Fournier c. La Reine

Fournier c. La Reine Court (s) Database Tax Court of Canada Judgments Date 2004-12-01 Neutral citation 2004 TCC 786 File numbers 2003-4152(GST)I Judges and Taxing Officers Pierre Archambault Subjects Part IX of the Excise Tax Act (GST) Decision Content Docket: 2003-4152(GST)I BETWEEN: DOMINIQUE FOURNIER, Appellant, and HER MAJESTY THE QUEEN, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeals heard on August 19 and 20, 2004, at Sherbrooke, Quebec Before: The Honourable Justice Pierre Archambault Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: Ginette Breton ____________________________________________________________________ JUDGMENT The appeals from the assessments made under the Excise Tax Act (the Act), the notices of which are dated June 5, 2003, are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment based on the following points: (i) the Appellant is entitled to input tax credits (ITCs) with respect to the goods or services set out in headings 1 (1998 GMC Savannah van ($2,317.00)) and 2 (ATV 4-wheel) of the memorandum on objection in Exhibit I-1, objection tab; (ii) with regard to the other ITCs, according to the concessions made by both parties, the Appellant is entitled to the ITCs set out in headings 16 (second paragraph), 23, 25, 27 (first paragraph), 34, 50, 53, 59, 60, 69, 86, 102 (to a maximum of $68), 121, 122, 123, 125, 129, 135 (to a maximum of $15.87), and 139 and to half of the ITCs set out in headings 112, 113, and 114 of the same memorandum; and (iii) that the penalty under section 285 of the Act must be cancelled. The whole is in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 1st day of December, 2004. "Pierre Archambault" Archambault J. Translation certified true on this 10th day of March 2005. Colette Dupuis-Beaulne, Translator Citation: 2004TCC786 Date: 20041201 Docket: 2003-4152(GST)I BETWEEN: DOMINIQUE FOURNIER, Appellant, and HER MAJESTY THE QUEEN, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT ArchambaultJ. [1] Dominique Fournier suffers from rampant proceduritis bordering on harassment. First, on July 29, 2003, he appealed pursuant to the informal procedure from assessments made under the Excise Tax Act (Act). Unfortunately, the notice of appeal does not specify the period at issue; however, in the Respondent's reply to the notice of appeal, the following periods are given: (1) from April 1, 1996, to June 30, 2000; (2) from October 1 to December 31, 2000; (3) from April 1 to June 30, 2001; and (4) from July 1 to September 30, 2001 (relevant periods). [2] As often happens when taxpayers represent themselves, the notice of appeal filed with respect to the assessments made by the Minister of National Revenue (Minister) provides little information regarding the issues. If Mr. Fournier had stuck to this notice of appeal, the situation certainly would not have been unusual; however, he saw fit to file, on July 7, 2004, an amended motion[1] in which he requested, in addition, that the penalties and interest for the period from January 1, 1996, to September 30, 2001, be cancelled; that he be allowed all of the input tax credits (ITC) the Minister had disallowed; and that the Respondent be ordered to pay an amount of $32,624,276.62 as well as $100,000 in exemplary damages for death threats, harassment, and a legal mortgage that allegedly destroyed his business.[2] The $32,624,276.62 amount is broken down as follows:[3] a claim for a refund of an overpayment of $90; a counter-claim (case 450-73-000208-11) of $31,474,172.00; loss of foster family work (case 450-05-005168-022) in the amount of $778,258.04; a request for input credit damage loss (case 450-17-000650-029) in the amount of $33,463.20; and wage bill 22601 (case 450-05-005094-020) in the amount of $348,293.38.[4] [3] It is important to note that the wage request was filed at the registry of the Superior Court of Québec on September 23, 2002. Mr. Fournier claimed fees from the Respondent that he said were fully justified at a rate of $600 per week for the collection of taxes and for management, calculations, accounting, research, and the collection of GST and QST. On February 14, 2003, Fournier J. of the Superior Court allowed a motion to dismiss on the grounds that the claim had not been correct in law, even if the alleged facts are true.[5] The amount of $778,258 had been claimed in proceedings against the Centre Notre-Dame de l'Enfant Sherbrooke inc., Centre Jeunesse de l'Estrie, and the Attorney General of Quebec. The amount was for damages, particularly for the purported breach of the contract under which Mr. Fournier had provided foster family services and for injury to reputation. The claim for $31,474,172 had been made in another suit for damages for the loss of his property, for having diverted justice in the suits initiated against the Hôpital de Sept-Îles, and for the forced loss of objection with the C.S.S.T.,[6] etc. [4] After filing the Respondent's amended reply to the notice of appeal, on June 3, 2004, the Court sent a notice of hearing setting the hearing date as August 19, 2004. In response, Mr. Fournier informed the registry that the hearing could last approximately 10 days because he wanted to present a dozen witnesses. During the conference call held on July 14, 2004,[7] which lasted more than two hours, I explained to Mr. Fournier that this court did not have jurisdiction to hear damage claims made against the Attorney General of Canada, let alone such claims made against the Attorney General of Quebec and other administrative bodies. [5] In respect to his eligibility for ITCs, Mr. Fournier had stated that he had 4,950 invoices to present. As it is not appropriate to conduct an audit at a hearing before the Court because this work should have been done before attending court, and as the parties should have identified which invoices were problematic prior to attending the hearing, I strongly encouraged the parties to meet so as to resolve their differences amicably or, at the very least, to properly define the issues at hand. For example, the parties could have sorted the invoices according to the problems they identified. [6] Even though counsel for the Respondent was reluctant to participate in that meeting, particularly because Mr. Fournier was not represented by a lawyer, I insisted that she participate, because I believed the parties would then have a better opportunity to attain the objectives I had set for them. Unfortunately, that hope was not fulfilled, owing to Mr. Fournier's fussy and quibbling attitude. Indeed, before the meeting even took place, Mr. Fournier had insisted that the Respondent provide him with information on his statement of account so that he would know what amounts the Ministère du Revenu du Québec (MRQ), as an agent for the Minister, had withheld as a set-off against the amounts Mr. Fournier owed. [7] Since counsel for the Respondent's letter responding in part to his request had not been sent to him within the timeframe he himself had set, Mr. Fournier had refused to participate in a meeting with counsel for the Respondent. As a result, nothing or virtually nothing had been accomplished prior to the hearing of Mr. Fournier's appeal. [8] Not only did Mr. Fournier attend court without having accomplished the tasks the Court had set out for him, but he also saw fit to submit a motion to dismiss[8] dated August 2, 2004. In paragraph 2 of that motion, Mr. Fournier states that the notices of assessment of the Deputy Attorney General of Canada, represented by Ms. Ginette Breton, are ill-founded in fact and in law, even if the alleged facts are true. The relevant passages of the motion are as follows: [TRANSLATION] 3.