http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/218768/index.do
Yu v. The Queen (November 21, 2016 – 2016 TCC 276, Boyle J.).
Précis: The taxpayer received $119,500 in 2010 in four tranches from his wife’s sister, Yan Siang Yu (who was also his former wife). Yan Siang Yu had a large tax debt arising from a net worth assessment of a marijuana grow operation at a Vancouver house on West 53rd Avenue owned by her. The taxpayer argued that the money was placed by his mother-in-law, Jiao Zhen Huang, with his sister-in-law, Yan Siang Yu, for the benefit of his wife and their son when his mother-in-law sold her house on West 46th Avenue in Vancouver. The Court did not accept this explanation and concluded that the taxpayer had simply not raised credible evidence to attack the assessment. The appeal was dismissed with costs to the Crown.
Decision: This decision was rendered from the bench. It ultimately boiled down to: Nice try but no cigar:
[23] In law a valid trust must meet what are called the three certainties: certainty of intention to create a trust, certainty of the subject matter of the trust, and certainty of the beneficiaries or object of the trust. The Appellant faces a number of problems, given the evidence before the Court.
1. The terms of the transfer in trust to Yan Siang Yu by her mother remain questionable. There is nothing in writing. The amount is uncertain. Was the total $200,000 or $285,000? Was $100,000, neither more nor less, for her second daughter? The mother said it was “some” of the money. The transferor said she sent $110,000 from her mother’s money. Was the balance held for the mother‑in‑law or for Yan Siang Yu? And was it to be invested for the mother‑in‑law’s living expenses, or her oldest daughter’s?
No statement of adjustment and no HSBC account records of the mother or older daughter attested to this transfer. The oldest daughter said she received the amount to act on her mother’s instructions in helping with her finances. This is inconsistent with her mother not even being aware the money was first sent to the Appellant to transfer to his wife.
2. The receipt of the money by the Appellant’s wife, which was said to have always been beneficially owned by her, remains unclear. The wife was certain she only ever received $100,000. The Appellant says he sent her the $100,000 and also the other $19,500, though perhaps combined with other amounts. The transferor says that $9,500 was her own money, not from her mother’s money at all. Again, no banking documents whatsoever with respect to the Appellant’s transfers to his wife were put in evidence.
3. The transferor’s handling of her mother’s money appears inconsistent with a trust. The Appellant testified that the transferor would transfer money when she had the ability, not when her sister asked for it, or when it was needed for his son’s medical expenses.
4. The testimony regarding the use of funds by the Appellant and his wife leaves me wondering if I have been told the whole story. The Appellant and the transferor said the money was used for the son’s medical and hospital bills. The Appellant’s wife said it was also used for their living expenses. The Appellant says his son was hospitalized for six or seven years, once he was four. The Appellant’s wife says he stayed in the hospital for 10 years. Her mother said he remained in the hospital at birth. I am surprised that parents would not be able to clearly remember if their son spent his first four years of life in a hospital or not.
5. No reason was given for the money being first transferred to the Appellant to transfer to the Bank of China for his wife. His mother‑in‑law was not aware this step was happening.
6. No reason was given for the delayed and broken‑up transfers of the money from her mother to the Appellant, other than that it was when the transferor had the ability to transfer some money.
7. The transferor could hardly have behaved less like a trustee. She was not certain of the amount in trust. She did not clearly know if it was $100,000 or $110,000. She did not maintain the amounts separate and available for distribution to the beneficiary. She made no attempt to ensure the money was used for its stated purpose, and it is unclear that it in fact was.
8. No explanation was given for the absence of documents that must have existed with respect to:
(a) the sale of one house and the purchase of another, which could be expected to ascertain what amount the Appellant’s mother in fact had to transfer;
(b) the mother‑in‑law’s HSBC statement, which could confirm the amount she transferred to her oldest daughter;
(c) the transferor’s HSBC or other banking documents that would confirm what amount her mother gave her, and whether she set the $100,000 or any other amount in trust for her sister aside, and whether she used that amount to make any of these four transfers;
(d) the Appellant’s HSBC or other banking documents which would confirm that all four transfers came from his sister‑in‑law, and from which account;
(e) the Appellant’s RBC account documents which could confirm that he transferred all or any of these four amounts on to his wife in China at the Bank of China.
Instead, the HSBC page in evidence shows he received the $100,000 in his account by transfer from another HSBC account and that he promptly used that money to purchase a $100,000 bank draft.
The Bank of China account documents of his wife’s could have been able to clarify whether she received $100,000 or $119,500, or some other amount, and corroborate whether she received anything at all. It could also tie in the timing of the transfers received by the Appellant from his sister‑in‑law to the Appellant’s transfers to his wife.
Instead, I have no disinterested corroborating evidence on these points in circumstances where the Appellant and his wife testified materially differently on the amounts transferred to her.
I am left with only the testimony of the Appellant, his wife, his sister‑in‑law and his mother‑in‑law. None of these are disinterested parties. Their testimony is not consistent on key points.
I have no idea why the Appellant and his counsel did not provide any of this to me. It was clear that a number of pages comprising some of it was in the courtroom and available to Appellant and his counsel.
[24] In these circumstances, I am simply unable to conclude on a balance of probabilities that the Appellant’s mother‑in‑law set $100,000 or $119,500 or any other amount aside in trust for her second daughter. There is simply insufficient credible and consistent testimony to allow me to conclude that is what probably happened, and what I have is uncorroborated by virtually any written evidence.
[25] I should add that, in response to counsel’s argument, even if I am satisfied that $100,000 found its way to the Appellant’s wife to pay their son’s medical bills, that does not prove on a balance of probabilities that it came from a trust, and a legal interest in the transferred amount therefore had no value. It could just as easily reflect a family choice of how to spend its available money.
[26] I should also add that the position of the Appellant’s counsel, given the noise in the numbers, that I could find a valid trust of at least $100,000 appears to work very strongly against the trust requirement of certainty of amount.
[27] Since the Appellant does not dispute that the four bank transfers totalling $119,500 were transferred to him, that the transferor was his sister‑in‑law, and that she had a tax liability greater than $119,500, I must dismiss his appeal.
The appeal was accordingly dismissed, with costs to the Crown.