Federal Court Decisions

Date: 20040708

                                                                                                                         Docket: ITA-5240-03

Citation: 2004 FC 974

In the matter of the Income Tax Act

                                                                         - and -

In the matter of an assessment or assessments assessed by the Minister of National Revenue under one or more of the following Acts: the Income Tax Act, the Canada Pension Plan and the Employment Insurance Act

AGAINST:

2524-2595 QUÉBEC INC.

Judgment debtor

REASONS FOR ORDER

RICHARD MORNEAU, PROTHONOTARY:

[1]         This is a motion by the judgment debtor, 2524-2595 Québec Inc., under article 596 of the Quebec Code of Civil Procedure (C.C.P.) and rule 364 of the Federal Court Rules, 1998, to have the seizure carried out by the Canada Revenue Agency (the Agency) on April 22, 2004, set aside on the ground that the property was seized pursuant to a seizure of movables although all of the seized property was, according to the judgment debtor, immovable property within the meaning of articles 900 to 903 of the Civil Code of Québec (C.C.Q.).

Context

[2]         On April 22, 2004, on the basis that the judgment debtor was its tax debtor in the amount of $16,740.02, the Agency had the following property belonging to the judgment debtor seized:

-            an aluminum floating dock, about 7' x 50'

-            two aluminum floating docks, about 7' x 42'

-            an aluminum floating dock, about 7' x 34'

-            a non-floating aluminum dock, about 7' x 22'

-            two aluminum floating docks, about 10' x 30'

-            a boat-lift of the brand Les Quais de l'Estrie with a capacity of 3,600 pounds

[3]         According to the affidavit of Jacques Labérée, a representative of the judgment debtor, the docks and boat-lift constitute a dock work. His affidavit informs us as follows concerning the installation and occasional handling of the seized property:

[translation]

5.              The said dock work was erected in 1990 in accordance with a blueprint prepared by TECHNOMARINE, as is indicated in the blueprint communicated and produced in support of this affidavit as exhibit O-2;

6.              Since 1990 the work has been and remains permanently installed;

7.              With the approach of winter, the parts of the work that serve as a footway and mooring for the boats, and the parts used as a boat-lift, i.e. the property that was seized in this case, must be detached and deposited on the shore;

8.              This operation, which takes two (2) days, requires the intervention of a crane and a team of four workers;

9.              When the spring comes, the parts of the work that were removed are reinstalled;

10.            Six concrete blocks measuring six (6) feet by six (6) feet and with a thickness of one (1) foot, weighing more than five thousand (5,000) pounds each, are installed underwater on the bottom;

11.            The concrete blocks were installed on the bottom using a barge equipped with a twelve thousand (12,000) pound winch;

12.            To complete the immobilization of the work, a reinforced concrete foundation is poured on the bank, which helps to stabilize the work;

13.            The foundation is poured to about five (5) feet in depth into the ground, to counter the effects of frost;

14.            The parts of the work that are temporarily removed are attached to concrete blocks by chains with links that are five eighths (5/8) of an inch in diameter;

15.            The work is also solidly attached to the shoreline foundation;

16.            The work is equipped with a water and electricity distribution system throughout the entire surface area of the work.

Analysis

[4]         The judgment debtor opposes the seizure in this case and asks that it be set aside pursuant to three main propositions that will be analyzed consecutively.

[5]         According to the first and central proposition of the judgment debtor, the foundation poured in the actual riparian soil (the foundation), the floating docks and the boat-lift should all be considered a single work for the purposes of article 900 C.C.Q.

[6]         Article 900 C.C.Q. and the other relevant articles of the C.C.Q., articles 901 to 907, as well as section 48 of the Act respecting the implementation of the reform of the Civil Code, S.Q. 1992, c. 57 (A.I.R.C.C.), read:

[7]         In the first place, I do not think the seized property is an indispensable accessory "of a system" the integrity of which depends on that accessory. Unlike the irrigation system discussed by Pierre-Claude Lafond, Précis de droit des biens (Les Éditions Thémis, 1999), at page 73, the foundation may very well be used as such without the seized property. Lafond states:

[translation]

-                an automatic ground irrigation system, underground pipes and sprinklers (including the computer that operates it):

·        Lafrance v. Lanouette, [1998] R.D.I. 163 (C.Q., c.p.) (although the judge cites article 903 C.C.Q. instead of articles 900 and 901 C.C.Q.)

