Executive Summary: Key Legal and Evidentiary Issues

• Fraudulent tax refund of nearly $5 million was obtained through improper tax filings and subsequently diverted to personal use

• Corporate veil between Distribution Carflex Inc. and its sole shareholder Yvan Drapeau was lifted due to fraudulent manipulation of corporate structure

• Property transfer from Drapeau to 9488-0846 Québec Inc. was declared inopposable to the Crown as it constituted a gratuitous act while the debtor was insolvent

• Affidavit evidence from the opposing party (Malo) was largely inadmissible for containing hearsay, opinion, and matters outside the affiant's knowledge as administrator

• Presumption of fraudulent intent under Article 1633 CCQ applied given the gratuitous nature of the transfer and the debtor's insolvency

• Provisional charging order on the Montreal condominium property was made permanent to secure the Crown's tax debt

The fraudulent tax scheme and its execution

This case originates from a series of tax maneuvers orchestrated by Yvan Drapeau through Distribution Carflex Inc., a company of which he was the sole shareholder and administrator. On February 17, 2023, Carflex filed an amended tax return for its 2021 fiscal year, artificially declaring $32,875,000 in capital gains, of which $16,437,500 was taxable. Following this amended declaration, the CRA issued an assessment on February 22, 2023, showing Carflex owed $7,340,411.50 in taxes and had a refundable dividend tax balance of $4,998,491. The same day the assessment was issued, Carflex paradoxically opposed its own declaration, claiming an "error" had occurred.

Despite this opposition, Drapeau proceeded on March 21, 2023, to file another declaration for the 2022 fiscal year ending June 30, 2022, reporting only $1,000 in income and no expenses while declaring dividends of $13,039,500. This triggered the refund of the refundable tax balance, with the CRA immediately establishing an assessment for 2022 with a credit balance of $4,997,433.72. On February 8, 2023, Drapeau had opened a TD Bank account in the name of 9462-7759 Québec Inc., another company where he was the sole administrator and shareholder. On March 16, 2023, Drapeau modified Carflex's banking profile with the CRA to add this TD account. On March 27, 2023, the CRA deposited $4,997,433.72 into this account.

Rapid dissipation of funds and property acquisition

On the same day the refund was deposited into the TD account of 9462, March 27, 2023, Drapeau made an electronic transfer of $1,450,000 to notary Louis Dumont to cover part of the purchase price of a condominium at 1010 rue de la Commune Est, unit 705, Montreal, which he acquired on March 31, 2023, for $2,035,000. Additional disbursements included four certified cheques totalling $125,000, dated April 1, 2, and 4, 2023, made to Konstantinos Giannou and cashed on April 3 and 4, 2023; a cheque for $49,895.10 dated April 4, 2023 to Gaétan Poitras; and transfers of $68,545 on March 31, 2023, $96,382.50 on April 3, 2023, and $54,688 on April 4, 2023.

On April 5, 2023, upon realizing the refund had been deposited into 9462's account, the CRA communicated with TD Bank to prevent the remaining funds from being used or dispersed. That same day, Drapeau, as president of 9462, requested TD Bank to transfer $3,150,000 to notary Patricia Charette in trust, which TD Bank refused following the CRA's request.

On March 31, 2023, Drapeau incorporated 9488-0846 Québec Inc., of which he was then the sole administrator and president. Three days later, on April 3, 2023, he transferred the property to this newly created company for "good and valuable considerations already paid," though no actual money changed hands. The company had no bank account, no commercial activity, and no income.

The Crown's recovery proceedings and the contested convention

On April 14, 2023, the CRA accepted Carflex's opposition and proceeded to reassess the refund. The same day, the Minister issued a certificate confirming Carflex's debt of $5,020,175.78, with daily compound interest at the prescribed rate under the Income Tax Act from April 14, 2023 until payment. This certificate was registered with the Federal Court on April 19, 2023, and is deemed to be an enforceable judgment of the Court under section 223 of the Income Tax Act. On April 17, 2023, the Attorney General of Canada commenced proceedings to be authorized to execute certain collection measures against Carflex under paragraphs 225.1(1)(a) to (g) of the Income Tax Act (file T-808-23). On April 19, 2023, Justice Gascon granted an ex parte provisional charging order on the property, which was published on April 20, 2023.

