Elke Veselinovic v. Minister of National Revenue, [1993] 2 CTC 3168, 93 DTC 1243

Sarchuk, T.C.C.J.:—This is an appeal by Elke Veselinovic from reassessments of income tax and penalties for taxation years 1979,1980,1981 and 1982. The Minister reassessed on the basis that the appellant in computing her income failed to include benefits conferred on her by Plastics CMP Ltd. (CMP) and Plastics Surface Finishers Ltd. (PSF) amounting to $84,299.72, $33,551.80, $10,366.25 and $1,998.30 in the respective taxation years.

It is not disputed that at all relevant times PSF and CMP were under the effective control of the appellant and her husband Ljubisav Veselinovic (Ljubisav). [1] He managed the operations of all the plants while the appellant was the comptroller and office manager of both CMP and PSF. During the taxation years in issue, primarily through CMP, they hired contractors and suppliers to renovate a residence located at R.R. 1, Orono, Ontario (Orono) and to build additions to a cottage located at Four Mile Lake. There is no dispute that the cost of these renovations and additions is correctly stated in Schedule 2 to the Minister's reply to the notice of appeal and that these amounts were paid by CMP or PSF and constitute the benefits included by the Minister in the computation of the appellant's income.

The issue before me is whether in the circumstances Elke Veselinovic obtained a benefit from the corporations and whether penalties were properly imposed pursuant to subsection 163(2) as a result of her failure to report such benefits.

The appellant’s evidence

(a) Orono Renovation

The appellant, Ljubisav and Mr. Branko Popadic (Popadic) testified. A good deal was heard regarding the genesis and growth of the corporations. What is relevant can be summarized as follows. While in Germany Ljubisav had successfully worked on the process of chrome plating plastics. Since business opportunities were restricted they moved to Canada in 1969. He obtained similar employment and in time earned a sound reputation in the industry. In 1972, at the urging of certain suppliers and customers, they began their own business. PSF was incorporated that year. In 1974 they built a second plant in Whitby. Their customer base grew and by 1978 PSF was so successful that it became necessary to construct another plant in Peterborough, Ontario. CMP was incorporated in November 1978 specifically for that purpose. Construction began that fall and was completed in June 1979.

The appellant was not in favour of the expansion. Peterborough was too far from their home in Oshawa and she was concerned Ljubisav would spend even less time with his family. At or about the time the decision was taken to build in Peterborough Ljubisav suggested that they move to a more centrally located home. The appellant was displeased since it would necessitate transferring their daughter to a new school and would require the appellant herself to put up with the inconvenience of country life. Notwithstanding these concerns she gave, at the very least, tacit approval both to the expansion and to the acquisition of a new home.

In December 1978 Ljubisav took the appellant to view Orono. Shortly thereafter he made arrangements to buy the property. A word regarding these arrangements. The appellant and her husband were both obligated by way of personal guarantees to their lenders for the costs of construction of the Peterborough plant. Their savings were inadequate to permit them to purchase Orono and they were not in a position to borrow from the bank. Ljubisav approached Popadic for financial help and he borrowed money from his bank. It was understood that Popadic would be provided with funds to make his loan payments. On January 19,1979 Ljubisav arranged to have Popadic make an offer to purchase Orono (Exhibit R-15). On February 2, 1979 Popadic executed a document purporting to be a declaration of trust with respect to Orono in favour of Ljubisav (Exhibit A-1). By deed dated March 26, 1979 the vendors conveyed Orono to Popadic (Exhibit R-16) and on April 2, 1979 he executed the affidavit of residence and value of consideration. This deed was registered. On that same day Popadic executed a deed conveying Orono to Ljubisav and Elke Veselinovic (Exhibit R-17). This document was not registered but was held on file by the solicitor acting for the Veselinovics at that time, Mr. Louis S. Allore (Al Io re). [2]

To complete the chronology, on December 7,1982 Popadic executed another deed conveying Orono to Ljubisav Veselinovic (Exhibit A-2). On that same day Ljubisav conveyed the property to himself and his wife as joint tenants (Exhibit A-3). These deeds were subsequently registered. [3]

The Peterborough plant was built by John Van Dompseler Construction (JVD Const.). In 1979 as it neared completion Van Dompseler was hired by CMP as plant manager. Concurrently JVD Const, was engaged to carry out the renovations to Orono. The appellant knew and agreed that the cost of renovation was to be funded by CMP. She said Ljubisav “ could get the best bargains during the time of construction in Peterborough . . . the best bargains, price wise, to make restorations and add-ons to the house during the time where basically materials in large quantities were purchased for the Peterborough plant”. Arrangements were made to have JVD Const. and certain other trades invoice CMP for all costs incurred. The renovations were substantially completed early in 1980 and the appellant and her family moved to Orono.

