Citation: 2016 TCC 146
Date: 20160629
Docket: 2014-1965(GST)G
BETWEEN:
ANNIE ST-PIERRE,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
[ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Favreau J.
[1]
This is an appeal from an assessment issued
against the appellant by Revenu Québec acting as an agent of the Minister
of National Revenue (the “Minister”) under
subsection 325(2) of the Excise Tax Act, R.S.C. 1985, c. E-15,
as amended (the “ETA”), for which the notice was
dated March 26, 2013, and numbered F-043428.
[2]
The appellant was assessed for an amount of
$7,604.72 as a third party following a transfer of money in the amount of
$27,000, made to her by the company Service d’urgence sinistre Yon inc. (“Service d’urgence”) without consideration on her part.
[3]
In establishing the appellant’s assessment, the
Minister based his conclusions on, among other things, the following
conclusions and assumptions of fact, stated in paragraph 17 of the Reply
to Notice of Appeal:
a) The appellant is a lawyer by training, and has
been a member of the Barreau du Québec for many years;
b) The appellant and Mr. Dany Yon, sole
shareholder of Service d’urgence, are related persons within the meaning of the
ETA;
c) Indeed, the appellant was Mr. Dany Yon’s
common-law partner at the time the transfer occurred (July 23, 2010);
d) The appellant lived in Boucherville from
November 22, 2007, until July 5, 2011, with Mr. Dany Yon,
in a single family home that belonged to her, in which Mr. Dany Yon
lived from April 15, 2009, until April 13, 2011, according to the
information provided by Mr. Dany Yon and the appellant to the SAAQ;
e) In addition, this information concurs with the
information obtained by the Minister, that this single-family home in
Boucherville was inhabited by Mr. Dany Yon from April 14, 2009,
to April 28, 2011, and by the appellant from November 26, 2007, to
July 25, 2011;
f) Prior to this, the appellant lived in the
town of Saint-Denis-sur-Richelieu from August 25, 2006, to
November 25, 2007, with Mr. Dany Yon, who lived there from
November 15, 2006, to April 14, 2009;
g) In 2009, the appellant was also co-owner, with
Mr. Dany Yon, of a mobile home acquired in August 2005 and
located on a campground in Saint-Jean Baptiste;
h) Also, on July 5, 2011, when the Minister
served Mr. Dany Yon with a writ of seizure at a property owned by the
appellant, two vehicles belonging to Service d’urgence sinistre Yon inc., a
company whose sole shareholder is Mr. Dany Yon, were found at the
appellant’s home;
i) On July 13, 2011, the appellant
contacted the Minister’s representative to mention that a friend had asked her
if he could park his vehicles at her house, the whole time stating that she was
unaware of which company the vehicles belonged to;
j) On August 16, 2011, the appellant only
barely opposed the seizure of goods from her home;
k) On November 5, 2012, during the objection
phase, the appellant’s representative, Olivier Brault, mentioned to one of
the Minister’s representatives that it was not possible for the appellant to
provide proof that the supposed loan repayment to Service d’urgence had been
deposited;
l) He also mentioned, in this same interview,
that the appellant was separated from Mr. Dany Yon and that the
supposed repayment made by the appellant had been part of a separation
obligation;
m) These unequivocal statements confirm the true
partner relationship between the appellant and Mr. Dany Yon;
n) On March 13, 2013, the same
representative, Olivier Brault, indicated to one of the Minister’s
representatives that Mr. Dany Yon had been the appellant’s roommate
in order to explain two cheques issued to her on May 7 and June 17,
2010, by Service d’urgence, apparently, as rent payments;
o) During the objection phase, the appellant’s
representative argued that Mr. Dany Yon had always been the appellant’s
roommate, adding that the parties had a verbal agreement regarding the lease,
without providing any explanation of the relationship or arrangements that
existed between the appellant and Mr. Dany Yon;
p) At the time that the sum of $27,000 was
transferred, Service d’urgence, of which the sole shareholder is Mr. Dany Yon,
the appellant’s common-law partner, was liable to the Minister, for tax years
2007, 2008, 2009 and 2010, for a total sum of $654,858.04 under the Taxation
Act, CQLR, c I-3, in GST and QST;
q) In addition to being related to Mr. Dany Yon,
the appellant failed to prove that she repaid the $27,000 transfer made to her
