Garon
J.T.C.C.:—These
appeals,
governed
by
the
informal
procedure,
were
heard
on
common
evidence.
In
the
case
of
the
appellant
Cosme,
this
is
an
appeal
from
a
reassessment
by
the
Minister
of
National
Revenue
("the
Minister")
dated
November
15,
1991
for
the
1987
taxation
year.
In
that
assessment,
the
Minister
added
the
sum
of
$9,215
to
the
appellant’s
income
on
the
ground
that
this
additional
sum
was
received
by
the
appellant
in
1987
in
respect
of
work
performed
or
done
for
Dunn
&
Benoît
Construction
(Canada)
Inc.
("Dunn
&
Benoît")
and
for
Construction
M.B.A.
Ltée
("M.B.A.").
The
Minister
also
assessed
a
penalty
of
$497.29
in
respect
of
this
failure
to
include
the
sum
of
$9,215
in
his
income.
As
to
the
appellant
Esteves,
this
is
an
appeal
from
a
reassessment
by
the
Minister
dated
August
23,
1991
for
the
1988
taxation
year.
In
that
assessment,
the
Minister
added
the
sum
of
$1,250
to
the
appellant’s
income
on
the
ground
that
this
additional
sum
was
received
in
1988
by
the
appellant
Esteves
in
respect
of
work
performed
for
Dunn
&
Benoît
and
M.B.A.
A
penalty
of
$46.37
was
assessed
in
that
assessment
in
respect
of
the
noninclusion
of
that
sum
of
$1,250.
In
the
case
of
both
these
assessments,
the
amounts
were
added
to
the
income
of
each
of
the
appellants
pursuant,
according
to
the
Minister,
to
section
3
and
subsection
5(1)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act").
The
penalties
were
assessed
in
each
case
pursuant
to
subsection
163(2)
of
that
Act.
For
the
purposes
of
simplification,
I
shall
refer
only
to
Dunn
&
Benoît
in
these
reasons
as
thought
that
firm
were
the
only
employer
of
the
appellants,
given
that
each
of
the
appellants
worked
for
M.B.A.
for
only
a
brief
period.
The
latter
had
the
same
shareholders
and
the
same
officers
as
Dunn
&
Benoît.
The
shareholders
owning
equal
numbers
of
shares
in
both
M.B.A.
and
Dunn
&
Benoît
were
Serge
Moffat
and
Gerry
Benoît.
Mr.
Moffat
was
the
president
of
Dunn
&
Benoît
was
its
vice-president
and
secretary.
It
was
admitted
by
the
respondent
during
the
hearing
of
these
appeals
that
the
sum
of
$3,480
representing
unemployment
insurance
benefits
received
by
the
wife
of
the
appellant
Cosme
had
inadvertently
been
included
in
the
income
of
that
appellant.
The
appeal
of
the
appellant
Cosme
was
therefore
allowed
on
this
point.
Furthermore,
at
paragraphs
30
and
67
of
her
factum
entitled
"respondent’s
notes
and
authorities"
of
December
17,
1993,
the
respondent
estimated
that
the
unreported
income
of
the
appellant
Cosme-set
by
the
reassessment
in
appeal
at
$9,215-amounted
instead
to
$6,395.66.
In
the
case
of
the
appellant
Esteves,
at
paragraphs
42
and
67
of
the
aforementioned
factum,
the
respondent
gave
her
consent
for
that
appeal
to
be
allowed
on
the
basis
of
unreported
income
of
$878,
whereas
the
assessment
in
appeal
had
set
the
amount
at
$1,250.
The
appellant
Cosme
stated
in
his
testimony
that
he
had
worked
from
September
1986
to
mid-December
1987
as
a
day
labourer
for
Dunn
&
Benoît.
According
to
this
appellant,
the
cheque
stubs
and
statements
of
the
Commission
de
construction
du
Québec
represented
the
whole
of
his
remuneration
for
all
those
hours
of
work.
According
to
him,
all
that
remuneration
was
received
in
the
form
of
cheques
during
1986
and
1987,
the
latter
taxation
year
being
the
only
one
that
concerns
us
in
the
instant
case.
The
appellant
Cosme
was
categorical
when
he
testified
that
he
had
received
no
remuneration
in
cash
from
his
employer
during
that
period
of
time.
The
appellant
Cosme
also
explained
that,
when
he
was
in
Dunn
&
Benoît’s
service,
a
normal
work
week
was
40
hours
per
week,
eight
hours
a
day,
from
Monday
to
Friday.
The
appellant
was
paid
time
and
a
half
for
the
overtime
that
he
was
able
to
do
during
a
working
day.
The
hourly
rate
was
doubled
if
the
appellant
had
to
work
on
Saturday
or
Sunday.
The
appellant
Cosme
specified
in
his
testimony
that
the
employees
on
the
construction
sites
could
be
asked
to
work
overtime
on
certain
work
days
in
a
given
week,
even
if
the
same
employees
might
have
worked
less
than
eight
hours
per
day
during
other
days
of
the
same
week
because
of
bad
weather,
for
example.
The
appellant
Cosme
also
explained
that
he
received
his
pay
cheque
from
the
foreman
in
a
sealed
envelope.
The
testimony
of
the
appellant
Esteves,
who
had
been
in
the
service
of
the
same
employer
Dunn
&
Benoît,
only
from
July
1988,
was
generally
consistent
with
that
of
the
appellant
Cosme.
He
also
stated
that
he
had
been
paid
by
cheque
both
for
the
normal
working
hours
and
for
overtime.
He
stated
that
he
had
been
paid
time
and
a
half
or
double
time
for
the
overtime.
His
testimony
contained
a
single
item
of
interest.
It
concerned
the
special
terms
and
conditions
of
Dunn
&
Benoît’s
remuneration
system
concerning
the
appellant
Esteves.
During
the
period
in
issue,
the
latter
held
a
cement
worker
apprentice’s
competency
card,
but
in
fact
worked
as
a
labourer,
those
two
employment
classes
providing
two
different
rates
of
remuneration.
A
penalty
was
assessed
on
this
point
by
the
Commission
de
construction
du
Québec
(CCQ)
for
a
violation
of
the
applicable
construction
order.
Special
terms
and
conditions
were
set
by
Dunn
&
Benoît
in
respect
of
the
remuneration
of
the
appellant
Esteves.
The
special
characteristics
and
the
position
of
counsel
for
the
respondent
on
the
existence
of
these
special
arrangements
are
set
forth
in
the
following
passage
from
the
examination-
in-chief
of
the
appellant
Esteves:
Q.
Mr.
Esteves,
we
can
see
that,
as
of
a
given
period,
if
we
take
for
example
the
period
from
November
12,
1988,
I
can
perhaps
pass
it
to
you,
your
Honour-that
is
the
period
after;
that
appears
to
be
exactly
the
same
thing.
I
see
that
you
have
regular
hours,
double-time
hours,
straight-time
hours,
and
you
have
part
of
those
hours
that
are
paid
at
$10
an
hour.
Why
would
those
hours....
This
is
the
first
column
at
the
top
which
was
paid
at
$10
an
hour.
Why
were
you
paid
for
those
hours
at
$10
an
hour?
A.
Why,
I
asked
my
foreman,
and
my
foreman...(inaudible)
me...cement
worker,
cement
worker
apprentice.
I
told
my
foreman
to
make
up
the
wages,
and
they
reported
the
hours
to
the
first
floor
to
make
up
the
difference
in
wages
between
a
cement
worker
apprentice
and
a
labourer.
Emanuel
Linhares:
Did
you
understand,
your
Honour?
Judge:
Yes,
I
think
I
understood
that....
Emanuel
Linhares:
Those
hours
were
paid
in
order
to
make
up
the
wage
difference
that
existed
between
a
cement
worker
apprentice
and
a
labourer.
Since
he
was
ultimately
carrying
on
a
labourer’s
trade,
he
only
had
a
cement
worker
apprentice’s
card,
the
employer
reported
the
hours
that
he
did
as
a
cement
worker
apprentice
to
the
CCQ
and
then
in
the
cheque
to
Mr.
Esteves
was
paid
a
consideration
of
$10
to
make
up
the
real
labourer’s
wage.
Bernard
Fontaine:
This
explanation
is
not
questioned
by
the
department.
That
was
checked
with
the
employer,
your
Honour.
[Translation.]
The
appellant
Esteves
also
explained
why
his
remuneration
did
not
include
overtime
during
the
first
months
of
his
period
of
employment
starting
in
July
1988.