- $28,148.90 is claimed from Mr. Fournier in a statement of arrears[9] dated[10] July 13, 2004. See Exhibit P1. 4.- In the statement under P1 dated June 7, 2004, the Deputy Attorney General of Canada claims unbelievable and unacceptable penalties and interests. Looking at what is highlighted, it is $3,632.66 + $5,089.23 = $8,721.89 of penalties and interests for $1,698.52 in tax, which is more than 800% more. This is fraudulent and unacceptable. 5.- Also, in his statements the Deputy Attorney General of Canada does not take into account the amounts forcibly withheld from the inputs allowed for the past four years. There is a row missing that should show the amounts withheld; this is essential in accounting. All Canadian citizens have the right to know all amounts that are forcibly withheld - completely relevant information - so that there is honesty and transparency. The fact that these amounts are hidden is unacceptable. SEE P1. (( 2 )) 6.- In actual fact, if you look at P1, dated June 7, 2004, you will see a total amount for tax for all of the periods: $14,580.04. The one dated July 13, 2004, three weeks later, states $21,602.83. The question is, why was this amount changed? This is fraudulent and unacceptable. 7.- Astronomical interest and penalties have been withheld for more than four years but charged on more than nine, the Deputy Attorney General's computer goes back only seven years, and the Fournier family has been bothered for the past four years. This is a war of nerves, a war of attrition, and in this manner SECTION 11(b) of the Canadian Charter of Rights and Freedoms ("Any person charged with an offence has the right to be tried within a reasonable time.") is being violated. Four years is unreasonable and therefore unacceptable. 8.- With regard to legal rights, SECTION 11(g) states, "Any person charged with an offence has the right not to be found guilty on account of any act or omission unless, at the time of the act or omission, it constituted an offence under Canadian or international law or was criminal according to the general principles of law recognized by the community of nations." The Deputy Attorney General of Canada cries out to whomever will listen that the work done by Mr. Fournier is completely free, forced volunteering, but our worker has received no training, and when his papers are checked, everything or nearly everything is accepted, yet two years later he is told that penalties and interest are being claimed for the past four years. This is completely unfair and unacceptable. [...] 11.- In the conference call before the Honourable Justice Pierre Archambeault of the Tax Court of Canada, the Deputy Attorney General of Canada, represented by Ms. Ginette Breton and Ms. France Brazeau, Auditor, agreed to provide Mr. Dominique Fournier with all of the amounts for the input credits withheld for the past four years as soon as possible, but they lied again; they did not give him anything. This is unacceptable. [9] This motion to dismiss was to be submitted on August 19, 2004, the date set for the hearing of Mr. Fournier's appeals. After hearing the arguments presented by Mr. Fournier at the beginning of the hearing, I dismissed the motion because I found it to be ill-founded and premature. [10] First, it must be remembered that Mr. Fournier's appeal is pursuant to the informal procedure. The underlying principles of this procedure imply that these types of appeals must be heard quickly and with the least amount of proceedings possible; in particular, no list of exhibits is to be filed, and no examinations for discovery are to be conducted. For this reason, it is rarely appropriate to submit motions of the type that Mr. Fournier submitted, and they must be discouraged.[11] In any case, even if it were appropriate to hear it, I would have had to hear all of the evidence to be able to determine whether the notices of assessment establishing the amount of net taxes, interest, and penalties were to be vacated. [11] After I had made my decision, Mr. Fournier informed me that he wanted to appeal and that we could not begin the hearing of his appeals, so I informed him that he could appeal from my decision regarding the motion to dismiss, but he would have to wait until the hearing of his appeals had finished.[12] Because Mr. Fournier had told me he wanted to leave the courtroom, I warned him that, if he did so, he ran the risk that counsel for the Respondent would request that his appeal be dismissed in his absence. I allowed him five minutes to decide what to do. When I returned, Mr. Fournier said he was prepared to proceed with the hearing of his appeals. Facts [12] In making the assessment with regard to Mr. Fournier, the Deputy Minister relied primarily on the following conclusions and assumptions of fact: a) The Appellant is a registrant for GST purposes. (admitted) b) The Appellant operates a business named Tracto Diesel enr. in the field of selling, trading, and repairing heavy machinery. (admitted) c) During the period from April 1, 1996, to September 30, 2001, the Appellant was an agent of the Deputy Minister for GST collection and remission. (admitted) d) Although the audit began on April 1, 1996,[13] the representatives of the Deputy Minister of Revenue nevertheless analyzed an invoice issued prior to the audit period, since it had been submitted by the Appellant, only to find that it was not consistent in a number of areas, namely, - It involved a purchase made in Ontario, for which the seller was an individual. - The purchase invoice had been prepared by the purchaser, who in that case was the Appellant. - The invoice did not have any record of the seller's identification as a registrant. - No tax had been invoiced. (admitted, except for the parts that are underlined) e) At the time of the purchase of the motor vehicle, (GMC Savannah van) a 1998 Chevrolet Chevy van, in 1998, the Appellant had claimed an ITC, the total of which was disallowed by the Deputy Minister because, according to the Appellant's own admission, it had not been used 90% of the time for business purposes. (denied) f) As a result of the representations made by the Appellant that the information originally given to the Deputy Minister's auditor was erroneous and the motor vehicle had actually been used 95% of the time for business purposes, the Objections Directorate vacated the assessment in order to allow the said ITC, but specified that the Deputy Minister reserved the right to re-assess the amount should a future audit reveal that the facts on which this decision was based were not accurate. (admitted) g) In connection