-                Usually, the problem is not so much one of finding whether this or that construction or work constitutes an immovable as it does determining what is a part thereof. In our opinion, as the foregoing example illustrates, if a system is to be consistent with the integrity of a complex, it must be designed as an indivisible entity and consequently the indispensable accessory of an immobilized property must be given the same characterization as the principal part.

[8]         I think that under article 900 C.C.Q., only the foundation can be considered a work and the docks and the boat-lift cannot be included under this heading.

[9]         In regard to the foundation, it is undeniable that it has a permanent character and is definitively attached to the ground (see Denys-Claude Lamontagne, Biens et propriété, 4th ed., (Éditions Yvon Blais, 2002), at page 27, paragraph 61).

[10]       However, in regard to the docks and the boat-lift, these properties do not themselves have an attachment to the ground. Such attachment would exist only through the intermediary of the foundation and this concept of attachment has to be ruled out from any consideration, it seems, under article 900 C.C.Q. As Professor Lafond states, at page 69:

[translation] - The test of attachment to the ground is essential. Contrary to the judge-made law developed under the aegis of the previous law, it rules out any possibility of a work becoming an immovable by being attached to a construction or a work. For example, a system of cable distribution lines attached in the air to other (electrical, telephone) systems including wires and poles, themselves characterized as immovables through attachment to the ground, would doubtless now no longer be characterized the same way. The concept of vertical joinder or attachment to the ground by intermediary no longer exists, in view of the language of the new article 900 C.C.Q.

[11]       Moreover, and similarly, the attachment of the seized properties to the concrete blocks installed underwater on the bottom is even less probative since I consider that these blocks that were "installed underwater on the bottom" are simply resting there. Accordingly, these concrete blocks do not present a strong and lasting physical relationship between them and the ground. There is no definitive link between them and the bottom. Notwithstanding their weight, they have not lost all mobility, judging from the evidence. They were placed on the bottom and they could probably be displaced as needed.

[12]       Consequently, these blocks cannot be viewed as an immobilized work and they remain movable property. Insofar as they are concerned, the seized properties are therefore linked to some movable properties (see Lafond, supra, at pages 68-69). This attachment of movable properties to movable properties cannot, therefore, turn the seized properties into immovables within the meaning of article 900 C.C.Q.

[13]       The second proposition of the judgment debtor is that the floating docks and the boat-lift should be viewed, nevertheless, as movable property forming an integral part of the foundation within the meaning of articles 900 in fine, 901 and 902 C.C.Q. If such integration is to be found, the said movable properties would then be viewed as immovables for the purposes of those articles.

[14]       From this perspective, a movable property becomes an immovable by integration with an immovable:

-            when it is incorporated in the group, in this case the foundation;

-            loses its individuality; and

-            ensures the utility of the immovable.

[15]       The authorities appear to be in agreement that these three conditions of integration are cumulative and that incorporation is of primary importance. As Lafond states, at page 78:

[translation] It must be acknowledged that, when the property is incorporated, the other two conditions decline in importance: the first, because incorporation suggests an implicit loss of individuality, the second, because the contribution to the utility of the immovable is akin to the concept of incorporation of the property (infra, (b) and (c)).

[16]       In regard to this concept of incorporation and the degree of incorporation that is sought, Lafond states, at pages 78-79:

[translation]

- This first criterion, incorporation, implies an extremely important physical connection if a property is to become an immovable according to this form of immobilization. All things considered, the three criteria stated above may be summarized as the search for such a physical link between the property and the immovable to which it is attached. This applies, for example, to the building materials that enter into the composition of a residential building.

- ... The stronger the physical attachment, the more the movable property "merges" with the attached immovable and the greater the tendency toward integration.

[17]       In this case I do not think the floating docks and the boat-lift fulfill this incorporation criterion. Although the seized properties are attached to the foundation by chains, these properties cannot be considered blended with the foundation, or integrated with it. These properties are attached from a distance to the foundation. Their link, the chains, are of course visible, perceptible. It cannot be argued that these properties are merged in some way or other with the foundation.

