Les voitures Orly Inc./Orly Automobiles Inc. v. The Queen

Les voitures Orly Inc./Orly Automobiles Inc. v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2004-04-22
Neutral citation
2004 TCC 86
File numbers
98-431(GST)G
Judges and Taxing Officers
Donald G.H. Bowman
Subjects
Part IX of the Excise Tax Act (GST)
Decision Content
Docket : 98-431(GST)G
BETWEEN :
LES VOITURES ORLY INC./
ORLY AUTOMOBILES INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on June 2 to 27, 2003; on October 14, 15, 16, 17, 20, 21 and 22, 2003; on December 1, 2, 3, 4 and 5, 2003 and on January 19 and 20, 2004
at Montréal, Quebec.
Before : The Honourable D.G.H. Bowman, Associate Chief Justice
Appearances:
Counsel for the Appellant:
François Barette
Mathieu Bouchard
Counsel for the Respondent:
Pierre Zemaitis
Michel Dansereau
____________________________________________________________________
JUDGMENT
The appeal from the reassessment made under the Excise Tax Act, notice of which is dated December 17, 1996 and bears number 032G0103727 for the period from August 1, 1995 to September 30, 1996, is allowed and the assessment is referred back to the Minister of National Revenue for reassessment and reconsideration to give effect to the respondent's concession with respect to the vehicle bearing Orly's stock number 6-388 and to reduce the disallowance of ITCs of $41,889.05 referred to in paragraph 3 of these reasons to $39,159.05 and to adjust the penalties accordingly.
.../2
The respondent is entitled to her costs.
Signed at Ottawa, Canada, this 22nd day of April 2004.
"D.G.H. Bowman"
Bowman, A.C.J.
Citation: 2004TCC86
Date : 20040422
Docket: 98-431(GST)G
BETWEEN:
LES VOITURES ORLY INC./
ORLY AUTOMOBILES INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
BOWMAN, A.C.J.
[1] This appeal is from a reassessment made under the Excise Tax Act ("E.T.A.") by the Minister of National Revenue through his agent, the Deputy Minister of Revenue of Québec ("Revenue Québec") for the period from August 1, 1995 to September 30, 1996 (the "relevant period").
[2] The appellant is an automobile dealer. In the relevant period it acquired new automobiles which, for the most part, it exported to the United States and Europe. No sales tax is payable on such sales to non-residents. That is not the issue. The main issue is whether the appellant is entitled to claim input tax credits ("ITCs") in respect of the Goods and Services Tax ("GST") which it says it paid when it bought those automobiles. The respondent denies that the appellant is entitled to the ITCs claimed.
[3] There were two assessments. The first was made on December 17, 1996. Revenue Québec disallowed ITCs of $518,109.91 with respect to automobiles acquired by the appellant, disallowed further ITCs of $41,889.05 with respect to other purchases and assessed tax of $69,287.55 on what it described as unreported sales of vehicles. Also, interest and penalties were assessed in the amounts of $25,920.25 and $27,997.07, respectively. The appellant filed a Notice of Objection on March 14, 1997, and on February 27, 1998, it filed a Notice of Appeal, over 180 days having passed without a response to the Notice of Objection. On April 27, 1998, Revenue Québec issued a reassessment. Some of the numbers were changed. ITCs in the amount of $792,631.24 were disallowed. In addition, interest and penalties were increased to $77,940.73 and $315,423.11, respectively. In the result the amount claimed under the reassessment was $1,297,171.68. The appellant amended its Notice of Appeal to refer to the reassessment.
[4] The assessment and reassessment were made without warning and without prior discussion. Counsel for the appellant moved at the beginning of trial for a direction that since Revenue Québec had not, prior to mailing the assessments, disclosed to the appellant the assumptions upon which it proceeded, the onus was upon the respondent to justify the reassessment. In oral reasons given at trial I dismissed the motion, except with respect to the penalties imposed under section 285 of the E.T.A. and the allegation in paragraph 71 of the Reply to the Notice of Appeal relating to the conditions in subsection 169(4) of the E.T.A.
