Tremblay
T.C.J.:
This
appeal
was
heard
at
Chicoutimi,
Quebec
on
July
22,
1997
under
the
informal
procedure.
1.
Point
at
issue
According
to
the
Notice
of
Appeal
and
the
Reply
to
the
Notice
of
Appeal
the
issue
is
whether
the
appellant
is
liable
under
s.
160(1)
of
the
Income
Tax
Act
(“the
Act”)
for
a
$6,000
debt
contracted
to
the
respondent
by
her
brother
Luc
Barrette
on
October
20,
1995.
The
respondent
maintained
that
on
that
date
the
appellant
transferred
a
1984
Chrysler
New
Yorker
automobile
to
her
brother
Luc
in
exchange
for
a
1990
Oldsmobile
98
Regency.
In
the
respondent’s
submission,
the
latter
car
was
worth
over
$6,000.
The
appellant
maintained
she
had
lent
her
brother
money
and
that
the
debt
was
repaid
by
the
exchange
of
automobiles.
2.
Burden
of
proof
2.01
The
appellant
has
the
burden
of
showing
that
the
respondent’s
assessment
is
incorrect.
This
burden
of
proof
results
from
several
judicial
decisions,
including
a
judgment
by
the
Supreme
Court
of
Canada
in
Johnston
v.
Minister
of
National
Revenue^
2.02
In
the
same
judgment
the
Court
held
that
the
facts
relied
on
by
the
respondent
in
support
of
the
assessment
or
reassessment
are
also
deemed
to
be
true
until
the
contrary
is
shown.
In
the
instant
case
the
facts
relied
on
by
the
respondent
are
set
out
in
subparagraphs
(a)
to
(h)
of
paragraph
3
of
the
respondent’s
Reply
to
the
Notice
of
Appeal.
The
paragraph
reads
as
follows:
[TRANSLATION]
3
In
arriving
at
this
assessment
of
the
appellant
the
Minister
made
the
following
assumptions
of
fact:
(a)
the
appellant
is
Luc
Barrette’s
sister;
[admitted]
(b)
the
appellant
is
therefore
a
person
related
to
Luc
Barrette;
[admitted]
(c)
on
October
20,
1995
the
appellant
transferred
her
car
(a
1984
Chrysler
New
Yorker)
to
Luc
Barrette
in
exchange
for
his
car
(a
1990
Oldsmobile
98
Regency);
[admitted]
(d)
the
appellant
gave
consideration
worth
less
than
the
amount
she
received;
[denied]
(e)
accordingly,
the
amount
of
the
benefit
conferred
on
the
appellant
by
Luc
Barrette
came
to
$6,000;
[denied]
(f)
there
is
no
evidence
of
the
money
allegedly
loaned
to
Luc
Barrette
by
the
appellant;
[denied]
(g)
on
October
20,
1995
Luc
Barrette
still
owed
the
tax
authorities
more
than
$6,000;
[not
known)
(h)
the
appellant
is
thus
also
liable
for
the
$6,000
tax
debt
of
her
brother
Luc
Barrette.
[denied]
3.
Facts
in
evidence
In
addition
to
the
foregoing
admissions,
the
evidence
also
consisted
of
the
testimony
of
the
appellant,
Gilles
Brassard
and
Pierre
Girard
and
the
filing
of
Exhibits
A-l
to
A-4
and
I-1
and
I-2.
3.01
Appellant’s
testimony
3.01.1
The
appellant,
who
is
a
taxation
clerk
with
Revenue
Canada,
first
noted
the
fact
that
since
1974
her
brother
Luc
Barrette
had
been
co-owner
with
Gilles
Brassard,
a
cousin,
and
Marcel
Pearson,
then
the
appellant’s
spouse,
of
a
cottage.
In
1989,
under
a
separation
settlement,
Mr.
Pearson
assigned
his
share
to
the
appellant.
3.01.2
When
the
cottage
was
sold
in
the
spring
of
1993
for
$7,000,
each
co-owner
was
to
receive
$2,333.
The
appellant’s
share
was
allegedly
loaned
to
her
brother
Luc
Barrette.
As
he
already
owed
her
$3,000
in
earlier
loans,
the
1993
debt
thus
amounted
to
$5,300.
The
appellant
maintained
she
loaned
her
brother
this
money
because
she
had
confidence
in
him:
he
was
an
engineer
working
for
Consolidated
in
the
city
of
La
Baie,
he
owned
a
bar,
a
woodlot
and
a
house.
