Date: 19981209
Docket: ITA-6476-97
MONTRÉAL, QUEBEC, DECEMBER 9, 1998
BEFORE: RICHARD MORNEAU, PROTHONOTARY
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, |
AGAINST:
106443 CANADA LTÉE,
Judgment debtor,
AND
2722941 CANADA INC.,
Garnishee.
ORDER
THE COURT ORDERS that all amounts due or to become due by the garnishee to the judgment debtor be finally garnished, assigned and transferred to Her Majesty the Queen in right of Canada, and in particular the sum of $168,352 paid to the garnishee by the judgment debtor as advances, in order to satisfy, and up to the amount owed under, the certificate filed herein on September 10, 1997 pursuant to s. 223 of the Income Tax Act, namely the sum of $46,588.81, plus interest compounded daily prescribed in accordance with the Income Tax Act on the said amount for the period from August 8, 1997 to the date of payment, plus the costs of these garnishment proceedings, amounting to $1,168.08.
IT IS ACCORDINGLY ORDERED that the garnishee, 2722941 Canada Inc., shall forthwith pay Her Majesty the Queen in right of Canada the sum of $46,588.81, plus interest compounded daily prescribed pursuant to the Income Tax Act on the amount of $46,588.81 for the period from August 8, 1997 to the date of payment, plus the costs of these garnishment proceedings, amounting to $1,168.08.
| Richard Morneau Prothonotary |
Certified true translation
Bernard Olivier, LL. B.
Date: 19981209
Docket: ITA-6476-97
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, |
AGAINST:
106443 CANADA LTÉE,
Judgment debtor,
AND
2722941 CANADA INC.,
Garnishee.
REASONS FOR ORDER
RICHARD MORNEAU, PROTHONOTARY
[1] This is an application by the judgment creditor Her Majesty the Queen for a final order of garnishment against the garnishee, 2722941 Canada Inc.
Facts
[2] On September 10, 1997 the judgement creditor filed a certificate in the record of this Court pursuant to s. 223 of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1 (as amended - "the Act"), to have the same force and effect as a judgment of this Court.
[3] By that certificate it was certified that the judgment debtor was indebted to Her Majesty the Queen in right of Canada in the amount of $46,588.81, plus interest compounded daily pursuant to the Act on the amount of $46,588.81 for the period from August 8, 1997 to the date of payment.
[4] The amount of $46,588.81 and the interest remain due and outstanding.
[5] An interim garnishment order was made on November 10, 1997 by which it was ordered that all amounts due or to be due by the garnishee to the judgment debtor, and in particular an amount of $173,327 paid to the garnishee by the judgment debtor as advances, and any securities belonging to the judgment debtor held by the garnishee, be attached to satisfy the certificate filed in the Registry of this Court against the judgment debtor on September 10, 1997.
[6] It appeared that the amount of $173,327 fluctuated with time and it would be more accurate now to speak of an amount of $168,352.
[7] The garnishee filed a negative statement of claim in the record of this Court, dated November 28, 1997 and signed by its president Jean-Pierre Mercier, to the effect that it owed the judgment debtor nothing as the debt held by 106443 Canada Limitée against 2722941 Canada Inc. was now prescribed and 2722941 Canada Inc. had not waived the prescription.
Analysis
[8] It should be mentioned that the judgment debtor and the garnishee have Jean-Pierre Mercier as president and director.
[9] The examination of the latter following the filing of his affidavit provides further information on the factual situation as seen by him, on the basis of which he argued that the debt of 106443 Canada Limitée (hereafter also "106") is now prescribed.
[10] In December 1992, when Mr. Mercier purchased the shares of 2722941 Canada Inc. (hereafter also "272"), the accounting documents of that company indicated that the latter had a debt to 106 of $186,038.18. This debt allegedly originated between 1985 and 1987 when 106 loaned Les Entreprises Jean Mercier Ltée a sum of nearly $400,000. This loan may be regarded as a demand loan.
[11] At the time of the share purchase in 1992, however, Mr. Mercier did not really consider that 272 had a debt to 106 since for all practical purposes it was he who was the prime mover in both companies. There was thus no question in his mind that the debt would be repaid between the two corporations. It was on the basis of these facts that counsel for the garnishee asked this Court to take into account this state of mind on the part of the garnishee, in addition to what may be concluded from the financial statements of the judgment debtor and the garnishee. However, contrary to the many cases submitted by counsel for the garnishee, the accounting documents here clearly showed what the objective situation was, namely that a debt had been created in the past.
[12] It must be noted that in its financial statements for the fiscal periods ending in February of 1993 to 1997 inclusive the garnishee acknowledged owing [TRANSLATION] "advances" to the judgment debtor.
[13] In addition, the existence of this debt appeared in the financial statements of the judgment debtor for the said years.
[14] The said financial statements, submitted in support of the tax returns, were approved by Jean-Pierre Mercier, the president, in the case of both companies.
[15] I am entirely of the view taken by counsel for the judgment creditor that the signature by the president of the garnishee of the financial statements mentioning advances owed to the judgment debtor constitutes an express acknowledgment of debt which interrupts prescription.
[16] Although it was mentioned that the loan dates back to 1987 or possibly to 1985, the precise date of the loan was not established in evidence. Only the date of September 26, 1992 appears clearly in the accounting documents. That is therefore the date to be used for the purposes of prescription.
[17] Even if one were to go back to 1985 or 1987, I think the entries in the various accounting documents (see Exhibit P-1, attached to the transcript of the examination held on March 17, 1998) should be regarded as a waiver of the established prescription.
[18] What is more, it should be noted that the financial statements of the judgment debtor, attached to its tax returns for 1991 to 1997 inclusive, indicate that it was insolvent at all relevant times.
[19] Accordingly, if we are to consider the intention of 106 not to claim repayment of the debt as amounting to a cancellation of the debt, then that cancellation must be regarded as having been made gratuitously when the judgment debtor was insolvent.
[20] Under art. 1633 C.C.Q., such a cancellation of a debt is deemed to have been made with fraudulent intent, since the judgment debtor was insolvent.
[21] As this act caused prejudice to the judgment creditor, the latter is entitled to have the Court rule that the act could not be set up against it, pursuant to art. 1631 C.C.Q.
[22] For these reasons, it must be considered that the facts in evidence cannot support the garnishee"s negative declaration. A final order of garnishment must be therefore be issued.
| Richard Morneau Prothonotary |
MONTRÉAL, QUEBEC
December 9, 1998
Certified true translation
Bernard Olivier, LL. B.
Date: 19981209 Docket: ITA-6476-97 In re the Income Tax Act
AGAINST:
Garnishee,
Garnishee. REASONS FOR ORDER |
FEDERAL COURT OF CANADA
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE No: ITA-6476-97
STYLE OF CAUSE: 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, |
AGAINST:
106443 CANADA LTÉE
Judgment debtor,
AND
2722941 CANADA INC.
Garnishee.
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: November 27, 1998
REASONS FOR ORDER BY: Richard Morneau, Prothonotary
DATE OF REASONS FOR ORDER: December 9, 1998
APPEARANCES:
Dominique Gagné for Her Majesty the Queen
Daniel Kochenburger for the garnishee
SOLICITORS OF RECORD:
Morris Rosenberg for Her Majesty the Queen
Deputy Attorney General of Canada
Daniel Kochenburger for the garnishee
Montréal, Quebec