Date: 19971223
File: A-504-94
OTTAWA, ONTARIO, TUESDAY, DECEMBER 23, 1997
PRESENT: DENAULT J.A.
DESJARDINS J.A.
LÉTOURNEAU J.A.
BETWEEN: LOUIS BELLIARD,
APPELLANT (applicant),
AND:
DEPUTY MINISTER OF REVENUE OF QUEBEC,
in the matter of an assessment or assessments
made by him under the Excise Tax Act
and
In the matter of the Excise Tax Act,
RESPONDENT,
AND:
COLIN, PARÉ & ASSOCIÉS, BAILIFFS,
MIS EN CAUSE.
JUDGMENT
The appeal is dismissed without costs, except in respect of the computer, which must be withdrawn from the seizure and returned to the appellant.
"Pierre Denault"
J.A.
Certified true translation
C. Delon, LL.L.
Date: 19971223
File: A-504-94
CORAM: DENAULT J.A.
DESJARDINS J.A.
LÉTOURNEAU J.A.
BETWEEN:
LOUIS BELLIARD,
APPELLANT (applicant),
AND:
DEPUTY MINISTER OF REVENUE OF QUEBEC,
in the matter of an assessment or assessments
made by him under the Excise Tax Act
and
In the matter of the Excise Tax Act,
RESPONDENT,
AND:
COLIN, PARÉ & ASSOCIÉS, BAILIFFS,
MIS EN CAUSE.
Hearing held at Québec, Quebec, on Monday, December 8, 1997
Judgment delivered at Ottawa, Ontario, on Tuesday, December 23, 1997
REASONS FOR JUDGMENT OF THE COURT BY: LÉTOURNEAU J.A.
CONCURRED IN BY: DENAULT J.A.
DESJARDINS J.A.
Date: 19971223
File: A-504-94
CORAM: DENAULT J.A.
DESJARDINS J.A.
LÉTOURNEAU J.A.
BETWEEN:
LOUIS BELLIARD,
APPELLANT (applicant),
AND:
DEPUTY MINISTER OF REVENUE OF QUEBEC,
in the matter of an assessment or assessments
made by him under the Excise Tax Act
and
In the matter of the Excise Tax Act,
RESPONDENT,
AND:
COLIN, PARÉ & ASSOCIÉS, BAILIFFS,
MIS EN CAUSE.
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
Facts and pleadings
[1] This is an appeal from the decision of a judge of the Trial Division dated September 21, 1994. On that date, the Trial Division judge dismissed, with costs, the appellant's motion opposing the seizure of the following property belonging to him:
| - a blue, four-door Saturn SL2 motor vehicle, licence number TFF-787, serial number IG8ZJ5573PZ108720; |
| - a Brother fax, model Fax-150; |
| - a wooden desk with drawers; |
| - a chair on castors; |
| - two grey four-drawer metal filing cabinets; |
| - a wooden L-shaped computer table; and |
| - an AST computer with keyboard, processor and Mitsubishi monitor, and accessories. |
[2] This seizure was carried out on July 27, 1994, on behalf of the Deputy Minister of Revenue of Quebec. Subsequently, because of section 130 of the Act respecting the Barreau, the seizing creditor released the two grey metal four-drawer filing cabinets from the seizure. The facts out of which this case arose may be summarized as follows.
[3] The appellant has been an advocate, or lawyer, in Quebec since 1982. He has practised law in Sept-Iles, Chicoutimi and Quebec, in succession. At the time of the seizure for amounts owing under the Excise Tax Act, the appellant was practising his profession in the city of Québec.
[4] The property that is the subject of this case, except the motor vehicle, was seized at the appellant's residence. The appellant contends that he carries out 30% of his professional activity at home and that at that time the remaining 70% consisted of criminal law cases which had been assigned to him by another lawyer, Martin Tremblay. He acknowledged that at that time he had access to support services at Mr. Tremblay's law firm, located on chemin St-Louis, Québec.