with the audit conducted for the period from April 1, 1996, to June 30, 2000, the Appellant was unable to establish, using documentary exhibits, that the motor vehicle had been used exclusively for his commercial activities. (denied) h) Via a decision on the objection, the Deputy Minister upheld the notice of assessment as issued. (admitted) j) On September 13, 2000, two representatives of the Deputy Minister went to the Appellant's place of business, located at 172 112 Route, Bishopton, to begin the audit. (admitted) k) The audit showed that the Appellant's accounting was inadequate, particularly with regard to his keeping of books and records. (denied) l) On September 18, 2000, two representatives of the Deputy Minister returned to the Appellant's place of business to complete the audit, but the Appellant informed them he would no longer allow them to continue their audit. (denied) m) On or around November 20, 2000, the Deputy Minister sent a requirement by process server ordering the Appellant to file certain information and documentation with the Ministèredu Revenu du Québec within 15 days. (no knowledge) n) The Appellant did not act on the requirement. (no knowledge) o) Further to the Appellant's failure to comply with the requirement, the Appellant was fined $1,000.00 in file no. 450-73-000208-011 under section 326(1) of the Excise Tax Act (R.S.C., 1985, c. E-15) (hereinafter called "the Act"). (admitted) p) For failing to provide the information and documentation required, the Deputy Minister assessed the Appellant and denied the total input tax credits the Appellant had claimed. (no knowledge) q) Only after being assessed did the Appellant provide the information and documentation to the representatives of the Deputy Minister. (no knowledge) r) The analysis carried out by the representatives of the Deputy Minister established that there were reconciliation discrepancies between the amounts claimed and the amounts that were eligible according to the invoices provided and the amounts claimed. (no knowledge) s) As a result of their analysis of the documentation and information provided, the representatives of the Deputy Minister found that the majority of the documentation and information was illegible, altered, incomplete, inconsistent, unrelated to the Appellant's commercial activities, or of a personal nature. (no knowledge) t) The Appellant had claimed input tax credits for personal expenditures. (no knowledge) u) The Appellant had claimed input tax credits for expenditures that had no connection to his commercial activities. For example, u.1) The Appellant claimed input tax credits in order to receive compensation of $132,508.00 for work related to the collection of GST and Quebec sales tax (QST) during the period from January 1, 1996, to December 30, 2000, to which he added interest at 2% capitalized monthly. (no knowledge) u.2) For the period from October 1 to December 31, 2000, the Appellant overclaimed input tax credits equivalent to (an ITC withheld by the Deputy Minister with interest at 2% capitalized monthly) 2% capitalized monthly on input tax credits withheld by the Deputy Minister, even though the withholding was justified by the Appellant's failure to co-operate in providing his supporting documents when the audit was conducted. (no knowledge) v) The Appellant claimed input tax credits for expenditures the supporting documents were not consistent with. (no knowledge) [13] It is important to describe the events that took place during the Minister's two separate audits. First, in 1998 the Minister carried out a summary audit of the period from April 1 to June 30, 1998. Under credit balances, a major increase in the ITCs claimed by Mr. Fournier had been noticed, so he had been asked to provide additional information. One of the purchases that had come to the auditor's attention was the purchase of a van (van) for which business use had been described as being between 70% and 90% of the time, based on the time of year. On September 18, 1998, Mr. Fournier was informed that he was being disallowed the ITCs of $2,317 for the purchase of that vehicle. According to the auditor's testimony, no comprehensive examination had been done of the other ITCs claimed by Mr. Fournier. [14] When the auditor was cross-examined by Mr. Fournier, it was learned that she had a number of invoices (approximately 15) in her file for purchases Mr. Fournier was claiming ITCs for. Some of those invoices had been issued by Mr. Fournier's suppliers and contained information prescribed by law. Other invoices, however, had been prepared by Mr. Fournier himself using his own forms. Other supporting documents provided by Mr. Fournier were statements of account. According to the auditor's testimony, little attention had been paid to those documents. [15] Mr. Fournier appealed from the 1998 assessment, claiming that he had made an error when he had replied that he had used the van for business purposes 70% to 90% of the time. He said that, in reality, his van had been used 93% or 95% of the time for business. Therefore, at the objection stage, he had been given the benefit of the doubt, and the assessment requiring the repayment of an amount of $1,633.31 had been vacated, although he had been informed that the Minister could change his mind should a future audit reveal that the facts on which that decision was based were not accurate (Exhibit I-1, 1998 van tab, dated July 22, 1999). [16] The second audit of Mr. Fournier began on September 13, 2000, when Ms. France Brazeau, of the external audit service, went to Mr. Fournier's place of business. She found that Mr. Fournier's bookkeeping was faulty. This compelled her to draw up a list of approximately 5,000 documents so that she could determine to what extent Mr. Fournier had remitted the GST amounts collectible and to what extent he was entitled to ITCs. The difference between the amount owing according to her calculations and the amount Mr. Fournier had declared as collectible taxes was $1,400. Mr. Fournier was unable to justify this difference. With regard to the ITCs claimed by Mr. Fournier, many of the invoices did not satisfy all of the conditions required by the Act for entitlement to ITCs; in particular, the invoices did not contain all of the information prescribed by regulation. [17] When the auditor returned a few days later to complete her audit, Mr. Fournier had refused to give her access to his business's documents. Even a requirement sent by the MRQ did not change the situation. Therefore, it is not surprising that Mr. Fournier was convicted by the Court of Quebec and fined $1,000 owing to his refusal to respond to the requirement.