The appellant and Ljubisav maintained that Orono "was going to be in his name". He said he alone authorized and ordered the renovation expenses to be put through CMP. The plan was to put the cost through the business and "recoup later on". The appellant asserted on a number of occasions that she was unhappy with this arrangement but was mollified by her husband's undertaking that he would “ attend to it” and that he alone would be responsible.

As requested, JVD Const. and other trades invoiced CMP for the costs incurred (Exhibits R-1 to R-8). As office manager the appellant was responsible for the books of account and general ledgers. As each invoice was presented it was initialled by her to authorize payment. CMP issued cheques in payment, many under Ljubisav's signature. However the appellant conceded that she was authorized to use Ljubisav's signature stamp and that she signed most of the cheques issued in payment of the Orono expenditures.

Ljubisav claimed the appellant was not involved in any of his arrangements. He intended to keep track of expenditures and says he asked the people who were doing the work to ensure that their time and costs "be tallied so that one knows how much has been spent”. In 1981 when he realized he could not "pay the funds back to the company as fast as I thought . . .” he asked Van Domp- seler to provide a list of expenses to enable him "to reimburse the correct amount”. On August 20, 1981 JVD Const, wrote a letter to CMP stating that the amount of money paid to it for labour and material was $112,761.74 (Exhibit A-4). Ljubisav alleged that on the same date he issued a promissory note to CMP in that amount, payable in five years (Exhibit A-5). Subsequently on June 13, 1984 Ljubisav arranged to have a mortgage for that amount in favour of CMP executed by himself and the appellant.

Both the appellant and Ljubisav asserted that she was not aware of the manner in which Orono was registered in 1979 nor was she aware of the steps taken in 1982 which made her a joint tenant of the property.

(b) The Cottage Addition

The cottage was described as a small and simple building which had been purchased by the appellant and her husband because friends had property on the same lake. She had not been in favour of its acquisition. The benefits in issue relate to the construction of a boat house with a small apartment above it. The appellant opposed the construction because they had no boat and no need for a boat house and it was being built primarily for Popadic’s use. She was also upset by the fact that the addition unbalanced the aesthetics of the site. Her antipathy to its appearance was such that after completion she only went to the cottage on rare occasions. The costs of this construction were invoiced and channelled through the corporations in exactly the same manner as with respect to Orono. There is no dispute that she and Ljubisav were the joint owners of this property during the taxation years in issue.

The respondent's evidence

Mr. Allore was first retained by the appellant, her husband and their corporations in 1972 or 1973. In the early part of 1979 he acted for them with respect to the purchase of Orono. Pursuant to his instructions Allore prepared a Declaration of Trust" to be signed by Popadic (Exhibit A-1). Upon receipt of the deed from the vendors to Popadic Allore registered it and retained the duplicate on his file. His instructions also required him to prepare a deed transferring the property from Popadic to the Veselinovics (executed by Popadic on April 2,1979) and” the appropriate trust documentation". [4] This deed was not to be registered. Allore reported the transaction to both the appellant and her husband and submitted his statement of account to them (Exhibit I-1). [5]

Allore testified that the transaction was always understood to be one where the property was held by Popadic for the Veselinovics. In his reporting letter he advised the Veselinovics that he was in the process of preparing the appropriate trust documentation "in order for the Deed to be stamped at the Land Transfer branch in Toronto and subsequently registered on title in favour of Ljubisav and Elke Veselinovic". He further explained in the course of his testimony [transcript page 198, 1. 18-25, page 199, 11. 1-9] that:

. . .the idea was to register the document on title—

Q. Which document are you referring to?

A. The deed to the Veselinovics.

Q. Yes?

A.—only with a stamp by the Ministry of Revenue that arrangements had been made for payment of the land transfer tax. In that manner, you avoid registering on title the land transfer tax affidavit which normally accompanies a deed and discloses the relationship between the transferor and the transferee. In other words, the land transfer tax affidavit would have to indicate that Mr. Popadic held title in trust only for these people. Whereas, if we stamped the deed through the Ministry of Revenue, that wouldn't show on title. [6]

A note to file dated June 7,1979 (Exhibit R-19) indicates that Allore advised his client to have the deed stamped and retained on file. According to Allore this portion of the transaction was not completed “because Veselinovic changed his mind about proceeding with having it stamped".