on July 23, 2010, by Service d’urgence;
r) Indeed, the appellant argues that she repaid
Service d’urgence $27,000 in cash on January 30, 2011, and offers as
evidence a blacked-out excerpt from a bank statement issued by the Bank of
Montreal;
s) This blacked-out statement shows that
withdrawals in the amounts of $20,000 and $15,000 respectively, were made on
January 18 and 21, 2011;
t) The opening bank account balance on
December 25, 2011, was $4,079.08 and the closing balance on
January 25, 2011, was $32.67;
u) This statement also shows that a total amount
of $39,962.24 was debited and that a total amount of $44,008.65 was credited to
the appellant’s account during the period ending on January 25, 2011,
without proof of any repayment;
v) The appellant refused to provide the Minister
with a clean copy of her bank statement, claiming that the information
contained therein was private;
w) The appellant also refused to explain where the
four deposits made into her bank account during the month of January 2011 came
from;
x) The appellant did not provide any explanation
regarding the fact that the two withdrawals that allegedly served to repay the
purported loan total amounted to more ($35,000) than the purported loan of
$27,000;
y) The appellant did not explain the reasons why,
on July 23, 2010, she allegedly “borrowed” a sum of $27,000 from Service d’urgence,
when she claims to have lent this same company a sum of $7,000 on
January 8, 2010;
z) The Service d’urgence tax return for the 2010 year
was not produced;
aa) In addition, the Service d’urgence bank
account has been inactive since October 5, 2010, that is to say, since a
seizure was made by the Minister, and no evidence of any deposits into the
Service d’urgence account was offered by the appellant as proof of the
purported repayment;
bb) The appellant is therefore the transferee of
property from the ceding company, Service d’urgence, which belonged to her
partner at the time of the transfer, and in consideration of which no amount
was paid;
cc) The appellant is therefore jointly and
severally liable for payment of the tax debt for which Service d’urgence is
liable under the ETA, up to the amount by which the fair market value of the
property exceeds the consideration paid.
[4]
The Minister assessed the appellant for an
amount payable pursuant to subsection 325(1) of the ETA.
Section 325 of the ETA sets out the circumstances under which a
person who is related to or not at arm’s length from the transferor can be held
liable for the transferor’s tax debts. Subsection 325(1) reads as follows:
Tax liability
re transfers not at arm’s length – Where at any
time a person transfers property, either directly or indirectly, by means of a
trust or by any other means, to
(a) the
transferor’s spouse or common-law partner or an individual who has since become
the transferor’s spouse or common-law partner,
(b) an individual
who was under eighteen years of age, or
(c) another
person with whom the transferor was not dealing at arm’s length,
the transferee
and transferor are jointly and severally liable to pay under this Part an
amount equal to the lesser of
(d) the amount
determined by the formula
A – B
where
A is
the amount, if any, by which the fair market value of the property at that time
exceeds the fair market value at that time of the consideration given by the
transferee for the transfer of the property, and
B is the amount, if any, by which
the amount assessed the transferee under subsection 160(2) of the Income
Tax Act in respect of the property exceeds the amount paid by the
transferor in respect of the amount so assessed, and
(e) the total of all amounts each of which is
(i) an amount that the
transferor is liable to pay or remit under this Part for the reporting period
of the transferor that includes that time or any preceding reporting period of
the transferor, or
(ii) interest or penalty for which the
transferor is liable as of that time,
but nothing in this subsection limits the liability
of the transferor under any provision of this Part.
[5]
In order for section 325 to apply, two
conditions must be met. Firstly, there must be a transfer of property between
related individuals (spouses, common-law partners or children younger than
18 years of age) or between non-arm’s length persons and, secondly, the
fair market value of the property at the moment of transfer must exceed the
consideration paid by the transferee for the transfer of the property.