For
the
appellants,
two
foremen
at
the
relevant
periods,
Guido
Cavallin
and
Denis
Allard,
confirmed
that
time
sheets
were
prepared
each
day
by
the
foreman
responsible
for
a
given
employee.
They
were
not
signed
by
the
foreman.
Those
time
sheets
were
collected
at
the
end
of
each
week,
either
occasionally
by
the
truck
drivers,
according
to
Mr.
Cavallin,
or
an
office
employee.
Wages
were
subsequently
inserted
in
sealed
envelopes
and
given
to
the
employees
concerned,
generally
by
the
foreman
and
sometimes
by
an
office
employee.
The
foreman
could
not
know
the
contents
of
the
envelope
because
the
envelope
had
been
sealed
at
the
office
before
being
handed
to
the
foreman
in
question.
Nor
did
Mr.
Cavallin
know
on
what
basis
a
given
employee
had
been
remunerated
for
the
overtime
he
had
done.
Mr.
Cavallin
did
not
know,
for
example,
whether
special
arrangements
had
been
reached
between
the
appellant
Esteves
and
Dunn
&
Benoît.
The
employee
received
two
envelopes
when
he
had
worked
on
two
sites
in
the
same
week,
but
otherwise
a
single
envelope
was
given
to
him.
It
was
the
true
number
of
hours
that
was
recorded
on
the
time
sheets
by
the
foreman.
Notes
were
made
on
certain
time
sheets
by
a
person
who
was
not
the
regular
foreman.
The
employees
did
not
complain
to
the
foreman,
or
rarely
so,
about
the
calculation
of
the
hours
and
amount
of
their
pay.
In
the
case
where
a
complaint
was
directed
to
the
foreman,
the
employee
was
then
asked
to
report
to
the
Dunn
&
Benoît
office.
The
foreman
Allard
specifically
stated
that,
if
an
employee
had
worked
only
three
hours
in
a
given
day
or
had
not
worked
at
all
because
of
bad
weather,
he
could
add
the
overtime
done
during
another
working
day
for
which
he
should
normally
have
been
remunerated
at
time
and
a
half
to
the
working
hours
of
the
day
on
which
he
had
worked
only
a
few
hours
or
had
not
worked
at
all
and
thus
be
remunerated
at
straight
time.
Lastly,
it
should
be
mentioned
that
the
two
foremen
in
question-although
the
situation
is
less
clear
in
Mr.
Cavallin’s
case-received
a
notice
of
reassessment
as
a
result
of
the
fact
that
they
allegedly
did
not
include
part
of
the
income
which
they
purportedly
received
in
cash
in
their
income.
The
validity
of
these
assessments
concerning
these
two
foremen
was
disputed
by
each
of
them,
and
their
cases
against
Revenue
Canada
had
not
yet
been
settled
at
the
time
these
appeals
were
heard.
They
stated
under
oath
that
they
had
received
no
part
of
their
remuneration
in
cash.
The
first
witness
for
the
respondent
was
Bradford
Cairns,
who
was
in
the
service
of
Dunn
&
Benoît
for
a
period
of
a
year
and
a
half
ending
in
January
1989.
He
was
then
operations
manager
and
made
sure
that
the
materials
and
equipment
required
were
available
on
the
sites.
He
communicated
with
the
suppliers
in
order
to
purchase
the
necessary
materials.
He
collected
the
time
sheets
on
the
sites
once
a
week.
Those
time
sheets
were
inserted
in
envelopes
with
memos,
purchase
orders
and
other
documents.
Those
envelopes
were
not
sealed
when
they
were
forwarded
to
the
Dunn
&
Benoît
office.
He
remitted
those
time
sheets
to
Mrs.
Sylvie
Dubuc
or
Mrs.
Sylvie
Racine.
He
entered
no
notes
on
the
time
sheets.
This
witness
explained
that,
on
pay
days,
the
Thursday
of
every
week,
he,
Mrs.
Sylvie
Dubuc,
whose
duty
was
to
prepare
the
cheques,
and
Mr.
Benoît,
who
then
had
the
necessary
notes
in
hand,
did
what
had
to
be
done
so
that
the
remuneration
of
the
employees
on
the
work
sites
could
be
paid
to
them
on
the
same
day.
Amounts
of
money
were
then
put
into
brown
envelopes;
the
names
of
the
employees
appeared
on
the
backs
of
those
envelopes.
Pay
cheques
were
put
in
white
envelopes.
He
testified
that
most
of
the
employees,
between
75
per
cent
and
80
per
cent,
receive
two
envelopes;
the
other
employees
received
only
one
envelope.
Mr.
Cairns
mentioned
that
he
could
occasionally
have
a
total
sum
in
all
the
brown
envelopes
amount
to
$25,000
in
cash,
on
a
particular
pay
day.
The
two
envelopes
were
sealed
when
they
were
handed
to
him
to
be
remitted
to
the
foreman.
Mr.
Cairns
then
went
to
the
work
sites
and
gave
the
appropriate
foreman
the
brown
and
white
envelopes
in
question,
the
whites
containing
the
cheques
and
the
browns
the
amounts
in
cash.
He
clearly
indicated
that
he
did
not
know
what
the
foreman
did
with
the
envelopes.
He
and
the
office
employees
were
not
remunerated
in
cash.
Mr.
Cairns
explained
that
he
could
work
80
hours
per
week
without
receiving
remuneration
for
overtime;
he
had
been
made
to
understand
that
he
would
one
day
become
a
partner.
He
did
not
remember
paying
a
foreman
part
of
his
remuneration
in
cash,
but
he
was
convinced
that
such
a
situation
had
occurred.
Mr.
Cairns’
testimony
was
followed
by
that
of
Mrs.
Sylvie
Dubuc,
employee
pay
clerk
from
the
fall
of
1987
to
December
1988.
That
same
month,
she
left
that
particular
employment
with
Dunn
&
Benoît
for
personal
reasons
unrelated
to
her
relations
with
her
former
employer.
Since
she
has
ceased
to
work
for
that
employer,
she
did
not
have
any
contact
with
the
officers
of
Dunn
&
Benoît;
nor
has
she
communicated
with
any
employee
whatever
of
that
firm,
except
with
one
of
her
sisters.
During
her
testimony,
Mrs.
Dubuc
explained
her
role
with
respect
to
the
remuneration
of
the
employees
working
on
Dunn
&
Benoît’s
sites
and
the
process
that
was
followed
for
preparing
the
employee’s
remuneration
and
forwarding
that
remuneration.
First
of
all,
the
remuneration
system
was
computerized.
Every
Monday
morning,
she
received
the
time
sheets
on
which
the
hours
of
work
of
each
employee
were
indicated.
The
data
recorded
in
the
computer
did
not
reflect
overtime
work.
The
working
hours
exceeding
eight
hours
in
a
working
day
(Monday
to
Friday)
and
the
hours
of
work
on
Saturdays
were
remunerated
at
straight
time
and
in
cash.
Calculation
sheets
for
the
remuneration
of
each
employee
on
which
the
cash
amounts
payable
to
each
employee
were
determined
were
prepared
by
Mrs.
Dubuc.
These
amounts,
in
denominations
from
$1
to
$20,
came
from
Formes
Horizontales,
a
business
name
used
by
Mr.
Benoît
as
part
of
the
operation
of
his
firm’s
business.
The
amounts
payable
to
each
employee
for
overtime
work
were
rounded
to
the
nearest
dollar.
The
total
amount
that
could
be
paid
in
cash
in
respect
of
overtime
work
varied
over
the
period
from
March
to
September
1988
between
$1,512
and
$13,177
per
week,
the
average
being
in
the
order
of
$7,000.
On
Thursday
mornings,
on
pay
day,
Mr.
Benoît
went
to
the
office
with
the
necessary
amount
in
cash
for
each
employee.
The
pay
cheques
which
had
already
been
prepared
previously
were
put
into
an
envelope;
the
amount
in
non-metal
currency
was
inserted
in
a
second
envelope,
which
was
brown.
For
each
site,
there
was,
to
use
Mrs.
Dubuc’s
terminology,
a
"pile
of
(pay)
cheques"
and
a
"pile
of
envelopes"
with
cash
for
the
employees
who
were
remunerated
in
cash
for
their
overtime
work.
According
to
this
witness,
if
in
a
given
week
an
employee
had
not
done
any
overtime
work,
he
received
only
one
envelope
containing
his
pay
cheque.
