had no other money. They were not educated but they could sign their own name.

[9] When the matter of purchase arose the Appellant said that she and her husband did not have $100,000.00 in cash and the in-laws wanted to be assured that they would be protected for the $77,500.00 if they put it into the new property. She and her husband and her in-laws agreed that if they went ahead with the deal that the Appellant and her husband would take the in-laws in at no cost to them and that if they ever gave up the property the Appellant and her husband would have to return the $77,500.00 to the in-laws. Her in-laws had their own lawyer who knew that they were putting up this money for the house, however, they went to see another lawyer, by the name of Mr. Lacroix, to look after the legal matters.

[10] The Appellant said that if they sold the property she would have to borrow money and pay it back to her in-laws and this would apply also if she and her husband separated. The in-laws' lawyer did not prepare any document with respect to this transfer but the agreement between the Appellant, her husband and her parents-in-law was reduced to writing as they had intended. The $14,000.00 was used for renovations to the quarters of the parents-in-law and 900 square feet was added to the house with a foundation. The en suite was in place and the in-laws had use of the whole house.

[11] The witness identified the document at Tab 8 of Exhibit A-1 which was an application to register notice of a non-registered estate, claim, equity in the property in question in this case. This was dated April 25, 1995. At that time the property was registered in the name of the Appellant alone.

[12] In support of the claim was an agreement allegedly made on the 26th day of May 1989 between Severin Landry, Emma Landry and Leonard Michel Landry and Claire Jeanne d'Arc Landry. It was agreed that the document was not signed on May 26, 1989 but the Appellant said that it reflected the agreement that they made before the closing of this property. In essence it purported to give to the parents-in-law an equitable charge or mortgage against the property in the sum of $77,500.00 and would be extinguished upon the death of the last remaining survivor of Severin Landry and Emma Landry.

[13] The document at Tab 5 of Exhibit A-1 was a mortgage against the same property for $32,000.00. The Appellant said that the money was used to allow the husband to buy a boom truck for his company. She was not comfortable with the arrangement but she signed it anyway. The money went into her account, then she made a cheque out to L & H Construction Steelworks Ltd. (Company) for $32,000.00. She had nothing to do with the Company.

[14] It was agreed between her and her husband after August of 1989 (the date of the mortgage) that if anything happened to the husband's business he would sign over the house to the Appellant. At that time the papers had not been signed to protect her parents-in-law with respect to the property but she had told them that she would protect them.

[15] A further security document was found at Tab 12 dated January 23, 1992. This was signed by L & H Construction Steelworks Ltd. and purported to convey any assets of the Company to Claire Jeanne d'Arc Landry and Leonard Michel Landry. The Appellant said that this was in addition to her right to the house.

[16] A further document at Tab 13 was dated February 24, 1992 and was filed in the appropriate provincial office, securing to Leonard Michel Landry and his wife the assets of the Company. The witness said that it was for the benefit of herself and her husband. Form 3C at Tab 12 was a verification statement of the filing of the document of February 24, 1992.

[17] The witness indicated that at the time the business was failing. Her husband signed the house over to her. Finances were bad. Her marriage was bad. The Company paid the mortgage at first and then it was paid by the Appellant herself. She could not say when she started paying the mortgage and she could not find any statements. She thought that she started paying $480.00 in August of 1991 because that is when the Company failed. She was still making payments. This mortgage was for money advanced to buy the boom truck. When the Company failed it had no assets. The truck was seized by Caisse Populaire. The witness said that she received nothing from Leonard Landry or the Company.

[18] Tab 16 contained the transfer/deed of land from her husband to herself which was signed on January 28, 1992 and registered on February 24th, 1992. Again the witness said that the house was transferred because of the agreement that was in place to protect her interest and that of her parents-in-law.

[19] The witness referred to a promissory note at Tab 9 between the Company and Leonard Landry to Claire Jeanne d'Arc Landry in the sum of $32,000.00 in support of the mortgage which was later to be obtained from Caisse Populaire. This note is dated August 21, 1989 but she said that it was signed in the spring of 1995. Likewise, the agreement at Tab 15 which was purportedly signed on February 24, 1992 was signed in 1995.

[20] She said that it was signed in 1995 because her husband was starting to receive papers from Revenue Canada and she wanted to protect her parents-in-law. She confirmed that the agreement was made in 1989. Her mother-in-law died in February of 1998 and her father-in-law in April of 1997. They were never charged any money for living in the house.

[21] She was referred to the date of February 24, 1992 which was the date of the transfer of the property to her. She was asked what would have happened if she had sold the house for $128,000.00 at that time. She said that she would not have received any money because she would have had to give back the $77,500.00 to her parents-in-law and pay out the mortgage. This would exceed the $128,000.00. She said that she and her husband lived with her in-laws all of their married life.

[22] In cross-examination the Respondent introduced Exhibit R-2 by consent and Exhibit R-3 which was admitted subject to proof of individual documents.

[23] The witness confirmed that she purchased the property at 824 Radar Road as evidenced by the transfer/deed of land document seen in Exhibit R-2 at Tab 6. As earlier indicated this was dated May 26, 1989. She said that they needed a mortgage from the Caisse Populaire and they met with a gentleman who approved it. She was referred to a letter from Caisse Populaire to Mr. J. Robert Leblanc dealing with the question as to whether or not the Caisse Populaire was aware that the proceeds of $77,500.00 from the sale of the property of the parents was being utilized by the children for the purchase of their Radar Road property. The answer was somewhat confusing and was not a simple yes or no. Further, the witness was referred to a document from the Caisse Populaire which did not indicate that the in-laws were creditors of the Appellant or her husband at the time that the mortgage was sought. The witness was further referred to a document at page 13, signed by herself and her husband, which set out a set of standard charge terms which indicated that she and her husband owned the property free and clear of many charges (including equitable charges). She was asked whether or not she and her husband were telling the truth when they signed this document and she said that she did not understand it. She did not know what she was signing. She was not worried about it and she did not take it to a lawyer. Then she said that she did not believe that she even read it.

[24] She was asked if the representative of the mortgage company asked her about clear title and she said that she never read it before or up until now. It was pointed out to her that paragraph 17 of the document required the mortgagor to notify the mortgagee of any subsequent charges. The Appellant said that she was unaware of this provision. She admitted that she did not tell the bank that her in-laws had a life interest in the property. She did not know that she had to tell the bank about this interest. She found out later on what a life interest meant. She was not present when the others met with Mr. Lacroix.

