Morneau
P.:
This
is
a
motion
by
the
judgment
creditor,
Her
Majesty
the
Queen,
for
a
garnishee
order
absolute
against
the
garnishee,
Mr.
Morty
Kape.
The
Facts
It
appears
that
the
garnishee
is
the
sole
shareholder
and
director
of
the
judgment
debtor,
which
allegedly
ceased
its
activities
at
the
end
of
the
fiscal
year
ending
on
November
30,
1991.
During
that
year,
the
judgment
debtor
allegedly
agreed
to
loan
the
garnishee
$41,632.00
(the
loan).
It
is
common
ground
that
this
loan
has
to
date
not
been
repaid
by
the
garnishee.
On
February
26,
1996
a
garnishee
order
to
show
cause
was
rendered
against
the
garnishee
in
regard
to
the
loan.
Defending
against
a
garnishee
order
absolute,
the
garnishee
filed
his
income
statement
for
the
1995
taxation
year,
in
which
he
included
the
amount
of
the
loan
in
his
income
for
1995.
According
to
the
garnishee’s
counsel,
he
did
this
to
comply
with
subsection
15(2)
of
the
Income
Tax
Act,
R.S.C.
1985
(5th
Supp.),
c.
1,
which
essentially
states
that
a
shareholder
who
does
not
repay
a
loan
within
the
year
following
the
grant
of
the
loan
must
include
the
amount
of
the
loan
in
his
income
for
the
taxation
year
in
which
he
received
the
loan.
The
relevant
part
of
subsection
15(2)
reads
as
follows:
(2)
Where
a
person
...
is
a
shareholder
of
a
particular
corporation,
...
and
...
has
in
a
taxation
year
received
a
loan
from
...
the
particular
corporation,
...
the
amount
of
the
loan
or
indebtedness
shall
be
included
in
computing
the
income
for
the
year
of
the
person
or
partnership,
unless...
(b)
the
loan
or
indebtedness
was
repaid
within
one
year
after
the
end
of
the
taxation
year
of
the
lender
or
creditor
in
which
it
was
made
or
incurred,
...
The
garnishee
accordingly
argues
that
since
the
loan
was
converted
to
income
it
no
longer
exists
between
him
and
the
judgment
debtor;
the
debt
is
extinguished
between
these
parties
aud
the
judgment
creditor
is
foreclosed
from
continuing
with
the
present
proceeding
to
obtain
a
garnishee
order
absolute.
It
must
be
recognized
at
the
outset
that
such
a
view
of
things
is
of
undeniable
financial
advantage
to
the
garnishee.
A
garnishee
order
absolute
would
force
him
to
pay
a
substantial
portion
of
the
loan
(in
this
case,
corresponding
to
$28,697.98
in
principal),
while
including
the
loan
in
his
income
entails
only
the
application
of
a
tax
rate
on
the
amount
of
the
loan.
In
the
circumstances,
I
have
great
difficulty
in
acceding
to
this
use
of
subsection
15(2)
by
the
garnishee.
In
the
first
place,
this
inclusion
was
applied
to
the
1995
taxation
year,
while
my
reading
of
subsection
15(2)
indicates
that
this
inclusion
should
have
applied
to
the
garnishee’s
1991
(or
perhaps
1992)
taxation
year.
On
this
first
point,
subsection
15(2)
is,
in
my
opinion,
unenforceable
against
the
judgment
creditor
herein.
Secondly,
the
garnishee
waited
too
long,
in
my
opinion,
before
resorting
to
this
subsection
15(2)
and
was,
by
the
time
he
decided
to
act,
foreclosed
from
doing
so.
An
affidavit
filed
by
the
garnishee
at
the
hearing
reveals
that
it
was
around
June
7,
1995
when
he
decided
to
resort
to
subsection
15(2).
1
think
the
garnishee
was
at
that
point
foreclosed
from
acting
in
this
way,
since
back
on
March
17,
1995
a
letter
of
requirement
was
sent
to
the
garnishee
in
that
capacity
by
the
judgment
creditor.
Thus
the
amount
of
the
loan
was
not
free
on
June
7,
1995
to
be
assigned
as
income
by
the
garnishee.
I
note
that
some
time
later,
on
February
26,
1996,
a
garnishee
order
to
show
cause
was
issued
by
this
Court
in
this
case.
