Docket: A-77-13
Citation: 2014 FCA 123
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CORAM:
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NOËL J.A.
MAINVILLE J.A.
SCOTT J.A.
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BETWEEN:
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FIDUCIE ALEX TRUST
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Appellant
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And
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HER MAJESTY THE QUEEN
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Respondent
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REASONS FOR JUDGMENT OF
THE COURT
(Delivered from the Bench at Montréal, Quebec, on May 12, 2014.)
MAINVILLE
J.A.
[1]
This is an appeal from a judgment of
Justice Favreau of the Tax Court of Canada, neutral citation 2013 TCC 14,
dismissing the appeal of Fiducie Alex Trust from an assessment made under
Part IX of the Excise Tax Act.
[2]
The facts giving rise to the dispute are simple.
Mr. Demirciyan and his spouse created Fiducie Alex Trust in order to
protect the family residence from their creditors, mainly the tax authorities.
Mr. Demirciyan owes the tax authorities a substantial amount, in the
millions of dollars.
[3]
Fiducie Alex Trust purchased the family
residence from Mr. Demirciyan and his spouse on January 14, 2008, for
the amount of $250,000, paid through a downpayment of $34,013.65 and the
balance by assuming the hypothec of $215,986.35. Fiducie Alex Trust did not pay
the portion of the down payment owed to Mr. Demirciyan in the amount of
$17,006.83, instead signing an acknowledgment of debt for this purpose. The tax
authorities are now claiming this $17,006.83 from Fiducie Alex Trust in order
to pay part of the tax debt owed by Mr. Demirciyan. Fiducie Alex Trust
submits that this downpayment was paid in the following transactions.
[4]
Through a private loan agreement dated
June 26, 2008, a friend of Mr. Demirciyan, David Bafri, allegedly
loaned Fiducie Alex Trust $18,000 in order to reimburse the downpayment.
Mr. Demirciyan and Mr. Bafri testified that Mr. Bafri wrote a
cheque in the amount of $18,000 payable to Mr. Demirciyan, which was
cashed at a branch of the Bank of Montreal.
[5]
Justice Favreau concluded from the evidence
before him that it was just as likely or possible that Mr. Bafri left the
bank with his own money as it was that the money was given to Mr. Demirciyan,
and that in this case Fiducie Alex Trust had not rebutted the presumption that
the Tax assessment regarding it was valid. It is this conclusion that Fiducie
Alex Trust is challenging in this appeal.
[6]
The conclusion is essentially based on the
judge’s assessment of the credibility of the witnesses he heard. The appellant
has not satisfied us that this assessment of the credibility of the witnesses
in question was the result of a palpable and overriding error on the part of
Justice Favreau.
[7]
At the hearing of the appeal, counsel for the
appellant raised for the first time the argument that the respondent
acknowledged the repayment of the appellant’s entire debt to the tax debtor. The
reply to notice of appeal from the assessment does indeed make such an
allegation.
[8]
This issue was not argued before the Tax Court
of Canada, nor was it raised in the notice of appeal filed before this Court or
in the appellant’s memorandum.
[9]
In any event, in tax matters, it is trite law
that a taxpayer who is not satisfied with a judicial admission and who presents
evidence on the admission in question before the Tax Court of Canada cannot
subsequently rely on the admission if the evidence suggests the opposite. This
Court laid down the following principle in Hammill v. Canada, 2005 FCA
252, 257 D.L.R. (4th) 1 (leave to appeal to the Supreme Court of
Canada denied), at paragraphs 29 to 32:
[29] Specifically,
the appellant argues that the Tax Court Judge was bound by the facts as
admitted, even if contrary evidence was adduced at trial. Sopinka, The Law of Evidence in Canada, 2nd
ed, Butterworths, 2004 at page 1051; Urquhart v.
Butterfield (1887), 37 Ch.D. 357, at 369 and 374; Copp v. Clancy (1957), 16 D.L.R. (2d)
415, at 425, are relied upon in this regard.
[30] In my view, these authorities which
derive from private party civil proceedings are of no assistance to the
appellant in the context of this appeal. While the admission reflected in the
Agreed Statement of Facts was favourable to the appellant, he was not satisfied
to have his appeal disposed of on that basis. The appellant chose to place
extensive evidence before the Court, over and beyond what had been agreed to,
about the nature and extent of the scam.
[31] In an appeal against an assessment
under the Act, the outcome does not belong to the parties. Public funds are
involved and the Tax Court is given, in the first instance, the statutory
mandate to confirm or vary the assessment based on the facts, proven or
admitted. In this respect, while the Court will not generally look behind a
formal admission, the parties cannot by agreement dictate the outcome of a tax
appeal. The Tax Court is not bound by an admission which is shown, through
properly tendered evidence, to be contrary to the facts.
[32] In this case, the relevant evidence
was tendered by the appellant himself, and the Tax Court Judge concluded from
this evidence that he had been the subject of a fraud from beginning to end, a
conclusion which precludes the existence of a business. In my view, the Tax
Court Judge could not pronounce on the validity of the reassessments while
turning a blind eye on the evidence placed before him.
[10]
Therefore, the appeal will be dismissed with
costs.
“Robert M. Mainville”
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