[25] She was questioned with respect to her discovery evidence and particularly question 72 which referred to the covenant of good title. In this discovery she was asked if she read these clauses and she said that she probably did. In Court she said that she was very nervous and that to her knowledge the answers given were correct. With respect to the questions and answers numbered 76 and 77 in the discovery, she said that she gave those answers, but in Court she said "I gave them but I did not have a clue as to what the word encumbrance meant." These questions again dealt with the duty to disclose any encumbrances on the property to the mortgagee before the mortgage was completed.

[26] In Court she was asked if she indicated to anyone that she did not understand the word "encumbrance" and she said, "yes". She did not indicate who that was or when. She was referred to questions 80, 81, 82 and 83 where she had answered that no one had an equitable interest in the property. In Court she said that she did not know what the word "interest" meant.

[27] She said that she did not read the documents registering her in-laws' claim in the property and that she just signed the security agreement in Exhibit A-1 at Tab 12 without reading it, although she admitted that it was signed in 1995 and not in 1992 as it seems to suggest. Then she said she did not read it over in 1995 as she trusted others. She did not read the documents before discovery, she received the charge documents but she did not read them over, and the same thing applied to the mortgage that she signed in support of the boom truck loan, even though she signed them. Her general indication was that she might have understood in general terms and that is why she signed them. Further, she admitted that she and her husband had to disclose their debts when applying for the mortgage to buy the boom truck and no mention was made of any encumbrances in favour of her parents-in-law. Further, she did not remember that she discussed the standard charge terms before the mortgage was taken out.

[28] She admitted that when the mortgage was taken out for $96,000.00 in August 1992 that she had concerns about the company position. She described the mortgage as being taken out to consolidate their loans. She admitted that she had to disclose information regarding their debts but she did not disclose a potential claim of her parents-in-law. The mortgage was signed after she received the general security agreement from the Company and after the transfer of the house had taken place for consideration of $2.00. She said that she might have glanced at it. She still did not know what the term "charge" meant.

[29] At the time she signed the mortgage she was concerned about the conditions but she was not concerned about what the standard charge terms were. She thought that she had mentioned to the Caisse that her parents-in-law had an interest in the property. She presumed that they knew because they had been dealing with both of them. She probably told her parents-in-law that if they did not want to live with them anymore that she and her husband would give them back their $77,500.00. Ultimately, the suggestion was that they had a moral agreement only, not a real agreement. She said that her parents-in-law could hardly see and did not know what they were signing. She suggested that the nature of all her evidence was to the effect that the only reason that the money would not be given back would be if the parents died. She believed that the agreement suggested the same thing. She cared a lot about what was in writing but then she said that she did not read agreements.

[30] With respect to the $32,000.00 loan taken out to buy the boom truck for the Company she said that she was not very familiar with business and she was not concerned about it at that time. She assumed that it was going fine. She became concerned as time went on what would happen if they could not pay back the loan against the house. By 1991 she realized that the Company had problems paying the mortgage on the home. She was aware that her security had been registered with respect to the Company and she knew that the boom truck was covered by security as well. She did not know if her husband had given a personal guarantee to the Caisse for money owing by the Company.

[31] She admitted that the three documents that were prepared in 1995 were prepared because Revenue Canada was sending letters to her husband concerning the money that he owed to them for taxes. She was not sure whether they were for personal taxes or property taxes or otherwise. The documents were not prepared to protect against the claim of Revenue Canada for taxes but to protect the interest of her parents-in-law. She said, "they should have been done a long time ago". She was asked why she thought that the execution of the documents at that date would protect the interest of her parents-in-law and she did not answer.

[32] She was asked why the promissory note dated August 21, 1989 was signed in 1995 and she said that it was done to protect her interest and that of her in-laws and not because Revenue Canada was coming around. There was nothing in writing about it up to that time. She did not know why the document did not show any terms of repayment. There were no answers as to why it did not refer to the house or why it was dated 1989, but her indication was that she believed that the documents said that Leonard Landry owed her $32,000.00. She was asked why she received a note in her own name only and not in the name of her parents-in-law. She said that her husband knew that she would look after them. She was asked why she took the note if she was prepared to honour her parents-in-laws' interest. There was no explanation for this. She did not calculate what the interest of her husband was in the house when it was transferred over to her. She said, "I just wanted the house into my name."

[33] She admitted that the house was transferred on February 24, 1992, the security agreement was registered on February 24, 1992 and when she was asked why she said that she did not know. She did not know whether the security document was removed once the house had been transferred over. She did not know what she was receiving when she received the security agreement for the assets of the corporation but she understood only that the property was being signed over to her.

[34] Her dealings with Revenue Canada with respect to her husband's debt may have prompted her to go ahead with the signing of the note and the agreement to protect her but this is not why they were done. The agreement had been drawn up verbally before any of them were reduced to writing.

[35] On October 9, 1998 she was able to have the purported Landry equitable charge removed from the record. Her parents-in-law had passed away.

[36] In re-direct, she confirmed that she believed that the Caisse Populaire knew about the involvement of her in-laws. She said that she did not know what questions 72, 73 and 74 were asking and she did not understand the word. She said that Miss Lanteigne acted for them in the purchase and sale of Radar Road and in the preparation of the mortgage when they borrowed money for the Company. She did not mention a dollar amount to Miss Lanteigne about the interest of her in-laws but they talked about them exchanging their house. She did not remember Miss Lanteigne discussing her obligations under the mortgages in 1989. There was little likelihood that the parents-in-law would move out and ask for their money back.

[37] It was her belief that according to the letter found in Exhibit R-3 at S-7, Revenue Canada would never claim against her again for her husband's taxes under section 160. At that time she had not been assessed under section 160.

[38] André Lacroix was a barrister and solicitor and at the instigation of Miss Lanteigne had seen Severin and Emma Landry who were contemplating moving in with their son and daughter-in-law. They were to contribute money. They discussed an agreement to protect their interest but they decided to do what they planned and not get an agreement.

[39] In cross-examination he said that he did not recall all of the items that he discussed with them. He did not open a file. They had their own lawyer and they had made up their minds.

[40] Nellie Lanteigne was a barrister and solicitor. She acted for the Landrys in 1989 and had acted for them since 1958. She lived next to them. She acted on the Radar Road property and also on the sale of Rita Street. She was familiar with the sale earlier referred to and the mortgage to the Caisse Populaire.