Allore ceased to represent the Veselinovics and the corporations at some point of time in 1982.

Mr. N.J. Papineau

Mr. Papineau is a certified general accountant and a certified fraud examiner. He commenced employment with Revenue Canada in 1972 as a business auditor and in 1975 became investigator in the Special Investigations Unit. From 1975 to 1990 he was an investigator and manager of Complex Investigations. In 1990 he transferred to the Auditor General of Canada where he is the manager of the Forensic Accounting Unit.

The returns for PSF for 1979 were under audit by Revenue Canada from September 1980 to November 1981. Commencing in June 1982 CMP was audited with respect to its returns for the 1980 and 1981 taxation years and then in June 1983 the returns of PSF for taxation years 1980 and 1981 came under audit. In the fall of 1983 the special investigations unit of which Papineau was a member picked up and continued the audits.

Mr. Papineau first reviewed the books of account, invoices and bank documents of CMP and PSF. He then interviewed all of the contractors involved in the renovations and examined their records including their work books to see where the work was done. Papineau tracked every relevant amount to the books of CMP and PSF, confirmed that the work was done at the cottage or at Orono and determined whether the work was expensed or capitalized by the corporations. When that was done he examined the T2 returns of CMP, PSF and Holdings as well as the T1 returns of the appellant and Ljubisav to deter mine how they had calculated their income in those years. His analysis disclosed that these amounts had not been included in the appellant's returns.

In December 1985 search warrants were executed at the business locations and at the residence of the appellant and her husband as well as at the residence of John Van Dompseler. The investigation when completed led to, in addition to other procedures, assessments of tax for the years in issue against the appellant and Ljubisav.

One further matter. Although Papineau made an in-depth examination of the documents and records of CMP, PSF and Holdings and had spoken to the appellant and to Ljubisav on a number of occasions he was not made aware of, nor did he find, the promissory note. Furthermore, the note was not reflected in the corporate books of account or in any other corporate record. It was discovered in a sealed envelope found on the premises of Holdings in December 1985 during the course of the search.

Position of the appellant

The primary position of the appellant is that during the period of time when the renovations were made to Orono she was not an owner of the property. The unregistered deed did not, by reason of its execution, transfer title to both the appellant and Ljubisav and thus she became an owner no earlier than December 2, 1982 when the subsequently executed deeds were registered.

Cour.sel submitted that the agreement between Popadic and Ljubisav was that the property would be in Popadic's name and would be transferred only when the loan was paid off. The deed dated April 2,1979 by which Popadic transferred the property to the appellant and Ljubisav remained at all times in Allore’s file since it was not Popadic's intention that he be “immediately and unconditionally” bound by the conveyance. Counsel contended that by inference it could be said the deed was held in escrow pending satisfaction of the repayment condition. Re Sammon (1979), 22 O.R. (2d) 721, 94 D.L.R. (3d) 594 (Ont. C.A.); Huron (County) v. Armstrong (1868), 27 U.C.Q.B. 533 (U.C.C.A.); Reynolds v. Waddell (1854), 12 U.C.Q.B. 9 (U.C.C.A.); Oliver v. Mowat (1874), 34 U.C.Q.B. 472 (U.C.C.A.); Cheshire, pages 757-58, C.E.D., volume 8, pages 44-26, paragraph 30.

Counsel further contended that even if the unregistered deed did transfer title to the appellant, her lack of knowledge thereof and her opposition to purchasing the residence negated any presumption of transfer of title. At most this deed could only pass title to Ljubisav since she was not even aware that it existed. Counsel submitted that the evidence supported the proposition that Ljubisav alone was the person for whom Popadic held the property. He further argued that, if the unregistered conveyance at any time had any effect whatsoever, the appellant was relieved of both the benefit and the burdens or liabilities (including the proposed tax liability) which acceptance of the gift, that is the transfer to her of the property, might have otherwise imposed on her. Such relief occurred by reason of the fact that throughout the relevant period the appellant never accepted such transfer from Popadic and in fact indicated her rejection of the property.

Last, counsel submitted that the improvements to the property were not benefits to her. Assuming that the appellant and her husband were indeed joint owners of the property, that did not necessarily mean that those benefits were received by both of them by virtue of their employment or interest in the company. He stated:

. . . that the benefits were not to either the house or the cottage — she didn't want either of them, she didn't receive either of them. The expenses were made but they were not received by her at all. They were received by another employee, another officer, another shareholder of those companies.