Furthermore,
if
the
same
employee
had
in
a
given
week
done
eight
hours
of
work
each
working
day
and
in
addition
five
hours
of
work
on
Saturday,
he
was
purportedly
remunerated
in
cash
at
straight
time
for
that
overtime.
The
same
arrangement
was
allegedly
applicable
if
the
overtime
had
been
done
during
a
given
working
day.
An
employee
could
also
receive
two
envelopes
even
if
he
had
not
done
any
overtime,
if
he
had
worked
on
two
sites
in
a
given
week.
The
pay
cheques
were
prepared
taking
into
account
the
necessary
source
deductions,
union
dues,
etc.
Part
of
the
remuneration
paid
in
cash
was
not
subject
to
any
deductions.
These
brown
and
white
envelopes
were
delivered
to
the
appropriate
foreman
most
of
the
time
by
Mr.
Cairns
and
occasionally
by
Mr.
Benoît,
Mr.
Moffat
or
by
an
engineer
when
the
latter
had
in
any
case
to
go
to
the
sites
on
pay
day.
According
to
an
exhibit
that
was
filed,
the
appellant
Esteves
did
17
overtime
hours
during
the
week
of
September
17,
1988
and
the
cash
amount
put
into
a
brown
envelope
was
calculated
accordingly
by
Mrs.
Dubuc.
The
latter
said
that
she
had
no
reason
to
doubt
that
this
amount
had
been
put
into
an
envelope
which
was
to
be
remitted
to
the
appellant
Esteves.
A
note
on
another
time
sheet
read
"CCQ
Saturday
cut
overtime".
In
another
case,
a
note
read,
"CCQ
came
by,
problem
with
Abilio
Esteves,
no
day
labourer’s
card".
Asked
to
give
the
meaning
of
these
inscriptions,
Mrs.
Dubuc
stated
the
following:
A.
For
CCQ
Saturday,
since
we
knew
that
there
was
a
CCQ
inspector
who
had
come
by,
we
had
to
show
hours
paid
at
double
time
on
the
pay
that
week,
and
the
problem
with
Abilio
Esteves
with
no
labourer’s
card
was,
it
was
at
that
time,
call
the
employee,
see
if
he
could
get
one
and
so
on;
it
had
nothing
to
do
with
the
pay
as
such;
it
had
more
to
do
with
the
fact
that
that
employee
was
not
entitled
to
work
at
that
time
without
a
card.
Q.
As
a
labourer?
A.
That’s
right.
[Translation.]
Further
on,
she
added
the
following
on
this
subject:
A.
Well,
as
I
said
a
moment
ago,
when
we...when
we
knew
that
the
CCQ
had
stopped
by
a
site,
we
had
to
show
those
hours
on
the
pay
cheque.
Here
there
were
five
hours
worked
on
Saturday;
so
we
had
to
show
five
hours
at
double
time.
Q.
Yes.
A.
Because
Saturday
was
double
time.
And
that
person,
Abilio
Esteves,
had
worked
43
1/2
hours
in
all.
If
I
put
five
hours
at
double
time,
instead
of
putting
all
the
rest
at
straight
time,
I
put
some
at....
It’s
as
though
the
five
hours
at
double
time
were
calculated
as
ten
hours
at
straight
time
because
those
five
hours
were
usually
paid
only
at
straight
time
in
cash.
So
for
that
to
be
continued,
for
it
to
be
the
same
amount
of
money,
it’s
as
though
the
five
hours
at
double
time
here
counted
for
ten
hours
at
straight
time.
A.
So
if
he
had
worked
43
1/2
hours
in
all,
less
ten
hours
at
straight
time,
that
left
only
33
1/2
hours,
but
all
the
hours
that
exceeded
the
eight
hours
had
to
be
paid
that
week....
[Translation.]
Referring
to
the
43
1/2-hour
work
week
of
the
appellant
Esteves,
Mrs.
Dubuc
continued
her
explanation:
Q.
So
in
fact,
the
total
43
1/2
is
the
total
of
all
hours
worked
in
terms
of
absolute
hours?
A.
Yes,
43
1/2.
Q.
On
his
pay
cheque,
he
had
22
hours
at
straight
time,
five
hours
at
double
time,
thus
the
equivalent
of
42
hours.
A.
Of
32
hours
by
my
count.
Q.
Sorry,
yes,
32
hours.
A.
So
if,
in
any
case,
if
I
rely
on
the
way
it
worked,
if
it’s
the
equivalent
of
32
hours,
normally
I
should
have
paid
him
overtime
in
cash;
wait
till
I
calculate
it;
there
are
11
hours
missing.
[Translation.]
After
experiencing
some
difficulty,
she
concluded
hesitantly
further
on
that
there
was
an
error
of
one
hour
in
the
calculation
of
the
time:
A.
Thirty-one.
That’s
why
there
are
22
hours
at
straight
time
here
plus
five
at
double
time;
in
other
words,
ten
at
straight
time
equals
32.
There
is
a
mistake
of
one
hour
here
somewhere
between
the
31
that
I
calculated
here
and
the
32
here,
but
that
was
the
way
it
worked
when
someone
came
by
on
Saturday.
[Translation.]
The
reason
for
this
stratagem
is
clearly
explained
in
the
following
passage:
Q.
Bernard
Fontaine:
And
if
I
correctly
understand
the
reason
why
you
did
that,
it
was-I
don’t
know-to
cover
your
tracks
in
case
the
CCQ
examined
your
monthly
reports?
A.
That’s
right,
especially
when
we
knew
perfectly
well
that
an
inspector
had
come
by
on
a
Saturday.
We
had
to
arrange
things
so
that
it
appeared
on
the
pay.
Then
on
other
occasions,
I
was
told
so
that,
so
that
it
would
look
well,
so
as
not
to
draw
attention,
because
it
is
normal
in
the
construction
industry
to
work
on
Saturday;
if
nothing
ever
appeared
on
Saturday,
it
might
not
seem
normal;
so
I
was
asked
to
make
the
calculations
so
that
there
were
hours
that
appeared
on
Saturday.
[Translation.]
Mrs.
Dubuc
also
indicated
that
Dunn
&
Benoît
had
to
file
a
monthly
report
with
the
Commission
de
construction
du
Québec
in
which
the
employer
indicated
in
particular
only
the
working
hours
of
each
employee
on
the
basis
of
which
the
pay
cheques
had
been
prepared,
data
that
were
recorded
in
the
computerized
system.
The
T4s
issued
by
the
employer
reflected
only
the
remuneration
paid
in
the
form
of
cheques
and
the
deductions
that
had
been
made.
Errors
sometimes
appeared
in
the
calculation
of
the
remuneration.
There
were
then
discussions
between
Mrs.
Dubuc,
the
employee
concerned
and
the
foreman
in
question.
The
corrections
were
made
the
following
week,
whether
those
errors
concerned
the
part
of
the
remuneration
paid
in
cash
or
in
the
form
of
a
cheque.
After
being
kept
by
Mrs.
Dubuc
for
two
or
three
weeks,
the
time
sheets
were
remitted
to
Mr.
Benoît.
This
system
of
remuneration
was
maintained
during
Mrs.
Dubuc’s
period
of
employment,
except
that,
starting
in
September
1988,
Mrs.
Dubuc’s
employers
asked
her
to
do
what
had
to
be
done
so
that
the
amounts
paid
to
the
site
employees
in
cash
were
reduced.
It
should
also
be
noted
that,
in
the
case
of
the
appellant
Esteves,
he
was
remunerated
at
two
rates
during
the
period
that
concerns
us,
as
a
cement
worker
apprentice
and
as
a
labourer.
In
cross-examination,
Mrs.
Dubuc
admitted
that,
starting
at
a
given
time
toward
the
end
of
her
period
of
employment,
she
was
asked
to
redo
false
time
sheets
which
were
supposed
to
be
taken
for
official
time
sheets.
She
was
also
asked
to
prepare
what
were
more
often
false
expense
accounts,
most
of
the
time
concerning
foremen
and
in
exceptional
cases
other
employees.
She
also
stated
that
sometimes
she
herself
handed
the
employees
on
the
construction
site
their
envelopes
and
that
on
those
few
occasions,
she
remitted
two
envelopes
most
of
the
time.
According
to
this
witness,
a
few
office
employees
received
part
of
their
remuneration
in
cash.
She
also
indicated
that
cash
had
been
offered
to
her,
but
she
had
refused.
Nor
had
she
received
a
reassessment
from
Revenue
Canada
in
respect
of
employment
income
which
she
had
not
reported.
The
office
employees
did
not
work
overtime,
or
very
rarely
did
so,
and
they
were
paid
at
a
weekly
rate.