[41] She was definitely concerned about the fact that the in-laws were providing the capital for the new property and the property was to be in the name of the son and daughter-in-law. She asked them to get independent legal advice and to pay attention to her recommendations. She did not want any undue influence or pressure put on them. She was concerned that they were to be protected for the rest of their lives but if nothing was registered against the title there would be nothing to protect them. She believed that they would be cared for by Mr. Landry Junior but if they moved out they would have to be compensated for the payments that they made. She referred them to Mr. Lacroix.

[42] She was referred to the document in Exhibit A-1 at Tab 8 and said that this agreement reasonably reflected what they had agreed to in 1989. Severin and Emma Landry agreed to move into the Radar Road property and to have a granny flat. She questioned them as to what they would do if Claire and Leonard moved out. She was told that rent was to be provided free. All care was to be given free and there was no discussion about who would pay for the food. They did not believe that they would qualify for the loan, and even though the home was to be in the name of Claire and Leonard, the home was really theirs. She was not too familiar with respect to the $30,000.00 mortgage which was subsequently placed against the property except that she knew that it was for Leonard's business. She said that Claire was not very happy about it and she was upset.

[43] In cross-examination she said that the document in Exhibit A-1 at Tab 8 generally reflected the oral agreement. They did not agree to put the equitable mortgage in place which is referred to in paragraph 2 of the agreement. They were comfortable with not placing the mortgage. She could not say if they discussed placing all of the names on the title or not.

[44] She would have mentioned to the Landrys that if they did not register their rights some other creditors might gain priority. They were aware of the fact that they could have lost everything. She prepared the acknowledgement signed by Claire Jeanne d'Arc Landry dated August 21, 1989 which is found in Exhibit R-2, Tab 14 at page 12. She explained it to Mrs. Landry. Then she said I would have told her.

[45] Leonard Landry said that they wanted to buy the Radar Road property and his parents put up their property at Rita Street to enable this to be done. The Grattons bought his parents' place. He confirmed the evidence given with respect to the obtaining of the funds and the mortgage on the property as earlier described by Mrs. Landry. He said that his father did not read or write and his mother could write a bit but only in French. Neither understood English documents. Prior to purchasing the Radar Road property his parents told him that if they put that amount of money in that he would have to take care of them for the rest of their lives. "They would not dish out one penny." Miss Lanteigne discussed it with them and sent him to see Mr. Lacroix. He explained what was happening and said that we should enter into an agreement to show that if anything happened they would get their money back. They did not get an agreement. They shook hands only. His father and mother trusted him.

[46] His wife was the applicant for the $33,700.00 loan and also for the next mortgage. His credit was not that good but his wife had a good job and a good credit rating. Later on the loan to buy the truck was obtained by his wife. A cheque was made out to her and put into her account and then she made out a cheque to the Company for $32,000.00. His parents dealt with the Caisse for years. He confirmed Mrs. Landry's indication with respect to the receipt and disbursement of funds and the building of the addition for his parents.

[47] He identified the mortgage signed by himself and his wife to the Caisse for the money to purchase the boom truck for his company. They would not lend money to the Company according to him. They put a second mortgage on the property. He confirmed the other relevant documents including the note from the Company and himself to his wife, the cheque for the boom truck, the deposit to the bank for the proceeds, the general security agreement found at Tab 12, but he said that he did not understand it. He further identified the documents at Tabs 13, 15 and 16 and said that he signed the agreement with respect to transferring title to his share of the property to his wife on February 24, 1992 because the marriage was not going well, she had made payments since four years and therefore he agreed to transfer the property over. Other than that there was no other consideration for the transfer except that $2.00 which is set out in the document. His wife had to take care of his parents or give back the money. There was still money owing to the Caisse Populaire and Claire has made the payments.

[48] When he transferred the property on February 24, 1992 there was no equity in it since the mortgage was around $68,000.00 and they owed his parents $77,000.00. The house was only worth $130,000.00. His parents celebrated their 70th anniversary in the house and lived there until their deaths. They paid nothing to live there. The father passed way in 1997 and the mother died in 1998.

[49] In cross-examination he said that he did not have the copy of the cheque from the Caisse to his wife but he thought that he gave it to his lawyer. Both himself and Claire were on the title and he only signed as a guarantor when he received the loan for $37,000.00. He signed as a guarantor because they asked him to sign. He was shown the mortgage for $37,000.00 and agreed that he was shown as a principal borrower and not as a guarantor. Likewise, the mortgage for the $32,000.00 showed him as a principal borrower. Likewise, he signed the charge terms in the mortgage as well as signing as principal debtor for the boom truck loan. He said that he signed it in the wrong place, then said that he never read the documents.

[50] When it was pointed out to him that none of the documents indicated that his parents had any interest in the property he said, "Yes, we did not want to put any sticks in the well. The Caisse had knowledge of our affairs." He signed the mortgage for $96,000.00 as spouse in 1992, in August of 1992. Again he was referred to pages 25, 26 and 27 and it was pointed out that he signed as original borrower and disclosed no interest of his parents.

[51] He said that the promissory note in favour of his wife was signed in 1989 when it was dated. Although it was pointed out to him that it had already been admitted that this document had not been signed until 1995. He said that he did not know. He did not know why it would be prepared in 1995 if that is when it was prepared.

[52] He never read the security document dated January 23, 1992 from the Company to his wife. It was done because he owed Claire money, the Company was going nowhere and if anything was left then Claire was going to get it. Again he suggested that he did not read it and he was not interested in it. He suggested that the date of January 23, 1991 found at the back of the document was an error and it should have read 1992.

[53] The house was not mentioned in the security document because the document only dealt with whatever property the Company had. He admitted that the other shareholder had nothing to do with the document and was not aware that it was signed, even though he had a 50% interest in the Company. There were difficulties existing between himself and the other shareholder. He was trying to protect the $32,000.00 investment that was put into the Company for the purchase of the boom truck.

[54] He was asked why the document of February 24, 1992 was prepared when it was and he said that it should have been prepared when they first bought the property but it was not. He did not remember when it was prepared. He never read it. He did not know why it was done. He referred to the transfer/deed of land from himself to his wife for the property in question and it showed consideration as being $2.00 plus natural love and affection. He said that he went by what Mr. Leblanc had told him.