Counsel argued that in this case one owner of jointly owned property decided to benefit himself and that was not sufficient to permit the Court to say that the appellant received any benefit by virtue of her employment or her office (Buckland v. M.N.R., [1991] 1 C.T.C. 2022, 91 D.T.C. 131 (T.C.C.)).

With respect to the penalties counsel submitted that they ought not to have been assessed against the appellant since it was Ljubisav alone who made the arrangements to invoice CMP and PSF. He implied that the appellant was directed by her husband to record the expenses on the corporations' books and that she merely followed his instructions. It was Ljubisav's scheme, he carried it out, the debt to the corporations was at all times his sole responsibility. Counsel also contended that in this context the appellant's lack of knowledge of the unregistered deed is a vital factor operating in her favour.

Position of the respondent

By deed dated March 26, 1979 and registered April 2, 1979 between the vendors and Popadic, Orono was transferred to Popadic. By virtue of this deed he merely acquired legal title, beneficial ownership of the property being in other persons. The deed dated April 2,1979 from Popadic to Ljubisav and the appellant, by operation of the Conveyancing and Law of Property Act, R.S.O. 1980, c. 90 (" Property Act"), validly transferred the property notwithstanding that it was not registered. Failure to register does not affect the validity of an instrument as between the parties to it.

Counsel submitted that in Ontario, the transfer of property is governed by the Property Act. It provides that an executed deed passes any interest that the conveying parties have in the property being conveyed. [7] A deed is fully executed when it is signed, sealed and delivered. [8] Furthermore there must be very strong evidence in order to justify a Court setting aside a deed on the grounds of non-delivery. Physical delivery of a deed to the grantee is not necessary to constitute effective delivery (Ross v. Ross (1977), 80 D.L.R. (3d) 377 (N.S.T.D.) at pages 379 and 382). In Zwicker v. Zwicker (1899), 29 S.C.R. 527 at page 533, a case where there was no actual delivery of a deed transferring property between non-arm's length parties, the Supreme Court of Canada found that the execution of a deed in the presence of an attesting witness was sufficient evidence from which to infer a delivery.

As to delivery, counsel for the respondent referred to Macedo v. Stroud, [1922] 2 A.C. 330 (P.C.). In that case the Privy Council held that a conveyance was effective where the grantor left the signed deed with his solicitor with the instructions to keep and not register it. The conveyance operated to convey the property to the grantee even though the deed was not physically delivered to the grantee, the grantee had no knowledge of the existence of the deed, and the deed was not registered. The Ontario Court of Appeal followed Macedo, supra, in Hooper v. Hooper, [1953] O.R. 753, [1953] 4 D.L.R. 443 (O.C.A.). In this instance the grantor signed a deed from himself to himself and his wife as joint tenants. The solicitor who drafted the deed mailed it to the husband. The document was kept in a box in the residence occupied by the husband and wife. The Court found the delivery to be effective. The Court held that an unregistered deed passes title in equity good for all purposes except against a bona fide purchaser for value registered on title.

The respondent's position is that the unregistered deed was fully executed because it was signed, sealed and delivered.

As to the second submission made by counsel for the appellant, counsel for the respondent contended that a grant to a person who is not aware of it operates upon its execution to pass title subject to that person's right to disclaim or repudiate it. The acceptance of a gift by the donee is presumed until he signifies his dissent (Purdom v. Northern Life Assurance Co. of Canada, [1928] 4 D.L.R. 679, 63 O.L.R. 12 (O.C.A.) at page 694 (O.L.R. 29); aff'd (sub. nom. Fidelity Trust Co. v. Northern Life Assurance Co. of Canada), [1930] S.C.R. 119, [1930] 1 D.L.R. 1003, Zwicker, supra, Macedo, supra, Ross, supra). It does not matter that a wife is unaware of a transfer to her of property, as acceptance by her is not necessary to complete a gift to her. The gift vests in her at once, subject to her right to repudiate or disclaim when becoming aware of the transfer (Walsh v. Walsh, [1948] 1 D.L.R. 630, [1948] O.R. 81 (Ont. H.C.) at page 650 (O.R. 103), aff'd [1948] 4 D.L.R. 876, [1948] O.W.N. 668 (O.C.A.)).