Mrs.
Dubuc
also
gave
the
appellant’s
agent
interesting
explanations
about
the
fact
that
the
appellants
Cosme
and
Esteves
had
received
cheques
whose
calculations
showed
that
they
had
been
paid
at
double
time
or
at
time
and
a
half
during
the
periods
that
concern
us.
She
stated
the
following:
A.
It
was
either
hours
that
were
invented,
if
I
may
say
so,
because
they
wanted
hours
to
appear
on
Saturday,
or
hours
at
time
and
a
half
during
the
week.
Then,
starting
in
the
fall
of
1988,
since
the
system....
They
wanted
more
and
more
to
reduce
the
time
paid
in
cash;
we
greatly
reduced
the
overtime
on
the
sites
and
almost
all
the
hours
actually
worked
as
overtime
on
the
sites
appeared.
Q.
So
that
was
another
fabrication
of
vouchers
with
the
hours?
A.
Yes.
Q.
Hours
invented
on
the
cheques....
A.
Yes.
Q.
...that
was
another
fabrication
of
documents?
A.
Yes.
[Translation.]
The
Court
also
learned
that
the
envelopes
handed
by
Mr.
Cairns
to
the
foreman
of
the
various
sites
were
not
immediately
distributed
to
the
employees
unless
delivery
of
the
envelopes
coincided
with
a
break
for
the
employees
of
one
site
in
particular.
As
to
the
week
of
September
17,
1988,
Mrs.
Dubuc
maintained
her
version
according
to
which
a
sum
representing
the
remuneration
of
the
appellant
Esteves
for
the
17
hours
of
overtime
was
put
into
a
brown
envelope
in
that
appellant’s
name.
She
obviously
could
not
know
whether
the
envelope
in
question
had
in
fact
been
given
to
the
appellant
Esteves.
According
to
her,
she
would
have
received
telephone
calls
if
the
remuneration
for
those
17
hours
had
not
been
received
by
the
appellant
Esteves.
Mrs.
Dubuc
also
confirmed
that
the
hours
of
work
from
one
given
day
could
be
allocated
to
another
day
at
an
employee’s
request
so
that
the
employee
would
have
a
full
40-hour
week,
an
operation
that
offered
certain
benefits
for
the
employee,
particularly
as
regards
the
pension
plan.
From
the
testimony
of
Mr.
Moffat,
president
of
Dunn
&
Benoît
and
one
of
the
two
shareholders,
it
should
first
be
noted
that
the
firm
Dunn
&
Benoît
ceased
operating
its
business
at
the
end
of
1988
or
in
early
1989,
when
the
firm
M.B.A.,
which
shared
the
same
facilities
and
the
same
manpower,
terminated
its
activities
in
1991
as
a
result
of
its
bankruptcy.
Mr.
Moffat
also
described
the
nature
and
role
of
Formes
Horizontales.
On
this
point,
he
mentioned
that
Formes
Horizontales
was
only
a
business
name.
No
business
was
operated
under
that
head.
Sums
of
money
were
transferred
from
Dunn
&
Benoît
to
Formes
Horizontales.
Formes
Horizontales
cashed
the
cheques
made
to
its
order
to
be
able
to
cover
the
part
of
the
remuneration
paid
in
cash.
The
technique
used
to
arrive
at
this
result
consisted
in
an
invoice
made
by
Formes
Horizontales
to
Dunn
&
Benoît,
likely
bearing
the
words
"hiring
labour",
for
the
part
of
the
wages
that
was
paid
in
cash.
Mr.
Moffat
substantially
corroborated
Mrs.
Dubuc’s
testimony
on
the
terms
and
conditions
of
the
system
of
remuneration
in
cash
for
overtime
work.
Mr.
Moffat
went
to
each
of
the
sites
nearly
every
day.
The
number
of
employees
on
those
sites
could
reach
about
100.
He
said
that
roughly
90
per
cent
of
the
wages
paid
for
overtime
beyond
40
hours
per
week
was
paid
in
cash.
The
introduction
of
this
system
of
remuneration
in
cash
was
made
necessary
by
the
competition.
According
to
him,
it
was
standard
practice
in
the
construction
industry
to
pay
site
employees
in
cash
for
overtime.
The
witness
stated
that
he
himself
had
never
received
remuneration
in
cash.
Payments
for
the
purchase
of
parts
or
equipment
rentals
could
be
made
using
the
Formes
Horizontales
designation.
Thus,
a
payment
of
$25,000
was
established
as
having
been
made
under
the
name
Formes
Horizontales
to
a
certain
Jean-Marc
Francoeur
for
services
in
respect
of
the
assembly
of
a
crane
and
of
the
price
to
rent
that
crane.
This
witness
confirmed
the
existence
of
what
he
called
"banked
hours",
in
the
sense
that
those
hours
could
be
accounted
for
as
though
they
had
been
worked
a
few
days
later,
but
he
emphasized
that
this
system
was
rather
exceptional.
He
also
mentioned
in
cross-examination
that,
to
the
best
of
his
knowledge,
he
had
not
handed
pay
envelopes
directly
to
the
employees.
He
also
stated
that
certain
inscriptions,
including
the
amount
in
cash,
appeared
on
the
brown
envelope.
In
response
to
the
question
whether
he
remembered
if
any
site
employee
had
"refused
to
be
paid
in
cash
for
his
overtime",
he
answered
as
follows:
A.
No,
I
can’t
say,
I
don’t
remember,
I
don’t
remember
whether
there
were
employees
who
did
not
want
to
be
paid
for
overtime.
I
believe
that,
at
that
time,
there
were
at
least
90
per
cent
of
the
employees
minimum
who
had
overtime,
in
any
case
who
had
overtime
or
who
wanted
a
part
to
be
paid
in
cash.
[Translation.]
He
then
continued
as
follows:
A.
That
doesn’t
mean
that
the
guys
who
didn’t
do
overtime
did
not
want
a
part
in
cash
because
there
were
many
who
wanted
to
have
32
hours
a
week,
who
did
just
40
hours,
who
did
straight
time;
they
wanted
just
32
hours
on
the
"payroll"
because
the
32
hours
was
the
insurable
maximum
for
unemployment
insurance.
So
the
guy
had,
for
him,
he
had
the
maximum
stamp
in
order
to
draw
unemployment
insurance
once
he
would
be
on
unemployment
insurance;
so
he
had
no
advantage
in
having
40
hours.
It
was
an
advantage
for
him
to
have
32
hours
on
the
"payroll"
and
to
have
eight
hours
in
cash,
instead
of
having
40
hours.
Q.
Yes.
A.
That
was
an
advantage
for
him;
he
had
more
money
for
the
moment,
in
his
pocket
today,
the
next
day;
he
had
more
money
than
by
having
it
on
the
"payroll".
[Translation.]
Later,
in
response
to
a
question
by
the
court,
he
added
the
following:
A.
No,
no,
I
said
a
moment
ago
that
some
overtime
was
done,
for
example
on
Saturday,
ultimately
if
the
Office
de
la
Construction
had
gone
to
the
site
on
Saturday
and
noted
that
the
employee
was
working
on
the
site.
At
the
end
of
the
month,
when
our
statements
were
sent
and
they
asked
for
a
copy
of
the
time
sheets,
they
could
check
whether
ultimately
those
eight
hours
or
those
four
hours
at
double
time
had
in
fact
been
recorded
on
the
report.
So
what
we....
Since
the
employee
wanted
to
have,
for
example,
32
hours,
40
hours
per
week,
we
based
it
on
his
total
hours,
the
double
time
converted
into
straight
time
so
that
the
total
number
would
reach
a
total
number
of
hours;
we
reduced,
we
cancelled
days
during
the
week.
But
it
has
already
happened
that
the
CCQ
was
on
the
site
all
week
and
the
guy
worked
on
Saturday
as
well;
we
had
to
put
down
all
the
hours;
we
paid
overtime.
But
generally,
overtime
or
the
agreement
that
the
employees
wanted
to
have,
in
general,
it
was
overtime
after
40
hours,
but
we
paid
it
in
cash.
[Translation.]
He
also
stated
that
the
office
employees
did
not
receive
part
of
their
remuneration
in
cash.
He
noted,
however,
that
it
was
Mr.
Benoît
and
not
himself
who
retained
the
services
of
the
office
employees
and
dealt
with
them
on
the
subject
of
their
remuneration.