[55] He had some trouble with Revenue Canada for some time. He did not file for the 1989 year on time and did not file for 1990, 1991 or 1992 until 1992. He was fined $1,000.00 for failure to file and had an order to file by March of 1994. He did not know if they were filed before the assessment.

[56] He did not remember the representative from Revenue Canada coming to see him. He might have talked to someone on the telephone and he might have told him that the Company was going to die and that all assets were gone. The only asset left was a pick-up truck. The pick-up truck was sold to Mrs. Landry. He denied that the house was transferred around about the same time in order to protect it against Revenue Canada.

[57] In re-direct Exhibit A-1 was proved.

[58] Mr. Laurent Larocque was an auditor for Revenue Canada. He did a payroll audit for the Company in 1992. He perused a payroll record for 1991 to see if there were any arrears and he assessed some and tried to collect them. He reviewed the payroll records at Leonard Landry's residence and dealt with him in person. He referred his report to collection. He tried to collect the amount owing. He discussed the assets of the Company with Mr. Landry. There was nothing left except personal property. Mr. Landry told him that the property at Radar Road was his wife's.

[59] He was told that the Company assets were taken by the other shareholder of the Company and that he had to pay the Caisse for the value of the truck. He told him that his wife had loaned $30,000.00 to pay some company debts and that the Company was no longer operating. He saw only the payroll records.

[60] In cross-examination he said that he was assessed the amount of $3,097.81 within one to two weeks and $50.00 of arrears. He focused on the Company.

[61] Franco Guescini was a team leader with Revenue Canada. He was a collections officer during the relevant time. He was involved in assessing director's liability against Mr. Landry and that is how Mrs. Landry became involved.

[62] Mr. Landry was a director of a company and was liable for $3,600.00 - $4,000.00 in the fall of 1993. The witness was told by Mr. Landry that he could not pay and that Mr. Guescini could take whatever action he wanted to collect. Mr. Landry said that his wife was supporting him. He asked for an income and expense statement.

[63] He found no encumbrances on the title on behalf of the Landrys' in-laws or on behalf of his wife. He concluded that there was equity in the property. He was unaware of the $32,000.00 mortgage. It was not there.

[64] A refund for Mrs. Landry was intercepted and she agreed to pay the assessment. He released any further claim for the Company account for that particular assessment. He confirmed that he used the figures provided by the Caisse Populaire for the outstanding mortgage balances as of February 25, 1992 of $35,776.04 and $27,843.11. He used these figures in his calculation of the equity.

[65] In cross-examination he said that he is not involved in the original assessment. Mr. Landry had already been assessed in April of 1993 for $3,600.00 or $3,700.00 plus interest. That was all that he was aware of. He was not involved with the other section 160 assessment. He knew that there was a much larger debt owing as well. He was familiar with the procedure used in a section 160 assessment and said that they generally received an appraisal and then they make any adjustments that are necessary. He received an appraisal from the Caisse, he spoke to the bank and obtained a current balance of the mortgages that were registered against the title.

[66] He placed no valuation upon the life interest and he was never involved in that aspect before. He told Mrs. Landry that there were no deductions for equitable interests before he sought an opinion on the subject. He spoke to Mrs. Landry personally even though she had counsel. She called him and he believed that it was proper for him to talk to her. He told her that all proceedings would be stopped if she paid the debt but was referring only to a particular assessment. She saw no need to talk to her counsel.

[67] In re-direct he said that he never received a call from Mr. Leblanc or Mrs. Landry after he sent out the letter that he would not assess her further with respect to that particular assessment.

[68] René Eugene Morel was involved in collections with Revenue Canada. He was involved in this case. It was referred to him for collection of the debt of Mr. Landry for 1992 to 1995. It was assigned to him in July of 1995. He said that they obtained arbitrary assessments based upon the fact that Mr. Landry had not filed returns. They reviewed Mr. Landry's conviction for the years 1989 to 1992 for failing to file. In August of 1995 he spoke to Mr. Landry. He had no assets or means and indicated that there was going to be a bankruptcy. The witness looked for assets and did a property search as well as a vehicle search. They uncovered the section 160 transfer to Mrs. Landry in November of 1995 and sent her a warning letter. He received a letter from Mr. Leblanc explaining why Mrs. Landry was not responsible for the debt. He said that he had no knowledge of the documents referred to before that time nor when they were prepared. They had no bearing on the action that he took. He sought instructions from his superiors and raised the assessment as shown in R-2 at Tab 1. He prepared it himself.

[69] In cross-examination he said that the assessment in question was based upon hard facts. It was an arbitrary assessment only in the sense that it was made without the benefit of any return having been filed by Mr. Landry. It was for the years 1989, 1990, 1991 and 1992. He did not know if he had filed up to that point but he did file later under section 238 proceedings. He did not know whether the assessments were higher or lower. No adjustments were made to the arbitrary assessments.

[70] Once he received the documents from the land titles office he received appraisals from the Caisse Populaire. Then he deducted the encumbrances which were registered against the title. He never considered an unregistered encumbrance. He raised the issue with others in the Department and they said that they did not consider them unless they were registered. He did not speak to the senior Landrys on the issue. He has never considered the effect of a life interest on the assessment.

Argument on behalf of the Appellant

[71] Counsel for the Appellant argued that the evidence on behalf of the Appellant was "divergent" but it was obviously not "coached". Leonard Landry was not sophisticated. The Landrys did not hide the fact that in 1992 they had financial trouble and marital problems. Claire Landry described the terms of the agreement with Mr. and Mrs. Landry senior. It is not a myth because they were signed in 1995. These documents do not counter the evidence that the oral agreement was in place at the time Radar Road was purchased in 1989.

[72] He referred to the evidence of Miss Lanteigne in support of this position. Her evidence corroborated the agreement as well as the evidence of Mr. Lacroix. The only reason that the property was put in the children's names was because the parents did not qualify for a mortgage. The agreements signed in 1995 were merely an attempt to put on paper that which existed heretofore.

[73] With respect to the general security agreement, the dates were 1991 and 1992. The verification statements are independent evidence of the agreement. On the evidence it is open for the Court to decide if they were executed in 1991 or 1992. He referred to the issue of the consideration paid for the transfer which is set out as $2.00 plus natural love and affection in the transfer document. However, Mrs. Landry had made payments on the mortgage for over one year before the transfer had taken place. This financing was put in place to pay for the boom truck. "She took the brunt of everything."