[14] [18] Consequently, Ms. Brazeau disallowed the ITCs for the expenditures for which she had not obtained documents containing the prescribed information. At the objection stage, Mr. Fournier changed his attitude. He provided the appeals officer with a meticulously prepared file of documents supporting his ITC claim. Unfortunately for Mr. Fournier, the invoices he provided represented in large part invoices from suppliers that he himself had prepared on his own invoice forms, and those invoices - or in any case, not those dismissed by the appeals officer - did not provide the information prescribed by the Act. [19] It is clear that, in order to be entitled to ITCs, Mr. Fournier had to provide supporting documents that contained the prescribed information. The relevant legislative provisions are as follows: 169(4) Required documentation - A registrant may not claim an input tax credit for a reporting period unless, before filing the return in which the credit is claimed, (a) the registrant has obtained sufficient evidence in such form containing such information as will enable the amount of the input tax credit to be determined, including any such information as may be prescribed; and (b) where the credit is in respect of property or a service supplied to the registrant in circumstances in which the registrant is required to report the tax payable in respect of the supply in a return filed with the Minister under this Part, the registrant has so reported the tax in a return filed under this Part. [Emphasis added.] [20] Section 3 of the Input Tax Credit Information (GST/HST) Regulationsprescribes the information to be provided as follows: 3. Prescribed information - For the purposes of paragraph 169(4)(a) of the Act, the following information is prescribed information: (a) where the total amount paid or payable shown on the supporting documentation in respect of the supply or, if the supporting documentation is in respect of more than one supply, the supplies, is less than $30, (i) the name of the supplier or the intermediary in respect of the supply, or the name under which the supplier or the intermediary does business, (ii) where an invoice is issued in respect of the supply or the supplies, the date of the invoice, (iii) where an invoice is not issued in respect of the supply or the supplies, the date on which there is tax paid or payable in respect thereof, and (iv) the total amount paid or payable for all of the supplies; (b) where the total amount paid or payable shown on the supporting documentation in respect of the supply or, if the supporting documentation is in respect of more than one supply, the supplies, is $30 or more and less than $150, (i) the name of the supplier or the intermediary in respect of the supply, or the name under which the supplier or the intermediary does business, and the registration number assigned under subsection 241(1) of the Act to the supplier or the intermediary, as the case may be, (ii) the information set out in subparagraphs (a)(ii) to (iv), (iii) where the amount paid or payable for the supply or the supplies does not include the amount of tax paid or payable in respect thereof, (A) the amount of tax paid or payable in respect of each supply or in respect of all of the supplies, or (B) where provincial sales tax is payable in respect of each taxable supply that is not a zero-rated supply and is not payable in respect of any exempt supply or zero-rated supply, (I) the total of the tax paid or payable under Division II of Part IX of the Act and the provincial sales tax paid or payable in respect of each taxable supply, and a statement to the effect that the total in respect of each taxable supply includes the tax paid or payable under that Division, or (II) the total of the tax paid or payable under Division II of Part IX of the Act and the provincial sales tax paid or payable in respect of all taxable supplies, and a statement to the effect that the total includes the tax paid or payable under that Division, (iv) where the amount paid or payable for the supply or the supplies includes the amount of tax paid or payable in respect thereof and one or more supplies are taxable supplies that are not zero-rated supplies, (A) a statement to the effect that tax is included in the amount paid or payable for each taxable supply, (B) the total (referred to in this paragraph as the "total tax rate") of the rates at which tax was paid or payable in respect of each of the taxable supplies that is not a zero-rated supply, and (C) the amount paid or payable for each such supply or the total amount paid or payable for all such supplies to which the same total tax rate applies, and (v) where the status of two or more supplies is different, an indication of the status of each taxable supply that is not a zero-rated supply; and (c) where the total amount paid or payable shown on the supporting documentation in respect of the supply or, if the supporting documentation is in respect of more than one supply, the supplies, is $150 or more, (i) the information set out in paragraphs (a) and (b), (ii) the recipient's name, the name under which the recipient does business or the name of the recipient's duly authorized agent or representative, (iii) the terms of payment, and (iv) a description of each supply sufficient to identify it. [Emphasis added.] [21] During the first day of the hearing, I reminded Mr. Fournier that the Court's role is to enforce the Act, and the Court would not be able to allow him ITCs unless all of the conditions decreed by the Act were met. I told him that negotiations might enable him to obtain more than what the Court itself could award him. Given Mr. Fournier's awkward relations with the representatives of the Respondent, I suggested that together we quickly review the appeals officer's memorandum to determine what expenditures could actually be discussed before the Court. The memorandum contained approximately 40 pages of points regarding ITCs that had been either allowed or disallowed by the appeals officer, and we reviewed each point, one after the other. For a number of them, Mr. Fournier was surprised to see that the appeals officer had already allowed the ITCs he had claimed. After that, Mr. Fournier was willing to concede that, for some of the ITCs, he had not satisfied all of the conditions needed to be entitled to them. So he announced that he was prepared to abandon a number of the ITCs mentioned in the memorandum.[15] Counsel for the Respondent and her agent also recognized Mr. Fournier's eligibility for some of his ITCs.