This
witness
was
unable
to
confirm
the
accuracy
of
the
amended
T4s
of
the
site
employees
for
the
two
years
in
issue,
the
calculation
in
this
respect
having
been
done
under
Mr.
Benoît’s
direction.
This
witness
did
not
himself
receive
a
reassessment
from
Revenue
Canada
in
respect
of
amounts
received
from
Dunn
&
Benoît
which
he
had
not
included
in
his
income.
As
to
his
expense
account
as
an
employee
of
Dunn
&
Benoît,
he
stated
that
he
was
paid
by
cheque,
rarely
in
cash.
To
the
question
whether
it
was
possible
"that
there
were
documents
that
were
fabricated
in
order
to
increase
your
expense
account",
he
answered,
"I
don’t
know,
I
don’t
think
so".
Mr.
Benoît
confirmed
the
essential
aspects
of
the
testimony
of
Mr.
Moffat
and
Mrs.
Dubuc.
He
further
explained
that
the
introduction
of
the
remuneration
system
for
the
overtime
done
by
the
employees
on
the
construction
sites
could
be
attributed
in
part
to
pressure
from
most
of
the
employees
who
wanted
to
be
remunerated
in
cash.
Mr.
Benoît
also
explained
that
the
data
supplied
to
the
CCQ
in
the
monthly
reports
were
those
that
were
recorded
in
the
computer.
So,
the
hours
of
work
in
question
in
those
monthly
reports
did
not
include
the
hours
for
which
one
employee
had
not
been
remunerated
by
cheque.
Mr.
Benoît
was
not
able
to
confirm
the
accuracy
of
the
amended
T4s.
In
the
case
of
1987,
he
admitted
that
the
amended
T4s
represented
only
estimates.
As
to
the
amended
T4s
for
1988,
Mr.
Benoît
believed
that
they
were
accurate
for
the
period
of
the
year
where
he
had
had
the
time
sheets
in
his
possession,
that
is
to
say
for
eight
or
nine
months.
Estimates
had
been
made
for
the
other
months
of
1988.
Mr.
Benoît
also
stated
that
he
had
not
been
reassessed
in
respect
of
sums
which
he
might
have
received
in
cash
during
the
years
in
issue.
One
of
the
employees
of
Dunn
&
Benoît,
an
apprentice
carpenter,
Mr.
Gilles
Barbeau,
was
also
called
on
behalf
of
the
respondent.
This
employee
was
in
that
firm’s
service
for
roughly
one
year,
having
started
in
July
or
August
1987.
His
foreman
was
Mr.
Denis
Allard.
At
the
start
of
his
employment,
Mr.
Denis
Allard
told
him
the
following:
A.
And
then
at
one
point,
they
told
me,
"If
you
want
to
continue
working,
you
should
do
a
little
overtime,
but
undeclared".
[Translation.]
This
employee
was
not
interested
in
receiving
part
of
his
remuneration
in
cash.
That
system
was
not
advantageous
for
an
employee
for
more
than
one
reason,
in
particular
since
it
had
a
negative
impact
on
the
social
benefits
which
he
could
receive
later
and,
furthermore,
it
would
postpose
the
day
when
"he
would
stop
being
an
apprentice
carpenter".
He
ultimately
agreed
to
be
remunerated
in
cash.
During
that
period,
this
witness
kept
a
record
in
which,
in
particular,
his
working
hours
exceeding
40
hours
for
a
given
week
were
recorded.
Mr
Barbeau
subsequently
received
T4
sup-
plementaries
with
respect
to
his
undeclared
income
for
1987
and
1988.
Those
T4
supplementaries
did
not
concord
with
the
figures
appearing
in
his
personal
records.
According
to
him,
those
T4
supplementaries
represented
three
to
four
times
the
undeclared
amounts.
Mr.
Barbeau
subsequently
appealed
from
the
reassessments
issued
on
the
basis
of
the
T4
supplementaries
for
those
two
taxation
years.
He
mentioned
that
errors
had
been
made
in
computing
his
wages.
The
government
ultimately
agreed
to
reduce
the
unreported
income
from
$2,400
to
$747
for
1987
and
from
$2,275
to
$875.12
for
1988.
The
evidence
of
Mrs.
Chun
Ling
Linda
Kwong,
an
auditor
with
Revenue
Canada,
and
Mr.
Gaétan
Ouellette,
an
investigator
for
the
same
department,
were
of
little
interest.
Mrs.
Kwong,
for
her
part,
had
prepared
a
table
with
the
aid
of
the
Dunn
&
Benoît’s
books
and
records,
including
the
T4
supplementaries,
and
the
data
supplied
by
Mr.
Barbeau
for
part
of
1987
and
1988
with
respect
to
the
latter’s
remuneration.
That
table
established
that
there
was
no
disparity
between
these
two
sources
of
documentation.
Mrs.
Kwong
had
also
prepared
another
table,
this
one
time
concerning
the
appellant
Esteves
for
1988,
with
the
aid
of
the
documentation
provided
by
Dunn
&
Benoît.
According
to
the
witness,
this
table
set
the
unreported
income
of
the
appellant
Esteves
at
$878
for
1988.
In
the
case
of
the
witness
Ouellette,
he
mentioned
that
the
total
of
the
amounts
appearing
on
the
T4
supplementaries
for
the
site
employees
was
substantially
less
than
the
funds
paid
to
Formes
Horizontales
by
Dunn
&
Benoît.
He
also
confirmed
that
the
T4
supplementaries
were
not
necessarily
accurate.
Appellants’
claims
In
the
appellants’
factum,
the
appellants’
agent
submitted
first
of
all
that
the
appellants
denied
they
had
received
the
sums
which
the
Minister
of
National
Revenue
had
added
to
the
revenue
reported
in
their
income
tax
returns.
He
further
argued
that
the
two
foremen
of
the
appellants
during
the
periods
in
issue
testified
that
they
had
distributed
only
a
single
envelope
per
employee
per
site
for
a
given
week,
except
on
certain
occasions,
according
to
Mr.
Cavallin,
if
the
employee
had
worked
on
two
sites
in
the
same
week.
Those
foremen
stated
that
they
themselves
remitted
the
pay
to
the
employees
most
of
the
time
and
that
they
had
never
given
the
appellants
envelopes
containing
cash
amounts.
The
appellants’
agent
also
mentioned
that,
while
acknowledging
their
writing
on
the
time
sheets,
the
two
foremen
did
not
admit
certain
inscriptions
appearing
thereon;
these
documents
appeared
to
have
been
altered
by
other
persons.
The
appellants’
agent
emphasized
the
following
points
in
his
analysis
of
the
testimony
of
the
persons
called
by
the
respondent.
Mr.
Bradford
Cairns
"stated
that
he
had
never
given
the
appellants
envelopes
containing
cash”.
As
regards
the
testimony
of
Mrs.
Sylvie
Dubuc,
the
appellants’
agent
emphasized
that
she
had
"stated
that
she
had
never
given
the
appellants
envelopes
containing
cash
and
that
she
did
not
remember
preparing
envelopes
containing
cash
in
the
appellants’
names".
Another
part
of
Mrs.
Dubuc’s
testimony
referred
to
by
the
appellants’
agent
was
that
in
which
she
"stated
that
it
was
common
practice
to
fabricate
documents
at
Dunn
&
Benoît
in
order
to
deceive
the
authorities".
As
to
Mr.
Serge
Moffat,
the
appellants’
agent
recalled
from
his
testimony
that
he
had
distributed
the
pay
to
the
various
sites
on
a
number
of
occasions.
According
to
that
agent,
he
stated
that
he
had
"never
remitted
envelopes
containing
cash
to
the
appellants".
As
to
the
testimony
of
Mr.
Gerry
Benoît,
he
pointed
to
the
statement
according
to
which
the
latter
did
not
often
go
to
the
sites
and
"did
not
really
remember
the
appellants".
The
appellants’
agent
argued
that
he
had
"confirmed
that
he
had
prepared
the
T4
supplementaries
and
that
he
had
relied
on
estimates
in
order
to
prepare
them
and
that
he
was
not
able
to
say
whether
the
amounts
recorded
on
the
T4
supplementaries
issued
in
the
appellants’
names
were
accurate".
As
to
the
testimony
of
Mr.
Gaétan
Ouellette,
an
investigator
with
Revenue
Canada,
the
appellants’
agent
stated
the
following,
at
the
bottom
of
page
4
in
the
"argument"
part
of
his
factum:
Mr.