[74] The Appellant refused to admit that at the time of transfer of the property the balance of all amounts that the transferor was liable to pay under the Act was $59,737.70 and this has not been established on a balance of probabilities. It was his position that the underlying facts upon which the assessments were based were not proven. There was no evidence as to how the subsequent filing of returns for Mr. Landry would affect the assessment.

[75] The interest of the parents-in-law is presumed from the financial contribution that they made to the purchase of this property. There have always been equitable mortgages but they have now been codified and they are referred to section 10 of the Statute of Frauds, R.S.O. 1990, c. 19. His position was that this section creates an exception to the provisions of section 1 which requires that every estate or interest in land be in writing.

[76] The Minister took the position from day one that there was no interest even though they had notice of the interest of the Appellant and the parents-in-law before the assessment. Leonard Landry testified that there was no equity in the property at the time of the transfer to his wife because at the time of the conveyance more debts existed against the property than it was worth, based upon the appraisal of $128,000.00 at the time of transfer.

[77] The actions of the Appellant, his wife and the parents-in-law after the initial purchase of the property were corroborative of the agreement which was put in place subsequently. The Court should honour the agreement. The questions to be asked by the Court are as follows:

1) Was there an equitable charge in favour of the Landrys (parents-in- law) for the sum of $77,500.00?

2) If there was, what was the effect on the assessment in question here?

3) Was there consideration for the transfer from Leonard Landry to Claire Landry? Counsel argued that there was because there was consideration which passed;

4) Has the Minister established a valid assessment against Leonard Landry which was the basis for the section 160 assessment?

5) If the Court finds that any trust existed, then a finding should be made in favour of the Appellant.

[78] Counsel argued that there were three kinds of trust which might be found in the present case: (1) an express trust which was formed by the express intention of the parties (but he admits that this is not well documented in this case); (2) a resulting trust; (3) a constructive trust.

[79] Counsel asked the question, was there a common intention to create an oral trust? He says that there was. There was always the right of the senior Landrys to live in the house, to be provided with care, etc. The evidence of this is shown by the testimony of Miss Lanteigne who discussed the matter with the senior Landrys before the property was purchased. He referred to pages 8, 12 and 17 of the transcript of her evidence. The evidence was that they lived out their days on the property. The parties must have intended to create a legal right in favour of the parents-in-law. They intended that the property be held in trust for them.

[80] In the event that the Court should find that there was not this common intention then the Court must consider whether or not there was a resulting trust. In the circumstances of this case, where the property was transferred gratuitously into the names of the son and daughter-in-law on the basis of the money provided by the senior Landrys, then a presumption of resulting trust arises. This presumption can be rebutted by evidence inconsistent with the presumption of a resulting trust such as the evidence of the intention to make a gift. This presumption can be rebutted. And it was rebutted. There was consideration: The son and daughter-in-law had to look after the senior Landrys and had to give the money back under certain conditions. Here there was a resulting trust. There was no presumption of advancement.

[81] The evidence of Miss Lanteigne at pages 7, 8 and 17 of the transcript destroys the presumption in favour of a gift. Counsel relied heavily upon the case of Savoie v. The Queen, 93 DTC 552 (T.C.C.). He submitted that the factual situation in Savoie (supra), was very similar to the one in this case although the facts in this case are more conducive to a favourable finding for the Appellant. The senior Landrys put forward the $77,000.00.

[82] It is true that in the present case the senior Landrys sought legal advice and obtained it. However, this should not be an impediment to the finding of a resulting trust. They trusted their son, this should not be fatal to their cause. Judge Bowman, in the case above referred to, had far fewer facts than those established in the case at bar and he found a trust. Counsel also took some consolation from the case of Holizki v. The Queen, 95 DTC 5591 (F.C.T.D.) particularly at page 35 where Rothstein J. considered not only the evidence of what they said but the evidence of their conduct in the surrounding circumstances. In that case he considered evidence of the accountant as well. Counsel was of the belief that Miss Lanteigne's evidence was corroborative of this intention. In Anderson Estate v. The Queen, 95 DTC 758 (T.C.C.) Mogan, T.C.C.J. applied the presumption of constructive trust between the taxpayer and her sister-in-law.

[83] Counsel argued that there was a constructive trust in this case as well. Such a trust does not depend on the intention of the parties be it expressed or presumed. It was his position that Canadian courts have perceived the constructive trust to be based on unjust enrichment and as a remedy rather than a substantive institution. He referred again to the constructive trust as found by Bowman J. in the case of Savoie (supra) where the Savoies were not educated persons, where they acted as a team and where what was acquired was as a team through their joint efforts. The learned trial judge found that it would be inconceivable to find that her entitlement depended upon a form of conveyance where she did not appreciate the legal implications as such. Counsel contends that the facts in that case are similar to the case at bar.

[84] Counsel referred also to the findings of Bowman J. in the case of Collins v. The Queen, 96 DTC 1034 (T.C.C.) where he concluded that "In light of this I do not think that this court is barred from considering whether the ingredients exist that would permit the application of a remedy arising out of a constructive trust by a court having jurisdiction to do so. If the Tax Court of Canada concludes that they are present it can then go on to determine a point in issue in an appeal under the Income Tax Act."

[85] Counsel argued that in the case at bar we have an enrichment of the younger Landry which is unjust. Counsel was of the mind that the three elements necessary to found an action for unjust enrichment as set out by Bowman J. are: "an enrichment of one person, a corresponding deprivation of the person who supplied the enrichment and the absence of any juristic reasons for the enrichment (such as a decision of two well advised persons to arrange their affairs in a particular way)".

[86] This appeal should be allowed with costs.

Argument on behalf of the Respondent

[87] With respect to the argument that the Minister has not properly established the basis for a section 160 assessment, counsel said that the basis for the assessment was not disputed in the Notice of Appeal and therefore this argument is inappropriate. With respect to the claim that there was an equitable interest in the property in favour of the parents-in-law of the Appellant, counsel argued that the evidence was clear that the parents sold their house and gave the proceeds to their son and daughter-in-law to assist them in buying another house. They gave cash. They had clear legal advice from two lawyers as to the need to protect the parents' interest if they wished to do so. Both of these lawyers were francophones and it cannot be argued that they did not understand what was being discussed because it would have been discussed in French.