She
did
not
ask
him
any
questions
about
his
need
for
money.
Also,
her
brother
was
not
talkative.
3.01.3
As
Exhibit
A-1
the
appellant
filed
an
agreement
to
which
was
attached
her
bank
book
with
the
Caisse
populaire
Desjardins
of
Jon-
qui$ea;re
for
August
27,
1993
to
April
6,
1994.
The
identification
number
of
this
book
was
815
70009
and
the
folio
number
073228.
It
appeared
that
during
this
period
she
loaned
her
brother
Luc
Barrette
the
sum
of
$480.
The
appellant
and
Luc
Barrette
signed
the
following
document:
[TRANSLATION]
October
20,
1995
I,
Louise
Barrette,
state
that
I
have
loaned
Luc
Barrette
(my
brother)
|
the
sum
of
|
$
80.00
on
October
21,
93
|
|
$140.00
on
January
21,
94
|
|
$
80.00
on
February
11,
94
|
|
$
40.00
on
March
18,
94
|
|
$
40.00
on
March
21,
94
|
|
$100.00
on
April
1,
94
|
|
for
a
total
of
$480.
|
|
|
(s)
Louise
Barrette
|
|
|
(s)Luc
Barrette
|
|
3.01.4
As
Exhibit
A-2
the
appellant
filed
an
agreement
dated
May
4,
1993
by
which
her
brother
allegedly
transferred
moveable
property
to
her
to
secure
his
debt
of
$5,300.
Another
document
was
attached
to
this
one,
in
which
the
appellant
authorized
her
brother
to
use
the
said
moveable
property.
These
documents
read
as
follows:
[TRANSLATION]
Witness:
(s)
Michel
Guay
Chicoutimi
May
4,
1993
I
the
undersigned,
Luc
Barrette,
residing
at
2239
Chemin
Des
Villas,
Chicoutimi,
hereby
give
possession
of
all
my
moveable
property
to
my
sister
Louise
Barrette
to
pay
my
debt
of
$5,300
(money
which
she
had
earlier
loaned
me).
As
of
today,
May
4,
1993,
all
the
moveable
property
in
the
house
at
2239
Chemin
des
Villas,
Chicoutimi,
becomes
the
property
of
my
sister
Louise.
This
property
includes:
living
room
furniture
(sofa,
chair,
tables,
lamps,
television,
video,
a
cable
converter,
sound
system),
kitchen
furniture,
dining
room
furniture,
my
bedroom
set
(waterbed,
desks,
lamps,
television,
video,
cable
converter),
furniture
set
for
spare
bedroom,
my
office
furniture,
and
so
on,
and
also
all
pictures.
(s)
Louise
Barrette
(s)
Luc
Barrette
Chicoutimi
May
4,
1993
I,
Louise
Barrette,
authorize
Luc
Barrette
to
make
temporary
use
of
my
furniture
which
he
has
transferred
to
me
in
payment
of
the
debt
of
$5,300
settled
by
written
agreement
on
this
day.
Present:
Michel
Guay.
(s)
Louise
Barrette
3.01.5
As
Exhibit
A-3
the
appellant
filed
the
agreement
signed
on
October
20,
1995
regarding
a
transfer
made
of
her
1984
Chrysler
New
Yorker
automobile
on
June
12,
1995
to
her
brother
Luc
Barrette,
who
transferred
to
her
in
exchange
his
1990
Oldsmobile
98
Regency,
in
payment
of
a
debt
of
$6,000.
That
document
reads
as
follows:
[TRANSLATION]
St-Honoré,
October
20,
1995
I
the
undersigned,
Louise
Barrette,
residing
at
3570
Chemin
des
Ruisseaux
in
Saint-Honoré,
do
depose
and
say:
That
on
June
12,
1995
I
gave
my
1984
Chrysler
New
Yorker
car
(licence
NVP
773)
to
my
brother
Luc
Barrette.
In
exchange
for
this
car
and
the
money
he
owed
me
(over
$6,000)
he
gave
me
his
1990
Oldsmobile
Regency
car
(licence
QDW
019).
(s)
Luc
Barrette
(s)
Louise
Barrette
3.01.6
As
Exhibit
A-4
the
appellant
filed
[TRANSLATION]
“the
Quebec
automobile
insurance
policy”
on
the
Oldsmobile
98
Regency
Brougham.