On April 21, 2023, Drapeau transferred the administration of 9488 to Jean-François Malo, who became the sole administrator and president. The shareholding of 9488, initially held entirely by Fiducie Mina, was transferred to Fiducie Annie, of which Malo's spouse, Annie Deslongchamps, is the settlor and one of the beneficiaries along with the children born and to be born of their union. The modification made on April 21, 2023, indicated that Malo had become president in place of Drapeau on April 7, 2023.

The opposition to the charging order came exclusively from 9488. Malo submitted an affidavit dated May 24, 2023, signed as president of 9488, accompanied by nine exhibits including a document entitled "Convention de reçu, transaction et quittance," dated and allegedly signed on April 3, 2023. This Convention purportedly showed that in exchange for advances allegedly made by Fiducie Annie to Drapeau totalling $640,336.47 and an undertaking to repay part of the purchase price paid by Drapeau, namely $1,300,000, the shares of 9488 would be transferred to Fiducie Annie, and the presidency of 9488 would be transferred to Malo.

Evidentiary problems with the opposing party's case

The Court found significant portions of Malo's affidavit inadmissible. The Attorney General of Canada requested that the affidavit be rejected on the ground that 24 of its 38 paragraphs violated Rule 81 of the Federal Courts Rules because they included opinions rather than facts and/or reported facts of which Malo did not have knowledge specifically in his capacity as administrator of 9488.

Having signed the affidavit as president of 9488 and not as trustee of Fiducie Annie, Malo could not submit in evidence facts of which he did not have knowledge in that capacity. Paragraphs 2, 5, 6, 7, 8, 9, 10, 11, 13, 14, 17, 18 (in part), 20, 21, 22, 23, 27, and 28 submitted facts of which only Drapeau, personally or in his capacity as officer of Carflex, 9462, or 9488 at the time of the facts in question, or Fiducie Annie and its agents, could have knowledge and introduce in evidence. Additionally, paragraphs 3, 4, 13, 16, 19, 20, 21, 32, 35, and 37 were only opinion or argument.

The alleged Convention presented numerous credibility issues. It was not signed before an officer of justice, such as a notary, even though it was allegedly signed on the same date as the property transfer deed, which was signed before a notary. Chronological inconsistencies appeared throughout the document. In the property transfer deed, it stated the transfer was for "good and valuable considerations already paid," but in the Convention, it stated the transfer "is made for the considerations that follow," suggesting the Convention and transfer were made at the same moment. Yet the Convention also indicated the transfer "will therefore be made for the total sum of $1,940,336.47," suggesting it would occur in the future. Furthermore, while supposedly dated April 3, the Convention provided that Drapeau undertook to pay co-ownership fees "from the monthly payment that will become due and payable on April 1, 2023."

During his cross-examination, Malo undertook to produce the original of the Convention but subsequently stated: "I have not found the original." The affidavit also contradicted the text of the Convention by stating that Fiducie Annie undertook to reimburse Drapeau $1,300,000 for the balance of the purchase price, whereas according to the Convention, it was 9488 that was to reimburse this sum.

Regarding questions about the source of funds allegedly advanced by Fiducie Annie, Malo did not respond. He raised a new objection never previously argued: the existence of confidentiality agreements with a third party. The Court noted that Malo is well known to the courts and has been the subject of numerous proceedings. In particular, in the decision Crédit Transit inc. c Chartrand, 2023 QCCS 1712, Justice Synnott wrote that Malo's statements under oath proved to be false and that "Malo is prepared to do or say anything and to lie, if it can serve him" and that "the Court gives him no credibility."

Lifting of the corporate veil

Article 317 of the Civil Code of Québec provides that the juridical personality of a legal person may not be invoked against a person in good faith where it is invoked to mask fraud, abuse of rights, or contravention of a rule of public order. The notion of fraud under Article 317 includes "the act accomplished in bad faith with the intention of harming the rights or interests of others or of escaping the application of a law" and "the act accomplished by an insolvent debtor with a view to defrauding his creditors."

The CRA acted in good faith, which was not contested. Drapeau used Carflex to mask fraudulent tax maneuvers so that Carflex could obtain a refund of $4,997,433.72 to which it was not entitled. He then ensured the refund was deposited in the bank account of another company he controlled, and personally appropriated a significant portion of the refund, notably to purchase the property, which he rapidly transferred to 9488, a company of which he was then the sole administrator. Neither Carflex nor Drapeau contested the lifting of the corporate veil.