[88] The parents rejected the advice because they trusted the children to take care of them. This is clear from the evidence of Miss Lanteigne. She made it clear that there was an agreement in place that Leonard and Claire had an obligation to look after their parents but he did not say that they had an interest in the land secured by the mortgage but that they only had a debt owing to them. They believed that they would never have a problem and that wherever Leonard and Claire went they would be going with them. It was made clear to them by their legal advisors that they would not be protected but they chose to disregard this advice. Mr. Lacroix also suggested that they enter into an agreement and they ignored it as well. Miss Lanteigne made it clear to the parties when the $32,000.00 mortgage was put on the property that the matrimonial property could be seized and no efforts were made to put a mortgage on the property to protect the interest of the parents-in-law. Each time a mortgage was put on the Landrys completed the loan application forms and it was clear that they did not disclose any kind of interest of the parents in the property on Radar Road. They executed a set of standard terms which required them to report any encumbrances against the property such as the alleged claim by the parents-in-law. They indicated that the property was free and clear except as to any encumbrances enclosed by the records. Twice they relied upon this document and had the mortgage company rely upon it. Now they come to Court and argue that there was a trust in favour of the parents-in-law because it is beneficial to do so at this time.

[89] Mr. Landry was asked why he did not disclose any such interest. He said that he did not want to put too many spokes in the well.

[90] Counsel asks that an adverse inference be drawn against the Appellant because she did not call anyone from the bank to say that they had knowledge of the alleged interest of the parents-in-law in the property. The only reason they did not do so was because they were afraid that they would have said that they were not aware of any such interest. It was clear that problems developed with the Company. On February 7, 1992 there was a payroll audit, yet Mr. Landry did not even remember it, even though he has confirmed in Court certain facts that came out in the conversation. He transferred the house on February 24, 1992 to his wife's name. This should make the Court suspicious. No documents were produced to show any interest of the senior Landrys in the property nor did they mention the note. The account was settled by Mrs. Landry after all of the agreements were prepared and in place. In 1995 the interest of Mr. and Mrs. Landry was registered.

[91] After the warning letter was sent to Mrs. Landry about the possible assessment under section 160 a letter was sent by her counsel which was misleading in that it enclosed documents but did not say that the documents were made up after the fact.

[92] There was an alleged promissory note made up in 1995 which was no longer needed since the property had already been transferred. It could only have been intended to mislead Revenue Canada.

[93] Even if there was a claim of Mrs. Landry against the property it should not be for $32,000.00 but only for one-half of the amount since Mrs. Landry owned 50% of the property.

[94] The Court should have a real question about the credibility of Mrs. Landry since her evidence in Court varied considerably from the discovery evidence. It is unreasonable to accept her evidence that she never read documents because she was a trusting person even though she was concerned about protecting her parents-in-law. She said that she signed because her husband told her to do so. That does not make sense because she said that her marriage was failing, the Company was in trouble, so there would be even more reason why she should read them carefully. She rejected the advice of Miss Lanteigne and Mr. Lacroix to put an encumbrance on the title to protect the property for the benefit of Mr. and Mrs. Landry senior.

[95] She acknowledged that she knew when the documents were prepared in 1995 but yet she said that she signed them only because her husband wanted her to do so. Firstly, she said that she signed the documents to protect the senior Landrys, and then she said she signed it because her husband wanted her to.

[96] All of the witnesses testified as to a moral obligation on behalf of the Appellant and her husband to look after the Landrys but no one testified as to a legal obligation. There was no evidence that the Caisse Populaire provided the cheque for the $32,000.00 mortgage.

[97] Mr. Landry said that the agreement between himself and Mrs. Landry was prepared in order to protect the life interest of his parents but it had nothing to do with the life interest of his parents except that it referred to it.

[98] The junior Landrys treated the property throughout as if it were their own. The $32,000.00 mortgage that was taken out had nothing with the senior Landrys. There was an intention by both Mr. and Mrs. Landry to mislead the Court throughout.

[99] Counsel referred to the case of Algoa Trust et al. v. The Queen, 93 DTC 405 (T.C.C.) to set out the purposes of section 160, which is to block the attempt of a taxpayer to transfer a property without consideration to another party when he owes money to Revenue Canada, which property would have been available to satisfy the liability.

[100] In the present case there was no trust because the parties did not intend to create a trust. There was no express trust, there was no constructive trust and there was no unjust enrichment. If there was a trust it was not capable of being transferred to someone else and only the Landrys could enforce it.

[101] Counsel referred to the case of Her Majesty the Queen v. A.D. Friedberg, 92 DTC 6031 (F.C.A.) where Mr. Justice Linden, speaking for the Court, said at page 6032: "In tax law, form matters. A mere subjective intention, here as elsewhere in the tax field, is not by itself sufficient to alter the characterization of a transaction for tax purposes. If a taxpayer arranges his affairs in certain formal ways, enormous tax advantages can be obtained, even though the main reason for these arrangements may be to save tax (see The Queen v. Irving Oil, 91 DTC 5106 (F.C.A.), per Mahoney J.A.). If a taxpayer fails to take the correct formal step, however, tax may have to be paid." Such is the case at bar.

[102] The documents which were executed ex post facto should be given no weight at all by the Court, these are irrelevant.

[103] With respect to the argument regarding the Statute of Frauds, counsel argued that section 1 provides that if the document is not in writing then you are out of luck unless you can bring yourself within the excepting provision of section 10. However, in order for this section to apply there must be a conveyance. The senior Landrys did not convey anything, they handed over the money to their son and daughter-in-law. Therefore, section 10 does not apply.

[104] There was no intention to have an interest in the land reserved to the father and mother-in-law. Their only intention was to have them repaid or to have service provided for them.

[105] Even if there is a trust there is a further problem of the Appellant created by the provisions of section 248.1, because there was still a transfer of what was meant to be caught by section 160. If there was a trust then it was capable of being released by the provision of the services by Leonard Landry and his wife. This was done and therefore the terms of the trust were fulfilled.

[106] Counsel further argued that the promissory note for the $32,000.00 in favour of the Appellant was not a real promissory note. It contained no maturity date and it was not made payable on demand. It is of no consequence. There was no consideration passing from the Appellant to Mr. Landry when he made the transfer of the property to her name.

[107] Counsel relied upon the case of The Canadian Imperial Bank of Commerce (CIBC) v. Morgan (1993), 143 A.R. 36 (Alta. Q.B.) in support of the proposition that the document referred to above was not a note under the Bill of Exchange Act. Therefore, that claim is not proper.