The
insurance
company
gave
[it]
no
value.
3.01.7
In
cross-examination
the
appellant
acknowledged
the
transfer
records
issued
by
the
Société
de
1’assurance
automobile
du
Qu$ea;bec
on
the
1984
Chrysler
New
Yorker
and
the
1990
Oldsmobile
Regency
(Exhibit
I-l).
The
vehicles
were
valued
at
$0
for
the
Chrysler
New
Yorker
and
$9,525
for
the
Oldsmobile
Regency.
On
each
of
the
documents
it
states
that
these
were
gifts
both
for
the
transferor
and
the
transferee
in
respect
of
each
car.
3.01.8
The
appellant
admitted
that
her
notice
of
assessment
was
issued
on
October
20,
1995,
claiming
$6,000
from
her,
and
that
the
notice
of
objection
was
filed
on
January
10,
1996
(Exhibit
I-2).
The
notice
of
objection
reads
as
follows:
[TRANSLATION]
BY
REGISTERED
MAIL
Saint-Honoré,
January
10,
1996
Revenue
Canada,
Taxation
100
Rue
Lafontaine,
Bureau
211
Chicoutimi,
Quebec
G7H
6X2
Dear
Sir/Madam:
This
is
to
inform
you
that
I
am
objecting
to
the
requirement
pursuant
to
s.
160(1)
of
the
Income
Tax
Act
that
I
repay
the
sum
of
$6,000
in
connection
with
the
transfer
of
a
1990
Oldsmobile
98
Regency
automobile
in
June
1995.
Statement
of
facts
and
reasons
for
objection
In
1992
and
1993
I
loaned
Luc
Barrette
the
sum
of
$5,300.
In
May
1993
Mr.
Barrette
could
not
repay
me
and
therefore
I
drew
up
a
written
agreement
with
him
to
protect
me
temporarily
until
the
loan
was
repaid.
Please
find
enclosed
a
copy
of
this
agreement,
dated
May
4,
1993.
I
subsequently
loaned
Mr.
Barrette
other
sums
of
money,
totalling
$1,000.
In
May
1995
I
asked
Mr.
Barrette
to
repay
his
debt,
but
it
was
impossible
for
him
to
do
so.
In
June
1995,
as
I
had
urgent
need
for
a
new
car
to
go
to
my
work,
since
I
live
out
of
town,
and
Mr.
Barrette
was
still
out
of
work
and
had
a
car
with
a
resale
value
amounting
to
his
debt
to
me,
after
considerable
discussion
he
Finally
transferred
his
car
to
me
in
payment
of
his
debt
and
I
gave
him
mine.
The
money
loaned
was
my
savings
for
the
purchase
of
a
car.
After
checking
with
financial
institutions
to
ensure
that
there
was
no
lien
on
the
car,
we
completed
the
transaction.
I
had
no
knowledge
of
the
taxpayer
Luc
Barrette’s
obligations
to
Revenue
Canada,
Taxation.
Accordingly,
I
do
not
see
how
the
taxpayer’s
debt
concerns
me.
Like
you,
I
simply
wanted
to
have
what
was
due
to
me.
I,
Louise
Barrette,
am
in
no
way
responsible
for
the
actions
of
another
person.
Mr.
Luc
Barrette
is
my
brother,
but
his
actions
are
his
concern:
he
is
a
responsible
adult.
Yours
truly,
Louise
Barrette
3570
Chemin
des
Ruisseaux
Saint-Honoré,
Quebec
GOV
1L0
Encl.
(s)
Louise
Barrette
The
appellant
said
that
$10,000
was
claimed
from
her
at
the
outset,
but
in
due
course
the
claim
was
reduced
to
$6,000.
3.01.9
In
answer
to
the
question
by
the
respondent’s
counsel,
as
to
why
Exhibit
A-3
is
dated
October
20,
1995
when
the
exchange
of
cars
took
place
on
June
12,
1995,
the
appellant
said
that
this
was
requested
by
her
brother
Luc.
He
wanted
it
to
be
clear
that
his
debt
was
completely
paid
off.
3,02
Testimony
of
Gilles
Brassard
The
witness
admitted
he
had
been
a
co-owner
with
Luc
Barrette
of
the
cottage
and
had
received
$2,333
when
the
cottage
was
sold
to
Réal
Black-
burn
in
late
March
1993.