[5] In this Court, the appellant argued that the property in issue enjoyed a privilege of exemption from seizure under article 552 of the Code of Civil Procedure and, for certain of the items, under both article 552 and section 130 of the Act respecting the Barreau. It is useful to reproduce the two statutory provisions in question:
Code of Civil Procedure
| 552. The debtor must be permitted to select from among his property and withdraw from seizure: |
| 3. The instruments of work needed for the personal exercise of his professional activity. |
Act respecting the Barreau
| 130. In addition to the exemptions mentioned in the Code of Civil Procedure and subject to subsection 2 of section 76, the records of an advocate, his account books, filing cabinets, law books and other documents of a professional nature shall not be liable to seizure. |
[6] I would add that the exception to the provisions of section 130 of the Act respecting the Barreau set out in subsection 76(2) does not apply to this case.
The seizure of the office furnishings, computer and fax
(a) The applicable law and the burden of proof
[7] Article 2644 of the new Civil Code restates the principle set out in article 1981 of the former Code, providing that the patrimony of a debtor is the common pledge of a creditor:
| Art. 2644 The property of a debtor is charged with the performance of his obligations and is the common pledge of his creditors. |
This is the general principle that applies in respect of the performance of obligations. Any exception to that principle, inter alia an exception conferring a privilege of exemption from seizure, must be strictly and narrowly construed.
[8] In this context, four observations are apparent on the face of the provisions of article 552(3).
[9] First, the privilege of exemption from seizure set out in subsection (3) of article 552 is limited to a debtor's instruments of work. Second, the instruments must be needed for the exercise of the professional activity. As was also the case in the earlier version of article 552, the legislature has clearly opted for a necessity test rather than a test based on usefulness or mere convenience. This is one indication that the legislature intended to preserve the very narrow nature of this exception in order to protect the rights of a creditor, while ensuring that execution measures did not result in the debtor becoming indigent.
[10] Third, by referring to the exercise of a professional activity, the legislature intended to deny the benefit of the privilege for instruments that are needed for the exercise of a commercial activity. Otherwise, the language in the provision would have referred to the exercise of a commercial rather than a professional activity, if the legislature had intended to give the benefit of the privilege to businesspersons, or to both sorts of activity, if the intention had been to extend the protection to the two categories of activity.1
[11] Fourth, the new version of subsection (3) of article 552, which was enacted after the new Civil Code came into force, refers to the "personal" exercise of a professional activity. The same exception, formulated in virtually the same terms, is also found in article 2648 of the new Civil Code:
| Art. 2648. The movable property of the debtor which furnishes his main residence, used by and necessary for the life of the household, may be exempted from seizure to the extent fixed by the Code of Civil Procedure, except where such movables are seized for sums owed on the price. |
| The same rule applies to instruments of work needed for the personal exercise of a professional activity, except where such movables are seized by a creditor holding a hypothec thereon. |
[My emphasis]
[12] To better understand the reason why the word "personal" was inserted in article 2648 of the Civil Code and article 552 of the Code of Civil Procedure, it should be recalled that article 1525 of the new Civil Code provides a very all-encompassing definition of the concept of the "carrying on of an enterprise", which includes providing a service in an organized economic activity, whether commercial or not:
| Art. 1525. Solidarity between debtors is not presumed; it exists only where it is expressly stipulated by the parties or imposed by law. |
| Solidarity between debtors is presumed, however, where an obligation is contracted for the service or carrying on of an enterprise. |
| The carrying on by one or more persons of an organized economic activity, whether or not it is commercial in nature, consisting of producing, administering or alienating property, or providing a service, constitutes the carrying on of an enterprise. [My emphasis] |
[13] Accordingly, under that definition, the exercise of the profession of advocate may constitute the carrying on of an enterprise. However, the addition of the word "personal" both in the exception in article 2648 of the new Civil Code and in the exception in article 552 of the Code of Civil Procedure is intended to limit the property that is exempt from seizure in those cases to the property an individual needs to personally exercise his or her professional activity, apart from any concept of the carrying on of an enterprise. This is in fact the justification given by the Minister of Justice in his explanatory comments in respect of article 2648, which was introduced in the new Civil Code:
| [TRANSLATION] Comments |
| This article, which reiterates the substance of article 552 C.C.P., sets out a public order exception to the principle that the property of a debtor is the common pledge of his creditors, by allowing property that may otherwise be seized, but that is essential in order for the debtor to meet his needs, to be exempted from seizure. The importance of this exception in terms of the principles laid down in the preceding articles made it necessary to set it out in the new Civil Code; the limitations on a debtor's power to withdraw certain property from seizure are still defined in the Code of Civil Procedure. |
...