[5] Four hundred and ninety eight exhibits were filed by the appellant and 486 by the respondent. The appellant called three witnesses and the respondent called 12. The trial lasted 31 days and the evidence was detailed. About 307 transactions were involved, most of which were exports of higher end automobiles such as Jeep Grand Cherokees, Chevrolet Tahoes, GMC Yukons or Chrysler Town and Countrys. Most of them had price tags in the neigbourhood of $40,000.00. Virtually every transaction was dealt with individually twice, once by Mr. James Doherty, a director and officer of Orly, and once by madame Linda Turcotte, an assessor with Revenue Québec, who conducted a detailed examination of the transactions.
[6] I shall start by attempting to state in broad outline what I believe to be the respective positions of the appellant and the respondent.
[7] Mr. Doherty testified that the principal business of the appellant, Les Voitures Orly Inc./Orly Automobiles Inc. ("Orly"), in the relevant period was the purchase and sale for export of automobiles. Orly and a large number of other auto dealers were black listed by the big three auto manufacturers, Ford, Chrysler and General Motors. What this meant was that their authorized franchised retail dealers were told not to sell automobiles to companies such as Orly. The reason given was that Orly and the other black listed companies were buying vehicles from dealers in Canada and selling them offshore thereby undercutting the big three's foreign dealers.
[8] Therefore, according to Mr. Doherty, Orly was obliged to buy from what it called "secondary dealers". The appellant's position is that when it bought from the secondary dealers, some of whom had GST registration numbers, it paid GST on the purchase price and this was clearly shown on the invoice. It is further the appellant's position that when it paid the GST to the secondary dealer its responsibility came to an end and if the secondary dealer did not remit the tax to the Receiver General this was no concern of Orly.
[9] The proposition of law that once a purchaser pays GST to a supplier of goods and services, the Minister cannot, unless there is fraud or collusion, recover GST from the purchaser a second time just because the supplier does not remit the GST to the government is unassailable. The matter was thoroughly discussed by Justice Campbell in Airport Auto Ltd. v. Her Majesty The Queen, 2003 TCC 683. The respondent does not dispute the principle of law but she contends that the facts do not support its application. The respondent's position is that any amounts shown on the invoices from the secondary vendors as GST were not paid as GST, were not intended to be paid as GST and were not intended to be transmitted to the government and, of course, were not paid to the government. The respondent alleges that some of the secondary dealers were not registered for the purposes of the GST and in many cases the amounts were paid to third parties other than the secondary dealers and the third parties were not registered for GST purposes. The respondent further alleges that the persons shown as vendors on the sales contracts were not the persons who sold the vehicles to Orly. On this hypothesis just who the "real" vendors were is a matter of some doubt. On one view of the matter they were Indians on reservations who paid no GST. On another view the Indians or corporations owned or controlled by Indians were simply conduits who did not pay for the vehicles, never took possession of the vehicles and indeed never really had title to them but who simply accommodated the transfer from franchised dealers to Orly who sold the vehicles to foreign purchasers or in some cases to domestic purchasers.
[10] In essence, the respondent alleges that the appellant used a variety of means to create the illusion that GST was paid by it when in fact it was not paid so as to justify the claim for ITCs. It boils down to a matter of fact: Did the invoices represent reality or were the transactions shams?
[11] The principal witness for the appellant, Mr. James Doherty, went through all of the transactions and put in evidence the sales contracts and other related documents. To illustrate the sort of evidence that was presented in this case, I shall start with one transaction described in the appellant's Exhibits A-3, A-4, A-5, A-6 and A-7 and in the respondent's Exhibit I-92. It would be difficult to find a transaction that could be described as "typical" of all of the transactions but I have chosen this one simply because it was the first one put in evidence by Mr. Doherty. It involved the purchase and export of a 1996 Dodge Caravan bearing serial number 1B4GP44R7TB165768. The vendor shown on the contract of sale dated August 9, 1995 is 2844-7167 Québec Inc. The purchaser shown is Orly Automobiles Inc. The stock number given to it by Orly and handwritten on the contract is 5-208. The name Daniel Foster appears besides the words "accepted by vendor". The price shown is $26,900.00, goods and services tax ("GST") of $1,883.00 and provincial sales tax ("PST") of $1,870.89 are also shown for a total of $30,653.89. The cheque dated August 9, 1995 in payment of this amount was drawn on the bank account of Crescent Auctioneers & Liquidators Inc. at the Bank of Nova Scotia, 505 St. Catherine Street West, Montréal, and is in favour of 3095-7344 Québec Inc. It was deposited on August 10, 1995 in the Royal Bank of Canada, St-Jean & Hymus branch at Pointe-Claire, Québec, in the account 3095-7344 Québec Inc. The export contract is dated 4-8-95 (which presumably is August 4, 1995) and shows the purchaser to be GECO which Mr. Doherty said was a German company with an address in Germany. The price is shown to be $29,000.00 and transport to Bremerhaven of $1,250.00 for a total of $30,250.00. An invoice for US$850.00 (converted to Cdn.$1,175.00 on Exhibit A-6) dated August 24, 1995 from a transportation company bears the notation "paid September 20, 1995".