Ouellette
stated
that
Revenue
Canada
had
proceeded
with
the
reassessment
of
the
employees
of
Dunn
&
Benoît
Construction
based
on
the
T4
supplementaries
provided
by
the
shareholders
of
that
company,
and
that
Revenue
Canada
had
been
unable
to
determine
accurately
whether
the
additional
amounts
of
employment
income
on
the
T4
supplementaries
were
correct.
[Translation.]
It
does
not
seem
to
me
appropriate
to
reproduce
the
substance
of
the
comments
made
by
the
appellants’
agent
concerning
the
testimony
of
Mr.
Barbeau,
a
former
employee
of
Dunn
&
Benoît,
or
by
Mrs.
Chun
Ling
Linda
Kwong,
an
auditor
with
Revenue
Canada.
In
the
"argument"
part
of
the
factum
of
the
appellant’s
agent,
it
seems
to
me
useful
to
note
the
following
passages
at
the
bottom
of
page
5:
Throughout
this
trial,
we
have
observed
that
the
evidence
filed
by
counsel
for
the
Minister
of
National
Revenue
was
based
on
more
or
less
credible
documents
prepared
by
the
shareholders
of
Dunn
&
Benoît
Construction,
documents
which
were
initially
used
to
deceive
the
tax
authorities.
Furthermore,
the
Minister
of
National
Revenue
has
never
been
able
to
prove
positively
and
accurately
that
the
appellants
received
the
alleged
cash
amounts.
The
Minister
showed
that
he
used
the
T4
supplementaries
issued
by
the
shareholders
of
Dunn
&
Benoît
Construction
as
basic
documents
in
order
to
reassess
the
appellants
and
to
assess
them
penalties
for
unreported
income.
However,
those
basic
documents,
that
is
to
say
the
T4
supplementaries
issued
by
the
shareholders
of
Dunn
&
Benoît
Construction
which
were
used
to
determine
the
amount
of
additional
income
assessed,
were
recognized
as
inaccurate
as
to
the
amounts
recorded
thereon
by
their
preparer,
Mr.
Benoît
himself.
In
other
appeals,
such
as
that
of
Mr.
Gilles
Barbeau,
for
example,
the
Minister
officially
recognized
the
T4
supplementaries
as
erroneous
for
lack
of
evidence.
How
then
did
the
Minister
manage
to
reassess
the
appellants
on
the
basis
of
amounts
which
he
knew
in
advance
were
incorrect?
The
Crown’s
witness
Mrs.
Sylvie
Dubuc
admitted
that
it
was
common
practice
at
Dunn
&
Benoît
Construction
to
falsify
the
documentation
in
order
to
evade
tax.
The
shareholders
Mr.
Moffat
and
Mr.
Benoît
admitted
that
they
had
adopted
the
stratagem
of
extracting
funds
from
the
company
in
order
to
be
able
to
appropriate
part
of
the
funds
personally.
When
faced
with
a
Revenue
Canada
audit,
the
shareholders
defended
themselves
saying
that
those
funds
had
been
used
to
pay
the
employees.
To
clear
themselves
of
this
fraud
and
to
try
to
reduce
the
amount
which
could
have
been
allocated
to
them
personally
as
income,
the
shareholders
issued
T4
Supplementary
slips
in
the
employees’
names.
By
proceeding
in
this
way,
they
showed
that
it
was
in
their
interest
to
increase
as
much
as
possible
the
amount
of
money
that
was
supposed
to
have
been
paid
to
the
employees,
including
the
appellants.
[Translation.]
Further
on
in
his
factum,
the
appellants’
agent
continued
his
statement
in
the
following
terms:
The
various
pieces
of
evidence
showed
us
that
a
number
of
persons
formed
an
integral
part
of
the
process
of
counting
and
allegedly
distributing
money
to
the
employees.
This
shows
us
that
this
money
could
have
stuck
to
the
shareholders’
fingers
or
to
those
of
the
superintendents
of
the
various
sites.
The
Crown
was
unable
to
prove
conclusively
that
the
moneys
in
question
were
distributed
to
the
employees
and
thereby
to
the
appellants.
No
intervener
in
the
alleged
process
of
distribution
indicated
that
they
had
personally
remitted
an
envelope
containing
cash
to
the
appellants.
[Translation.]
The
appellants’
agent
also
emphasized
by
means
of
abundant
commentary
that,
in
his
view,
Revenue
Canada
"did
not
directly
assess
the
company
or
its
shareholders".
He
mentioned
that
"Revenue
Canada
did
not
even
take
the
trouble
to
assess
Dunn
&
Benoît
Construction
in
order
to
recover
the
employer’s
portion
of
unemployment
insurance
premiums,
when
it
is
common
practice
at
Revenue
Canada,
when
T4
supplementaries
are
issued
in
order
to
increase
employees’
employment
income,
to
assess
the
employer
in
order
to
recover
the
employer’s
portion
of
unemployment
insurance
premiums.
The
Crown’s
witness
Mr.
Ouellette
confirmed
Revenue
Canada’s
practice
and
also
confirmed
that
Revenue
Canada
indeed
did
not
assess
the
company
Dunn
&
Benoît
Construction
for
the
amounts
of
the
employer’s
portion
of
unemployment
insurance
premiums".
Respondent’s
claims
Counsel
for
the
respondent
first
of
all
remarked
in
his
"notes
and
authorities",
that
"in
assessing
the
credibility
of
the
witnesses,
the
Court
must
consider
the
direct
or
indirect
interest
they
have
in
the
outcome
of
the
case".
Thus,
after
noting
the
appellants’
direct
monetary
interest,
he
also
pointed
out
that
the
witnesses
Cavallin
and
Allard
"have
an
indirect
finan
cial
interest
since,
having
themselves
been
assessed
for
undeclared
income,
they
have
an
interest
in
denying
the
allegations
showing
that
they
participated
in
a
system
which
enabled
them,
as
well
as
the
appellants,
to
receive
payment
in
cash
of
wages
which
did
not
appear
on
the
T4
slips
issued
by
their
employer.
A
decision
in
favour
of
the
appellants
could
indirectly
be
perceived
by
them
as
strengthening
their
position
in
their
case
against
the
tax
authorities".
He
hastened
to
point
out
that
none
of
the
witnesses
produced
by
the
respondent
had
a
"direct
financial
interest
in
the
outcome
of
the
appeal".
Counsel
for
the
respondent
relied
to
a
great
extent
on
a
number
of
elements
of
Mrs.
Dubuc’s
testimony.
At
paragraphs
9,
11
and
13,
he
described
and
commented
on
the
most
important
aspects
of
that
testimony
in
the
following
terms:
9.
In
these
circumstances,
the
employer,
through
its
principal
shareholders,
introduced
a
system
under
which
the
amounts
to
be
remitted
to
the
employees
"in
cash"
appeared
in
its
books
as
payments
of
subcontracts
let
to
Formes
Horizontales
(which
was
merely
a
business
name
of
J.
Benoît).
With
pay
day
approaching,
the
amounts
in
question
deposited
to
the
bank
account
of
Formes
Horizontales
were
almost
simultaneously
deposited
by
cheque
and
withdrawn
in
cash
upon
presentation
of
a
cheque
of
Formes
Horizontales
to
the
order
of
"payroll".
The
number
of
bills
of
different
denominations
needed
to
pay
the
"hidden"
part
of
the
weekly
remuneration
of
the
employees
was
communicated
to
the
bank
in
advance.
11.
The
reports
sent
to
the
Commission
de
la
construction
du
Québec
("CCQ")
were
not
weekly,
but
monthly
reports;
however,
if
month
after
month
there
had
been
little
or
no
overtime
reported
to
the
CCQ,
particularly
during
a
prosperous
period
in
construction,
the
inspectors’
concerns
might
have
been
awakened.
However,
by
converting
wages
for
40
hours
at
straight
time
to
wages
for
36
hours’
straight
time
and
two
hours’
double
time,
the
same
amount
was
paid
and
the
trail
covered.
Similarly,
if
the
week
consisted
of
four
non-holiday
days,
it
was
possible
to
generate
an
"official"
pay
of
24
hours
at
straight
time
and
four
hours
at
double
time,
which
equalled
32
hours
at
straight
time,
that
is
eight
hours
per
day
for
four
days.
13.
Unless
the
Court
is
prepared
to
conclude
that
the
appellants
agreed
to
work
free
of
charge
during
their
late
afternoons
and
weekends,
or
that
the
foremen’s
time
sheets
did
not
represent
the
real
hours,
it
must
be
concluded
that
they
were
part
of
the
great
majority
of
Dunn
&
Benoît
Construction’s
workers
described
by
the
Crown
witnesses
as
being
remunerated
partly
in
cash,
"under
the
table",
and
partly
by
pay
cheque.