| The second paragraph allows the instruments of work needed for the personal exercise of a professional activity, that is, the instruments that enable a person to exercise his profession apart from any concept of carrying the on of an enterprise, to be exempted from seizure. Thus a person may withdraw from seizure his books, tools or other items that enable him to practise his art, trade or profession, but not his office furnishings or the equipment or machines that transform the exercise of the activity into the carrying on of an enterprise. These instruments of work may not, however, be withdrawn from seizure by a creditor holding a hypothec thereon.2 |
[My emphasis]
[14] This restriction on the privilege of exemption from seizure that applies to the property of a debtor is understandable when we consider the presumed solidarity of debtors in respect of an obligation contracted for the service or carrying on of an enterprise. The exclusion of property that is used in the carrying on of an enterprise is therefore merely the logical and necessary corollary of the principle of solidarity in order to allow, in respect of all the debtors, for execution against property that is involved in the carrying on of an enterprise, but with the exception of property that is needed by a debtor for the personal exercise of his or her profession. That is why the reference in the Minister's comments to the fact that office furnishings are seizable property extends, in my view, to all other furnishings that are not instruments of work needed for the personal exercise of the professional activity and that, as the comments say, transform the personal exercise of the activity into the carrying on of an enterprise.
[15] Article 2644 of the Civil Code further establishes a presumption that a debtor's property may be seized. It is then up to the debtor to rebut that presumption and to establish the existence of each of the elements of the exception, on a balance of probabilities: that he or she exercises a professional activity, that the property seized which the debtor is seeking to have released from seizure consists of instruments of work under article 552(3) of the Code of Civil Procedure, that those instruments of work are needed by the debtor for the exercise of his or her professional activity, and that the exercise of that activity is personal in that it relates to the debtor and does not constitute the carrying on of an enterprise.
[16] A decision that property is not subject to seizure is not one that can be made in a vacuum or in the abstract. On the contrary, the tests for applying the exception themselves refer to variable concepts that become crystallized and specific in relation to the nature and intensity of the professional activity exercised, the nature, quality and quantity of the instruments of work in issue and the circumstances that characterize the debtor's activity in terms of time, place, manner, cause and condition. In my opinion, the court must also ensure, generally, that the debtor's claim as to the nature, quantity and quality of the instruments of work is reasonable and that the quantity of instruments claimed is reasonably proportionate to the needs engendered by the exercise of the professional activity. For example, it may be unreasonable to claim that three valuable antique work tables are exempt from seizure when one other table that is part of the property seized could be sufficient to meet the debtor's needs.
[17] The determination as to whether property may be seized must therefore be made having regard to all these elements, based on the evidence submitted by the debtor, who, I would repeat, has the burden of establishing that he or she is entitled to the benefit of the privilege against seizure which he or she is citing.
[18] Thus, where that is proved, article 2648 of the new Civil Code and article 552(3) of the Code of Civil Procedure, in my view, allow a desk, chair and filing cabinets which are needed by the advocate for the personal exercise of his profession to be withdrawn from the common pledge of the creditors.3
[19] In my view, a computer may also fall into this category. A computer that is used in its most basic and narrow function, as a word processing machine, is to the practice of the profession today what the typewriter, with its host of drawbacks, was in another era. No practising professional would want to go back to the nightmare of typing things with carbon copies. Nonetheless, if the machine was only used in this role, we would probably have to conclude that it is a very useful and desirable instrument of work, but not necessary an essential one.
[20] However, the computer is used for many other purposes that are necessary to the personal exercise of the profession of law.
[21] First, it serves as a virtual library by making it possible to consult computerized data banks or diskettes on which information is stored that was formerly accessible only on paper support. Young lawyers who are starting out in the practice of law often use the computer as a legal research tool when they do not have a traditional library. For example, recent amendments to the Quebec Code of Penal Procedure have introduced the electronic filing of offences, evidence in electronic form and judgment in electronic form, thereby making it necessary for the judge and the parties to have access to a computer.4
[22] It is also a well-known fact that computers have become a tool for managing a lawyer's professional activity, and as well an instrument for electronic archive storage. It is not uncommon for accounting information, client files containing personal information, agendas, billing material, dockets, model contracts or settlements and models for commonly used pleadings to be stored there, and this makes it exempt from seizure under section 130 of the Act respecting the Barreau.
