INCOME TAX |
Practice |
Canada v. Transport H. Cordeau Inc.
A-64-01
2002 FCA 228, Létourneau J.A.
31/5/02
17 pp.
Court must answer following questions: whether Trial Division has jurisdiction, in course of garnishment proceedings, to determine whether assignment of debt by respondent garnishee, Transport H. Cordeau Inc., made allegedly in fraud of rights of creditors, may be set up against appellant; to determine whether releases dated February 12 and March 25, 1997, resulting from assignment of debt and secret contract between respondent garnishee and judgment debtor, Gilbert Gadbois, may be set up against appellant; to order lifting of corporate veil between judgment debtor and his company, 2951-7539 Québec Inc.; to rule on appeal from Prothonotary's order making garnishment against respondent garnishee final, ordering latter to pay $100,000 with interest and costs to judgment creditor, Crown--In accordance with Income Tax Act, s. 223(2), (3), Crown registered certificate in Federal Court certifying amount payable by judgment debtor, Gilbert Gadbois, specifically $1,285,674.06, plus interest compounded daily thereon from February 14, 1997--In 1995, Transport H. Cordeau borrowed money from Gadbois' company, 2951-7539 Québec Inc. (Cie Québec Inc.)--Deed of movable hypothec securing loan indicated sum of $325,000, although pursuant to oral agreement, loan to be repaid with payment of $225,000--Revenue Canada sued Gadbois to recover tax debt--To avoid new seizure by Revenue Canada, taxpayer assigned $325,000 debt in November 1996 to J.L. Michon Transport Inc. for sum of $225,000, received payment--Intervening in assignment of debt, Transport H. Cordeau nevertheless confirmed hypothecary balance of $325,000, no interest paid since loan made--J.L. Michon Transport Inc. also stated amount owing $325,000, and Michon had to pay to Cie Québec Inc. any amount received from Transport H. Cordeau Inc. in excess of $225,000 plus interest Cie Québec Inc. entitled to--In January 1997, appellant undertook garnishment proceedings by means of requirement to pay against Transport H. Cordeau for balance of $100,000--In reply to garnishment, Transport H. Cordeau set up secret oral agreement with Gadbois and Cie Québec Inc. relating to amount due being $225,000 not $325,000--In October 1999, Court of Appeal affirming counter-letter could not be set up against Crown--Following Court of Appeal's decision, Prothonotary making final order of garnishment in March 2000--Trial Division Judge hearing appeal of decision holding, proprio motu, only provincial courts competent to try matter and declined jurisdiction-- Appeal allowed; questions must be answered in affirmative-- Must be noted, at no time did garnishee raise absence of Court's jurisdiction, even availed itself of Court's jurisdiction to ask secret oral agreement, assignment of debt, releases be set up against judgment creditor--Court has power to ensure its judgments enforced, may be required to dispose incidentally of issues under provincial law raised against enforcement: Bois de Construction du Nord (1971) Ltée v. Charles Guilbault Inc., [1986] 2 C.T.C. 227 (F.C.A.)-- Wellgate International Ltd. v. M.N.R., [2000] 3 C.T.C. 257 (F.C.T.D.) not applicable herein, appellant not seeking in any way to set aside transactions between parties--Civil Code of Lower Canada, art. 317, 1631 not challenging validity of transactions, not going beyond recovery of debt in situation involving execution of judgment made by appropriate court --Lastly, summary procedure neither unfair nor inappropriate in this case, recourse may always be had to Federal Court Rules, 1998, rr. 371, 453 to do justice between parties-- Appeal should therefore be allowed and order set aside; should be declared Prothonotary had jurisdiction to make final order of garnishment ordering Transport H. Cordeau to pay Crown sum of $100,000; Trial Division has jurisdiction to dispose of appeal filed by Transport H. Cordeau--Federal Court Rules, 1998, SOR/98-106, rr. 371, 453--Civil Code of Lower Canada, art. 317, 1631--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 223(2), (3) (as am. by S.C. 1994, c. 7, Sch. VIII, s. 129).