[6]
On July 23, 2010, the appellant
acknowledged having received $27,000 from Service d’urgence, in the form of a
bank draft from the Promenades de Montarville branch of BMO Bank of Montreal.
According to her, it was a loan that she claimed to have repaid in full on
January 30, 2011.
[7]
The appellant also produced a document entitled “Loan”
in which she acknowledged having received from Mr. Dany Yon and
Service d’urgence a loan in the amount of $27,000, to be repaid in full,
interest-free, no later than July 27, 2011. Hers was the only
signature on this document, dated July 27, 2010.
[8]
In her testimony, the appellant stated that she
had used the money obtained from Service d’urgence to make the initial down
payment on the purchase (with a friend, Brigitte Bélanger) of a three or
four-unit building, located on Rue Joliette in Montreal. The appellant offered
in evidence a bank draft from the Promenades de Montarville branch of BMO Bank
of Montreal, for the amount of $28,348.68, issued to François Gareau In
Trust, notary. The appellant also offered in evidence a photocopy of a bank
statement for the period ending on August 25, 2010, on which is indicated
a withdrawal of $28,348.68 made on August 5, 2010, via bank draft.
[9]
To substantiate the repayment of the loan, the
appellant offered in evidence a document entitled “Acknowledgement of Receipt,”
which she acknowledged having prepared and by which Mr. Dany Yon,
both personally and in his role as president and principal shareholder of
Service d’urgence, acknowledged having received from Ms. Annie St-Pierre
on January 30, 2011, the amount of $27,000 in cash, as full and final
repayment of the loan issued on July 27, 2010, for the same amount.
Mr. Dany Yon, both personally and in his role as president and
principal shareholder of Service d’urgence, furthermore released, discharged
and granted full and final release to Ms. Annie St-Pierre and
undertook to indemnify Ms. Annie St-Pierre from any and all claims or
actions of any kind resulting from the loan.
[10] In her testimony, the appellant maintained that she had used the
proceeds from the sale of her property located at 799 Chemin de Touraine
in Boucherville to repay the loan to Service d’urgence. In support of these allegations,
the appellant offered in evidence a statement of disbursements for the seller,
prepared by the firm Bolduc & Huard Notaires Inc. and dated
January 14, 2011, which shows the net proceeds from the sale as
$92,859.13, an amount which was deposited by the appellant into her savings
account on January 18, 2011. The bank statement for the appellant’s
savings account for the period ending on January 25, 2011, shows a deposit
of $92,859.13 made on January 18, 2011, and a transfer of $35,000 made on
the same day to the appellant’s chequing account. According the appellant, this
$35,000 transfer allegedly served to repay Service d’urgence.
[11] According to the appellant, she withdrew $20,000 in cash from her
chequing account on January 18, 2011, as well as a sum of $15,000 in cash
on January 21, 2011. The appellant’s chequing account statement for
the period ending on January 25, 2011, shows both of these withdrawals,
totalling $35,000. The appellant did not recall the denominations in which
these withdrawals were made. The appellant allegedly kept all of this money at
her home in a closet. By contrast, she was unable to provide the date on which
she repaid the money to Mr. Yon, nor to specify the location where the
repayment took place: at the bank, at her residence at 205 Rue Le Baron in
Boucherville, or elsewhere, or whether other persons, such as bank clerks, were
present for the loan repayment.
[12] The appellant also explained that prior to 2010, there had been
no loans between herself and Mr. Yon, but that, beginning in
January 2010, she had given him interest-free loans while he waited for
some of his clients to pay the invoices for services he had rendered to them.
