IN THE TAX COURT
2008-1828(IT)I
2007-4486(IT)I
BETWEEN:
DONALD GRANT BAUDAIS
SHARLENE JUNE BAUDAIS
Appellants;
- and -
HER MAJESTY THE QUEEN,
Respondent.
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Held before Madam Justice Campbell in Courtroom No. 350, 1355 Water Street, Kelowna, B.C., on Friday, March 13, 2009.
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APPEARANCES:
Mr. D.G. Baudais, On Their Own Behalf;
Ms. S. Currie, For the Respondent.
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THE REGISTRAR: C. DeSantos
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Allwest Reporting Ltd.
#1200 - 1125 Howe Street
Vancouver, B.C.
V6Z 2K8
Per: S. Leeburn
REASONS FOR JUDGMENT
(Delivered Orally in Kelowna, B.C. on March 13, 2009)
JUSTICE: Let the record show that I am delivering oral reasons in the appeals of Donald Grant Baudais and Sharlene June Baudais, which I heard earlier today. These appeals were heard together and are in respect to the 2004 and 2005 taxation years for both Appellants.
On April 4, 2008 the Minister of National Revenue confirmed the reassessments of Donald Grant Baudais and included unreported income of $38,636 in 2004 and $29,547 in 2005. In computing income for these years, the second Appellant, Sharlene Baudais, claimed married status tax credits of $6,803 in 2004 and $7,344 in 2005 in respect of her spouse, Donald Grant Baudais. The Minister denied the claim for these tax credits because the spouse's net income exceeded the threshold amounts for these taxation years. Mrs. Baudais' claim for these tax credits is dependent on my conclusions in Mr. Baudais' appeal. The issue in his appeal is whether the Minister properly included these amounts of $38,636 and $29,547 in his income for the taxation years.
I heard evidence from both Appellants who basically denied that Mr. Baudais did any work for Hovey Ventures Limited or received any income in 2004 and 2005. Mrs. Baudais was employed at Zellers and testified that her husband remained at home and was unemployed. In addition, Mr. Baudais denied that he is one and the same individual as the Grant Baudais that was issued cheques from Hovey Ventures in these years.
I also heard evidence from Louise Marischuk, the auditor, who was involved in the trust examination audit of Hovey Ventures. The audit confirmed that Hovey deducted 7 percent of its gross payments to many of its workers and she concluded that Hovey paid amounts to Mr. Baudais for education seminar activities he provided to Hovey employees in these years. As a result she issued T4-A forms based on her conclusion that they were commission-type payments.
Although not pleaded in the Notices of Appeal most, if not all, of the Appellant’s evidence focussed on the position taken that he was not the same Grant Baudais named in all of the documentary exhibits. In fact, he cross-examined the auditor in that same vein as to how she had concluded that he was in fact the same Grant Baudais as named in the documentation. However, in his submissions, Mr. Baudais argued that the Respondent had failed to prove or establish that Grant Baudais was carrying on a business with an expectation of profit. Therefore he was not required to include these amounts in income as there was no source of income and no services performed for Hovey.
In addition, he argued that there was no proof introduced by the Minister that there was a GST number or a SIN number belonging to the Appellant in the Hovey books and records and no evidence of a written contract between Hovey and the Appellant.
First, with respect to any argument that the Appellant was acting in a different capacity as Grant Baudais, there is ample case law, which not only am I bound to follow, but I also believe is correct, that there is no merit in arguing the distinction between the Appellant's capacity as a natural person and his capacity to act in some other way. I agree with the Federal Court's remarks in the case of M.N.R. v. Stanchfield, [2009] F.C.J. No. 61, at paragraph 27, that states that if an appellant were successful in such an argument:
"… he would be unilaterally choosing in what capacity he acts; this is obviously an untenable proposition, and one that runs afoul of any tenable interpretation of the Act."
In addition to the case law, I can find nothing in the Act that would give Mr. Baudais any basis to successfully advance this argument. The Federal Court has also concluded that none of the relevant provisions in the Act conflict with the Bill of Rights, nor with the taxpayer's rights of objection and appeal and of due process of law.
I pointed out to the Appellants at the outset of the hearing and again during submissions that the burden of proof in appeals such as these rested with the Appellants. It is not the Respondent's responsibility to bring evidence, documentary or otherwise to prove, as the Appellants suggest, that Mr. Grant Baudais was carrying on a business for profit or that there was no source of income or that services were performed for Hovey. The Minister is permitted in this Court to make certain assumptions of fact and they will be presumed to be correct and true in fact unless the Appellants can provide evidence that can convince me on a balance of probabilities that they are not to be assumed to be correct. On this basis alone the Appellants cannot be successful. I was simply provided nothing more in respect to addressing the assumptions than their mere refuting the veracity of the statements in the Replies. This will never be sufficient.
Although I was less than impressed with the Respondent counsel's preparation in the auditor's testimony, on a balance of probabilities I remain unconvinced that the Appellant, Donald Grant Baudais, is not one and the same person as Grant Baudais named in the documentary exhibits. The auditor could not provide the nexus between the Appellant and Grant Baudais in the documents and although she referenced the cheques at Exhibit R-5 as being negotiated through the bank statements, she did not have those documents to reference. However, her evidence was that she believed at the time she issued the T4-A forms that the Appellant was the Grant Baudais referenced in the documents based on the name, on the various cross-checks she performed and the links used by CRA.
In addition, Exhibit R-3, a product invoice from Paradigm Education to Grant Baudais, references a contacting e-mail address, which includes the names of Grant and Sharlene. The Appellant's response was that this was mere coincidence. However, I believe that on a balance of probabilities this points to a further identification of the Appellant as one and the same as Grant Baudais named in the documents.
The identity issue, I would think, is one that a taxpayer would immediately bring to CRA's attention if a T4-A were incorrectly issued. Yet this issue was never raised until this morning's hearing. In addition, in cross-examination of the auditor, Mr. Baudais alluded to the fact that his son, Bradley Grant Baudais could have been the individual that received those amounts from Hovey and not the Appellant. I must draw an adverse inference from this, because if in fact it was the Appellant's son, then Mr. Baudais did not produce his son as a witness. This had the potential of clarifying the identity issue for me and entitles me to draw an inference that the son's evidence would have been unfavourable to the Appellant's appeals.
For these reasons the appeals of Donald Grant Baudais are dismissed, without costs, on the basis that the Minister correctly included in income $38,636 in 2004 and $29,547 in the 2005 taxation year.
As a result of this finding, the appeal of Sharlene June Baudais is also dismissed on the basis that her spouse's net income was in excess of the threshold amounts permitted in the 2004 and 2005 taxation years.
And that concludes the reasons in the judgment and concludes the work for the Tax Court for this week in Kelowna. Thank you.
I hereby certify that the FOREGOING is a true and accurate transcript of the proceedings herein to the best of my skill and ability.
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S. Leeburn Court Reporter
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