[12] Madame Turcotte, the investigator for Revenue Québec, who made the second assessment, appeared as a witness for the respondent. She put in evidence as Exhibit I-1, a stock sheet (a form of internal record of Orly) showing a purchase of automobile stock number 5-208 from De Geronimo. The purchase price was shown as $26,900.00, overhead $300.00 and SAAQ (Société de l'assurance automobile du Québec) fee of $8.00 and a commission payable to "Ron" of $896.00. The selling price was shown as $30,250.00, the amount shown on the export contract.
[13] In addition, madame Turcotte put in evidence a sales contract for the same automobile from Embrun Dodge Chrysler of Embrun, Ontario, a franchised Dodge Chrysler dealer to John Wilfred Jerome ("Jerome"), an Indian, for a purchase price of $26,939.00. No GST or PST was charged presumably on the basis that the sale to Jerome was exempt. His certificate of Indian status was put in evidence. Throughout these reasons I am using the word "Indian" in the sense in which it is used and defined in the Indian Act.
[14] The SAAQ records show nothing except the name of Orly. There is no document transferring the vehicle from Jerome or from Embrun Dodge Chrysler to 2844-7167 Québec Inc. or to Orly. Madame Turcotte also traced the payment of the purchase price shown in the contract between Embrun and Jerome from the bank account of 3095-7344 Québec Inc. to a cheque which was used to satisfy the price to the dealer. The cheque is dated August 9, 1995 and is drawn on the Royal Bank St-Jean & Hymus branch, Pointe-Claire, Québec, in the amount of $26,939.00.
[15] I shall not describe all of the 307 transactions in such detail. Broadly, they follow much the same pattern.
[16] I turn now to a summary of the facts.Mr. Doherty says that Orly bought automobiles from numerous intermediate dealers. Madame Turcotte says the invoices are false. The essential question is whether Orly paid GST on these approximately 307 purchases. A few general preliminary observations may usefully be made. They apply to the majority of transactions although there may be exceptions and details may vary but in broad outline the following is the picture that emerges.
(a) There is no question that the sales invoices from the companies shown as vendors to Orly show an amount for GST on each transaction and the total amount paid to the person shown as vendor or to some third party includes the amount calculated in respect of GST.
(b) In many of the cases the cheques or bank drafts were made payable to an entity such as a corporation or a proprietorship that is not the vendor shown on the invoice and went into a bank account in the name of that entity or proprietorship (the "third party"). It was said that this was at the request of the "vendors". Notwithstanding the huge amounts that went into the bank accounts of the third parties, no written direction was produced with respect to any payment. Indeed there was absolutely no evidence (apart from Mr. Doherty's oral testimony) of any such request or direction. It is strange, to put it mildly, that any prudent business person would pay substantial amounts into bank accounts of persons about which he or she knew nothing at the oral request of some unknown person purporting to speak on behalf of a vendor about whom equally nothing is known.
(c) In no case has the amount shown on the invoice as GST and paid to the recipient or third party ever ended up in the hands of the government.
(d) In most cases the franchised General Motors or Chrysler dealers signed an agreement of purchase and sale of the vehicle to Indians living on reservations or their corporation and no GST or PST was paid presumably on the theory that the sales are exempt from tax under the Indian Act.
(e) In the majority of cases the vehicles were exported and therefore no GST was paid because the supply to non-residents is zero-rated.
(f) In some cases where the vehicles were sold to a German purchaser the purchase price was split up and a portion was charged as service and handling. There may have been reasons for this relating to German tax but the question is not germane to this case.
(g) On all, or virtually all, of the sales invoices to Orly, a number purporting to be the GST registration number of the person shown as vendor is set out.