[23] Given that the evidence has established that a computer serves as a research tool or management tool, or that it is used to consult computerized files, that machine must, in my view, be withdrawn from a seizure provided, of course, that the other requirements of article 552(3) have been met.
[24] That being said, however the situation is different for a fax, which in my view falls into the category of instruments of work that are useful but not needed for the personal exercise of the profession of law. In fact, in this instance, the appellant admitted to the trial judge that he could work without the fax.5 That machine, which is used to facilitate written communication between lawyers and between lawyer and client, is also often used as a way of serving pleadings. Doubtless, for a practising lawyer, this machine meets a practical, concrete need, and is of invaluable assistance, but the service it performs may be obtained by other existing means of communication or service. A lawyer's desire to give this instrument of communication preferential status in relation to others in no way makes it a tool that is needed for the exercise of his or her profession.
(b) Evidence
[25] The evidence before the judge of the Trial Division consisted of the testimony of the appellant, who was cross-examined by counsel for the respondent.
[26] The appellant's evidence with respect to the computer was not contradicted. The machine is used for accounting, operational needs and management. It contains client files, nominative and personal information, legal information and model pleadings.6 I am satisfied that it is an instrument of work that is needed by the appellant, and is also not subject to seizure, in the instant case, under section 130 of the Act respecting the Barreau.
[27] The Trial Division judge concluded that the appellant had access to Mr. Tremblay's office for the purpose of exercising his profession, and could use the support services of that law firm. He also said, quite rightly, that he was surprised that the appellant did not know whether he was listed as a lawyer in the telephone directory and how his name appeared in the lawyer's phone book, particularly since, for the year in issue, it appears from the entry in the phone book that he was practising within Mr. Tremblay's firm:
| BELLIARD, Louis (82) (418) 687-3733 |
922 chemin St-Louis fax: 682-3072
SILLERY
G1S 1C6
(MARTIN TREMBLAY & ASSOCIÉS)
[8.0] 7
[28] Moreover, the certificate of seizure relating to the appellant's property states that he practises law at 922 chemin St-Louis, Sillery, the address of the law firm of Martin Tremblay, which the appellant did not dispute.8
[29] The finding of fact made by the Trial Division judge was amply supported by the evidence9 and, in my view, he was right to deduce that the office equipment seized, i.e. the wooden desk with drawers, the chair on castors and the fax, were not instruments of work needed by the appellant for the personal exercise of his profession. No evidence of the need for the wooden L-shaped computer table was presented to the Court, and accordingly it is subject to seizure.
Seizure of the motor vehicle
[30] The evidence adduced before the trial judge, and accepted by him, established that the appellant travels 1,000 kilometres per week, on average, to represent clients in various cities and judicial districts. According to the appellant, this kind of travel may be explained by the fact that he practises criminal law, which requires that he travel frequently at all hours, to detention centres, penitentiaries and the various courthouses where his clients are to appear after they are arrested or charged. He is naturally contending that the motor vehicle is an instrument of work needed by him for the personal exercise of his profession, and is accordingly exempt from seizure.
[31] The respondent took the opposite position, which he based on the recent decisions of the Quebec courts; we shall examine these.
[32] There is no doubt that a motor vehicle is an instrument of work needed by a debtor for the personal exercise of his profession where he earns his income through the use of his motor vehicle. Thus in Sous-ministre du revenu du Québec v. Morissette,10 the motor vehicle belonging to a taxi driver was properly declared to be exempt from seizure since it was his instrument of work and source of income.