[16] The review lasted a good portion of the evening, as the first day of the hearing did not finish until 9:30 p.m. The review in question, which should have taken place before the hearing, as had been suggested, allowed everyone to agree on the points that were to be discussed the next day, namely (i) Mr. Fournier's eligibility to claim ITCs for the van and (ii) his eligibility to claim ITCs for an all-terrain vehicle (ATV). [22] On the second day of the hearing, Mr. Fournier presented his version of the facts regarding the purchase of the van and the ATV. The van in question had been purchased on May 27, 1998, from a GM dealer for $33,100 to replace another van. According to Mr. Fournier, the van had been used more than 90% of the time for his business of purchasing and trading heavy machinery. However, he acknowledged that it had been adapted to transport persons with disabilities and he had received a grant as part of a mobility assistance program for persons with disabilities. According to him, the van had been used for personal purposes during the four-year period from 1998 to 2002 for a total of 6,512 kilometres. Since the kilometrage on the counter indicated 96,549 kilometres, he said that 93.26% of the kilometrage had been for commercial purposes. He also said that his wife had a car (a Cavalier) - and this is corroborated by her testimony - that had been used for the family's needs, and that his daughter, who had a disability, did not go out often. Furthermore, since the other trucks Mr. Fournier used in his business were heavier trucks for transporting heavy machinery, he used his van mainly when he was going to auctions to purchase machinery. The transportation costs for going to the auctions were lower with the van. [23] In her testimony, the auditor stated that, owing to the following facts, she had concluded that the van had not been used exclusively or nearly exclusively for commercial activities. First, the van had been equipped to accommodate two wheelchairs, and it had been used to transport persons with disabilities. It should be added that Mr. Fournier had had custody of two other persons with disabilities, who lived with him as his foster children. Also, Mr. Fournier had not been able to provide the auditor with evidence that the van had been insured as a vehicle used for commercial purposes. The checks the auditor made with the Société de l'assurance automobile du Québec showed that the van had been registered as a simple family car. She had also discovered that Mr. Fournier had another vehicle, which he described as a pickup truck, that had been used for his business. What is more, she had not been given a kilometrage log to establish the van's use for business purposes. According to her, 1,000 kilometres could make the difference between 89% use and 93% use: 89% did not entitle the Appellant to ITCs. [24] Regarding the ATV, Mr. Fournier said he had purchased it to assist him in transporting certain parts needed to repair his heavy machinery. Following some difficulties he had had obtaining ITCs for that vehicle, Mr. Fournier had decided to sell it and use instead a tractor that was used to mow the lawn of his residence. [25] In addition to the penalty set out in section 280 of the Act, the Minister established a penalty of $325 under section 285 with regard to the 2% interest Mr. Fournier was claiming from the Minister for the delay in paying him the ITCs he had claimed but that had been withheld by the Minister to offset the amounts owed by Mr. Fournier. Analysis [26] As was mentioned previously, Mr. Fournier suffers from rampant proceduritis. He also described himself as Me Dominique Fournier in his own pleadings, while he is neither a lawyer nor a notary! Another surprising fact is that Mr. Fournier had claimed an ITC for the purchase of a robe that a judge from the Court of Quebec had suggested he wear when he appeared before that court. Obviously, Mr. Fournier is not entitled to that ITC. [27] Mr. Fournier claims to have been harassed by the MRQ, and he strongly believes, for all sorts of reasons, that he is entitled to damages. Regardless of these reasons and their validity, I tried a number of times to explain to him that the Tax Court of Canada was not the proper court for seeking remedy in damages. Furthermore, the evidence revealed that the attempt to obtain $258,672 in Superior Court as fees for collecting GST had been dismissed as markedly ill-founded at the motion to dismiss stage. Notwithstanding this decision of the Superior Court of Québec, Mr. Fournier stubbornly continued to claim this compensation, just as he persisted in claiming damages for damage he had allegedly suffered. [28] Even though I spent more than two hours attempting to explain to him that this court was not the proper court for this remedy in damages, even though the appeals officer had informed him when he filed his motion to amend the notice of appeal that he could not claim these damages, and even after Mr. Fournier had told the representatives for the Respondent that he would stop harassing the Department by claiming those amounts, at the end of his pleading Mr. Fournier reiterated his claim for damages. Tenacity can certainly be a good quality, but Mr. Fournier's extreme and abusive stubbornness constitutes vexatious conduct, and it has caused the Court to waste a great deal of time. The hearing, which should not have lasted more than one day, required two full 11-hour days. If it had not been an informal procedure, I would have ordered Mr. Fournier to pay costs for having needlessly prolonged the hearing of his appeal. I regret that the Tax Court of Canada Act does not grant this court the authority to order a taxpayer to pay costs under these types of circumstances. [29] With regard to the soundness of the assessment, I am prepared to grant Mr. Fournier the benefit of the doubt regarding the purposes for which the van and the ATV were purchased. The legislative provision set forth by the Respondent is subsection 202(4) of the Act.[17] But before determining whether this subsection is applicable, "[n]otwithstandingsubsections (2) and (3), . . . for the purpose of determining [Mr. Fournier's] input tax credit," it must be decided whether subsection 202(2) applies. This is what it states: 202(2) Where a registrant who is an individual or a partnership acquires or imports a passenger vehicle or aircraft or brings it into a participating province for use as capital property of the registrant, the tax payable (other than tax deemed to be payable under subsection (4)) by the registrant in respect of that acquisition, importation or bringing in, as the case may be, shall not be included in determining an input tax credit of the registrant unless the vehicle or aircraft was acquired or imported, or brought in, as the case may be, by the registrant for use exclusively in commercial activities of the registrant. [Emphasis added.] [30] The word "exclusive" is defined as follows in subsection 123(1) of the Act: "exclusive" means (a) in respect of the consumption, use or supply of property or a service by a person that is not a financial institution, all or substantially all of the consumption, use or supply of the property or service, and (b) in respect of the consumption, use or supply of property or a service by a financial institution, all of the consumption, use or supply of the property or service. [31] The issue to be determined here is whether the van is a passenger vehicle. According to subsection 123(1), a "passenger vehicle" is understood within the meaning of subsection 248(1) of the Income Tax Act (Tax Act). This subsection defines a passenger vehicle as follows: 248(1) "passenger vehicle" means an automobile acquired after June 17, 1987 (other than an automobile acquired after that date pursuant to an obligation in writing entered into before June 18, 1987) and an automobile leased under a lease entereed into, extended or renewed after June 17, 1987. [32] That same subsection of the Tax Act defined "automobile" in the following manner in 1998: 248(1) « automobile » Véhicule à moteur principalement conçu ou aménagé pour transporter des particuliers sur les routes et dans les rues et