(h) I do not propose to deal in any detail with the export of the individual vehicles. The majority were exported to the United States, Germany or France and in a few instances to the United Kingdom. There is no suggestion that there is anything amiss in the export of the vehicles. The tax free sale and export to non-residents may have been important in the overall scheme of things but it is really tangential to the issue in this case, subject to one observation. Whether a supply is exempt or zero-rated affects the right of a supplier to claim ITCs on the purchase of the supply. If the subsequent supply is exempt it cannot claim ITCs. If it is zero-rated it can.[1]
(i) In the early part of the period under review the cheques were made by Crescent Auctioneers & Liquidators Inc. ("Crescent"). The testimony was that Crescent was financing Orly. I see nothing in this fact by itself that is relevant to the issue here. After the export of the vehicle we see cheques for Orly to Crescent repaying it. Counsel for neither party made any point of it.
(j) In some cases one or more pieces of documentation are missing - for example a cheque from Crescent or Orly. The overall practice that emerges is that an invoice would be given by a vendor to Orly containing the stock numbers of the vehicle and its serial number. Payment would frequently be made by Orly or Crescent to an entity other than the vendor. The vehicle would be sold to a non-resident purchaser or in some cases to a purchaser in Canada. Where the purchaser was a Canadian, GST would be paid by the purchaser. Also, where Crescent paid the cost of the vehicle, there would generally be a cheque from Orly reimbursing it after Orly had sold it. Crescent was evidently involved in financing Orly until latterly when a bank took over the financing. Crescent was paid interest and a share of Orly's profit.
(k) The witness, madame Turcotte, provided copies of the records of the SAAQ. I will be referring from time to time to these records but I do not find them particularly reliable as evidence simply because names of owners that one would not expect appear on the records out of nowhere and names that one would expect to be on title are not there. I regard the evidence of the SAAQ to be at best secondary.
[17] The principal witness for the appellant was Mr. James Doherty. He testified that there was a demand in the United States for certain types of vehicles, such as sports utility vehicles and pick-up trucks, which were somewhat cheaper in Canada and were in short supply in the United States. The North American automobile manufacturers such as General Motors or Chrysler reacted to the export of automobiles from Canada and the United States and elsewhere by black listing such exporters as Orly and forbidding their franchised dealers selling to them, on pain of having their franchise cancelled.
[18] Mr. Doherty went through each transaction identifying the invoices from the various persons shown as vendors, the cheques or bank drafts used to pay for the vehicles and subsequent sale usually to non-residents but occasionally to Canadian purchasers. Mr. Doherty testified that he knew nothing about 2844-7167 Québec Inc., its owners, directors or employees, nor did he know Daniel Foster whose name appears as representing the vendor. Daniel Foster denied that the words Daniel Foster on the invoices for which the stock numbers were 5-208 and 5-256 were his signature, as well as his name on the invoices in which Autos 5ième Ère Inc. is shown as vendor. Mr. Doherty also testified that Orly was asked by 2844-7167 Québec Inc. to pay third parties such as 3095-7344 Inc. who he thought were financing vendors such as 2844-7167. He testified that he knew nothing about 3095-7344 Québec Inc. In fact, he testified that he knew nothing about the third parties to whom he says Orly was asked to make the payments, or the persons shown as vendors. He did not know who at the companies shown as vendors on the invoices asked that the many millions of dollars be paid into the bank accounts of these unknown third parties. There is no evidence that the request or direction was made in writing, nor did he enquire. He said it was not his concern.
[19] The names appearing as vendors on the bills of sale were 2844-7167 Québec Inc. ("2844"); Autos 5ième Ère Inc. ("5ième"); Centre d'Auto Marc et Mario Enr. - ("M & M"); Benny Automobiles ("Benny"); Auto Cartier ("Cartier"); Réal Provost Outaouais Motors Inc. ("Provost"); J.L. Auto Exchange ("J.L."); Garage Normand Duchesne ("Duchesne"); Gilles G. Caron Auto Service Ltée ("Caron"); R.A. Succès Automobile ("Succès").
[20] The names of the holders of the bank accounts to whom the payments were made were 3095-7344 Québec Inc. ("3095"); P.G. Auto ("P.G. Auto") Tomken Auto Sales ("Tomken"); Gestion Bergeron ("Bergeron"); Camions Marc et Mario ("CMM"); Benny Automobiles ("Benny"); Camions Cartier ("CC"); Auto Cartier ("Cartier"); Garage Normand Duchesne ("Duchesne"); J.L. Auto Exchange ("J.L."); Gilles G. Caron ("Caron"); Les Placements Locatifs Cécile Hogue Ltée ("Hogue").