He
knew
that
Luc
Barrette
had
a
balance
of
$4,666.66
left,
but
did
not
know
whether
he
had
given
the
appellant
$2,333.33.
3.03
Testimony
of
Pierre
Girard
3.03.1
The
witness
is
currently
an
auditor
with
source
deductions.
Revenue
Canada.
He
formerly
conducted
investigations,
including
those
of
Luc
Barrette
and
the
appellant.
3.03.2
A
seizure
was
made
in
Luc
Barrette’s
case
on
October
11,
1995
for
a
debt
to
the
respondent
of
$205,000.
On
October
17,
1995
proceedings
were
served
on
the
appellant
pursuant
to
s.
160
of
the
Act
for
the
purpose
of
intercepting
money
which
might
be
owed
to
Luc
Barrette.
303.3
Luc
Barrette
allegedly
told
the
witness
that
he
owed
the
appellant
the
sum
of
$4,000.
According
to
the
witness,
the
appellant
confirmed
this
on
October
20,
1995.
He
was
quite
definite
on
this
point.
Taking
into
account
the
fact
that
the
Oldsmobile
98
Regency
automobile
had
an
approximate
value
of
$10,000,
the
witness
set
the
appellant’s
debt
to
the
respondent
pursuant
to
s.
160
of
the
Act
at
$6,000.
4.
Act
-
case
law
-
analysis
4.01
Act
The
provisions
of
the
Act
governing
the
instant
case
are
contained
in
s.
160(1),
(2)
and
(3)
of
the
Income
Tax
Act.
Those
provisions
read
as
follows:
160:
Tax
liability
re
property
transferred
not
at
arm’s
length.
(1)
Where
a
person
has,
on
or
after
May
1,
1951,
transferred
property,
either
directly
or
indirectly,
by
means
of
a
trust
or
by
any
other
means
whatever,
to
°
(a)
the
person’s
spouse
or
a
person
who
has
since
become
the
person’s
spouse,
‘
(b)
a
person
who
was
under
18
years
of
age,
or
•
(c)
a
person
with
whom
the
person
was
not
dealing
at
arm’s
length,
the
following
rules
apply:
•
(d)
the
transferee
and
transferor
are
jointly
and
severally
liable
to
pay
a
part
of
the
transferor’s
tax
under
this
Part
for
each
taxation
year
equal
to
the
amount
by
which
the
tax
for
the
year
is
greater
than
it
would
have
been
if
it
were
not
for
the
operation
of
sections
74.1
to
75.1
of
this
Act
and
section
74
of
the
Income
Tax
Act,
chapter
148
of
the
Revised
Statutes
of
Canada,
1952,
in
respect
of
any
income
from,
or
gain
from
the
disposition
of,
the
property
so
transferred
or
property
substituted
therefor,
and
•
(e)
the
transferee
and
transferor
are
jointly
and
severally
liable
to
pay
under
this
Act
an
amount
equal
to
the
lesser
of
•
(i)
the
amount,
if
any,
by
which
the
fair
market
value
of
the
property
at
the
time
it
was
transferred
exceeds
the
fair
market
value
at
that
time
of
the
consideration
given
for
the
property,
and
•
(ii)
the
total
of
all
amounts
each
of
which
is
an
amount
that
the
transferor
is
liable
to
pay
under
this
Act
in
or
in
respect
of
the
taxation
year
in
which
the
property
was
transferred
or
any
preceding
taxation
year,
but
nothing
in
this
subsection
shall
be
deemed
to
limit
the
liability
of
the
transferor
under
any
other
provision
of
this
Act.
160.(2)
Minister
may
assess
transferee.
The
Minister
may
at
any
time
assess
a
transferee
in
respect
of
any
amount
payable
by
virtue
of
this
section
and
the
provisions
of
this
Division
are
applicable,
with
such
modifications
as
the
circumstances
require,
in
respect
of
an
assessment
made
under
this
section
as
though
it
had
been
made
under
section
152.
160.
(3)
Rules
applicable.