comptant au maximum neuf places assises, y compris celle du conducteur, à l'exclusion des véhicules suivants: a) les ambulances; a.1) b) les véhicules à moteur acquis principalement pour servir de taxi, les autobus utilisés dans une entreprise consistant à transporter des passagers et les fourgons funéraires utilisés dans une entreprise consistant à organiser des funérailles; c) c) sauf pour l'application de l'article 6, les véhicules à moteur acquis pour être vendus ou loués dans le cadre de l'exploitation d'une entreprise de vente ou de location de véhicules à moteur et les véhicules à moteur utilisés pour le transport de passagers dans le cadre de l'exploitation d'une entreprise consistant à organiser des funérailles; d) d) les véhicules à moteur de type pick-up ou fourgonnette ou d'un type analogue: (i) comptant au maximum trois places assises, y compris celle du conducteur, et qui, au cours de l'année d'imposition où ils sont acquis, servent principalement au transport de marchandises ou de matériel en vue de gagner un revenu, (ii) dont la totalité, ou presque, de l'utilisation au cours de l'année d'imposition où ils sont acquis est pour le transport de marchandises, de matériel ou de passagers en vue de gagner un revenu. 248(1) "automobile" means (a) a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and 8 passengers, but does not include (b) an ambulance, (c) a motor vehicle acquired primarily for use as a taxi, a bus used in a business of transporting passengers or a hearse used in the course of a business of arranging or managing funerals, (d) except for the purposes of section 6, a motor vehicle acquired to be sold, rented or leased in the course of carrying on a business of selling, renting or leasing motor vehicles or a motor vehicle used for the purpose of transporting passengers in the course of carrying on a business of arranging or managing funerals, and (e) a motor vehicle of a type commonly called a van or pick-up truck or a similar vehicle (i) that has a seating capacity for not more than the driver and 2 passengers and that, in the taxation year in which it is acquired, is used primarily for the transportation of goods or equipment in the course of gaining or producing income, or (ii) the use of which, in the taxation year in which it is acquired, is all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income; [Emphasis added.] [33] However, the only issue raised at the hearing that must be responded to here is the following: Was the use of Mr. Fournier's van purchased in 1998 all or substantially all for commercial activities?[18] I came to the conclusion that the van had been purchased for such purposes, since I am accepting Mr. Fournier's testimony in this respect. The fact that it had been used 93% of the time for business purposes from 1998 to 2002 supports Mr. Fournier's statement regarding his intent for purchasing it in 1998. [34] It is important to point out that the Act does not state that "all or substantially all" corresponds to 90%. The administrative interpretation that establishes this number does not bind the courts, who have mentioned several times that there is no magic number. The following is what the late Taylor J. of this Court wrote in Wood v. M.N.R., [1987] 1 C.T.C. 2391, 2393, 87 DTC 312, 313: The Minister's rule (from I.T.-171 (supra)) is that the Canadian income should be at least 90% of total income - the "90% rule". Obviously that is just a departmental assessing policy, and while arbitrary is undoubtedly a useful and functional mechanism in dealing with a difficult section of the Act, I would think the Minister might be hard-pressed to refuse a claim where the percentage was 89%, may be even 85% or 80% or lower - and that brings up this taxpayer's position which ends up to be about 70%. ($30,000 out of $42,500). [FOOTNOTE: Assumes that the $12,500 U.S. income has been "converted" into Canadian funds.] Clearly the term "substantially all"[19] does not lend itself to a simple mathematical formula. Further it would seem to me that any particular definition of "substantially" would be only valid with reference to the specific context in which it is found. [...] [Emphasis added.] [35] In my opinion, the ATV is not a passenger vehicle because it is not an "automobile," that is, a motor vehicle designed primarily to carry individuals on highways and streets. I believe it was designed to carry individuals off highways and streets.[20] Thus, the general rule set out in subsection 199(2), which reads as follows, must be applied: 199(2) Acquisition of capital personal property - Where a registrant acquires or imports personal property or brings it into a participating province for use as capital property, (a) the tax payable by the registrant in respect of the acquisition, importation or bringing in of the property shall not be included in determining an input tax credit of the registrant for any reporting period unless the property was acquired, imported or brought in, as the case may be, for use primarily in commercial activities of the registrant; and (b) where the registrant acquires, imports or brings in the property for use primarily in commercial activities of the registrant, the registrant is deemed, for the purposes of this Part, to have acquired, imported or brought in the property, as the case may be, for use exclusively in commercial activities of the registrant. [Emphasis added.] [36] Here the issue is whether the ATV had been acquired "for use primarily in [Mr. Fournier's] commercial activities." In my opinion, the benefit of the doubt may be given to Mr. Fournier in this respect, as was indicated previously. He says that he purchased the ATV to transport parts on his property for the repair of his heavy machinery; therefore, he is entitled to the ITC for the purchase of the ATV. [37] When hearing the arguments of counsel for the Respondent, I had told her that I believed part of Mr. Fournier's assessment should be vacated because, with regard to that particular part, the assessment had been made outside of the normal assessment period set out in subsection 298(1)[21] of the Act; such was the case in particular with respect to the period from April 1996 to June 30, 1997. After some reflection, I do not think I can come to that conclusion for two reasons. [38] First, the evidence is not sufficiently clear on this issue. To be sure, the Minister may make a reassessment, without having to prove that the taxpayer made a misrepresentation that is attributable to the person's neglect, carelessness, or wilful default or by committing a fraud,[22] within four years following "the later of the day on or before which the person [in this case, Mr. Fournier] was required under section 238 to file a return for the period and the day the return[s were] filed." Yet the evidence did not reveal when Mr. Fournier had filed his GST returns for the periods at issue. Therefore, my decision cannot be based solely on the first date set out in the Act, as I did at the hearing. The two relevant dates must be known to be able to decide that there is a limitation. Also, since this issue had not been raised by Mr. Fournier in