[21] The general picture that emerges from the evidence of Mr. James Doherty is as follows:
(a) Where the bill of sale to Orly bore the name of 5ième the payment went into the bank account of 3095, Bergeron or Tomken.
(b) Where the bill of sale bore the name of 2844 as vendor, the payment went generally into the bank account of P.G., although sometimes they went into the account of Tomken or Bergeron and once into the account of 3095.
(c) In the early part of the period with which we are concerned, cheques were issued by Crescent to the entities indicated above and the funds went into the bank accounts in their name.
(d) Where M & M is shown as the vendor Orly would sometimes issue the cheque to Bergeron, but usually to M & M or CMM.
(e) Benny is shown on two invoices and the cheques went to Benny.
(f) Where Cartier is shown as the vendor, the cheques were issued to Cartier or, more frequently, CC.
(g) Where Provost is shown as the vendor the cheque was issued to Provost.
(h) Where the vendor is shown as Caron, the cheque was issued to Caron.
(i) Where Succès is shown as vendor, the cheque was issued to Succès, except in one case where it went to Duchesne.
(j) Where the vendor was shown as Duchesne the cheques were issued to Duchesne but the money went into the bank account of Hogue.
[22] Before I set out with greater particularity what I have summarized above I should mention a point that is of tangential importance and that is the method of payment. In the early part of the period in question Crescent issued the cheques. Later, Orly issued the cheque, which was either deposited in the bank account of the person to whom it was issued or used to support a bank draft in favour of the payee. In some cases the cheques were certified and in some cases they were not. I mention these methods of payment simply for the sake of completeness but I do not see how they add anything of significance to the case. Orly appears to have proceeded on the premise that the invoices gave it sufficient of the indicia of title to permit it to sell the vehicles domestically or abroad. In this appeal I am not required to decide that Orly acquired good title to the vehicles, or if it did, from whom. Orly disposed of the vehicles (usually abroad). The amounts shown on the invoices to Orly were deposited to the bank account of someone, whether the person shown as vendor on the invoice or someone else. The invoices to Orly show GST and PST on the price of the vehicle and although the total amount was deposited to the bank account, nothing ever found its way into the governmental coffers. Orly claimed ITCs in respect of the GST shown on the invoices and the claims were paid. Now the government wants the ITCs back because it says Orly never paid the GST in the first place. That is substantially what this case is about.
[23] I come now to the transactions in which various persons are shown as vendors to Orly.
Centre d'Auto Marc et Mario Enr. ("M & M")
[24] There were 79 vehicles involved in which M & M is shown as the vendor on the invoices to Orly. In 13 cases the cheques were issued to Bergeron and in all the rest the cheques were issued to CMM. According to the stock sheets, the vendors were shown in three cases as Bergeron, in seven as 2844 and in all the rest as CMM. In the records of the SAAQ neither M & M nor CMM is shown as the vendor. In some cases it is a regular franchised dealership. In many others it is 2844 or Alexandre Minassian. In about 61 cases, the vehicles were exported and in about 18 they appear to have been sold domestically. These figures may be slightly inaccurate because occasionally a bill of lading or an invoice to a purchaser was missing but by and large the numbers are substantially correct. The same qualifications must be made about the following figures. The evidence discloses that in all but five cases the vehicle originated with a franchised dealership who had acquired it from the manufacturer such as General Motors of Canada or Chrysler Canada. The dealer entered into an agreement of purchase and sale with an Indian living on a reserve or a corporation incorporated and controlled by Indians. There are a couple of gaps in the evidence where the name of the dealer or of the Indian is missing but I think this is attributable to the fact that in dealing with over 300 transactions with many moving parts, it is not surprising that occasionally a document may not be found. I am entitled, in this case, to draw an inference from the overall pattern and the conclusion which I draw is that the dealers entered into an agreement of purchase and sale of the vehicle with the individual Indian or the Indians' corporation and were paid by bank draft or cheque out of the bank account of the various persons mentioned above into which Orly paid the price shown on the invoice to Orly. No GST was paid on the transactions between the dealers and the Indians or their corporations on the basis that the sales were exempt. There is no evidence of any document transferring title from the Indians or the aboriginal corporations to the persons shown as vendors on the invoices to Orly.