It
is
revealing
to
compare
the
virtually
total
absence
of
hours
remunerated
at
time
and
a
half
for
the
months
and
years
preceding
the
last
week
of
September
1988
on
the
computer
printouts
and
their
sudden
presence
starting
in
the
last
week
of
September
1988
and
to
observe
that
the
hours
remunerated
at
double
time
prior
to
that
period
were
virtually
always
divided
by
two,
whereas,
after
the
third
week
of
September
1988,
there
were
uneven,
even
and
half
numbers
in
the
overtime
column.
[Translation.]
In
particular,
he
stated
in
reference
to
Mrs.
Dubuc
that
"for
part
of
1987
and
almost
until
October
1988,
she
was
at
the
centre
of
what
was
described
by
the
respondent’s
witnesses
as
a
system
under
which
Dunn
&
Benoît
Construction’s
employees,
with
few
exceptions,
were
paid
for
their
overtime
or
the
equivalent
of
their
overtime
in
cash".
Referring
to
the
state
of
the
evidence
concerning
the
appellant
Cosme,
counsel
for
the
respondent
wrote
as
follows
at
paragraph
14
of
his
"notes
and
authorities":
14.
In
the
case
of
Mr.
Jose
Cosme,
not
all
the
time
sheets
completed
by
his
foreman
were
available,
some
having
been
destroyed,
photocopies
or
doubles
(Exhibit
R-5)
have
survived,
however,
and
were
found
in
the
possession
of
the
Minister
of
National
Revenue.
These
documents,
apparently
reliable
when
compared
to
Mr.
Cosme’s
cheque
stubs
and
to
the
computer
printouts,
show
that
his
hours
in
1987
were
not
all
paid
by
cheque.
In
fact,
one
realizes
that,
contrary
to
what
this
appellant
claims,
he
often
worked
more
than
eight
hours
a
day
and
often
on
Saturdays
in
the
employment
of
Dunn
&
Benoît
Construction.
[Translation.]
In
the
case
of
the
appellant
Esteves,
he
commented
on
the
subject
of
the
evidence
of
the
amount
of
income
not
declared
by
the
latter
in
the
following
terms:
22.
In
the
case
of
Mr.
Esteves,
it
is
virtually
impossible
to
prove
the
exact
amount
of
undeclared
income
to
the
last
cent
given
the
absence
of
a
large
number
of
the
site
sheets.
There
is
a
discrepancy
between
the
figures
appearing
on
Exhibit
R-3
and
those
appearing
on
Exhibit
R-5.
We
submit
that
the
Court
should
conclude
that
amounts
were
not
reported
in
the
appellant’s
T1
return
for
his
1987
taxation
year
and
that
the
appellant
knew
or
should
have
known
that
they
did
not
appear
on
the
T4
slip
which
his
employer
remitted
to
him.
[Translation.]
Counsel
for
the
respondent
added
the
following
commentary
on
the
appellant
Esteves
at
paragraph
42:
42.
However,
in
the
case
of
Mr.
Esteves,
the
amount
may
be
set
at
$878,
according
to
Mrs.
Kwong’s
table
(Exhibit
R-12),
and
the
respondent
claims
that
the
appeal
to
reduce
the
undeclared
income
to
this
amount
and
to
adjust
the
penalties
and
interest
accordingly
should
be
allowed.
[Translation.]
It
seems
to
me
useful
to
note
the
observations
of
counsel
for
the
respondent
at
paragraphs
38
and
39
of
the
"notes
and
authorities"
where
he
refutes
the
assertion
of
the
appellants’
agent
that
the
respondent’s
evidence
was
not
based
on
very
reliable
documents
issued
by
the
shareholders
of
Dunn
&
Benoît.
Those
paragraphs
read
as
follows:
38.
The
appellants’
claims
contained
in
their
written
argument
to
the
effect
that
the
respondent’s
evidence
is
not
based
on
very
credible
documents
prepared
by
the
shareholders
Dunn
&
Benoît
Construction,
"documents
which
were
initially
used
to
deceive
tax
authorities",
are
unjustified.
The
foremen’s
time
sheets,
Mrs.
Dubuc’s
weekly
work
sheets,
Mr.
Barbeau’s
personal
notes
are
not
documents
prepared
by
the
shareholders
of
Dunn
&
Benoît
Construction,
but
documents
prepared
by
non-shareholder
employers
of
Dunn
&
Benoît,
two
of
whom,
that
is
Messrs.
Cavallin
and
Allard,
were
the
appellants’
own
witnesses.
Furthermore,
most
of
those
documents,
at
least
those
unfavourable
to
the
appellants’
claims,
were
made
before
the
tax
auditors
appeared
on
the
employer’s
premises.
39.
The
documents
that
were
used
to
deceive
the
authorities
are
those
on
which
the
appellants
relied,
that
is
to
say
their
cheque
stubs,
Exhibits
A-l
and
A-2,
and
the
T4
copies
appended
to
the
appellants’
T1
returns.
Those
slips
mentioned
only
the
amounts
paid
by
cheque
and
which
appeared
on
the
computer
printouts.
The
CCQ
statements
are
based
on
the
monthly
reports
which
were
forwarded
to
it
by
the
employers.
Thus,
in
the
case
of
Dunn
&
Benoît,
these
hours
apparently
do
not
include
the
hours
paid
in
cash.
[Translation.]
Analysis
I
shall
now
analyze
the
various
elements
of
the
evidence
and
comment
on
the
witnesses’
credibility.
First,
the
appellants
seemed
to
me
to
be
honest
and
reliable
witnesses.
They
both
stated
categorically
that
no
part
of
their
remuneration
was
received
by
them
in
cash
during
the
years
in
issue.
Their
testimony
was
absolutely
clear
and
unequivocal.
As
to
the
foremen
Guido
Cavallin
and
Denis
Allard,
I
did
not
believe
them
when
they
stated
that
they
distributed
only
one
pay
envelope
to
each
of
their
employees
on
their
sites
during
the
periods
in
issue.
This
version
of
the
facts
goes
against
the
statements
of
independent
witnesses
such
as
Mrs.
Dubuc
and
Mr.
Cairns
and,
in
general,
the
weight
of
the
evidence.
As
already
indicated,
these
two
foremen
are
parties
to
a
tax
case
against
Revenue
Canada
in
respect
of
the
remuneration
which
they
received
from
Dunn
&
Benoît
during
the
years
in
issue.
They
were
therefore
not
disinterested
witnesses.
I
have
serious
doubts
as
to
their
credibility
on
certain
aspects
of
their
testimony.
On
the
other
hand,
the
testimony
of
Mrs.
Dubuc
is
support
of
the
respondent’s
position
must
first
be
considered.
The
latter
had
no
direct
or
indirect
interest
in
the
instant
case.
She
seemed
to
me
to
be
an
honest
person.
She
generally
spoke
clearly
and
did
not
answer
evasively
at
any
time.
Her
version
of
the
facts
seemed
to
me
to
correspond
to
the
reality
and
I
accept
her
testimony
as
a
whole.
Certain
parts
of
Mrs.
Dubuc’s
deposition
concerning
certain
work
weeks
of
the
appellant
Esteves,
such
as
that
of
September
18,
1988,
at
the
very
least
render
plausible
the
circumstance
that
the
brown
envelopes
intended
for
the
appellant
Esteves
were
remitted
to
the
foreman
of
the
site
in
question.
However,
there
was
no
direct
evidence
that
these
brown
envelopes
were
transmitted
to
the
appellant.
Furthermore,
if
the
appellant
Esteves
did
not
receive
these
brown
envelopes
in
respect
of
a
few
of
the
weeks
of
his
period
of
employment
with
Dunn
&
Benoît,
we
would
then
be
dealing
with
a
situation
in
which
the
appellant
Esteves
was
not
remunerated
for
an
appreciable
number
of
hours
of
work.
This
appellant
should
normally
have
complained
about
this
major
discrepancy
in
his
remuneration
unless,
of
course,
the
remuneration
that
was
paid
to
him
in
the
form
of
cheques
reflected
entirely,
or
almost
entirely,
all
of
his
hours
of
work
in
a
given
week.
If
such
were
the
case,
the
remuneration
in
cash
included
in
the
brown
envelopes
would
have
represented
all
or
a
very
large
portion
of
the
false
hours
and
the
persons
for
whom
that
money
was
really
intended
would
not
have
been
employees
like
the
appellants
Esteves
and
Cosme.