She made specific reference to loans of $500, $7,000 and $10,000, which
allegedly did not include interest and were allegedly all repaid in full. In
addition, she argues that she was unaware of Mr. Yon’s financial situation
and that of Service d’urgence, and that she only learned of the existence of
tax debts (goods and services tax and Quebec sales tax) for the first time on
July 12, 2011, during the seizure of moveable property from her home on
Rue Le Baron in Boucherville. This seizure was carried out by the Deputy
Minister of Revenue (Quebec) following a judgment rendered on October 26,
2010, against Mr. Yon for amounts of goods and services tax for which he
was assessed as administrator of his Service d’urgence company. Following that
judgment, the Service d’urgence bank account was seized and has not been
released.
[13] The appellant opposed the property seizure and sale and applied for
cancellation of the seizure of moveable property that belonged to her. She was,
indeed, granted a release from the seizure and sale of property she owned. Two
of the three vehicles on the site were not seized, because they belonged to
Service d’urgence. The other vehicle was owned by the appellant.
[14] Regarding her relationship with Mr. Yon, the appellant
acknowledged that he had lived with her in her homes for intermittent periods
and that she had had sexual relations with him. By contrast, she stated that
Mr. Yon was not a common-law partner and she had never declared him as
such in her tax statements.
[15] The appellant explained that she had met Mr. Yon in 2004
while she was a student and was working for a law firm. The appellant and
Mr. Yon dated in the months after they met and he allegedly came to live
with her in 2006 while she was the owner of the residence located on Rue
Cartier in Saint-Denis-sur-Richelieu. The appellant sold this residence in
September 2007 and bought another residence located on Rue De Touraine in
Boucherville in November 2007. From September to November 2007, the
appellant lived with her sister. Mr. Yon lived with the appellant for long
periods of time between 2007 and 2011. He allegedly moved out of the appellant’s
residence in 2008, and again in May 2009. Mr. Yon allegedly
moved back in with the appellant from May to November 2010. Mr. Yon
allegedly did not live with the appellant on a permanent basis (only
intermittently, when he needed somewhere to stay) while she was the owner of
the residence on Rue Le Baron in Boucherville, that is to say, from
January 4, 2011, until February 2012. From February 2012 until
May 14, 2012, the appellant lived with her sister. Beginning on
May 14, 2012, the appellant lived at her residence located on the Rue des
Sureaux in Boucherville and Mr. Yon did not live with her at all. The said
residence was rented out beginning in January 2015, and the appellant lived
at 28 Rue De Fontainebleau in Blainville with a partner. From 2006 to
2011, the appellant did not have any ongoing relationships with anyone.
[16] During her testimony, the appellant also gave explanations regarding
her cohabitation with Mr. Yon. They had an agreement for sharing household
expenses. Mr. Yon had to pay household expenses like electrical bills and
groceries. The appellant was in charge of balancing the books and Mr. Yon
was often late in paying his portion of the expenses. The appellant paid the
phone bill and the school and municipal taxes, as well as the monthly mortgage
payments. She was in charge of meal preparation, except for barbecuing. She did
the grocery shopping, housekeeping and laundry, while Mr. Yon was
responsible for cutting the grass. Mr. Yon gave her gifts on occasion.
Mr. Yon and the appellant took vacations together to Mexico on a few
occasions and went camping at the Domaine de Rouville in Saint-Jean Baptiste.
In 2005, Mr. Yon and the appellant purchased land and a trailer together
at the Domaine de Rouville campground, and in 2008, Mr. Yon purchased
another trailer on his own, which he set up at the Domaine de Rouville
campground and where he lived for a large portion of 2008.
[17] The appellant was financially independent and had no shared bank
accounts with Mr. Yon. The appellant and Mr. Yon have no children
together.
[18] Mr. Dany Yon testified at the hearing. He confirmed that he had
loaned the appellant money on July 27, 2010, to purchase property.
According to him, the appellant repaid him the loan in question in person, on
January 30, 2011, in cash at the Bank of Montreal. He even stated that he
signed the Acknowledgement of Receipt on the very same day the loan was repaid.
Mr. Yon went on to confirm that the appellant had, on several occasions,
loaned him money in amounts smaller than $10,000, to live on.
