Les Pro-Poseurs Inc. v. The Queen

Les Pro-Poseurs Inc. v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2011-03-01
Neutral citation
2011 TCC 113
File numbers
2008-3955(IT)G
Judges and Taxing Officers
Paul Bédard
Subjects
Income Tax Act
Decision Content
Docket: 2008-3955(IT)G
BETWEEN:
LES PRO-POSEURS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
Appeal heard on common evidence with the appeals of Les Pro-Poseurs Inc. (2008-2580(GST)G) and
Claude Séguin (2008-3954(IT)G),
on January 12, 13 and 14, 2011, at Montréal, Quebec
Before: The Honourable Justice Paul Bédard
Appearances:
Counsel for the appellant:
Martin Fortier
Counsel for the respondent:
Nancy Dagenais
____________________________________________________________________
JUDGMENT
The appeals from the reassessment made under the Income Tax Act for the 2001, 2003, 2004, 2005 and 2006 taxation years are dismissed, with costs, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 1st day of March 2011.
“Paul Bédard”
Bédard J.
Translation certified true
on this 29th day of June 2011.
François Brunet, réviseur
Docket: 2008-2580(GST)G
BETWEEN:
LES PRO-POSEURS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
Appeal heard on common evidence with the appeals of Les Pro-Poseurs Inc. (2008-3955(IT)G) and
Claude Séguin (2008-3954(IT)G),
on January 12, 13 and 14, 2011, at Montréal, Quebec
Before: The Honourable Justice Paul Bédard
Appearances:
Counsel for the appellant:
Martin Fortier
Counsel for the respondent:
Nancy Dagenais
____________________________________________________________________
JUDGMENT
The appeal from the reassessment made under Part IX of the Excise Tax Act, notice of which is dated June 21, 2007, for the following sixteen quarterly reporting periods, which are not all consecutive, from October 1, 2002, to December 31, 2002, from April 1, 2003, to June 30, 2003, from July 1, 2003, to September 30, 2003, from October 1, 2003, to December 31, 2003, from January 1, 2004, to March 31, 2004, from April 1, 2004, to June 30, 2004, from July 1, 2004, to September 30, 2004, from October 1, 2004, to December 31, 2004, from January 1, 2005, to March 31, 2005, from April 1, 2005, to June 30, 2005, from July 1, 2005, to September 30, 2005, from October 1, 2005, to December 31, 2005, from January 1, 2006, to March 31, 2006, from April 1, 2006, to June 30, 2006, from July 1, 2006, to September 30, 2006, and from October 1, 2006, to December 31, 2006, is dismissed, with costs, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 1st day of March 2011.
“Paul Bédard”
Bédard J.
Translation certified true
on this 29th day of June 2011.
François Brunet, réviseur
Docket: 2008-3954(IT)G
BETWEEN:
CLAUDE SÉGUIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
Appeal heard on common evidence with the appeals of Les Pro-Poseurs Inc. (2008-3955(IT)G) and
Les Pro-Poseurs Inc. (2008-2580(GST)G),
on January 12, 13 and 14, 2011, at Montréal, Quebec
Before: The Honourable Justice Paul Bédard
Appearances:
Counsel for the appellant:
Martin Fortier
Counsel for the respondent:
Nancy Dagenais
____________________________________________________________________
JUDGMENT
The appeals from the reassessment made under the Income Tax Act for the 2002, 2003, 2004, 2005 and 2006 are dismissed, with costs, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 1st day of March 2011.
“Paul Bédard”
Bédard J.
Translation certified true
on this 29th day of June 2011.
François Brunet, réviseur
Citation: 2011 TCC 113
Date: 20110301
Dockets: 2008-3955(IT)G,
2008-2580(GST)G,
2008-3954(IT)G
BETWEEN:
LES PRO-POSEURS INC.,
CLAUDE SÉGUIN,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1] These three appeals were heard on common evidence.
Docket 2008-2580(GST)G
[2] This is an appeal from an assessment of $36,337.15, notice of which is dated June 21, 2007, made under Part IX of the Excise Tax Act (the ETA) for the sixteen quarterly reporting periods, which are not all consecutive (the 16 periods at issue), from October 1, 2002, to December 31, 2002, from April 1, 2003, to June 30, 2003, from July 1, 2003, to September 30, 2003, from October 1, 2003, to December 31, 2003, from January 1, 2004, to March 31, 2004, from April 1, 2004, to June 30, 2004, from July 1, 2004, to September 30, 2004, from October 1, 2004, to December 31, 2004, from January 1, 2005, to March 31, 2005, from April 1, 2005, to June 30, 2005, from July 1, 2005, to September 30, 2005, from October 1, 2005, to December 31, 2005, from January 1, 2006, to March 31, 2006, from April 1, 2006, to June 30, 2006, from July 1, 2006, to September 30, 2006, and from October 1, 2006, to December 31, 2006.