Counsel argued that the deed in question was left with the solicitor for the grantees under the instructions of Ljubisav. There is no evidentiary basis which would entitle this Court to set aside the deed on the grounds of non-delivery. There has been no dissent, no disclaimer or repudiation by the appellant. Quite the contrary, the appellant moved into the residence as soon as construction was completed, residing there with her husband and two children. Her interest was disclosed and registered on title on the day Popadic's name was taken off the registry. Counsel submitted that the evidence was consistent with acceptance and inconsistent with any repudiation. Accordingly the presumption in favour of acceptance of a gift has not been rebutted.

Furthermore, counsel submits that there is corroborative evidence confirming their joint beneficial ownership of the property. He referred to the reporting letter from Mr. Allore’s law firm addressed to both the appellant and Ljubisav and to the aide mémoire in Allore’s file noting his instructions that the deed from Popadic to the appellant and Ljubisav was to be retained on his file and was not to be registered on title. Counsel contends the testimony of Allore with respect to the transaction unequivocally confirmed joint ownership of the property.

Conclusion

(a) Credibility

The onus in an appeal from an assessment of tax rests upon the taxpayer. To succeed the appellant must demonstrate on a balance of probabilities that the facts and assumptions relied upon by the Minister were wrong. In this appeal certain assertions made by the appellant and her husband are essential to her case. They relate to her opposition to the purchase of Orono; her lack of knowledge and involvement in the arrangements with Popadic and to her “understanding” that the house of Ljubisav's and that all advances by the corporations were his responsibility. Since there is virtually no independent evidence to support these assertions the credibility of both becomes a critical factor.

The appellant's testimony is for the most part improbable and unreasonable. It is difficult to reconcile her oft repeated claims of non-involvement and absence of knowledge with her actual conduct. Her actions seriously impair the weight to be given to her testimony. Two or three examples will suffice.

The primary thrust of the appellant’s testimony is that the renovation expenses, although charged to the corporations when incurred, would in due course be paid by Ljubisav. This assertion is totally at odds with what actually occurred. The appellant was aware that invoices were to be prepared so as not to reflect the actual work done. Furthermore, they were not segregated from invoices properly relating to the construction of the plant. No system of keeping track of the renovation expenses was in place or even considered. As comptroller and the person who maintained the general ledgers she must have known that the manner in which these expenses were being entered in the corporations’ books militated against any subsequent calculation for the purposes of repayment if that indeed were intended. In fact it probably would not have been possible since Papineau’s testimony demonstrated that only by an analysis of the books and records of the various trades involved could one track and identify the actual expenses incurred and charged to the corporations with respect to the renovations.

There was also uncontradicted evidence from Papineau that invoices from contractors and suppliers for work done were returned on occasion for resubmission if they were issued with too much detail of the work done or if the invoices were issued to the Veselinovics personally. Since the appellant approved all invoices for payment the logical inference is that she was directly involved in this process.

Chartered accountants prepared the tax returns for the corporations and for the appellant and Ljubisav. They did so on the basis of information provided by her, information she knew was incomplete and indeed false in substance. The accountants were never made aware of the fact that the expenses in issue had been charged to the corporations. This fact, I am satisfied, was deliberately withheld by her. She then signed corporate T2 returns in several of the years in issue as well as her own, in each case attesting to their accuracy. When questioned regarding her failure to advise the accountants she first placed all responsibility upon her husband and then added that "We had issued a promissory note to the company stating that these funds were owed to the company". These answers are clearly unresponsive and evasive. The promissory note was not produced to the accountants nor was its existence mentioned to them. Furthermore, it was not reflected at any point of time in the corporations' books of account or other records although the appellant was aware of it and was responsible for the books.

Notwithstanding her denials I am satisfied that the appellant was involved in the arrangements regarding the acquisition and renovation of Orono. She attended to all bank and accounting matters, both personal and corporate. They maintained a joint bank account but, as she said, Ljubisav" never signed a cheque in his life, personally. . . ." She was aware of their financial status and that "their savings" fell short by some $50,000 of meeting the required purchase price. She said they could not borrow more money because their personal guarantees to the bank were very high. She also knew that to overcome this difficulty Popadic went "to the bank to borrow the money in his name but let us use it, basically so that the house could be paid for. . . ." With regard to the renovations made to Orono it is improbable that an architect was retained to prepare plans for that purpose and that he did so without any input from the appellant whatsoever.