[108] Further, some of the loan was paid off so that the outstanding balance was only $27,843.11 as of the date of transfer. The property and the only claim to which the Appellant would have been entitled would be one-half of that amount.

[109] Counsel argued that in any event the Appellant is entitled to a $500.00 credit since the assessment was in error and the appeal should be allowed with respect to the $500.00.

[110] The appeal should otherwise be dismissed.

[111] Counsel also wished to make a submission to the Court after the filing of the decision in this matter with respect to the awarding of costs on a solicitor-client basis.

Rebuttal

[112] In rebuttal, counsel said that what took place here was actually a swap of houses in that the senior Landrys conveyed their house over to the vendors of the house purchased by the Appellant and her husband and therefore there was a conveyance under the Statute of Frauds.

[113] Further, counsel argued that there would be an unjust enrichment to the Appellant and her ex-husband in the event that the Court does not recognize the claim of the senior Landrys in the property.

[114] On the issue of consideration for the $32,000.00 mortgage, counsel argued that there was a debt owing from Leonard Landry to Claire Landry. Leonard Landry transferred one-half of the interest in the property to Claire Landry and he was thus discharging his obligation to her. Therefore, the question has to be asked: What did Leonard Landry convey to Claire Landry and what did he receive in consideration therefore? The answer is that Claire Landry gave up real value for the transfer and consequently the value of the equity in the transferred property as determined by the Minister should be reduced by $32,000.00 or at least by the amount of $16,000.00 in the event that the Court should find that one-half of the interest in the loan was that of the Appellant.

[115] On the matter of the trust, counsel argued that at the time of the transfer the senior Landrys were still living in the property and one could not determine if the conditions of the trust would be met or not. In any event, no one would want to purchase the property with those trust conditions attached to it. Therefore, the value of the equity in the property should be reduced by the amount of the advance of $77,500.00.

[116] Counsel also pointed out that he made a strategic error in that he did not call the manager of the Caisse Populaire because he gambled on this witness being called by the Respondent and she did not call him.

Analysis and Decision

[117] The ultimate question in this case is the value of the equity of the Appellant in the transferred property at the time of the transfer which was February 24, 1992. The Minister assessed the Appellant on the basis that the equity of the Appellant in the property at the time of the transfer was $32,690.50 although it has been agreed that this amount was incorrect due to an arithmetic error and that the amount of assessment should have been $32,190.50. The Minister assessed that amount against the Appellant on the basis of section 160 of the Act claiming that it represented the Appellant's equity in the property at the time of the conveyance on or before February 24, 1992.

[118] In order for the Appellant to be successful in this case, she must establish on the balance of probabilities that this assessment was incorrect. The Appellant argues that at the time of the transfer there was no equity in the property on behalf of her husband and indeed the combined value of the encumbrances against the property were in excess of the value of the property which was appraised at $128,000.00. Counsel put forward the case by asking four questions:

1) Was there an equitable charge against the property to the value of $77,5000.00 in favour of the parents-in-law of the Appellant?

2) If there was, what was the effect of this encumbrance on the assessment of the Minister?

3) Was the transfer to the Appellant by her husband made for valuable consideration?

4) Has the Minister established the factual basis for a section 160 assessment based upon the outstanding liability of the transferor at the time of the transfer?

[119] The Court will deal with question number 4 posed by the Appellant first. The Court has no doubt that the evidence has established beyond any doubt that the basis for the section 160 assessment has been established. The presumption in the Reply to the Notice of Appeal has not been rebutted and indeed there was specific evidence provided by witnesses on behalf of the Appellant that the assessment was well founded. The Court has no doubt that the assessment was based upon proper facts and at the time of the transfer in question the total of all amounts that the transferor was liable to pay under the Act in respect of the taxation year in which the property was transferred or any preceding year was $59,737.70.

[120] Counsel for the Appellant took the position that since he had denied the basis for the assessment and refused to agree in the notice to admit facts that this amount was owing by the transferor, the Minister must produce evidence to satisfy the Court that the basis for the assessment was correct. However, the Minister in the Reply has pleaded that the transferor was liable to pay the above referred to amount under the Act at the time of the transfer and it becomes the duty of the Appellant to satisfy the Court on the balance of probabilities that this was not correct. This, the Appellant has not done, and indeed the Minister has shown on the basis of evidence produced that the basis for the assessment was indeed factually founded and correct.

[121] Ground 4 of the argument submitted on behalf of the Appellant is rejected.

[122] The second important issue is whether or not there was an equitable charge in favour of the Appellant's parents-in-law against the property for the sum of $77,500.00 or any amount. If there was such an equitable charge, then this amount will have to be additionally deducted from the value of the equity of the Appellant as calculated by the Minister. Counsel for the Appellant discussed at length the case law in this respect and a very detailed article on the subject of express trust, resulting trust and constructive trust and concluded that there was a trust in place in favour of the parents-in-law of the Appellant, be it an express trust, a resulting trust or a constructive trust.

[123] The Court has no doubt that there was no express trust created in this case. It agrees with the submission of counsel for the Appellant that this was not well documented and indeed there was no substantial evidence that such an express trust existed. With respect to the argument of resulting trust, counsel for the Appellant took the position that a resulting trust can arise in two circumstances. Firstly, where a settlor creates an express trust but fails effectively to dispose of the entire beneficial interest. This does not occur in the present case as the Court has already found that there was no express trust created.

[124] The second set of circumstances under which a resulting trust arises according to the Appellant's counsel is the case where one person buys a property, such as the parents-in-law in the present case, and transfer the property into the name of their son and daughter-in-law. In such a case, there is ordinarily a presumption of resulting trust in favour of the transferor. This presumption can be rebutted by evidence inconsistent with the presumption of resulting trust such as evidence of the intention to make a gift. The presumption of resulting trust does not arise in case of certain relationships, such as where the transferor/purchaser is the father of the person into whose name the property is placed. In such a case there is instead a presumption of advancement, meaning a presumption of the intention to make a gift. However, counsel argued that this presumption can be rebutted. Initially, counsel argued that the law is such that a resulting trust may arise out of the common intention of the parties but then appeared to admit that this was in effect an express trust.

[125] On the facts of the present case, counsel argued that there was consideration passing from the Appellant and her husband to the parents-in-law in that they had undertaken to look after the husband's parents, to care for them and to give the money back under certain circumstances. In that case, the presumption of advancement had been defeated and there was a resulting trust.