[25] One thing is clear. The Indians or their corporations did not pay for the vehicles out of their own funds. They had possession of the vehicles, if at all, for only a brief moment. There seems to be some question whether some of the vehicles were delivered to the reservation or whether the exemption under the Indian Actwas properly claimed. This is not a matter that I need consider. Whether the Indians ought to have paid GST is not germane to the issue here, which is whether Orly paid GST.
2844-7167 Québec Inc. ("2844")
[26] 2844 is shown as the vendor to Orly of 88 vehicles. The pattern is much the same as in the case of M & M. In one case the cheque was issued to 3095, in one case to Lasalle Jeep Eagle. In 57 cases the cheque was to P.G., in 13 cases to Tomken, in 10 cases to Bergeron and in 3 cases to Desmeules Dodge. It appears about 59 were exported. The stock sheets show the vendor to have been P.G. in 58 cases, 2844 in two cases, Lasalle Jeep Eagle in one case, Tomken in 14 cases, Bergeron in eight cases and CMM in one and Desmeules Dodge in three. If this does not add up to 88 it may be because there are gaps in the documentation or it may be because my arithmetic is faulty. As in the case of M & M, the SAAQ records bear little relationship to any of the other documents.
[27] Again, the pattern is that franchised dealers would execute agreements of purchase and sale with Indians or aboriginal corporations. They would be paid out of the bank accounts that were in the names of the persons to whom Orly made the cheques payable. There is no evidence of any documents transferring title to the vendors shown on the invoices to Orly.
[28] I should have thought that where title to a piece of property such as an automobile is transferred it would be a relatively simple matter to trace the chain of title. In this case it should look somewhat like this:
Manufacturer (GM or Chrysler)
↓
Licensed dealer
↓
Indian purchaser
↓
Vendor shown on invoice
↓
Orly
↓
Domestic or foreign purchaser
J.L. Auto Exchange ("J.L.")
[29] J.L. is shown on 19 invoices to Orly. In every case the cheque was payable to J.L. J.L. does not appear in any of the SAAQ records. Frequently it is Huntley Crawford or Gérard Ouellette and once 9039-7662 Québec Inc. In all cases the evidence shows that the vehicles originated with a licensed dealer and in all but three cases that the dealer entered into an agreement of purchase and sale with an Indian. This in my view is attributable to a lack of documentation and not a difference in the pattern. Only two vehicles appear to have been exported.
R.A. Succès Automobile ("Succès")
[30] Succès appears on 17 invoices to Orly. All of the cheques were payable to Succès except one, which was payable to Duchesne. The SAAQ records make no mention of Succès. The owners are shown as Huntley Crawford in 14 cases. Gérard Ouellette in two and Ventes d'Auto Giordano Inc. in one. Subject to the fact that there are a few gaps in the documentation, the pattern repeats itself of an agreement of purchase and sale from a licensed dealer to an Indian or an aboriginal corporation.
[31] The evidence seems to disclose only four exports from this group.
Benny Automobiles ("Benny")
[32] Benny appears as the vendor to Orly on only two invoices and the cheques were both issued to Benny. One vehicle was exported. Two licensed dealers were involved but the documentation discloses only one contract with an Indian.
Gilles G. Caron Auto Service Ltée ("Caron")
[33] Caron is shown as the vendor to Orly on 40 invoices. The cheques were all issued to Caron. Various vendors are shown in the SAAQ records, but never Caron. In one case the individual, Gilles Caron, the owner of Caron, is shown. The most frequent name is Huntley Crawford, about whose testimony I will have more to say later.
[34] The same pattern as in the other cases appears - an agreement of purchase and sale between a licensed dealer and an Indian or an aboriginal corporation. In five cases, the Indian with whom the dealer signed the contract is the individual, Gilles Caron. The available documentation appears to show that 11 of the 40 vehicles with which Caron was involved were exported.
Réal Provost Outaouais Motors Inc. ("Provost")
[35] Provost appears as vendor on five invoices to Orly. The cheques were all issued to Provost. Provost appears on none of the SAAQ records. Huntley Crawford is shown as the vendor of two and Ventes d'Auto Giordano Inc. on two others. The documentary evidence indicates that one or possibly two vehicles were exported.
Autos 5ième Ère Inc. ("5ième")
[36] 5ième appears as the vendor on 34 invoices of vehicles to Orly. No cheques were issued to 5ième. Eight were issued to Bergeron, 15 to 3095, one to Lasalle Jeep Eagle and eight to Tomken. Two cheques are missing. The vendors, according to the stock sheets, are in most cases the same as the persons to whom the cheques were issued.