[3] The $36,337.15 in question can be broken down as follows:
Adjustments in the calculation of the reported net tax
[$1,503.42 + $231.69 + ($98.47) + $364.99 +
$2,243.43 + $4,287.45 + $3,247.57 + $1,756.36 +
$4,639.76 + $1,293.59 + $517.22 + $2,230.88 +
$898.04 + $160.02 + $276.00 + $319.74]
$23,871.69
Late remitting penalties
[$540.54 + $78.75 + $111.97 + $512.86 + $960.41 +
$650.74 + $311.06 + $697.41 + $188.93 + $46.74 +
$190.18 + $63.39 + $8.22 + $6.97 + $3.12]
$4,371.29
Penalties under section 285 of the E.T.A.
(25% of $20,835.35)
$5,208.84
Arrears interest
[$304.44 + $45.65 + $66.59 + $311.77 + $600.27 +
$420.42 + $209.00 + $490.08 + $140.76 + $37.56 +
$168.17 + $62.66 + $9.32 + $10.10 + $8.54]
$2,885.33
Total [amount owing]
$36,337.15
[4] Specifically, the adjustments, totalling $23,871.69, in the calculation of the net tax reported by the Appellant for the 16 periods at issue can be broken down as follows:
Goods and Services Tax (“GST”) collected or collectible
$2,884.20
Input Tax Credits (“ITCs”) over-claimed or claimed and obtained in error or without entitlement
$20,987.49
Total
$23,871.69
I note that the GST collected or collectible of $2,884.20 is not challenged by the appellant. I also note that the appellant’s challenge to the disallowed ITCs only involves the ITC amount of $20,835.35 related to the supplies of property and services it acquired from the 13 suppliers listed in paragraph 19(f) of the amended Reply to the Notice of Appeal (the dubious suppliers).
[5] In assessing the appellant in the amount of $36,337.15, the Minister of National Revenue (the Minister) relied, inter alia, on the following findings and assumptions of fact set out at paragraph 19 of the amended Reply to the Notice of Appeal:
[Translation]
(i) The facts admitted below;
(ii) The appellant is a registrant for the purposes of Part IX of the ETA;
(iii) The appellant operates a business specializing in interior systems work either as a contractor or subcontractor;
(iv) During the 16 periods at issue, the appellant acquired taxable supplies of property and services for consumption, use or supply in the course of both its commercial activities for which the GST, and the GST was paid or payable by the appellant to the suppliers on those supplies;
(v) The appellant recorded in its records the GST so paid or payable as an ITC and claimed, and received, in the calculation of the net tax that it reported to the Minister for the 16 periods at issue, said ITC amount;
(vi) Of the total ITC amount claimed, and received, in the calculation of the net tax that it reported to the Minister for the 16 periods at issue, the appellant claimed an amount totalling $20,835.35 for supplies of property and services it acquired during the 16 periods at issue from thirteen (13) distinct suppliers, namely:
Construction Lubac Inc. (Lubac)
$215.40
Constructions Générales M.J.P. Inc.
(M.J.P.)
$451.07
9149-3114 Québec Inc. [alfa.com]
(Alfa)
$2,205.87
9137-6483 Québec Inc.
[Cie Gypse.Com Inc.] (Gypse)
$2,445.10
Système Intérieur RASTEL Inc.
(Rastel)
$2,717.81
Système Intérieur Rovac inc.
(Rovac)
$1,130.46
Les Joints Universels Inc.
(Joints Universels)
$2,782.53
J.C.M.J. Rénovation Inc.
(J.C.M.J.)
$173.51
9139-8347 Québec Inc.
[Les constructions G.S.B. Inc.]
(G.S.B.)
$677.67
9158-0258 Québec Inc.
[Méga Maxx Construction]
(Méga Maxx)
$160,02
Système Intérieur Kelowna Inc.
(Kelowna)
$6,609.54
Système Intérieur D.D. Inc.
(D.D.)
$666.40
9031-4410 Québec Inc.
[Système intérieur Dinar Inc.]