[18]       For these reasons, it must be concluded that the seized properties do not fulfill either the incorporation criterion or the loss of individuality criterion. They cannot be considered to have become immovables through integration within the meaning of articles 900 to 902 C.C.Q.

[19]       That leaves the third proposition of the judgment debtor, that the seized properties qualify as immovables within the meaning of article 903 C.C.Q. and section 48 A.I.R.C.C.

[20]       Again, these provisions read as follows:

Art. 903.     Movables which are permanently physically attached or joined to an immovable without losing their individuality and without being incorporated with the immovable are immovables for as long as they remain there.

Art. 48.     Under article 903 of the new Code, only those movables referred to which ensure the utility of the immovable are to be considered as immovables, and any movables which, in the immovable, are used for the operation of an enterprise or the pursuit of activities are to remain movables.

[21]       This form of immobilization by physical attachment or joinder depends on five requirements. As Lafond states, at page 96:

[translation]

These five requirements follow from the statement of principle in article 903 C.C.Q., which serves as a definition, and from section 48 A.I.R.C.C., which complements them:

1.      the presence of an immovable (a);

2.      an attachment or a physical joinder linking the movable property to the immovable (b);

3.      the retention of individuality of the movable property and the lack of incorporation (c);

4.      a permanent link (d); and

5.      a function ensuring the utility of the immovable (e).

[22]       Owing to our previous analysis, it is not hard to find that the first three requirements are met, in favour of the seized properties.

[23]       That leaves the fourth and fifth requirements.

[24]       Regarding the fourth requirement, a permanent link, here is what Lafond says about it, at page 102:

[translation] - The permanent attachment or physical joinder replaces the former requirement of "placed permanently". This de facto state of course does not imply a connection in perpetuity between the movable property and the attached immovable. The expression "permanently" does not mean "forever", but rather expresses the idea of an indefinite or indeterminate period of time, a permanent link, as opposed to a temporary or short-lived attachment. The requirement is met when the owner had the intention to make the movable property a permanent accessory of the immovable.

[25]       In this case, it is true that the floating docks and the boat-lift have to be physically detached from the immovable, the foundation, for a fairly fixed and precise period of the year. In fact, as the record discloses, at paragraphs 7 and 9 of the affidavit of the judgment debtor's representative:

[translation]

7.              With the approach of winter, the parts of the work that serve as a footway and mooring for the boats, and the parts used as a boat-lift, i.e. the property that was seized in this case, must be detached and deposited on the shore;

9.              When the spring comes, the parts of the work that were removed are reinstalled;

[26]       However, this separation of the movable properties from the immovable should not be viewed in the very special circumstances of this particular case as fatal to the fulfilment of the fourth requirement.

[27]       The cases and authorities indicate that there must be an idea of permanency behind the physical detachment.

[28]       In Axor Construction Canada ltée v. 3099-2200 Québec inc., R.E.J.B. 2002-27758, a majority of the Quebec Court of Appeal held that some arena boards qualified as an immovable under article 903 C.C.Q. although these boards could occasionally be dismantled to allow events other than hockey to take place. At paragraphs 15 and 16 (page 3 of 7), the Court states:

[translation]

15.            It seems to me it is common ground that the owner of the immovable intends to make the boards a permanent accessory of the arena. That they may be withdrawn occasionally in no way alters the fact that they equip the building and are a permanent accessory thereof. Modern construction techniques, to insure greater use of the building for varied purposes, do not bar the permanent physical attachment of an accessory as important to an arena as the boards around the rink.

16.            I think it is worth noting that the immobilization mechanism in article 903 C.C.Q. is not reserved solely to the owner of the immovable. Article 571 C.C.P. so provides, explicitly. This leads me to conclude that the expression "permanently" reflects the willingness of the owner of the property to physically attach it to an immovable for an indefinite period with the intention of making that property a permanent accessory of the immovable. In short, I am of the opinion that in the case at bar this fourth requirement is satisfied.

[29]       In the present case, as in the Axor decision, I think the judgment debtor's intention was to make the docks and the boat-lift permanent accessories of the foundation. The physical detachment of the seized property is in my opinion an event forced by nature that in no way removes the intention of permanency. It could even be said that when the foundation is used for something, the docks and the boat-lift are too. Conversely, during the dead season, winter, the foundation and the docks are inactive. So the seized property follows the cycle of the foundation. In short, I am of the opinion that in the case at bar this fourth requirement is satisfied.