[37] As in other cases the SAAQ records bear no relationship to the invoices, the stock sheets or the cheques. In some cases the vendors are shown as licensed dealers, in others as 2844. Again, we have the same pattern of contracts between franchised dealers and Indians. The documents indicate that 26 of the 34 vehicles were exported.
Automobiles Cartier ("Cartier")
[38] Cartier is shown on the invoices as the vendor to Orly of 11 vehicles. The cheques were issued either to Cartier or CC. The same pattern emerges as in other cases with respect to the contract between licensed dealers and Indians or aboriginal corporations. Some vehicles appear to have been exported.
Garage Normand Duchesne ("Duchesne")
[39] Duchesne appears on the invoices as the vendor to Orly of six vehicles. The ubiquitous Huntley Crawford appears as the supplier of four vehicles in the SAAQ records. The cheques were all issued to Duchesne. The pattern here is consistent with that in other cases, with a contract between franchised dealers and Indians or their corporations. The evidence does not indicate that any of this group of vehicles was exported.
[40] Finally I come to a group of six vehicles, set out in madame Turcotte's table which is Exhibit I-437, where there are no suppliers identified because there were no invoices. The evidence on these vehicles is unsatisfactory and of course the SAAQ records cannot be relied on. Two of the vehicles were exported. The only evidence that is reasonably clear is that ITCs were claimed in respect of these vehicles and ultimately denied and reclaimed by the respondent. In respect of one vehicle bearing stock number 6-388 the respondent concedes that GST was paid.
[41] In some cases, the stock sheets show as the vendor the company into whose account the payment is made such as 3095 or P.G., not the company whose name appears as vendor on the invoice.
[42] Mr. Doherty stated that he did not know most of the individuals or companies appearing in the documents as vendors, but that perhaps one of his other employees such as Shawn McGovern or Bob Robichaud would know them. Bob Robichaud did not testify. It seems he was nowhere to be found. "Rob" appears frequently in both the oral and documentary evidence, particularly in connection with the transactions with Indians.
[43] It is, I think, a fair conclusion on all of the evidence that "Rob" is Robert Robichaud, the employee of Orly and that he was very much involved in the part of the overall transactions that had to do with the sales of the vehicles in question here to Indians and from this I conclude that so was Orly.
[44] The other employee, Shawn McGovern, testified that he dealt with the various persons shown as vendors. He said that the person with whom he dealt at 5ième was Marcel Gaudreault. He said he did not know Daniel Foster.
[45] He said he dealt with Daniel Paquette and Claude Bergeron at 2844. At M & M he says he dealt with someone called Alex and also Claude Bergeron. At Duchesne he says he dealt with Normand Duchesne. At Caron he dealt with Gilles Caron. At J.L. he dealt with John Lemoyre, who died in 1996, and at Provost it was Serge Létang. He did not recall who he dealt with at Benny, Succès or Cartier. He did not know any of the third parties to whom payments were made. He said he thought they were financing the vendors. Mr. McGovern testified with respect to a number of the invoices it was his handwriting on them. This is contrary to Mr. Doherty's testimony that the invoices were vendor generated and that they would come in completed form to Orly. He also stated that he was unable to recognize many signatures on the invoices of persons said to be representing the vendors.
[46] Before I move on to the evidence of the witnesses called by the respondent I should observe that quite apart from any evidence from the respondent's witnesses that contradicted that of Mr. Doherty or Mr. McGovern, I did not find the evidence of these two appellants' witnesses particularly persuasive. I had the distinct impression that they were holding something back and were giving me the bare minimum that they considered necessary. For example, the transactions involving over 300 vehicles had a value in the millions of dollars. Yet they remained inexplicably ignorant of anything about the vendors to whom they were paying vast sums of money. They did not appear to care where the cars came from or where the money went. I find this, to say the least, implausible. It is explicable only on the hypothesis that Orly knew what was going on at every step of the way and was in control from the moment the vehicle left the car dealer to the point at which it was sold, whether abroad or domestically.