(Dinar)
$599.97
TOTAL
$20,835.35
(vii) The appellant did not provide the Minister, when required to do so, with information sufficient, including any such information as may be prescribed, to enable the amount of $20,835.35 in ITCs mentioned in the previous subparagraph that it claimed and obtained in the calculation of the net tax for the 16 periods at issue to be determined;
(viii) Specifically, the appellant did not provide the Minister with any supporting documents that would have enabled said ITC amount to be determined or provided, to determine said ITC amount, supporting documents that did not meet the requirements of the ETA and its regulations;
(ix) Essentially, the supporting documents provided in support of the disallowed ITCs in the amount of $20,835.35 for supplies of property and services it acquired during the 16 periods at issue are false and constitute invoices of convenience for the purpose of allowing the appellant to wrongfully claim ITCs in the calculation of its net tax for the 16 periods at issue;
(x) The purpose of the scheme was to claim, through the use of the so-called invoices “of convenience”, inappropriate ITCs based on the requirements of the ETA;
(xi) In the case at bar, the appellant, the “accommodated” person, used the services of third parties, who may or may have not operated real businesses, the “accommodator” persons, specifically the thirteen (13) suppliers in question, issued invoices to the appellant for supplies of goods and services they did not provide to the appellant and which the appellant did not acquire from any them;
(xii) The appellant did not acquire any of the supplies of property or services in question from said thirteen (13) suppliers in question and did not acquire the supplies of property or services in question from the thirteen (13) suppliers in question; rather, the appellant acquired them from a completely different supplier than the ones indicated on the supporting documents provided for. . . the 16 periods at issue;
(xiii) The appellant was not well-known to the Commission de la construction du Québec (hereinafter CCQ) during the 16 periods at issue and reported to the CCQ having contracted with only one subcontractor;
(xiv) Based on the information held by the CCQ, the thirteen (13) suppliers in question are not subcontractors for the appellant;
(xv) Some of the thirteen (13) suppliers in question cannot be located;
(xvi) Some of the thirteen (13) suppliers in question are in default to Revenu Québec with respect to several tax statutes;
(xvii) The thirteen (13) suppliers in question do not have the staff or equipment to make the supplies of goods and services they undertook to make to the appellant;
(xviii) The cheques written by the appellant to pay for the supplies acquired from any of the said thirteen (13) suppliers in question, if not all of the thirteen (13) suppliers, were almost always provided to cheque cashing businesses by said suppliers to be cashed;
(xix) Some of the supporting documents in support of the ITCs claimed do not contain a sufficient and detailed description allowing adequate identification of each of the alleged supplies made by either of the said thirteen (13) suppliers in question and which were acquired by the appellant;
(xx) Some of the supporting documents provided in support of the ITCs claimed for a given supplier have an inconsistent numerical sequence;
(xxi) Although the thirteen (13) suppliers in question are distinct persons, the invoicing for some of them is almost identical, in all respects, except for the designation of the supplier and the GST and QST registration numbers;
(xxii) The appellant therefore owes the Minister the amount of the adjustments to its reported net tax for the 16 periods at issue, plus interest and penalties.
[6] The first issue to address in this appeal is whether the appellant is entitled to an ITC of $20,835.35 in the calculation of its net tax for the 16 periods at issue. To answer, the Court will first have to determine
(i) whether the appellant actually acquired from the 13 dubious suppliers the supplies for which it claimed an ITC of $20,835.35 in the calculation of its net tax;
(ii) whether the invoices allegedly prepared by the appellant’s suppliers meet the requirements prescribed by the ETA and the Input Tax Credit Information Regulations (the Regulations).
The second question to address in this appeal is whether the Minister was correct in imposing a penalty under section 285 of the Act.
Docket 2008‑3955(IT)G
[7] There are also appeals from the reassessments made by the Minister under the Income Tax Act (the Act) for its 2001, 2003, 2004, 2005 and 2006 taxation years.
[8] In setting the amount payable by the appellant, the Minister relied on the following facts set out in paragraph 13 of the Reply to the Notice of Appeal:
[Translation]
(i) The appellant’s fiscal year ends on March 31 of each year;
(ii) For the years in question, the Minister made the following changes to the appellant’s income:
2001
2003
2004
2005
2006
Net income (previous loss for income tax purposes)
$6,384
($6,021)
$18,724
$1,776
($6,381)
Add
Disallowed subcontracting expenses
$__
$24,868
$21,028
$55,866
$49,542
Disallowed
rental expenses
$__
$__
$2,484
$2,484
$__
Disallowed purchases of materials
$__
$__
$691
$6,638
$__
Revised net income for income tax purposes
$6,384
$18,847
$42,927
$66,764
$43,161
Subtract
Claimed non-capital loss
($6,021)
$__
($6,381)
$__
$__
Cancelled non-capital loss
$6,021
$__
$6,381
$__
$__
Revised taxable income
$6,384
$18,847
$42,927
$66,764
$43,161
(iii) The appellant is active in the construction industry;
(iv) The appellant’s sole shareholder is Claude Séguin;
Disallowed subcontracting expenses
(v) In 2003, 2004, 2005 and 2006, the appellant deducted from its business income the expenses it says it incurred for services from various subcontractors:
•
2003:
$24,868
•
2004:
$21,028
•
2005:
$55,866
•
2006:
$49,542
(vi) The subcontractors are in fact companies of convenience whose sole purpose was to provide invoices to their clients to allow them to deduct business expenses they did not actually incur.