[33] However, the registrar of the Superior Court for bankruptcy refused to declare a motor vehicle to be exempt from seizure where it belonged to a debtor who, as a doctor in general practice over a large geographic area, had to make house calls and deliver samples to laboratories and hospitals. She concluded that a motor vehicle may be seized even where, although almost essential to a debtor, it is used not to produce income but rather to facilitate the receipt of that income.11
[34] A few months earlier, the registrar of the Superior Court in the District of Rimouski for bankruptcy had also refused to recognize a privilege of exemption from seizure for a gynecologist who stated he needed his motor vehicle for emergency situations that arose in respect of certain deliveries or surgical operations. In addition, the evidence established that the doctor had to provide services on a regular basis in other hospitals in the region to fill in when specialists there were away. He concluded that the debtor's vehicle served merely to facilitate the exercise of his practice and that it was not needed by him to earn his living.12
[35] In Raymond Bissonnette Inc. v. Martel,13 the Civil Division of the Court of Quebec dismissed an application by a construction contractor who objected to the seizure of his truck. According to the Court, the applicant exercised an economic activity in an organized manner and the truck was one element of the organization of the economic activity. Accordingly, it was used in carrying on the enterprise and could therefore not be considered to be needed for the personal exercise of his profession.
[36] Based on similar reasoning, the registrar of the Superior Court in the District of Hull in bankruptcy cases refused to release from seizure a motor vehicle belonging to an insurance broker who had been self-employed for 25 years. The registrar saw this as carrying on an enterprise, that is, the exercise of an organized economic activity that is commercial in nature.14
[37] Lastly, in Sous-ministre du revenu du Québec v. Bergeron,15 the Superior Court held the seizure of a mobile canteen owned by a businessman to be valid on the ground that the exception in article 552(3) did not apply to the exercise of a commercial activity.
[38] On analyzing these decisions we see a strict interpretation and application of the exception set out in article 552(3). The vehicle seized was declared subject to seizure sometimes because it was not an instrument of work, sometimes because it was not needed for the personal exercise of the profession, sometimes because it was used in carrying on an enterprise and sometimes because it was used in the exercise of an activity of a commercial nature that did not fall within the scope of article 552(3).
[39] There is no doubt that the appellant in the instant case is engaged in the personal exercise of a professional activity. The question that must then be answered in relation to the seizure of his motor vehicle has two parts: is it an instrument of work, and if so is that instrument of work needed by him in the personal exercise of his profession? A negative answer to either of these two questions would mean that the privilege against seizure conferred by article 552(3) would be lost.
[40] The appellant contends that the trial judge erred in law in his analysis of this question when he concluded that the property seized, including the motor vehicle, was not [translation] "property specially intended for use by a professional in the exercise of his profession, such as a lawyer's or notary's law books, a doctor's medical kit or a tradesman's tools".16
[41] The appellant contends that the question of whether an instrument of work is exempt from seizure must be determined not objectively, based on abstract rules or typical needs of the profession in general, but rather subjectively, based on the specific needs of the judgment debtor, since the statutory provision refers to an instrument of work needed by a debtor for the personal exercise of his professional activity. According to that interpretation, a motor vehicle which for one lawyer might be used only as a means of transportation from home to the work place will, for another, be an instrument of work needed in the exercise of his profession. Each case will therefore turn on its facts, and must be assessed based on the needs of a debtor and the characteristics of the profession exercised by that debtor.
[42] As I had the opportunity to explain earlier, the insertion of the word "personal" was intended to limit the scope of the exemption from seizure to property that is not used in carrying on an enterprise. That being said, the appellant is partially correct in saying that article 552(3) refers to the debtor's professional activity and that the definition of what constitutes an instrument of work, and of whether it is necessary, must be assessed subjectively, that is, based on the needs of the debtor. However, as I mentioned earlier, whether the tests that apply to the exception have been met must also be determined by reference to a set of circumstances and on the basis of the reasonableness of the debtor's claim.
[43] In short, I am of the view that the question must be determined having regard to the circumstances and on the basis of the debtor's needs, and not on the basis of the needs of a typical lawyer practising the profession of law, if indeed we could agree as to the characteristics and needs of the typical lawyer.
[44] The fact that the appellant devotes 70% of his time to criminal practice, on which he bases his objection to the seizure of the motor vehicle, essentially requires that he represent his client in the courts at various stages of the proceedings, that he present legal and factual argument, that he make submissions as to his client's guilt or innocence and, where necessary, that he make sentencing submissions, that he appeal the decision and the sentence and that he provide the argument that is needed if his appeal is to succeed. In my view, none of these duties, which form the essence of the appellant's professional activities, requires an instrument of work in the nature of a motor vehicle in order to be carried on or executed.