The inopposability action under Quebec civil law

Articles 1631 to 1635 of the Civil Code of Québec govern the action in inopposability. Five criteria must be met: (1) a claim prior to the impugned act, (2) a claim that is certain, liquid, and exigible, (3) an action brought within one year of the creditor's knowledge of the prejudice resulting from the impugned act, (4) an impoverishment of the debtor by the transaction that removes from his patrimony an asset that could have been seized, and (5) the debtor's intention to defraud, which is presumed if the debtor is insolvent because of the transfer.

The company 9488 admitted that criteria (1) and (3) were met, namely that the Crown's claim was prior to the transfer deed of April 3, 2023, and that the Attorney General acted within one year of learning of the prejudice. The Court found the Crown's claim was certain at the time the action was instituted on April 19, 2023, since as of April 14, 2023, it had been established by an assessment deemed valid under subsection 152(8) of the Income Tax Act, which was never contested by Carflex. The claim was liquid and exigible, established by the certificate deemed to be an enforceable judgment of the Court.

Regarding prejudice, the Court found that since 9488 did not contest the lifting of the corporate veil, Carflex and Drapeau are a single person from the perspective of their patrimony, jointly and severally responsible for the tax debt. Even accepting the terms of the Convention, 9488 itself recognized an impoverishment of $94,663.53. Additionally, the combined patrimony of Drapeau and Carflex was diminished by at least $369,142.25: $304,741.25 for taxes on the purchase of the property (GST of $101,750 plus QST of $202,991.25) and $64,401 for transfer duties.

Application of the presumption of fraudulent intent

Article 1633 CCQ poses an irrebuttable presumption of intention to defraud when the impugned act was made gratuitously while the debtor was insolvent or was attempting to render himself insolvent. For an act to be classified as gratuitous or onerous, the Court must go beyond appearances and search for its substance and effects. The notion of gratuitous character includes not only an act made without any consideration but also one for which the consideration is markedly inferior to the benefit received.

The Court determined the transfer was gratuitous. The only consideration allegedly provided by 9488 was a debt acknowledgment for $1,300,000, contradictorily attributed sometimes to 9488 according to the Convention, and sometimes to Fiducie Annie according to Malo's affidavit. This represented a significant disproportion from the property's $2,035,000 purchase price. Taking into account the total cost of acquisition including the purchase price and taxes, totalling $2,404,141.25, the disproportion was comparable to cases where Quebec courts have found transfers to be gratuitous.

Evidence of insolvency was established. As of April 14, 2023: Carflex and Drapeau owned two 2022 Jeep vehicles, both subject to third-party rights registered in the RDPRM; Carflex owned no immovable property; Carflex was involved as a defendant in two civil suits, including one where it was sued by the Business Development Bank of Canada; Carflex had a commercial default score of 4, corresponding to high risk of delay; Carflex had not filed its financial statements for fiscal years ending June 30, 2021 and 2022 with the CRA; Drapeau's credit file at Equifax had been the subject of no fewer than 26 access requests between March 15, 2022, and April 12, 2023; and no slips concerning registered savings such as a Tax-Free Savings Account had been filed by Drapeau since 2020. Fiducie Annie itself, in proceedings before the Quebec Superior Court, alleged that Drapeau had no known assets other than shares in 9462. Neither Carflex nor Drapeau contested these findings.

The Court held that even if the transfer had been made for valuable consideration, the rebuttable presumption under Article 1632 CCQ would apply because the insolvency of Carflex and Drapeau, actual or impending, is presumed to be known to 9488, since Drapeau was also the administrator of 9488 at the time of the transfer. According to the transfer deed of April 3, 2023, Drapeau appeared before the notary both in his personal capacity as transferor and as sole representative of 9488, the transferee.

Ruling and outcome

The Federal Court granted the Crown's motion in its entirety. The provisional charging order was made permanent. The Court declared the corporate veil between Carflex and Drapeau lifted, rendering them jointly and severally liable for the tax debt. The property transfer was declared inopposable to the Crown, authorizing the Minister to use the property to satisfy her claim as if the judgment debtor were the owner. The Court rejected 9488's request for a declaration that the charging order does not modify its rights regarding the sum of $592,917.14, noting that the proof that Carflex and Drapeau owe this sum to 9488 was not demonstrated, and the only evidence submitted, which was itself unconvincing, was that Drapeau would owe this sum to Fiducie Annie, which is not a party to the proceedings. Costs of $13,410.25 were awarded jointly against Carflex and 9488. As of September 23, 2025, the outstanding tax debt stood at $2,452,158.24.