http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/144647/index.do
Klundert v. The Queen (May 26, 2016 – 2016 TCC 130, Smith J.).
Précis: This may be one of the last chapters of the Klundert litigation about a tax protesting doctor. In this case roughly $1,000,000 had been transferred at Dr. Klundert’s direction by OHIP to his wife’s account during a period when he was a tax debtor. CRA assessed Mrs. Klundert under subsection 160(1) in respect of the transfer. The Tax Court rejected the appeal with the exception of a small ($3,614.51) adjustment. Somewhat unusually, there was no order as to costs.
Decision: The decision boiled down to a very few points:
[30] In the present appeal, the Appellant admitted that she opened her savings account 698 at the request of her spouse. She also admitted that, at the time her spouse requested OHIP to deposit his payments into her account, she knew that her spouse was reporting to the CRA that the Act was unconstitutional and he didn’t have to pay taxes. It is my view that the Appellant also knew that the CRA would attempt to collect the taxes which her spouse owed. The following exchange took place during cross-examination:
Q Yes, did you and your husband discuss whether or not the idea behind having the money go into an account only in your name was the -- it would be safe guarded from a creditor of Jack Klundert?
A I don’t know.
Q You don't know or you don't remember?
A I don't remember.
Q Did your husband tell you that he was worried that Canada Revenue Agency maybe trying to get after his money because of what he was doing and the way he was reporting his taxes?
A Possibly.
[31] The Appellant’s responses were evasive. When she was asked if she made the arrangements to have her savings account linked with the chequing account she jointly held with her spouse, she did not answer the question. However, I have concluded that she authorized the linking of the two accounts. She was the only signatory on the savings account and the only one with the capacity to instruct the bank to link that account with the chequing account.
[32] As in Livingston, the Appellant gave her spouse, the tax debtor, access to the funds deposited in her savings account. This did not alter the fact that the funds had been transferred to her.
[33] It is my view that, each time the OHIP deposited Dr. Klundert’s payments into the Appellant’s savings account, there was a transfer of those funds to the Appellant and section 160 of the Act was engaged. That Dr. Klundert had access to the funds through his chequing account was not sufficient to reverse the triggering of section 160: Livingston (supra) at paragraph 24. I have concluded that Dr. Klundert transferred the amount of $959,403.03 to the Appellant during the relevant period.
[34] The Appellant also argued that she did not have beneficial interest in the funds deposited into her savings account; that she did not derive a benefit from the funds; and, that she merely held them in trust for her spouse and paid them out according to his instructions.
[35] I disagree with the Appellant’s arguments. First, the Appellant held both legal and beneficial title to the funds deposited in her account. She could have done with them as she chose once they were deposited into her account. Second, it is not necessary that the Appellant receive a benefit in order for section 160 to apply: Livingston (supra) at paragraph 24. Third, there was no documentary evidence to support the Appellant’s testimony that she held the funds in trust for her spouse. Fourth, she did not have a legally enforceable promise to pay out monies only on her spouse’s instructions. Any obligation she had to her spouse was only a moral one: Raphael (supra) at paragraph 10.
[36] The Appellant has argued, in the alternative, that she gave consideration for the funds deposited into her savings account. She stated that her account was debited $8,000 each month for her spouse’s business expenses and $2,000 each month for household expenses. The consideration she gave consisted of amounts she paid to keep the household running; amounts she paid for her spouse’s business expenses; and, services she performed for her spouse’s business.
…
[44] I have not been convinced that any services the Appellant performed for the optometry business were consideration for the funds deposited into her savings account.
As a result the Tax Court rejected the appeal with the exception of a small ($3,614.51) adjustment. Somewhat unusually, there was no order as to costs.