(vii) The alleged subcontractors did not render any services to the appellant.
(viii) The alleged subcontractors cannot be found.
(ix) The alleged subcontractors do not have the staff or equipment to make the supplies of goods and services which appear on the invoices submitted by the appellant.
(x) The cheques written by the appellant to pay the invoices from the alleged subcontractors were provided to cheque cashing businesses by the subcontractors to be cashed.
(xi) The appellant’s shareholder appropriated the money.
(xii) The invoices submitted do not contain a sufficient and detailed description to allow adequate identification of each of the alleged services or supplies provided.
(xiii) Some of the supporting documents provided in support of the expenses claimed for a given subcontractor have an inconsistent numerical sequence.
(xiv) Although the subcontractors appear as distinct persons, the invoices of some of them are almost identical in all respects except for the designation of the subcontractor and the GST and QST registration numbers.
Disallowed rental expenses
(xv) In 2004 and 2005, the appellant paid rent to its shareholder, Claude Séguin, for the use of an office in his personal home.
(xvi) The appellant paid $4,800 to Mr. Séguin for each of the years.
(xvii) The rent paid ought to have been $2,316 per year, as the appellant only used 20% of Mr. Séguin’s residence for business purposes.
Disallowed purchases of materials
(xviii) The amounts of $691 in 2004 and $6,638 in 2005 are not supported by appropriate documents or are the personal and living expenses of the appellant’s shareholder.
[9] In order to impose the penalty provided for in subsection 163(2) of the Act, the Minister relied on the following facts set out in paragraph 16 of the Reply to the Notice of Appeal:
[Translation]
(i) The facts mentioned in paragraph 13 above.
(ii) The appellant was aware that it was doing business with companies of convenience to obtain false invoices in order to deduct from its income amounts it never incurred for the purpose of gaining or producing income.
[10] I note that, in regard to the expenses disallowed, the appellant is challenging the Minister’s decision only as to the following subcontractors:
(i) Rastel
(ii) D.D.
(iii) Gypse
(iv) Rovac
[11] The only issues in this appeal are the following:
(i) did the appellant have deductible expenses for the supplies provided by Rastel, D.D., Gypse and Novac in the amount of $24,868 in 2003, $21,028 in 2004, $55,866 in 2005 and $49,542 in 2006?
(ii) was the imposition of the penalty under subsection 163(2) of the Act justified?
Docket 2008-3954(IT)G
[12] This is an appeal from the reassessments made by the Minister under the Act for his 2002, 2003, 2004, 2005 and 2006 taxation years.
[13] In setting the amount payable by the appellant, the Minister relied on the following facts set out in paragraph 9 of the Reply to the Notice of Appeal:
[Translation]
(i) The appellant is the sole shareholder of Pro-Poseurs Inc. (the Company);
(ii) For the years in question, the Minister made the following changes to the appellant’s income:
2002
2003
2004
2005
2006
Total income previously assessed
$34,996
$35,224
$40,367
$43,705
$46,247
Add
Company benefits
-
-
-
-
-
(i) Subcontracting
$24,705
$14,662
$63,886
$8,196
$11,656
(ii) Materials and
Restaurant
-
-
$5,661
$932
-
(iii) Rent
-
-
$2,484
$2,484
(iv) Automobile benefit
-
-
$3,400
$3,539
Subcontracting
(iii) The company works in construction.
(iv) In 2003, 2004, 2005 and 2006, the Company deducted expenses it says it incurred for services from subcontractors.
(v) The Company rather did business with companies of convenience whose sole purpose was to provide invoices to their clients to allow them to deduct business expenses they did not actually incur and to allow the shareholders or directors of the business clients pocket the money equivalent to the amounts of the false invoices.
(vi) The alleged subcontractors did not render any services to the Company.
(vii) The alleged subcontractors cannot be found.
(viii) The alleged subcontractors do not have the staff or equipment to provide the supplies or services described in the invoices submitted by the appellant.
(ix) The invoices submitted do not contain a sufficient and detailed description adequate identification of each of the alleged services or supplies provided.
(x) Some of the documents provided in support of the expenses claimed for a given subcontractor have an inconsistent numerical sequence.
(xi) Although the subcontractors appear as distinct persons, the invoice of some of them are almost identical in all respects except for the designation of the subcontractor and the GST and QST registration numbers.