[30]       The fifth requirement becomes especially important, then, since in my opinion it serves to make a distinction between the identification and the ultimate fate of the seized properties. Indeed, I think that this requirement, which requires that each seized property have a function ensuring the utility of the immovable, imposes a difference between the floating docks and the boat-lift.

[31]       In Axor, the Quebec Court of Appeal, by noting what Professor Lafond says in this regard, provides us with an analytical blueprint. The Court states, at paragraphs 20 to 25:

[translation]

20.            The question remains: how to distinguish between a movable that ensures the utility of the immovable and one that is used in the operation of an enterprise? It is my opinion that in order to answer adequately, it is first necessary to examine the nature of the relation between the immovable and this ancillary movable. In the case at bar this exercise is particularly revealing because we have an immovable with a specific purpose. I think Professor Lafond expresses the appropriate criterion in such matters:

To find the utility characteristic, it is important to bear in mind the unity formed by the immovable and its accessory, the movable property. The integrity of the immovable, as it exists in its actual design and construction, must be at the heart of the characterization process. Any infringement of that unity or integrity will point to the conclusion that the accessory property has been immobilized, provided the other factors are assembled.

As in the case of immobilization through integration, we recommend the application of a subjective test, peculiar to the immovable by attachment, for this type of immovable may have an influence on the unity or integrity that results. The unity of a very luxurious immovable will be assessed differently from that of a dwelling of inferior quality. This relationship of unity in a subjective context also inclines us to reflect on the purpose or intrinsic function of the immovable, in order to assess the utility of the movable property attached thereto. The purpose of a residential building is to provide shelter and comfort to its occupants. The architectural reality of a church, a sports centre or a concert hall differs substantially from that of a residential building. This will affect the jurist's view when he or she is characterizing movable property physically attached as accessories to these immovables. The concept of utility is assessed differently from one context to another [See note 7 below]

Note 7: Pierre Claude LAFOND, supra, p. 107.

21.            He concludes:

When the movable property that is being characterized directly serves the purpose of the immovable and the latter would be incomplete or incoherent without it, it must be concluded that it has become immobilized by attachment or joinder. If, in the interest of the immovable's integrity, the immovable can be of no use other than for its initial purpose without these accessories, absent major work, then it must be concluded that they have become immobilized. For example, a movie theatre could not exist as such without the screen and the seats that serve its purpose. Similarly, a church would not be a church without its organ [See Note 8 below].

Note 8: Id., p. 109.

22.            To put it more simply, the boards, albeit removable, are a useful accessory to an arena, just as a stage is to a theatre. One need only ask oneself the following question: Would the immovable be complete without this movable? In the case of an immovable with a specific purpose, the reply is often self-evident. On the other hand, if it is a residential building, commercial or otherwise, without any special characteristics, it will be easier to associate the movable with the operation of an enterprise than with the utility of the immovable.

23.            Section 48 of the Act respecting the implementation of the reform of the Civil Code invites us to make a distinction between the movable ensuring the utility of the immovable and the movable used for the operation of an enterprise. In performing this exercise, we should not overlook the impact of article 903 C.C.Q. or reduce the immobilization of movables to residential buildings alone, as opposed to those that house an enterprise.

24.            More than one hundred years ago, Mignault wrote:

However, it is obvious that a building cannot be taken to mean only the walls, large or small, of which it is composed. It must also include the accessories that are so much the essence of the building that without them it would still be incomplete, and so incomplete that it would be impossible or extremely difficult to derive from it the utility for the purpose of which it was built.... [See Note 9 below].

Note 9: P.B. MIGNAULT, Le droit civil canadien, vol. 2 (Montréal: Théorêt, 1896), at pp. 401 and 402.

25.            In my opinion, an arena without boards would be an incomplete, even unusable immovable, for the initial purposes for which it was built.

[32]       It is clear in this case that the foundation is an immovable with a specific purpose. In fact, the foundation has only one purpose. Its first and only purpose is to serve as an anchorage for the floating docks. The foundation and the floating docks, for the purposes of this attempt to find the utility (and not to go back to what was said in respect of them under article 900 C.C.Q.), are but one in actuality. This unity would be breached if the floating docks were to be deprived of the foundation. Without the docks, the foundation is of no use.

