Case information

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Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Judgments and orders – Execution – Lifting of corporate veil – Procedural fairness – Audi alteram partem – Motion by third party to oppose seizure in execution – Seizing creditor alleging that third party was debtor’s alter ego and, as legal person, could not set up juridical personality to dissemble fraud – Whether art. 317 of Civil Code of Québec could be relied on at stage of opposing seizure without breaching procedural fairness.

From 1997 to 2000, a restaurant was operated by 9046 9262 Québec inc., of which Rong Fu Chen was the majority shareholder and president. In 2000, the restaurant was sold to 9087 3118 Québec inc. (“9087”), of which Mr. Chen’s father in law was the majority shareholder and president. Mr. Chen worked at the restaurant as a cook. In 2004, Revenu Québec began investigating and auditing 9087 for 2001 to 2004. In April 2005, 9087 sold the restaurant to the applicant 9153 8629 Québec inc. (“9153”), of which Mr. Chen was a minority shareholder and director. In October 2005, Revenu Québec obtained a judgment against 9087 for $399,877. In April 2006, Revenu Québec obtained a writ of execution against 9087. In January 2007, the tax authorities seized the movable property of the restaurant, which was then being operated by the applicant 9153. A motion was filed by 9153 to oppose the seizure on the ground that it owned the property. Revenu Québec argued that 9153 was 9087’s alter ego, that the two companies formed a single enterprise, that there was fraud and that art. 317 C.C.Q. prevented 9153 from setting up its separate personality against it.

The Superior Court allowed the motion to oppose. Tôth J. found that it was clear from the evidence that the sale of the restaurant to 9153 in 2005 had been fraudulent. However, he concluded that the tax authorities could not seize 9153’s property because 9153 had not been condemned solidarily with 9087 in the proceedings against 9087. The Quebec Court of Appeal allowed the appeal, finding that art. 317 C.C.Q. prevented 9153 from setting up its separate juridical personality to dissemble its fraud. According to the Court, the fact that the debate on 9153’s nature had taken place during proceedings for seizure in execution rather than in an action brought by the tax authorities against 9153 was of no consequence; the opposing party could assert all its rights during the opposition and the tax authorities bore the burden of proving that art. 317 C.C.Q. should be applied.