This
is
a
possibility
that
cannot
be
ruled
out
given
the
large
number
of
procedures,
manoeuvres
and
stratagems
instituted
by
Dunn
&
Benoît
and
certain
persons
in
the
service
of
that
firm
in
order
to
pay
cash
amounts
to
a
large
number
of
employees
as
a
portion
of
their
remuneration.
As
to
the
testimony
of
the
witness
Cairns,
he
seemed
to
me
honest.
He
took
part
in
particular
in
putting
bank
notes
into
envelopes
on
the
backs
of
which
appeared
the
number
of
hours
of
work
and
the
amount
in
cash.
These
envelopes
were
not
normally
handed
over
to
the
employees
in
Mr.
Cairns’
presence.
He
testified
that
roughly
75
per
cent
to
80
per
cent
of
the
employees
received
two
envelopes.
According
to
his
testimony,
it
was
he
who
handed
the
white
and
brown
envelopes
to
the
foremen
most
of
the
time.
He
stated
categorically
that
he
did
not
know
what
the
foremen
might
have
done
with
those
envelopes.
His
testimony
did
not
establish
conclusively
whether
either
one
of
the
appellants
had
received
part
of
his
remuneration
in
cash.
I
noted
from
Mr.
Moffat’s
testimony
that
he
mentioned
that
about
90
per
cent
of
the
overtime
during
the
two
years
in
issue
was
remunerated
in
cash.
He
also
confirmed
the
existence
of
the
system
of
"banked
hours",
but
he
added
that
this
procedure
was
exceptional.
Mr.
Moffat’s
testimony
did
not
directly
address
the
question
of
the
likelihood
that
either
one
of
the
appellants
had
received
part
of
his
remuneration
in
cash.
If
it
can
be
considered
material,
Mr.
Barbeau’s
testimony
tends
to
show
in
particular
that
the
T4s
issued
by
Dunn
&
Benoît
could
have
been
substantially
incorrect.
If
this
evidence
is
considered
on
balance,
it
appears
undeniable
that
certain
employees
did
not
receive
brown
envelopes
and
consequently
part
of
their
remuneration
in
cash.
It
also
seems
fair
to
say
in
light
of
the
evidence
that
employees
working
on
construction
sites
might
have
been
remunerated
for
overtime
partly
in
cash
for
some
of
those
overtime
hours
and
partly
by
cheque
for
some
other
overtime
hours
when,
for
example,
the
CCQ
was
informed
that
a
certain
employee
had
worked
on
a
Saturday
in
particular.
On
the
other
hand,
the
weight
of
the
evidence
shows
that
most
of
the
employees,
75
per
cent
to
80
per
cent
according
to
one
witness,
90
per
cent
according
to
another,
working
on
Dunn
&
Benoit’s
construction
sites
were
remunerated
in
cash
for
overtime
work.
This
evidence
does
not
exclude
the
possibility
that
brown
envelopes
containing
amounts
of
cash
intended
for
the
appellants
were
not
handed
over
to
the
latter
by
their
foremen.
These
brown
envelopes
could
have
been
intercepted
along
the
way.
It
should
not
be
forgotten
that
the
various
operations
involved
in
preparing
the
site
employees’
remuneration
and
in
paying
that
remuneration
were
part
of
an
overall
context
of
special
arrangements,
irregularities
and
illegalities.
For
example,
a
percentage
of
the
site
employees,
which
might
have
varied
between
75
per
cent
and
90
per
cent,
received
part
of
their
remuneration
in
cash,
whereas
the
other
site
employees
for
one
reason
or
another
were
not
remunerated
in
that
way.
Certain
other
employees
might
have
been
paid
for
overtime
partly
by
cheque
for
certain
overtime
hours
and
partly
in
cash
for
certain
other
overtime
hours.
We
should
also
remember
the
existence
of
the
"banked
hours"
system
described
above,
the
role
played
by
Formes
Horizontales,
the
false
monthly
reports
sent
to
the
Commission
de
la
construction
du
Quebec,
the
false
expense
accounts
for
certain.
employees,
the
increase
in
the
number
of
hours
of
work
remunerated
at
straight
time,
the
reduction
in
the
number
of
hours
to
which
the
remuneration
rates
at
time
and
a
half
and
double
time
could
apply.
The
reassessments
are
further
based
on
amended
T4s
whose
principal
author,
Mr.
Benoît,
could
not
guarantee
their
accuracy.
In
the
case
of
the
appellant
Cosme,
it
should
be
remembered
that
it
was
admitted
by
counsel
for
the
respondent
that
the
reassessment
for
the
1987
taxation
year
in
appeal
was
made
after
the
normal
assessment
period
provided
by
subsection
152(4)
of
the
Act.
The
onus
was
thus
on
the
respondent
to
prove
by
the
weight
of
the
evidence
that
the
appellant
made
a
misrepresentation
or
committed
fraud
in
filing
his
income
tax
return.
If
the
appellant
Cosme
had
received
part
of
his
remuneration
in
cash,
this
could
only
be
a
case
of
tax
evasion,
given
that,
in
the
circumstances,
there
was
obvious
bad
faith
on
the
appellant’s
part
in
not
reporting
this
income
received
in
cash.
In
the
case
of
the
appellants
Cosme
and
Esteves,
the
Minister
of
National
Revenue
is
required
under
subsection
163(3)
of
the
Act
to
establish
the
facts
justifying
the
assessment
of
a
penalty,
that
is
to
say
the
facts
tending
to
establish
the
existence
of
gross
negligence
or
an
intentional
act
to
explain
the
non-inclusion
of
part
of
their
remuneration
in
their
income.
Lastly,
the
burden
of
proof
was
on
the
appellant
Esteves
to
the
extent
that
his
appeal
concerned
the
"tax"
element
of
the
assessment
rather
than
the
"penalty"
element.
Having
regard
to
the
foregoing
observations
concerning
the
various
elements
of
the
evidence,
I
conclue
that
the
respondent
did
not
discharge
the
burden
of
proof
that
was
on
him
in
the
case
of
the
appeal
of
the
appellant
Cosme,
in
respect
of
both
the
"tax"
part
of
the
assessment
and
the
"penalty"
part.
The
same
conclusion
applies
to
the
appellant
Esteves
in
respect
of
his
appeal
to
the
extent
that
it
concerns
the
"penalty"
elements
of
the
assessment.
As
to
the
appeal
respecting
the
"tax"
part
of
the
reassessment
of
the
appellant
Esteves,
I
conclude,
having
regard
to
all
the
circumstances,
that
he
probably
did
not
receive
remuneration
in
cash.
I
note
among
other
factors
that
he
did
not
begin
working
for
Dunn
&
Benoît
until
July
1988
and
that
Dunn
&
Benoît
considerably
reduced
the
cash
payments
it
made
to
site
employees
toward
the
end
of
September
1988,
as
certain
witnesses
stated.
It
seems
to
me
more
likely
that
the
appellant
Esteves
was
part
of
the
small
group
of
employees
who
were
not
remunerated
in
cash
rather
than
the
large
majority
group
of
employees
who
received
part
of
their
remuneration
in
cash.
For
these
reasons,
the
appeal
of
the
appellant
Cosme
is
allowed
and
the
assessment
for
the
1987
taxation
year
is
referred
to
the
Minister
of
National
Revenue
for
reconsideration
and
reassessment
on
the
basis
indicated
below:
1.
the
amount
of
$9,215
msut
be
subtracted
in
computing
his
income
from
his
employment
with
Dunn
&
Benoit;
2.
his
penalty
in
respect
of
the
non-inclusion
of
that
amount
of
$9,215
in
his
income
is
set
aside;
3.
the
amount
of
$3,480
representing
unemployment
insurance
benefits
received
by
the
wife
of
the
appellant
Cosme
must
be
excluded
in
computing
the
appellant
Cosme’s
income.
As
to
the
appeal
of
the
appellant
Esteves,
it
is
allowed
and
the
assessment
for
the
1988
taxation
year
is
referred
back
to
the
Minister
of
National
Revenue
for
reconsideration
and
reassessment
to
take
into
account
the
following:
1.
the
amount
of
$1,250
is
excluded
from
his
income
from
his
employment
with
Dunn
&
Benoît;
2.
the
penalty
in
respect
of
the
failure
to
include
this
amount
of
$1,250
in
his
income
is
set
aside.
Both
appellants
are
entitled
to
a
refund
of
expenses
in
respect
of
the
instant
case.
Appeals
allowed.
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