his pleading or by me at the beginning of the hearing, the Respondent did not know that she was to present evidence regarding circumstances that could have justified an assessment outside the normal assessment period. Claiming a limitation to vacate part of the assessment under these circumstances would therefore constitute a violation of the principle of procedural fairness. [39] As concerns the imposition of the penalty under section 280 of the Act, the case law has acknowledged that, in order for that type of penalty to be cancelled, it must be shown that due diligence was used in fulfilling the obligations set out in the Act. As was acknowledged in Corporation de l'École Polytechnique c. La Reine, 2004 CAF 127, [2004] A.C.F. No. 563 (Q.L.), it is clear that "ignorance of the law does not excuse"[23] the lack of prescribed information. Furthermore, the fact that the Minister had been able in the past to conduct an audit and had not told Mr. Fournier at that time that he was not entitled to the ITCs owing to the lack of supporting documents required does not constitute a defence for Mr. Fournier. This is very far from using the officially induced mistake of law as a defence. In Corporation de l'École Polytechnique, Décaryand Létourneau JJ. referred to the comments made by Lamer, C.J., in R.v. Jorgensen, [1995] 4 S.C.R. 55, and summarized them as follows: [44] Finally, the Chief Justice concluded that in order to benefit from the defence of officially induced mistake of law, an accused must show that "she made a mistake of law, that she considered her legal position, consulted an appropriate official, obtained reasonable advice and relied on that advice in her actions": ibid., at para. 36. [Emphasis added.] [40] Mr. Fournier acknowledged a number of times that his accounting was deficient, and he did not state that he had made any efforts to inquire of the MRQ as to his obligations for collecting GST and the conditions he would have to meet to be entitled to ITCs. Some of the documents issued by the Minister had been available at that time to provide him with information, in particular GST Memorandum 400-1-2, dated November 8, 1990, entitled Documentary Requirements, which provides the information that invoices must contain to be eligible for ITCs. Thus I have no hesitation in concluding that it is out of indifference that Mr. Fournier did not take the measures needed to obtain the information he needed to claim ITCs. The penalty imposed under section 280 is well-founded, but I am not prepared to conclude that, in these circumstances, Mr. Fournier's conduct was equivalent to gross negligence by claiming ITCs. Therefore, I am cancelling the penalty imposed under section 285 of the Act.[24] However, this conclusion must not be interpreted by Mr. Fournier as an authorization to continue claiming ITCs equivalent to 2% capitalized monthly on input tax credits withheld by the Deputy Minister when he is not entitled to them. If he were to claim such ITCs in the future, he may not receive so much clemency from this court. [41] For all of these reasons, Mr. Fournier's appeals are allowed, and the assessments are referred back to the Minister for reconsideration and reassessmentbased on the following points: (i) the Appellant is entitled to ITCs with respect to the goods or services set out in headings 1 (1998 GMC Savannah van ($2,317.00)) and 2 (ATV 4-wheel) of the memorandum on objection in Exhibit I-1, objection tab; (ii) with regard to the other ITCs, according to the concessions made by both parties, the Appellant is entitled to the ITCs set out in headings 16 (second paragraph), 23, 25, 27 (first paragraph), 34, 50, 53, 59, 60, 69, 86, 102 (to a maximum of $68), 121, 122, 123, 125, 129, 135 (to a maximum of $15.87), and 139 and to half of the ITCs set out in headings 112, 113, and 114 of the same memorandum; and (iii) that the penalty under section 285 of the Act must be cancelled. Signed at Ottawa, Canada, this 1st day of December, 2004. "Pierre Archambault" Archambault J. Translation certified true on this 10th day of March 2005. Colette Dupuis-Beaulne, Translator CITATION: 2004TCC786 COURT DOCKET NO.: 2003-4152(GST)I STYLE OF CASE: Dominique Fournier and the Queen PLACE OF HEARING: Sherbrooke, Quebec DATE OF HEARING: August 19 and 20, 2004 REASONS FOR JUDGMENT BY: The Honourable Justice Pierre Archambault DATE OF JUDGMENT: December 1, 2004 APPEARANCES: For the Appellant: The Appellant Himself For the Respondent: Ginette Breton COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada [1] It is in fact an amended notice of appeal, but it is addressed both to one of the judges of the Court of Quebec, Civil Division, and to the Tax Court of Canada. The heading includes the following: Canada, Court of Quebec, Saint-François District, Number 450-80-000171-032, Canada Tax Court, 2003-4152(GST). [2] When a registry officer attempted to inform Mr. Fournier that this court did not have the jurisdicition to hear this type of request, Mr. Fournier insisted that it be included in the file. [3] Paragraphs 14 to 18 of the amended motion. [4] The amount mentioned in the decision of Fournier J., which is included in the next paragraph, was $248,672.32. [5] Even though this decision was res judicata, this did not prevent Mr. Fournier from repeating before this court his request for compensation, which had been found by the Superior Court of Québec to be without merit. [6] See Exhibit A-2, Tab D-3, p. 4. [7] It should be mentioned that, at the beginning of that conference call, Mr. Fournier had required that the Respondent's auditor be absent from counsel's office. To promote better discussion, I had requested that that person leave the office. [8] As with the amended motion, this motion to dismiss referred to the Court of Quebec, file 450-80-000171-032, as well as to the Tax Court of Canada, file 2003-4152(GST). [9] Mr. Fournier complained about the use of the word arrears to describe the past-due amounts he owed to the Respondent. He said that this word made him sound like a person who lacked intelligence. [10] The text here is a translation of the wording of the motion. [11] If a motion to dismiss could have been submitted here, it is the Respondent who would have had valid grounds for doing so to obtain the removal of all of the paragraphs in the amended motion that concerns the claims for damages. [12] The reasons for this decision are as follows. It is not possible to appeal from an interlocutory decision in an appeal pursuant to the informal procedure. Only a final judgment may be appealed. However, as has already been mentioned, Mr. Fournier's appeal is pursuant to the informal procedure (section 18.3001 of the Tax Court of Canada Act). My conclusion is based on subsections 27(1.1) and (1.2) of the Federal Courts Act, which state the following: 27(1.1) An appeal lies to the Federal Court of Appeal from (a) a final judgment of the Tax Court of Canada, other than one in respect of which section 18, 18.29, 18.3 or 18.3001 of the Tax Court of Canada Act applies; (b) a judgment of the Tax Court of Canada, other than one in respect of which section 18, 18.29, 18.3 or 18.3001 of the Tax Court of Canada Act applies, on a question of law determined before trial; or (c) an interlocutory judgment or order of the Tax Court of Canada, other than one in respect of which section 18, 18.29, 18.3 or 18.3001 of the Tax Court of Canada Act applies. 