[45] However, the appellant submits that the necessity arises from the need to travel in order to meet with clients and represent them in the places where their trials take place. With respect, I believe that it is more accurate in this case to talk about convenience to describe the method by which the appellant argues he needs to meet his travel needs. It is indeed useful, more functional, more practical and less annoying to have access to a personal motor vehicle in those circumstances for travelling, but to say that the motor vehicle is an instrument of work needed for the exercise of those functions is to confuse something that is utilitarian with something that is essential. In support of this, I would note that a lawyer who loses his driver's licence for a year does not stop practising and does not lose his income, even though he does suffer major inconvenience as a result.
[46] I do not believe that the test of necessity adopted by the legislature in article 552(3) implies that a debtor may and is entitled to travel in his own motor vehicle, to the detriment of his creditors, where there are other methods, such as renting and using public transit and taxis, of reaching the same result without prejudicing creditors.
[47] In my view, the trial judge committed no error in finding that the appellant's motor vehicle was not property exempt from seizure under the provisions of article 552(3) of the Code of Civil Procedure.
[48] For these reasons, I would dismiss the appeal, except with respect to the computer, which must be withdrawn from the seizure and returned to the appellant. Given the limited success of the appeal, I would not award costs.
"Gilles Létourneau"
J.A.
"I concur
Pierre Denault J.A."
"I concur
A. Desjardins J.A."
Certified true translation
C. Delon, LL.L.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE NO: A-504-94
APPEAL FROM A JUDGMENT OF THE TRIAL DIVISION DATED SEPTEMBER 21, 1994. FILE NO.: GST-737-93
| STYLE OF CAUSE: Louis Belliard v. Deputy Minister of Revenue of Quebec et al. |
PLACE OF HEARING: Québec, Quebec
DATE OF HEARING: December 8, 1997
REASONS FOR JUDGMENT OF THE COURT BY: Létourneau J.A.
CONCURRED IN BY: Denault J.A.
Desjardins J.A.
DATED: December 23, 1997
APPEARANCES:
Louis Belliard for the appellant
François Marcoux for the respondent
SOLICITORS OF RECORD:
Louis Belliard
Montréal, Quebec for the appellant
Veillette & Associés
Sainte-Foy, Quebec for the respondent
__________________1 See Québec (Sous-ministre du Revenu) v. Bergeron, [1994] R.J.Q. 2552 in which Banford J. of the Superior Court concluded that article 552, subsection (3), does not cover the activities of a businessperson per se. See also Charles Belleau, Précis de procédure civile du Québec, Éd. Yvon Blais, 1993, p. 103.
2 Commentaires du ministre de la Justice, vol. II, Les Publications du Québec, 1993, p. 1657.
3 See Batrawi v. Imprimerie A.D.V. Inc., [1983] R.D.J. 477, in which the Quebec Court of Appeal held similar property to be needed in order to maintain a suitable law office.
4 An act to amend the Code of Penal Procedure and other legislative provisions, S.Q. 1995, c. 51, ss. 6, 11, 18, 29 and 46.
5 Transcript p. 14.
6 Transcript pp. 6, 12, 13 and 24.
7 52e Annuaire téléphonique judiciaire du Québec, August 1994 edition, Wilson et Lafleur Ltée, Montréal, p. 37.
8 Transcript pp. 33-34.
9 Transcript pp. 14, 17-18 and 27-29.
10 J.E. 95-1925 (Superior Ct.).
11 Languedoc et Fortin et Associés Syndics et Cie d'immeuble Bona Ltée, S.C. Montréal No. 500-11-001069-950, July 23, 1996.
12 Blair et Mallette, Benoit et Cie Ltée, S.C. Rimouski, no. 100-11-000178-967, May 1, 1996.
13 J.E. 96-1331. See also Gagnon v. St-Pierre, [1995] R.J.Q. 1729 (S.C.), in which the Superior Court upheld the seizure of a motor vehicle belonging to a retail and wholesale dealer, for the same reasons. In the Court's view, the debtor's source of income was sales and the proceeds of his sales, and not the use of his motor vehicle.
14 Landry et Ginsberg, Gingras et Ass. Inc., S.C. Hull, No. 550-11-000625-948, December 19, 1994.
15 [1994] R.J.Q. 2552.
16 See Appeal Case, at p. 20.