Date: 20041123
Docket: T-1289-04
Citation: 2004 FC 1630
Montréal, Quebec, November 23, 2004
Present: THE HONOURABLE JOHANNE GAUTHIER
DANS L'AFFAIRE DE LA LOI DE L'IMPÔT SUR LE REVENU
et
DANS L'AFFAIRE D'UNE COTISATION OU DES COTISATIONS
ÉTABLIES PAR LE MINISTRE DU REVENU NATIONAL
EN VERTU D'UNE OU PLUSIEURS DES LOIS SUIVANTES : LA LOI DE
L'IMPÔT SUR LE REVENU, LE RÉGIME DE PENSIONS DU CANADA
ET LA LOI SUR L'ASSURANCE-EMPLOI
CONTRE :
SADOK SAGMAN
débiteur judiciaire
AMENDED REASONS FOR ORDER AND ORDER
[1] This is a motion to review the jeopardy order issued by Harrington J. on July 15, 2004, authorizing the Minister of National Revenue (the Minister) to proceed with the collection of all or part of the amount assessed, before the expiration of the delay of 90 days in accordance with section 225.2(2) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c.1 (ITA).
[2] The main principles applicable to such a review under 225.2 (11) of the ITA including the burden of proof are well summarized in Canada (Minister of National Revenue-.M.N.R.) v. Services M.L. Marangère Inc., [1999] F.C.J. No. 1840 (QL) at paragraph 63, and in Canada v. Satellite Earth Station Technology Inc., [1989] F.C.J. No. 912 (QL).
[3] I am required to consider not only the evidence produced on this motion, but also the initial evidence produced by the Minister.
[4] I am satisfied that Mr. Sagman has met his initial burden of establishing that there are reasonable grounds to doubt that the test set out in section 225.2(2) of the ITA has been met. I do not, however, agree with Mr. Sagman that the Minister acted in bad faith or failed to disclose all of the relevant information in its ex parte application before Harrington J. In fact, I find that there is no such evidence before me.
[5] I have reviewed all of the grounds initially raised by the Minister to support his position that the recovery of the debt would be jeopardized by delaying the collection of the amounts owing pursuant to the tax assessment as well as those arising from the examination of Mr. Sagman. These can be summarized as follows:
vi) non-cooperation during the tax assessment;
vii) misrepresentation of his revenues to third parties;
viii) non-filing of his income tax reports for years 2002 and 2003;
ix) non-payment of GST;
x) the recent sales of three buildings;
xi) systemic non-payment of creditors;
xii) recent 60-day notices sent by creditors holding a mortgage on some of
Mr. Sagman's properties; and
xiii) Mr. Sagman's intention to purchase another building and give this new asset as well as existing ones in guarantee.
[6] The new evidence filed with respect to this motion brought to light very relevant information which was not known to the Minister and thus not brought to the attention of Harrington J. For example, except for a small amount on which Mr. Sagman does not agree that GST must be paid, Mr. Sagman has paid these taxes under the name of a corporation. It also appears that the money received from the recent sales has been used to pay creditors and improve Mr. Sagman's overall financial situation.
[7] In fact, having analysed in detail the evidence, most of which was discussed during the hearing with the Minister's counsel, the only thing that is clearly established is that as in Satellite Earth Station Technology, supra, Mr. Sagman is not operating "on a very business-like basis in terms of records and the meeting of formal requirements" and that he may not be truthful at all times. However, as was found in Satellite Earth Station Technology, supra, this is not enough to justify the issuance of a jeopardy order when there is no evidence that the taxpayer has taken any action to put his assets out of the reach of the creditors and there is no evidence of a lavish lifestyle or of dissemination of assets.
[8] This is especially so when one considers that Mr. Sagman has formally undertaken to give 30-day notice to the Minister prior to making any change that would affect his patrimony by way of purchases, sales, or by modification of any mortgage, so that the Minister will be in a position to take protective measures if he deems it necessary to safeguard his rights with respect to the disputed tax assessment. The Court understands this commitment to include giving notice to the Minister of any measure taken by any creditor to secure payment on his assets such as a 60-day notice.
[9] Mr. Sagman has also formally committed to administering his affairs in a conservative manner until the litigation in which he is involved with the Minister is decided by a Court of final jurisdiction. Again, the Court understands that this commitment includes maintaining proper insurance on all his assets and keeping them in a good state of repair to avoid any diminution of value.
[10] Obviously, any breach of these commitments would in my view justify the issuance of a new jeopardy order. I was advised by Mr. Sagman's counsel that the taxpayer understands this.
[11] Obviously, if Mr. Sagman does not remedy the defaults with respect to the mortgages on the DuFort, Notre-Dame and Sinclair properties, the financial institutions could repossess those buildings.
[12] Under the circumstances, I am not prepared to rescind Harrington J's order with respect to those assets until such time as the defaults have been cured. Subject to that exception, I am not satisfied that the Minister has met on a balance of probability the test set out in 225.2 (2) of the ITA.
[13] The parties have agreed that I should assess costs on a lump-sum basis.
ORDER
THIS COURT ORDERS that:
1. The motion is granted in part as explained below.
2. The order of Harrington J. is varied so that all assets with respect to which measures were taken by the Minister other than the three properties affected by the 60-day notices sent by La Caisse Desjardins de Lorimier and the Toronto-Dominion Bank shall be released within five days of the present order;
3. The order of Harrington J. shall continue to be in effect with respect to the above-noted properties until such time as the defaults have been remedied. For each property, the Minister shall release his legal hypothec within five days of receiving confirmation of such payment.
4. Once the defaults have been remedied, the order of Harrington J. shall become null and void.
5. Mr. Sagman shall be entitled to costs which are fixed at a lump sum of $2,500 all inclusive.
"Johanne Gauthier"
Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1289-04
STYLE OF CAUSE:
LOI DE L'IMPÔT SUR LE REVENU
CONTRE :
SADOK SAGMAN
débiteur judiciaire
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: November 18, 2004
AMENDED REASONS FOR ORDER AND ORDER : GAUTHIER J.
DATED: November 23, 2004
APPEARANCES:
Claude Bernard FOR HER MAJESTY THE QUEEN
Jérôme Choquette FOR SADOK SAGMAN
SOLICITORS OF RECORD:
Morris Rosenberg FOR HER MAJESTY THE QUEEN
Deputy Attorney General of Canada
Montréal, Quebec
Choquette, Beaupré, Rhéaume FOR SADOK SAGMAN
Montréal, Quebec