I now turn to Ljubisav's testimony. To achieve their objective he solicited and obtained falsified invoices to be submitted to the corporations and passed off as legitimate business expenses. He specifically asked JVD Const. and others to prepare invoices so as to make it appear that the work related to the construction of the plant. When cross-examined regarding these facts he was evasive and unresponsive.

Ljubisav had no difficulty whatsoever in recognizing any document prepared during the relevant period of time which was supportive of the position he was advancing. His failure to recollect the deed dated April 2, 1979 executed by Popadic and his inability to recall giving Allore specific instructions not to register it does not ring true and can best be described as selective memory loss.

Throughout his testimony Ljubisav maintained that his instructions to Allore related only to his acquisition of Orono and could not have been taken to include his wife as owner. Allore consistently maintained otherwise. At one point in response to Mr. Mack’s questions he said:

A. Well, in all of my dealings with Mr. Veselinovic, he was dealing on behalf of himself and his wife, there was no question in my mind about that.

Although Allore's testimony was on occasion imprecise it is supported to some extent by contemporaneously made documents and memoranda. Where there is a difference between his testimony and that of Ljubisav, I accept that of Allore.

I also have serious reservations with respect to Ljubisav’s testimony regarding the execution of the promissory note. It is quite remarkable that no mention of this note was made by him at any time, particularly in light of the fact that during the years 1980 and 1982 the corporations were being audited.

A word about the testimony of Popadic. He and Ljubisav are distantly related. Ljubisav sponsored his immigration to Canada, took him into his home and offered him work. At all relevant times he was employed by CMP. It is not disputed that the boat house and apartment above it were constructed primarily for his use. It was most apparent from his testimony that he considered Ljubisav his benefactor and would do whatever Ljubisav asked without question. I have grave doubts whether he understood any of the documents he signed. My overall assessment of Popadic's evidence is to treat it with caution.

(b) Counsels' submissions

The evidence does not support the position advanced by counsel for the appellant that the deed dated April 2, 1979 conveying the property to the Veselinovics was conditional upon repayment of the moneys advanced by him. He gave no such instructions to Allore nor is it possible to draw such an inference from Popadic's testimony. These comments apply equally to his submissions that the unregistered deed was not delivered because Popadic did not consider himself to be bound by it other than in a conditional sense and the deed was for all practical purposes delivered to Allore in escrow.

The appellant is an intelligent and strong minded individual. Her testimony with respect to the management and operation of the businesses demonstrated that she is knowledgeable, articulate and has a sound grasp of financial and accounting matters. I am satisfied that throughout the years nothing was ever done either in the context of their business endeavours or their personal financial affairs without her full knowledge and participation. The actions of the appellant cannot be brushed aside by the simple assertion that everything that occurred was her husband's responsibility.

I am also satisfied that in every aspect of their lives the appellant and Ljubisav worked in concert. During the years in issue both were at one time shareholders of Holdings and directly or indirectly controlled CMP and PSF. Title to the Grenfell Street property in Oshawa, their first residence, was in the name of both the appellant and Ljubisav. The cottage was jointly owned by them. Their personal bank account was a joint account. It is improbable that an alternate form of ownership was intended for Orono. The cumulative effect of the evidence adduced leads me to the conclusion that at all relevant times it was the intention of the appellant and her husband Ljubisav to acquire Orono and to cause the corporations to advance the necessary funds to complete the renovations. It must not be forgotten that the bulk of the funds for the purchase of Orono came from what the appellant said was their savings. One can only draw the inference that the moneys required for the purchase were advanced equally by the appellant and Ljubisav. The evidence as a whole leads me to conclude that at all relevant times the appellant and her husband were the beneficial owners of Orono.

I further find that even if the appellant was not specifically aware of the existence of the unregistered deed, the ultimate transfer to her could not in any sense of the word be considered a gift. I agree with the position taken on behalf of the respondent that there is no evidence before me to justify setting aside the deed on the grounds of non-delivery.

Finally, the submission by counsel for the appellant that the improvements to the properties were not benefits to the appellant finds no favour with me. Buckland, supra, relied on by him does not stand for that proposition.

Penalty

I am satisfied that the Minister was correct in assessing the penalty against the appellant. Subsection 163(3) of the Act imposes a burden on the Minister to establish sufficient facts to justify such an assessment. The evidence satisfies me that the appellant knowingly made a false statement or omission in her returns in respect of the taxation years in issue. The Minister's reasons for assessing the penalty as expressed by Papineau have been established to be correct and, in my view, more than adequately justify the assessment.

The appeals are dismissed.

Appeals dismissed.