(xii) The cheques written by the appellant to pay the services of the alleged subcontractors were provided to cheque cashing businesses by the subcontractors to be cashed.
(xiii) The appellant appropriated the amounts received following the cashing of the cheques.
Purchases of materials and restaurant expenses
(xiv) The Company deducted as business expenses amounts for purchases of materials and restaurant expenses.
(xv) It also deducted amounts for purchases, according to the ledger, at Costco.
(xvi) None of the expenses made at Costco are supported by adequate documents.
(xvii) The other expenses claimed for purchases of materials and restaurant-related items are the appellant’s personal expenses.
Rent
(xviii) In 2004 and 2005 the Company paid rent to the appellant for the use of an office in his home.
(xix) The appellant received $4,800 from the Company for each of the years.
(xx) The rent paid ought to have been $2,316 per year, as the Company only used 20% of the appellant’s residence for business purposes.
(xxi) In 2004 and 2005, the Company conferred a benefit of $2,484 on the appellant.
Automobile benefit
(xxii) In 2004 and 2005, the Company put at the disposal of the appellant a Mazda Tribute.
(xxiii) The vehicle was also used for business purposes.
(xxiv) At the time of the audit, the appellant proposed to the auditors to consider that the 1000 km per month was the distance he drove with the Mazda Tribute. The auditors agreed.
(xxv) The automobile benefit conferred on the appellant was $3,400 in 2004 and $3,539 in 2005.
I note that the appellant is challenging the Minister’s decision only as to the benefits related to subcontracting expenses.
[14] In issuing reassessments for 2002 and 2003 beyond the normal reassessment period and imposing the penalty under subsection 163(2) of the Act, the Minister relied on the following facts set out in paragraph 10 of the Reply to the Notice of Appeal:
[Translation]
(i) The facts mentioned in paragraph 9 above.
(ii) Only the amounts representing the benefit conferred on the appellant with respect to the false subcontracting invoices were subjected to the penalty provided for in subs. 163(2) of the ITA.
(iii) From 2002 to 2006, the appellant did not claim the respective amounts of $24,705, $14,662, $63,886, $8,196 and $11,656 he appropriated as part of his Company’s participation in a scheme involving the issuance, by companies of convenience, of false subcontracting invoices to allow the Company to deduct amounts from his business income and to allow the appellant to pocket the amounts allegedly paid to the subcontractors.
(iv) The appellant is actively involved in the Companies’ activities.
(v) The appellant was aware that the Company had not received the services described on the invoices of convenience.
(vi) It was knowingly, or under circumstances amounting to gross negligence that the appellant pocketed the amounts mentioned in para. (c) above and that he did not add them to his income.
[15] The only issues are the following:
(i) Did the appellant receive taxable benefits from the Company from 2002 to 2006?
(ii) Was the issuance of reassessments for 2002 and 2003 under subsection 152(4) of the Act justified?
(iii) Was the imposition of the penalty under subsection 163(2) of the Act on the amounts the appellant appropriated (corresponding to the total of the subcontracting invoices) justified?
[16] The appellant, Claude Séguin, Francis Gaudreault, George Stouraitis, Jean Vendette, Daniel Pauzé, Hermel Lanteigne (Mr. Séguin’s brother-in-law), Daniel Preston (an employee of the appellant Les Pro-Poseurs Inc.), Tony Surprenant (an employee of the appellant Les Pro-Poseurs Inc.) and Priscilla Séguin (Mr. Séguin’s daughter) testified in support of the appellants’ position. Daniel Fugère (an audit department head at Revenu Québec) and Steve Parent (a tax auditor with Canada Revenue Agency) testified in support of the respondent’s position.
Testimony of the appellant Claude Séguin
[17] The testimony of Claude Séguin (majority shareholder and principal officer of Les Pro-Poseurs Inc. during the periods at issue) may be summarized as follows:
(i) Les Pro-Poseurs Inc. has been a building contractor specializing in interior systems (installation of metal partitions, installation of drywall, filling of joints and installation of acoustic ceiling tiles) since 1988. Also since 1988, the main client of Les Pro-Poseurs Inc. has been Industrie Vendette Ltée, a general building contractor specializing in office space renovation and fit-up (in commercial buildings) and hotels located mainly in Montréal.