I
think
the
garnishee
might
validly
have
resorted
to
subsection
15(2)
if
he
had
acted
prior
to
March
7,
1995.
The
judgment
creditor’s
evidence
discloses
that
the
question
of
the
loan’s
status
was
brought
to
the
attention
of
the
garnishee
and
his
accountant
representatives
many
times
before
that
date.
I
think
the
garnishee
could
have
acted
in
this
way
even
if
one
is
willing
to
concede
for
the
purposes
of
discussion
that
the
garnishee
did
not
have
access
to
the
corporate
documents
of
the
judgment
debtor
until
1994,
as
it
was
alleged.
Furthermore,
even
though
he
made
his
decision
on
June
7,
1995,
the
garnishee
apparently
delayed
reporting
it
to
the
officials
of
the
judgment
creditor
in
this
case.
Indeed,
in
a
supplementary
affidavit
filed
in
connection
with
the
motion
for
a
garnishee
order
to
show
cause,
the
judgment
creditor’s
collection
officer
states
that
as
of
June
30,
1995
the
loan
was
reported
as
still
not
having
been
repaid.
On
March
28,
1996
the
garnishee
filed
in
the
Court
record
a
negative
statement
in
regard
to
the
statements
contained
in
the
garnishee
order
to
show
cause
without
however
referring
specifically
to
the
conversion
of
the
loan
to
income
—
a
significant
event,
nevertheless,
in
this
case.
Even
during
the
examination
in
relation
to
this
negative
statement,
on
May
15,
1996,
the
garnishee
could
not
be
specific.
For
these
reasons,
a
garnishee
order
absolute
will
be
issued
in
this
matter
according
to
the
usual
wording.
Motion
granted.
ITA-8159-95
MONTREAL,
QUEBEC,
THIS
4
DAY
OF
NOVEMBER
1996
PRESENT:
RICHARD
MORNEAU,
ESQ.,
PROTHONOTARY
In
the
matter
of
the
Income
Tax
Act
-and-
In
the
matter
of
an
assessment
or
assessments
by
the
Minister
of
National
Revenue
under
one
or
more
of
the
Income
Tax
Act,
Canada
Pension
Plan,
Unemployment
Insurance
Act,
AGAINST:
Euro
Sales
Inc.,
Debtor
and
Morty
Kape,
Garnishee
Order
IT
IS
ORDERED
that
all
sums
due
or
accruing
due
from
the
above-mentioned
garnishee
to
the
above-mentioned
judgment
debtor,
and
more
particularly
a
sum
of
$41,632.00
received
by
the
garnishee
from
the
debtor
as
a
loan
to
shareholder,
and
all
the
moveables
belonging
to
said
judgment
debtor
be
definitely
assigned,
transferred
and
conveyed
to
Her
Majesty
the
Queen,
to
answer
the
Certificate
filed
on
the
6
day
of
September
1995
in
the
Federal
court
of
Canada
against
said
judgment
debtor
by
Her
Majesty
the
Queen,
and
up
to
the
debt
due
in
virtue
of
said
Certificate,
that
is
the
sum
of
$28,697.98,
plus
the
interest
compounded
daily
at
the
rate
prescribed
under
the
Income
Tax
Act
applicable
from
time
to
time
on
the
said
sum
from
the
16
day
of
August
1995
to
the
day
of
payment.
IT
IS
FURTHER
ORDERED
that
the
garnishee,
Morty
Kape,
pay
to
Her
Majesty
the
Queen
in
Right
of
Canada,
upon
receipt
of
the
present
Final
Order
of
Seizure
by
Garnishment,
the
sum
of
$28,697.98,
plus
the
interest
compounded
daily
at
the
rate
prescribed
under
the
Income
Tax
Act
applicable
from
time
to
time
on
the
said
sum
from
the
16
day
of
August
1995
to
the
day
of
payment;
the
whole
to
answer
inter
alia
the
debt
of
the
judgment
debtor
towards
Her
Majesty
the
Queen
in
Right
of
Canada
in
virtue
of
Certificate
filed
herein
on
the
6
day
of
September
1995
in
the
Federal
Court
of
Canada
against
said
judgment
debtor
by
Her
Majesty
the
Queen,
plus
the
sum
of
$294.24
representing
costs
of
the
present
proceedings
of
seizure
by
garnishment
to
be
paid
by
preference
on
the
sum
garnished
by
this
Final
Order.
Richard
Morneau
Prothonotary
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