[19] In cross-examination, Mr. Yon had to confirm the home addresses
that he had provided to various entities or institutions from 2006 to 2012. In
particular, he had given 131 Rue Cartier in Saint-Denis-sur-Richelieu and
799 Chemin De Touraine in Boucherville as home addresses to Revenu Québec,
to the Régie de l’assurance maladie du Québec (RAMQ), and to the Société de l’assurance-automobile
du Québec (SAAQ). To Canadian Tire Financial Services, with whom he held a
credit card, he provided a home address of 799 Chemin de Touraine, in
Boucherville. When creating a family trust on June 28, 2007, Mr. Yon
stated that he lived at 131 Rue Cartier in Saint-Denis-Sur-Richelieu. On
April 8, 2009, Mr. Yon was served a notice of garnishment of wages at
his home located at 799 Chemin de Touraine in Boucherville. According to
Mr. Dany Yon’s criminal records, he was residing at 205 Rue Le Baron
in Boucherville in July 2012, the date on which he allegedly committed
assaults for which he faced four charges.
[20] Mr. René St-Pierre, the appellant’s father, also testified at
the hearing. He confirmed that he knew Mr. Yon personally, and appeared to
have a good relationship with him. He had met Mr. Yon at each of the three
residences in which the appellant had lived, on moving days and at family
parties. He stated that the relationship between his daughter and Mr. Yon
was at times stormy and that he had witnessed few displays of affection between
Mr. Yon and his daughter, while at the same time admitting that he did not
know the details of his daughter’s relationship with Mr. Yon. According to
him, the appellant was not dating anyone besides Mr. Yon.
[21] At the hearing, four representatives for the Quebec and federal tax
authorities testified. Their testimonies mostly bore on the assessments issued
against Service d’urgence and Mr. Yon and with the collection actions that
had been taken by the tax authorities.
[22] Service d’urgence was assessed in a notice dated February 3,
2011, for the GST/QST reporting periods from December 4, 2006, to
August 31, 2010, which were outstanding. The amount due under this
assessment was $189,369.61.
[23] Service d’urgence was also assessed in a notice dated
February 4, 2011, for a total amount of $451,072.29 in fees, interests and
penalties due under the Act respecting the Québec sales tax for the
period from December 4, 2006, to August 31, 2010. On December 2,
2011, Service d’urgence was again assessed under the Quebec Taxation Act
for an amount of $230,022.79 (balance of $222,722.79 owing) for its tax year
ending on December 31, 2008, and for a total amount of $40,117.50 (balance
of $40,022.52 owing) for its tax year ending on December 31, 2009.
[24] Within the context of the collection actions taken against
Mr. Yon and Service d’urgence, particular attention was paid to the home
addresses of Mr. Yon and the appellant. Address verification showed that
all of Mr. Yon’s addresses were connected to those of the appellant and
that, for the entire period from fall 2006 until spring 2011,
Mr. Yon never really lived anywhere other than with the appellant, with
the exception of very short periods of time.
Issues
[25] This case raises the following issues are in dispute:
a) was the appellant Mr. Dany Yon’s common-law partner or not
at arm’s length from him; and
b) did the appellant repay the amount of $27,000?
Parties’ positions
[26] The appellant submits as follows:
a)
she was not Mr. Dany Yon’s common-law
partner within the meaning of the ETA at the time of the loan nor at the
time of the repayment;
b)
she repaid in full on January 30, 2011, the
$27,000 loan that Mr. Dany Yon had given her, and that he gave her
the duly signed Acknowledgement of Receipt;
c)
the repayment of the loan constitutes valid
consideration that excludes the application of section 325 of the ETA.
The appellant cites Martin v. The Queen, 2013 TCC 38, a case
decided by Mr. Justice Boyle which stands for that proposition with
respect to section 160 of the Income Tax Act.