(ii) Claude Séguin is 52 years old. He has been married since 1981 and has two children. He has very little education (secondary III). The salary he receives from Les Pro-Poseurs Inc. is his only source of income. As an employee of Les Pro-Poseurs Inc. during the periods at issue, he was responsible for the supervision of the work of the employees of Les Pro-Poseurs Inc. and its suppliers’ employees, the negotiation of the terms and conditions of contracts awarded by Industrie Vendette Ltée or others contracting out work and the negotiation of the terms and conditions of contracts awarded to the suppliers of Les Pro-Poseurs Inc. Mr. Séguin explained that he performed very few administrative tasks for Les Pro-Poseurs Inc., owing to his limited skills and knowledge in that area. He added in that regard that Les Pro-Poseurs Inc. had hired an external accountant to keep its accounting books, to draft its legal reports, to prepare and file its income tax and GST returns, and finally to prepare its financial statements. The appellant also explained that he had asked the bank of Les Pro-Poseurs Inc. to send to the external accountant the original cheques cashed by the suppliers of Les Pro-Poseurs Inc. directly so that the bank account of Les Pro-Poseurs Inc. could be reconciled.
(iii) During the periods at issue, Les Pro-Poseurs Inc. had on average three employees (including Mr. Séguin) who regularly worked for it. When Les Pro-Poseurs Inc. had an overflow of contracts, it would award some to suppliers. The suppliers were generally selected as follows: Les Pro-Poseurs Inc. contacted (by telephone) the owner of Quincaillerie Ste‑Hélène (hardware store where numerous contractors or workers specializing in interior systems work got their supplies during the periods at issue) or with certain company employees (Marie, Jacques and André) and would let them know that the appellant needed workers. I note that the appellant did not disclose that information to the two CRA auditors who asked him, in a meeting held on September 26, 2006, how he contacted the suppliers (see Exhibit I‑3, page 9). I also note that it would have been very interesting to hear the testimony of the owner of Quincaillerie Ste‑Hélène or one of its employees in that regard. The appellants could have called those witnesses to testify but did not. I infer from this that the evidence would not have been in their favour.
(iv) The contracts with the suppliers were oral. During the periods at issue, the appellant mainly awarded drywall and joint filling contracts. The remuneration generally agreed upon with the suppliers was as follows: approximately $240 per thousand square feet of drywall installed, approximately $300 per thousand square feet of drywall installed with joint-filling compounds, and approximately $40 for repairs. The payment agreement was generally [Translation], “The sooner the work is completed and invoiced, the sooner one gets paid.” I note that Mr. Séguin told (see Exhibit I‑3) the two CRA auditors he met with on September 26, 2006, that Les Pro-Poseurs Inc. usually paid its suppliers two weeks after receiving the invoice. I note that the cheques drawn on the bank account of Les Pro-Poseurs Inc. and payable to the suppliers were sent to the suppliers in a different way depending on whether or not it was one of the 13 dubious suppliers. In the first case, the cheque was remitted to the dubious supplier’s employee who worked with the employees of Les Pro-Poseurs Inc. at a given work site; in the other case, the cheque was sent by mail.
(v) Mr. Séguin was unaware of the name of the directors, officers, foremen and shareholders of the dubious suppliers as he had only communicated with their employees. Mr. Séguin’s “modus operandi” with respect to signing contracts with the dubious suppliers was as follows: the dubious suppliers’ employees (sent to Les Pro-Poseurs Inc. by Quincaillerie Ste‑Hélène) would telephone Mr. Séguin to let him know that they were available to do work for Les Pro-Poseurs Inc. The employees would therefore show up, at Mr. Séguin’s request, at the work site designated by him. Mr. Séguin then explained to the employees the nature of the work to be done, the method of remuneration and the payment terms. After having verified whether the employees had their trade cards and whether the suppliers they worked for had their permits, the appellant would orally award the contracts to the dubious suppliers the employees worked for. In the end, the dubious suppliers’ employees negotiated and concluded for their employers and in their name all the contracts Les Pro-Poseurs Inc. awarded to the dubious suppliers during the periods at issue. In that respect, Mr. Séguin explained that
(1) Hermel Lanteigne (Mr. Séguin’s brother-in-law) negotiated and concluded for Alfa, Gypse, Rastel, Rovac and J.C.M.J. and in their name all the contracts Les Pro-Poseurs Inc. had awarded to them. Mr. Lanteigne also performed (on occasion with the help of an individual whose first name was Ben) all the contracts awarded by Les Pro-Poseurs Inc. to the five dubious suppliers. It should be noted that at the meeting of September 26, 2006, with the two CRA auditors, Mr. Séguin was unable to identify or even describe the person or persons who performed the work for three of the five dubious subcontractors (see Exhibit I‑3). To explain those lapses in memory, Mr. Séguin stated that at that point he was so intimidated by the two CRA auditors that he was completely at a loss. Mr. Séguin’s version of the facts in that regard (although corroborated by his daughter Priscilla) failed to convince me. In fact, to be intimidated to the point where he no longer recalled that his brother-in-law was the one who performed most of the work for the three dubious suppliers just seems unlikely to me and lacks credibility in the circumstances. I note that Mr. Séguin’s lapses in memory in that respect only added to my doubts as to his credibility.
