Date: 19991001
Docket: ITA-2508-98
BETWEEN:
IN RE THE INCOME TAX ACT
and
IN RE ONE OR MORE ASSESSMENTS
BY THE MINISTER OF NATIONAL REVENUE
PURSUANT TO ONE OR MORE OF THE FOLLOWING STATUTES:
THE INCOME TAX ACT, THE CANADA PENSION PLAN AND THE
EMPLOYMENT INSURANCE ACT,
Plaintiff,
BETWEEN:
9003-0172 QUÉBEC INC.,
Defendant,
AND
9067-1819 QUÉBEC INC.,
Objector.
REASONS FOR ORDER AND ORDER
BLAIS J.
[1] This is a motion by the company 9067-1819 Québec Inc., the objector, seeking cancellation of the seizure carried out on December 5, 1998 on the following property:
| - 1 Rodech trailer, closed (chips), lic. RM 87170, serial No. 2M5341555G1012699 and accessories; |
| - 1 black mobiliser trailer, lic. RM 87169, serial No. soldered on chassis DXK734512. |
[2] The objector 9067-1819 Québec Inc. claimed that it was entitled to object to the distraint on the property described in the conclusions herein since it is the sole owner of the said property.
| [3] The objector filed two detailed affidavits by Gilles Castonguay and Yolande Cyr. |
[4] Counsel for the objector first maintained that several paragraphs in the affidavit of André Deschênes, an employee of the Department of National Revenue, are hearsay, in particular paragraphs 23, 24, 26 and 27 of his affidavit.
[5] Counsel for the objector further mentioned that paragraph 18 should be rejected on the ground that it contains the word "jointly", which in the circumstances is incorrect.
[6] Essentially, the objector argued that the objecting company 9067-1819 Québec Inc. separated from the defendant 9003-0172 Québec Inc. and that the other companies owned by Gilles Castonguay or Yolande Cyr were organized in this way in corporate terms to meet the requirements of the Quebec Transport Commission, which divides the province into regions for purposes of granting bulk transportation licences, and the companies must have their head offices in the region for which they require a licence.
[7] The objector accordingly objected to the corporate veil being lifted in the circumstances and maintained that each company operates differently from the others and should be treated as a separate entity.
[8] The plaintiff argued that André Deschênes" affidavit is entirely admissible in accordance with the provisions of the Federal Court Rules, in particular Rule 81, which authorizes hearsay in the filing of an affidavit.
[9] Counsel for the plaintiff maintained that it is clear from reading Mr. Deschênes" affidavit that all the companies alleged, and in particular 9067-1819 Québec Inc. and 9003-0172 Québec Inc., belong to Gilles Castonguay or to Yolande Cyr, his spouse, or to other companies such as Gestion Vincycas Inc., which is a management company wholly owned by Yolande Cyr.
[10] The plaintiff argued that it is important to lift the corporate veil in such a situation.
[11] The plaintiff maintained that it appeared from the investigation by the Department of National Revenue that the judgment debtor and objector, despite their separate legal personalities, are related and participated separately and with other related artificial persons, and their directors and shareholders, in the operation of the same goods transportation business.
[12] It appeared that Yolande Cyr is the sole shareholder and director of the judgment debtor and Gilles Castonguay is the sole shareholder and director of the objector at bar.
[13] Gilles Castonguay and Yolande Cyr are de facto spouses.
[14] It appeared from the evidence filed that the two aforesaid businesses and Ms. Cyr and Mr. Castonguay together operated a goods transportation business and together received payment of money by cheque for operation of the said goods transportation businesses, according to various photocopies of the front and backs of checks filed in support.
[15] The evidence at bar clearly showed that the separate legal personalities of the artificial persons involved in the case at bar were obviously used for the purpose of deceiving creditors, and to avoid the judgment debtor having to repay money it had collected as trustee on behalf of the Department of National Revenue and had failed to reimburse.
[16] Article 317 of the Civil Code of Quebec states:
La personnalité juridique d"une personne morale ne peut être invoquée à l"encontre d"une personne de bonne foi dès lors qu"on invoque cette personnalité pour masquer la fraude, l"abus de droit ou une contravention à une règle intéressant l"ordre public.
In no case may a legal person set up juridical personality against a person in good faith if it is set up to dissemble fraud, abuse of right or contravention of a rule of public order.
[17] Although the contracts of sale were filed to illustrate the sale of the property seized from 9003-0172 Québec Inc. to Gilles Castonguay and subsequently by Gilles Castonguay to 9067-1819 Québec Inc., it did not appear that any money changed hands in these transactions and it actually appeared that the transactions were carried out only in order to avoid paying money to the plaintiff.
[18] The Court did not believe the arguments either of the objector or the defendant, represented in particular by the two detailed affidavits of Yolande Cyr and Gilles Castonguay.
[19] The Court considers that the objector cannot rely on the legal personality of an artificial person other than the defendant in order to object to the seizure and sale of the seized property.
[20] Counsel for the Department cited a judgment of Denault J. in a similar case.1 In that case the judge said:
| The incorporation of various companies by Yvon Latouche, sometimes in his own name and sometimes in that of his wife, taking care never to transfer the assets of the company he was discarding to the name of the company he was preparing to do business with, was manifestly done in order to deceive creditors, avoid the payment of debts and, as here, avoid having to reimburse money which he had collected as a trustee but had neglected to reimburse. Clearly, the Court cannot be a tool or accomplice in such machinations. |
[21] In the circumstances the applicant"s objection is an abuse of right and a very clumsy attempt to avoid its obligations to the plaintiff.
[22] For these reasons, the objection by 9067-1819 Québec Inc. is dismissed with costs.
| Pierre Blais Judge |
OTTAWA, ONTARIO
October 1, 1999
Certified true translation
Bernard Olivier, LL. B.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
| COURT No.: ITA-2508-98 |
| STYLE OF CAUSE: TAXATION v. 9003-0172 QUÉBEC INC. |
PLACE OF HEARING: QUÉBEC
| DATE OF HEARING: September 24, 1999 |
REASONS FOR ORDER BY: BLAIS J.
DATED: October 1, 1999
APPEARANCES:
| Étienne Trépanier for the judgment creditor |
| Éric Bernatchez for the objector |
SOLICITORS OF RECORD:
Étienne Trépanier for the judgment creditor
| Éric Bernatchez for the objector |
| MORRIS ROSENBERG for the defendant |
DEPUTY ATTORNEY
GENERAL OF CANADA
__________________1 Deputy Minister of Quebec and Couverture C.G.L. Inc. and Les Entreprises Yvon Latouche Inc. (GST-100-94), February 17, 1994.