[27] The respondent submits as follows:
a)
Service d’urgence, for which Mr. Dany Yon
is the sole shareholder, transferred $27,000 to the appellant;
b)
the appellant and Mr. Dany Yon are
related persons since they were common-law partners when the loan was agreed to
on July 23, 2010;
c)
the appellant has never proved the alleged
repayment of the $27,000 loan;
d)
subsection 325(1) of the ETA applies
in this case and the appellant was assessed on a pro rata basis for the Service
d’urgence tax debts under the ETA and for this company’s total tax
debts, up to the value of the advantage received. The appellant was assessed according
to the following formula:
Debts under the
ETA = $184,444.98
X
$27,000 = $7,604.72
Total tax debts
= $654,858.04
Analysis
[28] Subsection 126(1) of the ETA provides that related persons
shall be deemed not to deal with each other at arm’s length and that it is a
question of fact whether persons not related to each other were, at any
particular time, dealing with each other at arm’s length.
[29] Subsection 126(2) of the ETA specifies that, under
subsections 251(2) to (6) of the Income Tax Act, it must
be determined whether persons are related for the purposes of this part of the
ETA.
[30] Subsection 251(2) of the Income Tax Act provides that
individuals connected by common-law partnership are deemed to be related.
[31] The definition of the phrase “common-law
partner” is found in subsection 248(1) of the Income Tax Act,
which reads as follows:
common-law
partner, with respect to a taxpayer at any time, means a person who cohabits at
that time in a conjugal relationship with the taxpayer and
(a) has so cohabited throughout the 12-month period that ends
at that time, or
(b) would be the parent of a child of whom the taxpayer is a
parent, if this Act were read without reference to paragraphs 252(1)(c) and (e) and subparagraph 252(2)(a)(iii).
and, for the
purpose of this definition, where at any time the taxpayer and the person
cohabit in a conjugal relationship, they are, at any particular time after that
time, deemed to be cohabiting in a conjugal relationship unless they were
living separate and apart at the particular time for a period of at least 90 days
that includes the particular time because of a breakdown of their conjugal
relationship.
[32] To be considered common-law partners, the appellant and Mr. Dany Yon
must have cohabited in a conjugal relationship for 12 months,
without living separately for a period greater than 90 consecutive days.
[33] It is worth noting that no definition of the phrase “cohabiting in a conjugal relationship” is found in the
Income Tax Act and that one must therefore refer to those criteria set
out in Molodowich v. Penttinen, (1980) O.J. No. 1904,
which were also used by the Supreme Court of Canada (the “SCC”) in M. v. H., [1999] 2 SCR 3,
at paragraphs 59 and 60. There the SCC clearly defines a “conjugal relationship” as follows:
Molodowich v.
Penttinen (1980), 17 R.F.L. (2d) 376 (Ont. Dist. Ct.), sets out the generally
accepted characteristics of a conjugal relationship. They include shared
shelter, sexual and personal behaviour, services, social activities, economic
support and children, as well as the societal perception of the couple.
However, it was recognized that these elements may be present in varying
degrees and not all are necessary for the relationship to be found to be
conjugal. While it is true that there may not be any consensus as to the
societal perception of same-sex couples, there is agreement that same-sex
couples share many other “conjugal” characteristics. In order to come within
the definition, neither opposite-sex couples nor same-sex couples are required
to fit precisely the traditional marital model to demonstrate that the
relationship is “conjugal”.
Certainly an
opposite-sex couple may, after many years together, be considered to be in a
conjugal relationship although they have neither children nor sexual relations.
Obviously the weight to be accorded the various elements or factors to be
considered in determining whether an opposite-sex couple is in a conjugal
relationship will vary widely and almost infinitely. The same must hold true of
same-sex couples. Courts have wisely determined that the approach to
determining whether a relationship is conjugal must be flexible. This must be
so, for the relationships of all couples will vary widely. . . .
[34] This Court has applied these criteria on many occasions, in
particular in Milot v. Canada, [1995] T.C.J. No. 412, when
considering the concept of a conjugal relationship.
Issue 1: Non-arm’s
length relationship between the appellant and Dany Yon
[35] In the present case, the issue is whether there is a non-arm’s
length relationship between the appellant and Mr. Dany Yon.
