Minister of National Revenue v. Livingston, 2008 FCA 89

• Judge: Létourneau, Sexton and Pelletier, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: March 07, 2008
• Jurisdiction: Canada (Federal)
• Citations: 2008 FCA 89;(2008), 375 N.R. 309 (FCA)

MNR v. Livingston (2008), 375 N.R. 309 (FCA)

MLB headnote and full text

Temp. Cite: [2008] N.R. TBEd. AP.061

Her Majesty The Queen (appellant) v. Jean Livingston (respondent)

(A-213-07; 2008 FCA 89)

Indexed As: Minister of National Revenue v. Livingston

Federal Court of Appeal

Létourneau, Sexton and Pelletier, JJ.A.

March 7, 2008.

Summary:

A taxpayer owed $80,000 in income taxes. The Canada Revenue Agency's (CRA) collection attempts were defeated by its inability to locate the taxpayer's monies. The taxpayer's friend (Livingston) opened a bank account in Livingston's name. The taxpayer was the only one to deposit and withdraw funds from the bank. A total of $36,650.82 had been deposited into the account. The Minister assessed Livingston for that amount under s. 160(1) of the Income Tax Act. Section 160(1) made the taxpayer and Livingston jointly and severally liable where, inter alia, the taxpayer transferred property in trust or otherwise to a person with whom the taxpayer was not dealing at arm's length and the fair market value of the property transferred was less than the fair market value of the consideration given by Livingston.

The Tax Court of Canada held that notwithstanding that Livingston knowingly assisted the taxpayer in defeating the CRA as a creditor for unpaid taxes by opening the account in her name, s. 160(1) did not apply. Although there was a transfer of property to Livingston, and the taxpayer and Livingston were not dealing at arm's length, adequate consideration flowed from Livingston to the taxpayer. The Minister appealed.

The Federal Court of Appeal allowed the appeal, restoring the Minister's assessment. The taxpayer's deposit of monies into Livingston's bank account constituted a transfer of property. The Tax Court erred in finding adequate consideration flowing from Livingston to the taxpayer. Livingston provided nothing to the taxpayer equivalent to the fair market value of the monies deposited in the account.

Income Tax - Topic 203

Persons liable - Transfers of property from taxpayer - A taxpayer owed $80,000 in income taxes - The Canada Revenue Agency's (CRA) collection attempts were defeated by its inability to locate the taxpayer's monies - The taxpayer's friend (Livingston) opened a bank account in Livingston's name - The taxpayer was the only one to deposit and withdraw funds - A total of $36,650.82 had been deposited into the account - The Minister assessed Livingston for that amount under s. 160(1) of the Income Tax Act - Section 160(1) made the taxpayer and Livingston jointly and severally liable where, inter alia, the taxpayer transferred property in trust or otherwise to a person with whom the taxpayer was not dealing at arm's length and the fair market value of the property transferred was less than the fair market value of the consideration given - The Tax Court of Canada held that notwithstanding that Livingston knowingly assisted the taxpayer in defeating the CRA as a creditor for unpaid taxes by opening the account, s. 160(1) did not apply - Although there was a transfer of property to Livingston, and the taxpayer and Livingston were not dealing at arm's length, adequate consideration flowed from Livingston to the taxpayer - The Federal Court of Appeal allowed the Minister's appeal - The taxpayer's deposit of monies into Livingston's bank account constituted a transfer of property - It was irrelevant that the taxpayer retained beneficial ownership, Livingston received no "benefit", or that all of the funds went back to the taxpayer - The Tax Court erred in finding adequate consideration flowing from Livingston to the taxpayer - Livingston provided nothing to the taxpayer equivalent to the fair market value of the monies deposited in the account - The court noted that although the Tax Court found an intention to assist the taxpayer in avoiding the tax debt, such was not a precondition to the application of s. 160(1).

Cases Noticed:

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1, refd to. [para. 14].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 15].

Bell ExpressVu Limited Partnership v. Rex et al. (2002), 287 N.R. 248; 166 B.C.A.C. 1; 271 W.A.C. 1; 2002 SCC 42, refd to. [para. 15].

Medland v. Minister of National Revenue (1998), 227 N.R. 183 (F.C.A.), refd to. [para. 18].

Minister of National Revenue v. Heavyside (1996), 206 N.R. 206 (F.C.A.), refd to. [para. 18].

Raphael v. Minister of National Revenue, 2000 D.T.C. 2434 (T.C.C.), refd to. [para. 18].

Wannan v. Minister of National Revenue (2003), 312 N.R. 247; 2003 FCA 423, refd to. [para. 19].

Leblanc v. Minister of National Revenue, 99 D.T.C. 410 (T.C.C.), refd to. [para. 23].

Raphael v. Minister of National Revenue (2002), 286 N.R. 389; 2002 FCA 23, refd to. [para. 29].

Statutes Noticed:

Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 160(1) [para. 16].

Authors and Works Noticed:

Driedger, Elmer A., Construction of Statutes (1st Ed. 1974), p. 67 [para. 15].

Waddams, Stephen M., The Law of Contracts (5th Ed. 2005), para. 121 [para. 29].

Counsel:

Michael Taylor, for the appellant;

J. Andre Rachert, for the respondent.

Solicitors of Record:

John H. Sims, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the appellant;

Dwyer Tax Lawyers, Victoria, B.C., for the respondent.

This appeal was heard on January 22, 2008, at Vancouver, B.C., before Létourneau, Sexton and Pelletier, JJ.A., of the Federal Court of Appeal.

On March 7, 2008, Sexton, J.A., delivered the following judgment for the Court of Appeal.