http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/144649/index.do
Copeland v. The Queen (May 20, 2016 – 2016 TCC 124, Pizzitelli J.).
Précis: Mr. Copeland received cheques totally $111,000 from a related corporation, Tradepro, at a time when it was a tax debtor. As a result he was assessed under subsection 160(1) for the amount of tax debt of Tradepro at the date of the transfer. Mr. Copeland testified that the cheques were partial repayment of a loan made by his late father (who also used the same middle name, Blaine) to a predecessor corporation of Tradepro and that he held the funds as the agent of his father. Unfortunately for Mr. Copeland the Court did not accept his evidence or that of his bookkeeper and the appeal was dismissed with costs.
Decision: Mr. Copeland’s evidence was not found to be credible:
[31] While I appreciate that documents between related parties, particularly between parents and their children, are often simplistic due to the relationship and the trust that exists between them, it is a fundamental principle of contract law that an agreement between two parties must be between the two parties. The Appellant is the only party that signed the agreement and so he cannot bind the father to advance the sum of $186,000 by this document.
[32] While I appreciate the evidence of the Appellant is that the building was in fact built, which I accept since there is evidence it was in fact sold, and that it is the proceeds of such sale that are the source of funds for the transfers in issue in this matter, this document is not credible evidence that the Loan was advanced.
[33] Moreover, since the evidence of the Appellant is that his attorney, one M. J. advised him he should have some documents to evidence the Loan, it seems peculiar to me that the lawyer would have prepared the guarantee and not the loan agreement as well in more detailed form since it is the basis for the purported Loan and would normally set out its terms. Moreover, the guarantee signed by the Appellant in favour of his father is inconsistent with the loan agreement in that it is dated the same day but only refers to an amount of $180,000. The Appellant’s explanation, that his father changed his mind and offered to advance $186,000 at the last minute, for the difference in amounts between the documents is not very convincing given that the documents are dated the same day. No explanation was given as to why the reference to $180,000 in the guarantee could not have been manually amended. After all, the date of the loan agreement was manually inserted. Moreover, the Appellant is also shown as a borrower on the guarantee together with 549883, another inconsistency between the documents. I note as well the guarantee is signed but not witnessed as contemplated by its penultimate wording nor is a seal attached.
The same was true of the evidence of his bookkeeper (“TT”):
[43] Frankly, I am not inclined to accept the testimony of TT as credible or reliable on the matter for a few reasons.
[44] Firstly, she testified the accountant would have given her adjusting entries after completing each years financial statements and that the accountant would have calculated interest on the promissory note, so she would have been aware of the interest particulars for the years she prepared the records. If the promissory note was shown as having a balance forward of $200,000 from the forwarding entries she received from the former accountant that she saw for the first time in 2003, then if interest was charged by adjusting entry subsequent to that, why is there reference to the same amount for the promissory note in the 2005 year end?
[45] Secondly, she interpreted the very short and vague loan agreement identified by the Appellant as being the basis for concluding the Loan was “secured” by the property sold. There is absolutely no reference in that short loan agreement to any security or mortgage nor evidence one was taken. She either is not knowledgeable about such matters, which seems unlikely given her experience and the fact she still continues to run a bookkeeping business or she really had no first-hand knowledge of the issue, making her testimony unreliable.
[46] Thirdly, she testified that her role was limited to preparing the general ledger through the journal entries and preparing draft balance sheets and income statements and providing them to the company accountant for finalization and preparation and filing of tax returns. Clearly, she did not have final say in the final product and accordingly I am inclined to accept the statement information as filed as being more reliable. Moreover, it is simply not credible to suggest the CRA filings were an error when one considers that they represent filings over several years that do not accord with her evidence.
[47] Finally, TT only provided the general ledger for the period ending April 30, 2005 which was printed out in June of 2014 upon the request of the Appellant as indicated and no other period, even though she testified she prepared them for the 2001 year end onward until 2006. More detailed records were clearly available for the earlier years that presumably could have shed further light on the evidence that were not submitted as evidence when the Appellant clearly had the ability to do so, particularly before TT’s software program crashed afterwards as she stated.
In the result Mr. Copeland did not meet the evidentiary burden necessary to demolish the Minister’s assumptions:
[49] Having regard to the limited evidence of the Appellant, the many inconsistencies in such evidence and my concerns regarding his lack of credibility and the unreliability of both the Appellant and his bookkeeper’s evidence, I cannot find that there was a Loan made by the Appellant’s father in any amount to the transferor and hence no consideration was given for the transfer of funds to the Appellant pursuant to subsection 160(1) of the Act.
As a consequence the appeal was dismissed with costs.