(2) Alain Gagnon negotiated and concluded for Lubac, M.J.P., G.S.B., Méga Maxx and Dinar and in their name all the contracts that Les Pro-Poseurs Inc. had awarded them. Mr. Gagnon also performed all the contracts awarded by Les Pro-Poseurs Inc. to the five dubious suppliers. It would have been very interesting to hear the testimony of Mr. Gagnon. The appellants could have called that person to testify but did not. I infer from this that the evidence would not have been in their favour.
(3) Bob Ryan negotiated for Joints Universels and Kelowna and in their name all the contracts that Les Pro-Poseurs Inc. had awarded them (worth approximately $134,000). Mr. Ryan performed all the contracts awarded by Les Pro-Poseurs Inc. to the two dubious suppliers. It would have also been very interesting to hear the testimony of Mr. Ryan, a key player in these disputes. The appellants could have called that person to testify but did not. I infer from this that the evidence would not have been in their favour.
(4) Mr. Séguin could not recall the name of the person who negotiated and concluded for D.D. and in its name the contracts that Les Pro-Poseurs Inc. had awarded it; nor could he recall the name of the person or persons who performed the work under the contracts awarded.
(vi) In 20% of the cases, Mr. Séguin himself completed the dubious suppliers’ invoices where their employees were illiterate. It is appropriate to point out that Mr. Séguin did not identify the invoices he completed. Nor did he identify the illiterate employees.
Finally, I note that when asked to comment on certain invoices regarding the exact place where the work was performed, the exact nature of the work performed (installation of drywall, filling of joints), the number of square feet of drywall installed or installed with joint-filling compounds, and finally, the method of remuneration, Mr. Séguin was generally vague and imprecise, and often non-responsive.
Testimony of Francis Gaudreault
[18] The testimony of Francis Gaudreault (an electrician) may be summarized as follows:
(i) Mr. Gaudreault has been an employee of Au Courant Électrique for some 24 years;
(ii) During the years at issue, he often worked at the same work sites as Mr. Séguin, as Industrie Vendette Ltée almost always used the same suppliers to perform the contracts awarded to it;
(iii) He had seen, on more than one occasion and at a number of work sites, Messrs. Ryan, Lanteigne and Gagnon work with the employees of Les Pro-Poseurs Inc. I note, however, that the testimony of Mr. Gaudreault regarding the “situs” of the work sites where he saw those individuals, how often he saw them, and when he saw them was generally laborious, vague and imprecise. I note that Mr. Gaudreau was unable to specify the status (employee or self-employed) of the three individuals when they worked with Mr. Séguin and the name of the businesses for which they worked.
Testimony of George Stouraitis
[19] The testimony of Mr. Stouraitis may be summarized as follows:
(i) Mr. Stouraitis is a painter and self-employed;
(ii) Industrie Vendette Ltée used him at almost all its work sites since 1993;
(iii) He knows Mr. Séguin very well as they frequently worked at the same work sites;
(iv) He had seen, on more than one occasion and at a number of work sites, Messrs. Lanteigne, Ryan and Gagnon work with the employees of Les Pro-Poseurs Inc. I note, however, that the testimony of Mr. Stouraitis regarding the “situs” of the work sites where he saw the three individuals, how often he saw them, and when he saw them was generally laborious, vague and imprecise. I also note that Mr. Stouraitis was unable to specify the status (employee or self-employed) of the three individuals when they worked with Mr. Séguin and the name of the businesses for which they worked.
Testimony of Jean Vendette
[20] The testimony of Mr. Vendette, the main shareholder and executive of Industrie Vendette Ltée, may be summarized as follows:
(i) Industrie Vendette Ltée has been active as a general contractor in the construction industry for the past 30 years and its annual sales vary between 3 and 5 million dollars;
(ii) Industrie Vendette Ltée almost always uses the same suppliers to perform the contracts awarded to it;
(iii) He knows Mr. Séguin very well through the awarding of numerous subcontracting contracts to Les Pro-Poseurs Inc. over the past twenty years;
(iv) The contracts concluded with Les Pro-Poseurs Inc. and the suppliers it frequently uses are always oral;
(v) He never verifies the status of its usual suppliers with the RBQ, the CCQ and the CSST. He only conducts verifications for suppliers with which it does not regularly do business;
(vi) He goes to the work sites of Industrie Vendette Ltée once a week;
(vii) He knows Mr. Lanteigne very well as he had seen him (at least a hundred times or so) do drywall installations with the employees of Les Pro-Poseurs Inc. at the work sites of Industrie Vendette Ltée. He recalled that Mr. Lanteigne had told him once while on break that he was self-employed. Mr. Vendette added that he never made any inquiries to verify whether the Mr. Lanteigne’s statements regarding his status were true. Finally, he testified that at the periods at issue, he was aware that Mr. Lanteigne was Mr. Séguin’s brother-in-law;
(viii) He remembered having seen a person whose first name was Alain at a work site of Industrie Vendette Ltée. He remembered that person because he pointed out to him that his work (“seam caulker”) had not been done properly. I note that the physical description that Mr. Vendette gave of that person corresponds with the physical description that the other witnesses gave of Alain Gagnon;
(ix) He remembered having seen Bob Ryan work at the work sites of Industrie Vendette Ltée (as a drywall installer) with the employees of Les Pro-Poseurs Inc. I note that Mr. Vendette was unable to specify the status of Mr. Ryan when he worked with the employees of Les Pro-Poseurs Inc. at the work sites of Industrie Vendette Ltée and the name of the business for which he worked.