Where
a
transferor
and
transferee
have,
by
virtue
of
subsection
(1),
become
jointly
and
severally
liable
in
respect
of
part
or
all
of
a
liability
of
the
transferor
under
this
Act,
the
following
rules
apply:
•
(a)
a
payment
by
the
transferee
on
account
of
the
transferee’s
liability
shall
to
the
extent
thereof
discharge
the
joint
liability;
but
•
(b)
a
payment
by
the
transferor
on
account
of
the
transferor’s
liability
only
discharges
the
transferee’s
liability
to
the
extent
that
the
payment
operates
to
reduce
the
transferor’s
liability
to
an
amount
less
than
the
amount
in
respect
of
which
the
transferee
was,
by
subsection
(1),
made
jointly
and
severally
liable.
4.02
Analysis
Is
the
appellant
subject
to
s.
160(1)
of
the
Act?
4.02.1
The
appellant
admitted
that
she
was
not
dealing
with
Luc
Barrette
at
arm’s
length,
since
he
is
her
brother
(160(1
)(c)).
4.02.2
Did
the
appellant
receive
any
amount
from
her
brother
Luc?
The
appellant’s
argument
was
that
in
1992
and
1993
she
loaned
$5,300
and
later
another
$1,000,
$480
of
which
was
broken
down
as
in
Exhibit
A-1
(3.01.3).
This
argument
had
already
been
made
in
her
notice
of
objection
(Exhibit
1-2:
3.01.8).
4.02.3
The
$5,300
debt
On
the
$5,300
debt,
the
appellant
said
that
the
agreement
of
May
4,
1993
regarding
Luc
Barrette’s
furniture
(Exhibit
A-2:
3.01.4)
was
only
a
security,
not
a
final
payment
of
the
debt.
To
begin
with,
paragraph
2
of
the
agreement
should
be
quoted:
[TRANSLATION]
As
of
today,
May
4,
1993,
all
the
moveable
property
in
the
house
at
2239
Chemin
des
Villas,
Chicoutimi,
becomes
the
property
of
my
sister
Louise.
It
seems
quite
clear
that
ownership
of
the
property
was
transferred
to
his
sister
Louise
“As
of
today,
May
4,
1993”.
Furthermore,
on
an
accompanying
document
signed
by
the
appellant
on
the
same
day,
authorizing
Luc
Barrette
to
make
temporary
use
of
the
furniture
transferred
to
her,
it
states:
[TRANSLATION]
I,
Louise
Barrette,
authorize
Luc
Barrette
to
make
temporary
use
of
my
furniture
which
he
has
transferred
to
me
in
payment
of
the
debt
of
$5,300
settled
by
written
agreement
on
this
day.
It
is
abundantly
clear
that
the
debt
was
cancelled
as
of
May
4,
1993.
4.02.4
After
that
date,
according
to
Exhibit
A-1,
another
amount
of
$480
was
allegedly
loaned
to
Luc
Barrette
between
October
21,
1993
and
April
1,
1994
(3.01.3).
The
evidence
did
not
establish
any
other
loans
were
made
by
the
appellant
to
her
brother
Luc
until
the
latter
was
assessed.
4.02.5
The
transfer
of
an
automobile
worth
$10,000,
owned
by
Luc
Barrette,
for
one
which
the
appellant
said
was
worth
$400,
but
which
neither
the
Quebec
automobile
insurance
policy
(Exhibit
A-4:
3.01.6)
nor
the
Société
de
1’assurance
automobile
du
Québec
(Exhibit
1-1:
3.01.7)
placed
any
value
on,
indicates
a
very
marked
difference.
4.02.6
According
to
the
evidence
submitted
to
the
Court,
the
$4,000
debt
to
the
appellant
which
was
supposed
(3.03.3)
to
exist
at
the
time
of
the
seizure
(October
11,
1995),
as
mentioned
by
Luc
Barrette,
and
confirmed
by
the
appellant
according
to
the
testimony
of
Pierre
Girard,
was
in
fact
non-existent.
Only
a
debt
of
$480
could
be
established.
The
Court
has
no
jurisdiction
to
increase
the
debt
to
$9,520
($10,000
-
$480),
but
must
uphold
the
assessment
made
in
the
amount
of
$6,000.
The
language
of
s.
160(1),
(2)
and
(3)
of
the
Act
is
clear
(4.01).
Any
transfer
of
property
between
persons
not
dealing
with
each
other
at
arm’s
length,
when
one
of
those
two
owes
certain
amounts
of
tax,
makes
the
individuals
jointly
and
severally
liable
to
the
Department
of
National
Revenue
for
the
amount
owed.
5.
Conclusion
For
the
foregoing
reasons,
the
appeal
is
dismissed.
Appeal
dismissed.
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