[33]       Consequently, it must be concluded that the floating docks that were seized have to be characterized as an immovable under article 903 C.C.Q. and exempt from the seizure that was carried out in this case.

[34]       The same cannot be said for the boat-lift, however. There is no indication, in the evidence or in theory, that the foundation loses its integrity in terms of design and construction if it is separated from the boat-lift. With or without this property, the foundation serves very well as an anchorage for the floating docks. The boat-lift is likely useful, but in my opinion this utility relates to the operation of the enterprise carried on by the judgment debtor, namely a marina. It is of course very practical and useful for a marina to provide a boat-lift service. However, that does not go to the utility of the immovable at issue here, namely the foundation. Consequently, the boat-lift, by virtue of section 48 of the A.I.R.C.C., remains a movable property that is still subject to the seizure carried out by the Agency on April 22, 2004.

[35]       The latter conclusion leads me to draw attention to a factual aspect raised by the evidence submitted by the Agency.

[36]       This evidence indicates that following the seizure, on May 6, 2004, the floating docks and the boat-lift were put back in the water. Yet, need I repeat, on May 6 the property was under seizure and Mr. Labérée, the representative of the judgment debtor, was the guardian of that property.

[37]       Counsel for the Agency, in his written representations, denounced this situation in the following words:

[translation]

Moreover, the Crown expressly reserves its right to request a contempt of court order against Mr. Jacques Labérée and the judgment debtor, should the opposition to the seizure be allowed, as they knowingly and deliberately thwarted the execution of a writ of this Court;

For example, as mentioned previously, Jacques Labérée allowed the seized property to be moved and put in the water. In the work entitled Précis de procédure civile, Charles Belleau addressed the obligations of the guardian and states (at p. 167): [translation] "The courts have also held that the guardian has the obligations of a depositary within the meaning of the Civil Code (art. 2280 to 2294 C.C.Q.). He shall therefore act with prudence and diligence in the safekeeping of the property (art. 2283 C.C.Q.) and, accordingly, answer for any damages caused to the creditor by the loss or deterioration of the property occurring subsequent to his appointment unless he proves that these were the result of force majeure." (Tab 1) Thus, article 2283 C.C.Q. provides that: The depositary shall act with prudence and diligence in the safekeeping of the property; he may not use it without the permission of the depositor. Jacques Labérée, who is the guardian of the property, was never authorized to use the docks and the boat-lift.                                      [Emphasis in the original.]

[38]       The motion in opposition by the judgment debtor will therefore be allowed in part only and the seizure carried out in this case will be set aside in respect of the floating docks only. The boat-lift remains under seizure and the execution in respect of it may therefore continue. In this regard, may it suffice in the context of the present motion to mention that the actual situs of the boat-lift is admittedly problematic, and that Mr. Labérée would be well advised, in view of this execution, to consider his obligations as a depositary (see, inter alia, articles 2285 and 2286 C.C.Q.) and article 608 C.C.P.

[39]       Given the divided success on this motion, there will be no award of costs.

[40]       An order shall issue accordingly.

"Richard Morneau"

Prothonotary

Montréal, Quebec

July 8, 2004

Certified true translation

Suzanne M. Gauthier, C.Tr., LL.L.

FEDERAL COURT

SOLICITORS OF RECORD

DOCKET:                                ITA-5240-03

STYLE:                                                In the matter of the Income Tax Act

- and -

In the matter of an assessment or assessments assessed by the Minister of National Revenue under one or more of the following Acts: the Income Tax Act, the Canada Pension Plan and the Employment Insurance Act

AGAINST:

2524-2595 QUÉBEC INC.

Judgment debtor

PLACE OF HEARING:          Montréal, Quebec

DATE OF HEARING:            June 14, 2004

REASONS FOR ORDER:    Richard Morneau, Prothonotary

DATED:                                              July 8, 2004

APPEARANCES:

Julie Mousseau                                                                          for the judgment creditor

Frédéric-Antoine Lemieux                                                                     for the judgment debtor

SOLICITORS OF RECORD:

Morris Rosenberg                                                                                  for the judgment creditor

Deputy Attorney General

of Canada

Drouin Lemieux                                                                                     for the judgment debtor

Sherbrooke, Quebec