[36] In 2006 and 2007, Mr. Dany Yon lived a few days per week in the
appellant’s house on Rue Cartier, and this continued until the house was sold
in September 2007.
[37] Then, from 2007 to 2011, the appellant lived in the house on
Chemin De Touraine and Mr. Yon also lived there at times. That house was
sold in January 2011 and the appellant then moved to Rue Le Baron. The
evidence has revealed that all of Mr. Yon’s addresses were connected to
those of the appellant and that Mr. Yon never lived anywhere other than
with the appellant.
[38] The appellant submits that she and Mr. Dany Yon were not
common-law partners even though they lived under the same roof. In that regard,
the case law of the Tax Court of Canada has clearly decided that the fact of
living under the same roof does not, in itself, indicate a conjugal
relationship and that this is just one of the criteria that must be considered.
See, among others, Perron v. The Queen, 2010 TCC 547 and Aukstinaitis
v. The Queen, 2008 TCC 104 and a contrario: Bellavance v. The
Queen, 2004 TCC 5, Sykes v. Canada, [2005] 3 C.T.C. 2054
[39] Even if we assume that the appellant and Mr. Dany Yon
lived under the same roof, it is appropriate to consider the other criteria relevant
to determination of a conjugal relationship.
[40] The appellant had everything in her name and had an agreement with
Mr. Yon under which he had to pay the household bills, including the
electricity and the groceries. They shared expenses, but Mr. Yon did not
pay rent in the legal sense of the term.
[41] The appellant testified that she took care of meals, of the
housework, the grocery shopping, the laundry, and that Mr. Yon cut the
grass and did the barbecuing. The appellant also mentioned the fact that there
wasn’t much communication or interaction between them, that they sometimes ate
meals together, that they gave each other gifts, that they went camping
together and that they had sexual relations. The appellant also lent him money
to live on, on a few occasions. These loans were interest-free. However, from
2004 to 2011, the appellant did not date other people.
[42] In my opinion, the appellant’s comment regarding the absence of
interaction seems contradictory, since the appellant rendered numerous services
to Mr. Yon, whereas he only paid a small portion of the household
expenses.
[43] It is appropriate to recall here that the appellant mentioned that,
at the time the money was transferred, she was dating Mr. Dany Yon,
but that she was not aware of his tax debts; here, the appellant herself
acknowledged that she was in a relationship with Mr. Dany Yon at the
time that the $27,000 was transferred.
[44] The appellant’s father testified that he knew Mr. Dany Yon
personally and that he had met him on several occasions, among other times, on
moving days and at each of the three residences. He also indicated that
Mr. Dany Yon was sometimes present at family parties. He also said
that his daughter’s relationship with Mr. Dany Yon was stormy and
that they had highs and lows; however, he mentioned not knowing the details of
his daughter’s relationship with Mr. Dany Yon.
[45] In view of the evidence of record and following an analysis of all
of the criteria, it appears to me that the appellant and Mr. Dany Yon
were indeed in a conjugal relationship. The couple gave each other gifts and
took vacations together. The appellant gave her partner interest-free loans to
live on. The couple lived under the same roof and had sexual relations.
[46] It is important to remember that the burden of proof rests with the
appellant to prove that she is at arm’s length from Mr. Dany Yon. To
that effect, the Federal Court of Appeal concluded in Downey v. Canada,
2006 FCA 353 that despite the fact that the judge did not determine
whether the parties were at arm’s length from one another, the taxpayer did not
discharge his burden of proof to show that no non-arm’s length relationship
existed.
[47] In this case, the appellant has not discharged her burden of proof
to substantiate the case that she had an arm’s length relationship with
Mr. Dany Yon.
Issue 2: Repayment of the amount of $27,000
[48] In this case, there was a transfer of $27,000 to the appellant, made
on July 23, 2010, by bank draft, and the issue is whether this amount
was repaid. In principle, if the loan amount was repaid, the repayment would
constitute a legitimate consideration and section 325 of the ETA
could not be applied.
