Fournier v. Agence du revenu du Québec, 2018 QCCQ 786

On August 15, 2007, Mr. Fournier sold land to a family corporation (“Canada Inc.”) for a purchase price that was satisfied by the issuance by it of a non-interest-bearing promissory note. Canada Inc. then started work on a condo development on the property. Mr. Fournier and his wife opted to receive a particular condo in the development pursuant to a preliminary purchase agreement dated March 18, 2009, and opted to pay various “extras” for the construction of their unit to an enhanced standard. After taking possession in December 2010 for use of the condo as their personal residence, they paid the condo-related utilities and municipal taxes personally.

Due to lender requirements, it was not possible to transfer legal ownership to Mr. Fournier in 2010, but on July 31, 2013, an executed notarial deed provided for the transfer of ownership of the condo unit by Canada Inc. to him. In 2017, apparently after an ARQ assessment of him for a taxable benefit under the Quebec equivalent of s. 56(2) respecting the rent-free use of the condo unit viewed as a corporate asset (of Canada Inc.) by him and his wife for most of the period between December 2010 and July 2013, the parties amended the July 2013 notarial deed through a deed of correction which indicated that Mr. Fournier became the owner of the condo on December 1, 2010.

Before concluding (at para. 107, TaxInterpretations translation) that “this correcting notarial deed achieved an accurate reflection of what the parties wished to write down from the outset, being that which corresponded to reality,” so that the ARQ’s taxable benefit assessments respecting the December 2010 to July 2013 period were to be vacated, Guénard JCQ noted that the documentary evidence was mixed (a hypothec granted on the property had named Mr. Fournier and his wife as the grantors) and that the credible testimony of Mr. Fournier indicated that the July 31, 2013 deed was prepared in the standard form used in other condo closings rather than to reflect the parties’ intention, as evidenced inter alia by the bearing of the condo expenses from December 2010 onwards personally.

After quoting from Jean Coutu, he stated (at para. 135):

The amended notarial deed in this case did not rewrite history.

The ARQ assessed the taxpayer and his wife for taxable benefits for a period of approximately 2 ½ years on the alleged basis that during that period they occupied on a rent-free basis a condo that was owned by a non-arm’s length corporation. (Along with many other missing key facts, including the role of the taxpayer’s wife, the judgment did not describe the corporation’s ownership or why the taxable benefit was assessed under the Quebec equivalent of s. 56(2) rather than s. 15(1).) Apparently well after these assessments, the taxpayer entered into a “correcting” notarial deed with the corporation to move back the date of the transfer of ownership of the condo unit to him from the corporation from the end to the beginning of this 2 ½ year period.

Guénard JCQ found (at paras. 135, 107 and 113) that this amendment “did not rewrite history” but instead “achieved an accurate reflection of what the parties wished to write down from the outset” in light of convincing testimony of the taxpayer that it was intended that he be the owner “from Day 1,” which was corroborated by him and his wife having borne the utilities and municipal taxes during the 2 ½ year period, and by a hypothec in which the taxpayer was named as the grantor. No taxable benefit was applicable.