27(1.2) An appeal lies to the Federal Court of Appeal from a final judgment of the Tax Court of Canada in respect of which section 18, 18.29, 18.3 or 18.3001 of the Tax Court of Canada Act applies. [Emphasis added.] [13] The audit allegedly took place in 1998. [14] In his testimony, Mr. Fournier attempted to justify his conduct by the fact that he had been experiencing difficulties at that time, owing in particular to the health problems of one of his daughters, who suffers from cerebral palsy. Nevertheless, the evidence has by no means shown that he had requested that the MRQ grant him more time to allow him to respond to the requirement. [15] It should be noted that many of the claimed ITCs that were either allowed or disallowed by the Minister were for amounts of less than $20. [16] They are outlined in my final conclusion. [17] This is what it stipulates: 202(4) Non-exclusive use of passenger vehicle or aircraft - Notwithstanding subsections (2) and (3), where a registrant who is an individual or a partnership at any time acquires or imports a passenger vehicle or aircraft, or brings it into a participating province, for use as capital property of the registrant but not for use exclusively in commercial activities of the registrant and tax is payable by the registrant in respect of the acquisition, importation or bringing in, as the case may require, for the purpose of determining an input tax credit of the registrant, the registrant is deemed (a) to have acquired the vehicle or aircraft on the last day of each taxation year of the registrant ending after that time; and (b) to have paid, on that day, tax in respect of the acquisition of the vehicle or aircraft equal to the amount determined by the formula A x B [...] [Emphasis added.] [18] At the hearing, the discussion never covered the issue of whether the van was a "passenger vehicle." In his response, the Minister did not claim as a fact supporting his assessment that the van had a seating capacity for more than the driver and 2 passengers and had not been used primarily for the transportation of goods or equipment "in the course of gaining or producing income" in 1998 or that its use in 1998 had not been all or substantially all for the transportation of goods, equipment, or passengers in the course of gaining or producing income. It is possible here for the van to be excluded from the definition of a passenger vehicle (particularly under subparagraph (d)(ii) of the definition of an automobile). Therefore, it is possible that the purchase of the van is not subject to the rule set out in subsection 202(2) of the Act but rather that it is subject to subsection 199(2) of the Act. Yet, since the discussion at the hearing was not specifically about this issue and the evidence is not as clear as it should have been, I will continue my analysis on the basis that the van was a passenger vehicle, as the parties did at the hearing. In any case, this will not change the scope of my decision. [19] The relevant provision (paragraph 115(1)(f)) of the Income Tax Act uses the English expression "all or substantially all." [20] This issue was not discussed at the hearing, but even if the ATV had been a passenger vehicle, I would have concluded that it had been purchased with the intent that its use would be all or substantially all for Mr. Fournier's business. [21] The section states: 298(1) Period for assessment - Subject to subsections (3) to (6.1), an assessment of a person shall not be made under section 296 (a) in the case of (i) an assessment of net tax of the person for a reporting period of the person, (ii) an amount payable under section 230.1 in respect of an amount paid to, or applied to a liability of, the person as a refund under Division V in respect of a reporting period of the person, or (iii) an amount payable under section 230.1 in respect of an amount paid to, or applied to a liability of, the person as interest under Division V in respect of an amount paid or applied as a refund in respect of a reporting period of the person, more than four years after the later of the day on or before which the person was required under section 238 to file a return for the period and the day the return was filed [...] c) in the case of an assessment of tax payable by the person under Division II, other than tax referred to in paragraph (b), more than four years after the tax became payable; [...] e) in the case of any penalty payable by the person, other than a penalty under section 280, 285 or 285.1, more than four years after the person became liable to the penalty; [...] [22] 298(4) Exception - An assessment in respect of any matter may be made at any time where the person to be assessed has, in respect of that matter, (a) made a misrepresentation that is attributable to the person's neglect, carelessness or wilful default; (b) committed fraud (i) in making or filing a return under this Part, (ii) in making or filing an application for a rebate under Division VI, or (iii) in supplying, or failing to supply, any information under this Part; or (c) filed a waiver under subsection (7) that is in effect at that time. [Emphasis added.] [23] Unless it is an invincible mistake of law owing, for example, to the fact that the legislation was not published in a satisfactory way. See par. 32 and 38-40 of this decision. [24] The provision states the following: 285 False statements or omissions - Every person who knowingly, or under circumstances amounting to gross negligence, makes or participates in, assents to or acquiesces in the making of a false statement or omission in a return, application, form, certificate, statement, invoice or answer (each of which is in this section referred to as a "return") made in respect of a reporting period or transaction is liable to a penalty of the greater of $250 and 25% of the total of (a) if the false statement or omission is relevant to the determination of the net tax of the person for a reporting period, the amount determined by the formula A - B where A is the net tax of the person for the period, and B is the amount that would be the net tax of the person for the period if the net tax were determined on the basis of the information provided in the return, (b) if the false statement or omission is relevant to the determination of an amount of tax payable by the person, the amount, if any, by which (i) that tax payable exceeds (ii) the amount that would be the tax payable by the person if the tax were determined on the basis of the information provided in the return, and (c) if the false statement or omission is relevant to the determination of a rebate under this Part, the amount, if any, by which (i) the amount that would be the rebate payable to the person if the rebate were determined on the basis of the information provided in the return exceeds (ii) the amount of the rebate payable to the person.