[49] The appellant submits that she fully repaid Mr. Dany Yon
in cash on January 30, 2011. The appellant could not repay Service d’urgence
by cheque since the company’s bank account had been frozen since its seizure in
October 2010. To make the repayment, the appellant submits that she made
the following withdrawals from her BMO bank account:
●
January 18, 2011: withdrawal of $20,000
●
January 21, 2011: withdrawal of $15,000
[50] The appellant testified that she had withdrawn an amount totalling
$35,000 in two transactions in order to repay the amount of $27,000 on
January 30. The appellant gave no explanation for the difference between
these two amounts and the appellant did not recall the denominations of bills
in which the cash was withdrawn, but she said she believed it was probably $100 bills.
However, the appellant mentioned, that for the period of time between the
withdrawals and the repayment, she had kept the money at her house in her
closet.
[51] The appellant also did not recall where she made the repayment to
Mr. Dany Yon—whether it was at the Bank of Montreal or at her
residence on Rue Le Baron. In January 2011, Mr. Dany Yon
was living with the appellant on Rue Le Baron. According to
Mr. Dany Yon’s testimony, he was allegedly repaid in cash, by hand,
at the bank branch. In addition, the appellant mentioned that no one else had
been present when the repayment was made.
[52] According to Mr. Dany Yon, the Acknowledgement of Receipt
dated January 30, 2011, was signed and remitted on the same day that the
repayment was made.
[53] According to the evidence of record, the appellant allegedly made
withdrawals from her bank account to repay the loan amount; she allegedly
stored the money at her home and then, more than a week after the last
withdrawal, she allegedly went to the bank, already having the cash in hand,
with the goal of repaying Mr. Dany Yon, who, let it be recalled, was
living with her at that time.
[54] We are currently faced with a version of the facts that appears to
include inconsistencies or weaknesses. In that kid of case, Madam Justice Miller,
in Nichols v. The Queen, 2009 TCC 334, clearly explains the elements
that a judge can consider when assessing a witness’ credibility:
In assessing
credibility I can consider inconsistencies or weaknesses in the evidence of
witnesses, including internal inconsistencies (that
is, whether the testimony changed while on the stand or from that given at
discovery), prior inconsistent statements, and external inconsistencies (that
is, whether the evidence of the witness is inconsistent with independent
evidence which has been accepted by me). Second, I can assess the attitude and
demeanour of the witness. Third, I can assess whether the witness has a motive
to fabricate evidence or to mislead the court. Finally, I can consider the
overall sense of the evidence. That is, when common sense is applied to
the testimony, does it suggest that the evidence is impossible or highly
improbable.
[My emphasis.]
[55] Considering the testimonies of the appellant and of Mr. Dany Yon,
I do not believe that, in this case, the loaned amount of $27,000 was repaid.
In any event, I strongly doubt that the loan was legally repaid, since the
money was not remitted to the lending company, namely Service d’urgence. No
documentary evidence was offered showing that Mr. Dany Yon was acting
as an agent of Service d’urgence. No resolution of the board of directors nor
any resolution by the shareholders of Service d’urgence authorizing
Mr. Dany Yon to grant the appellant a loan or to release her from her
debt was entered into evidence. The manner in which the Acknowledgement of
Receipt was written by the appellant clearly shows the dilemma the appellant
was facing. The Acknowledgement of Receipt was signed by Mr. Dany Yon
as an individual and as the president and principal shareholder of Service d’urgence,
and not as a director.
[56] Moreover, it is important to remember that the appellant bears the
burden of proof to show that the loan was repaid, as I stated in Pelletier
v. The Queen, 2009 TCC 541.
[57] In view of the evidence of record, I am not convinced that the
amount of money transferred was indeed repaid. In that regard, I conclude that
the appellant has not discharged her burden of proof.
Conclusion
[58] Since
the evidence offered by the appellant has not convinced me that she had an arm’s
length relationship with Mr. Dany Yon, or that the loan was repaid,
the assessment must be upheld.
Signed at Ottawa, Canada, this
29th day of June 2016.
“Réal Favreau”
Email this Content