[47] I note, for example, that neither Mr. McGovern nor Mr. Doherty mentioned in their evidence the role that the sales to the Indians played. The Indians were never mentioned. I should have thought that given the serious nature of the allegations in the Reply to the Notice of Appeal and in the other material disclosed by the respondent to the appellant, they would have gone to great lengths to find the representatives of the companies involved and have them testify to establish the authenticity of the impugned transactions. Mr. Doherty said that he did not try because he was not concerned. I am inclined to draw a less favourable inference and that is that the appellant knew that if it had called the persons who, in the result, the respondent called, they would not have supported its case.
[48] I turn now to the evidence of the respondent's witnesses.
Daniel Foster
[49] Daniel Foster's name appears on a number of invoices of 5ième and on two of 2844. He denies that on any of the invoices it is his signature. He was the owner of 5ième but he testified that it sold only used cars and that it carried on no business after the suspension of its licence on June 14, 1995. He stated that 5ième had carried on business selling used cars between 1988 and 1993. He said that he knew nothing of the transaction whereby 5ième was shown as selling to Orly. He denied that the signature Daniel Foster on the invoices from 2844 to Orly were his. He testified that he did not know James Doherty, Shawn McGovern or Bob Robichaud or Ron Snyder. The first time he heard of Orly was when Revenue Québec contacted him.
Marcel Gaudreault
[50] Mr. McGovern said that he dealt with Marcel Gaudreault at 5ième. Mr. Gaudreault says he worked for 5ième for a few weeks or months. His main function seems to have been to "exchange cheques". He became involved with Daniel Paquette in P.G. They opened a bank account in the name of P.G. at the National Bank in Lachine, Québec. Both had signing authority.
[51] He received $100.00 for each exchange of cheques which involved depositing cheques and drawing cheques for bank drafts. I find as a fact the cheques were from Orly (or Crescent on Orly's behalf) and the bank drafts were to automobile dealers to pay for cars allegedly sold to Indians. He had not known Daniel Paquette before he approached him to open up the bank account.
[52] The procedure was that a driver would give Mr. Gaudreault a cheque at a meeting place near the bank. He would deposit it and get a bank draft which he would give to the driver. He did not recognize the name Orly or Crescent. Any money that was left he would give back in the form of cheques to the person who delivered the cheques. He knew nothing about where the money came from or where it went. P.G. had no function or business activity other than the exchange of cheques. He said it never bought automobiles or sold automobiles to Orly.
[53] His name appears also on the card of a bank account of CMM. He denied any knowledge of this. Specifically, he denied that it was his signature on the bank account signature card. He denied any knowledge of the transaction of CMM. The other signature on the card was Jocelyn Bourcier, whom he said he did not know. When he purchased bank drafts he bought them in the name of the person given to him by the driver who brought the cheques to him and to whom he gave the drafts.
[54] His memory with respect to the persons to whom bank drafts were made payable was vague but he thought there must have been payees containing names such as Jeep Eagle or Chevrolet.
[55] He knew nothing about 2844 and he said that he did not believe Orly ever loaned money to 2844.
[56] He did not know James Doherty, Ron Snyder, Bob Robichaud or Serge Létang. He admitted that he had met Shawn McGovern at the auto auction at Saint-Eustache. He had no recollection of who asked him to open up an account at the Royal Bank at Pointe-Claire. He did not know the people who brought him the cheques to exchange for bank drafts. There were several.
[57] He was not challenged in cross-examination on his denial of sales to Orly or his description of the manner in which he was involved in the exchange of cheques.
[58] I asked him several questions for clarification. He informed me that Mr. Paquette and he performed the cheque exchange service and they were paid $100.00 for each transaction. He also stated that when he bought a bank draft the difference between the cheques that he deposited from Orly or Crescent and the draft payable to the dealer would be given by way of a cheque to the person who brought him the cheque from Orly or Crescent less his $100.00 fee.
Gabriel Bélanger
[59] Mr. Bélanger was the incorporator of 2844. He was also the sole shareholder and director. This company, it is alleged, sold about 85 automobiles to Orly. Most of the cheques for the amounts on the Orly invoices went to P.G. and some to Tomken or Bergeron. None went to 2844.
[60] Mr. Bélanger testified that 2844 sold only used cars. He denied any knowledge of the sales shown on the invoices from 2844 to Orly. He stated that he did not know Orly. Evidently he permitted a number of persons to work under the bond of 2844, including Daniel Foster. Mr. Foster, it will be recalled, denied his signature on any of the invoices from 2844 to Orly. 2844 had no bank account and he knew nothing of the companies into whose accounts amounts shown on the invoices were paid such as Tomken,