I note that the testimony of Mr. Vendette regarding the “situs” of the work sites where he saw the three individuals work with Mr. Séguin and the employees of Les Pro-Poseurs Inc. and regarding when and how often he saw them was generally vague and imprecise.
Testimony of Daniel Pauzé
[21] The testimony of Mr. Pauzé may be summarized as follows:
(i) He has been working for Industrie Vendette Ltée since 1994 as a project manager;
(ii) He has known Mr. Séguin since 1993;
(iii) He goes to his employer’s work sites every day;
(iv) He had seen Mr. Lanteigne do drywall installations with the employees of Les Pro-Poseurs Inc. at his employer’s work sites on a number of occasions. He is aware that Mr. Lanteigne was Mr. Séguin’s brother-in-law;
(v) He was unable to specify the status of Mr. Lanteigne when he worked with the employees of Les Pro-Poseurs Inc. at his employer’s work sites and the name of the business for which he worked;
(vi) He does not know Bob Ryan. I note that the testimony Mr. Séguin that Mr. Ryan had very often worked for Les Pro-Poseurs Inc. as an employee for a number of dubious suppliers to which Les Pro-Poseurs Inc. had awarded contracts during the periods at issue.
Testimony of Hermel Lanteigne
[22] The testimony of Mr. Lanteigne may be summarized as follows:
(i) He is 60 years old. He is practically illiterate;
(ii) He has been doing drywall installations for some 30 years;
(iii) He had to take an oral exam to obtain his trade cards given his illiteracy. He has had his trade card for some 30 years;
(iv) During the periods at issue, he worked for the following dubious suppliers: Alfa, Gypse, Rastel, Rovac and J.C.M.J. His contact at the five suppliers had almost always been an individual by the first name of Michel;
(v) He had frequently worked (as an employee) for the five dubious suppliers during the periods in question. He had been paid in accordance with the applicable orders. He received about $600 (net) per week for his 40 hours of work. Any salary received from the five dubious suppliers during the periods in question was reported as employment income. I note that the testimony of Mr. Lanteigne in that regard was flatly contradicted by the testimony of Steve Parent, an auditor with the CRA who audited the appellants. Mr. Parent testified that his audits confirmed that in 2002, 2003 and 2004, none of the dubious suppliers for which Mr. Lanteigne had worked had issued a T‑4 slip and that Mr. Lanteigne had not reported any employment income from the five dubious suppliers for those taxation years. As a result, it would be hazardous to lend Mr. Lanteigne's testimony any credence without any conclusive corroborating evidence in the form of documentation or testimony by credible witnesses;
(vi) Mr. Séguin would communicate directly with him when Les Pro-Poseurs Inc. needed a drywall installer. After reaching an oral agreement (on behalf of his employer and in his name) with Mr. Séguin with respect to the terms and conditions of the drywall contract Les Pro-Poseurs Inc. wished to award to his employer at that point in time, he would go to the work site. When he performed the contract awarded to his employer, he would call Michel and provide him with the information necessary for the dubious supplier to invoice the work he had performed for Les Pro-Poseurs Inc. Michel hand-delivered the invoice to him and in turn he hand-delivered it to Mr. Séguin. Les Pro-Poseurs Inc. immediately drew a cheque on its bank account as payment for the work, a cheque which Mr. Séguin remitted to Mr. Lanteigne, who, in turn, hand-delivered it to Michel. He explained that it was when the cheque was remitted to him that Michel wrote a cheque from the account of the dubious supplier concerned as payment for his hours of work related to the drywall installation at the work site in question;
(vii) It was not until 2007 that he learned that the five dubious suppliers had a duty to report his hours of work to the CCQ and that they als