[126] Counsel also argued that the evidence of both lawyers indicated that there was no intention to make a gift and that the presumption of intention to make a gift has been defeated. The creation of the resulting trust should not be defeated because the party sought legal advice because the mother and father trusted their son.

[127] The Court is satisfied that there was no resulting trust in this case and the Appellant cannot be successful on that basis.

[128] Counsel's strongest argument was reserved for the constructive trust which is a trust imposed on the whole of the property by the operation of law. This does not depend on the intention of the parties whether expressed or presumed. Counsel took the position that "Canadian courts have established a general principle of unjust enrichment". The constructive trust has been perceived as, at least generally, to be based on unjust enrichment and has, at least generally, been seen as a remedy rather than as a substantive institution. In the case at bar, there was an unjust enrichment of the junior Landrys at the expense of the senior Landrys as can be seen from the evidence.

[129] Counsel took great consolation from the factual situation in Savoie (supra) arguing that many of the factors that Judge Bowman considered there in finding a constructive trust applied equally to the facts of the present case. They urged that the Court should find common intention in the parties under the circumstances to create the trust. Further, Mr. and Mrs. Savoie were not educated persons not unlike the senior Landrys in the case at bar. Presumably they were arguing that it would be inconceivable for this Court to deny the entitlement to the senior Landrys and find that the right to such a share depended upon a form of conveyance which they did not appreciate. On the other hand, counsel for the Respondent pointed out that there was clear evidence that legal advice of two lawyers had been sought by all of the parties in this case, both the parents and the Appellant and her husband. Apparently there was no language barrier or any other reasons which could have accounted for the failure to put in place a specific trust which protected the alleged intended interest of the senior Landrys in spite of the clear indication of two lawyers that they should do so. Consequently, as counsel argued, Savoie (supra) does not apply because even in that case, the learned trial judge indicated that the situation is different when people make a conveyance with full appreciation of the legal consequences of what they are doing as the senior Landrys did here and yet went ahead and transferred the property into the names of their son and daughter-in-law without providing for any protection for themselves.

[130] This was a clear indication of their intention that they did not wish to do so, that they trusted their son and daughter-in-law to do what they said they would do and they did not require anything further than that. They chose to ignore the advice and they cannot now claim a constructive trust.

[131] The Court finds as a fact that a reasonable interpretation of the evidence leads to such a conclusion.

[132] From the beginning, the parents-in-law, the Appellant and her husband acted in such a way towards the property that there is no doubt that they placed no restrictions upon the ownership of the land in question and the Appellant and her spouse were free to do with it as they pleased.

[133] There was no mention of any rights of the parents in the land in the financial documents which were completed for the bank, in the mortgages that were completed, in any discussion with the lending authorities and indeed at all times the Appellant and her husband certified that no such encumbrances existed.

[134] This was so until the execution and registration of the ex post facto documents, to which the Court gives no weight at all.

[135] Such documents could not have and did not have the effect of corroborating any alleged intention to create such rights on behalf of the parents. Indeed, a fair consideration of the evidence of the Appellant and her husband, as well as the evidence of the two lawyers would dictate that the chief concern of the parents was that they received a place to stay for the rest of their life without costs and that they trusted that both the son and daughter-in-law would guarantee such happenings. There is nothing in the evidence that the parents desired, let alone intended to receive any more consideration than that.

[136] For their own reasons the parents chose a course of action which, legally speaking, was fraught with danger, in spite of the warnings that they received that they should protect their interest in a more formal way.

[137] Surely this is the situation that Bowman J. had in mind in Savoie (supra) where he clearly indicated that he would not find the constructive or resulting trust in circumstances similar to those found here.

[138] The Court is satisfied that no constructive trust existed in this case and the Appellant's argument fails in that regard.

[139] The only remaining question is whether or not the transfer in question took place for valuable consideration, and if it did, what was the value of the consideration?

[140] If the Appellant is to succeed here, she must satisfy the Court as to the fact that the consideration was given from her to her husband at the time of the transfer for his interest in the property in question and the value of that consideration.

[141] On this issue, the credibility of the witnesses is crucial. The Court finds that the evidence of both the Appellant and Mr. Landry is suspect, unconvincing and inconsistent. The Appellant claimed that she made a loan to the Company and in return she received the conveyance of the husband's interest in the property. However, there was no document placed in evidence, apart from the ex post facto documents, which the Court finds of no value, that corroborates the evidence of the Appellant that the consideration for the transfer was the forgiveness of the $32,000.00 debt that the Company allegedly owed to the Appellant.

[142] In any event, this debt was a debt of the Company and not that of the husband, the proceeds were used for company purposes, the Company was facing bankruptcy, had little or no assets, so one cannot see why the husband would convey away his rights in the property for something that had no value.

[143] Further, the Appellant was the co-borrower of the money, was a principal on the mortgage securing this loan and would be jointly and severely liable with her husband if the debts were not paid off.

[144] Further, the Appellant testified that the Company had paid off some of the loan. She was not sure when she started paying the loan, so that it is impossible for the Court to determine what the amount of the consideration was for the transfer and that is the responsibility of the Appellant.

[145] The Court is satisfied from the whole history of the events as disclosed by the evidence that the execution of the ex post facto documents, including the documents relating to the loan for the boom truck for the Company, were initiated after the personal, business and taxation problems of the Appellant and her husband became manifest. Their actions were intended to allow the Appellant to remain in possession of whatever assets were available to the exclusion of anyone except the registered encumbrances of the Caisse Populaire, which she could not avoid in any event, and particularly Revenue Canada. Her husband said as much in his evidence.

[146] The transfer document itself referred to the consideration as being $2.00 and natural love and affection. It is true that under normal circumstances the true consideration for a transfer is not set out in the conveyance document, but these were not normal circumstances and one would expect that if the real consideration was in accordance with the Appellant's position there would have been proper documentation created, at the time the moneys were advanced or at the very least when the transfer took place, giving the Appellant valid security for the husband's share of the property.

[147] In light of the Court's findings it will not be necessary to consider the other arguments advanced by counsel for the Respondent.

[148] The Court finds that the Minister's assessment should be reduced by $500.00 but in all other respects, the appeal is dismissed. The matter will be referred back to the Minister of National Revenue for reassessment and reconsideration based upon these findings.

[149] The Court will hear the parties on the matter of costs at a convenient time by way of conference call.

Signed at Ottawa, Canada, this 27th day of September 1999.

"T.E. Margeson"

J.T.C.C.