Hunter J.: — The taxpayer, Marie Steele (“Steele”) applies for a review of the jeopardy order obtained by the Minister of National Revenue (the “Minister”) on October 24, 1995. The Minister obtained the order pursuant to subsection 225.2(2) of the Income Tax Act, R.S.C. 1985, c. l(5th Supp.) as amended. Steele has the right pursuant to subsection 225.2(8) to apply for a review of the jeopardy order and subsection 225. 2(11) states that the judge hearing the review application:
... shall determine the question summarily and may confirm, set aside or vary the authorization and may confirm, set aside or vary the authorization and make such other order as the judge considers appropriate.
In Minister of National Revenue v. Landru, (sub nom. Landru v. Canada) [1993] 1 C.T.C. 93, 107 Sask. R. 1 (Q.B.), Geatros J. Considered a similar application and following a review of the relevant authorities, he held that the taxpayer has the initial burden to put evidence before the court that there are reasonable grounds to doubt that the test required in subsection 225.2(2) has been met but that the ultimate burden is on the Crown. The court considering the review of the order may consider both the evidence on the original application under subsection 225.2(2) and any evidence presented by the parties at the review hearing. The test that must be satisfied is that on a balance of probability, the evidence leads to the conclusion that it is more likely than not than collection would be jeopardized by delay.
Primarily, there are four transactions that cause the Minister to believe that Steele would waste, liquidate or transfer assets to jeopardize collection of the debt (by reason of the reassessment delivered coincident with the jeopardy order) through her inability to pay. The four alleged transactions are:
1. the transfer of substantially all the assets of the corporation Hotshot Transporter Services Ltd. (“Hotshot”) of which Steele is the sole shareholder and director and the assignment of the payments to Steele’s husband who is a recently discharged bankrupt;
2. the sale of the motor home;
3. the transfer of the jeep to John Steele (the husband) in September, 1995; and
4. the conduct of John Steele during the seizure by the deputy sheriff pursuant to the jeopardy order.
With respect to each of these transactions Steele deposes that in 1994 on the advice of the accountant for Hotshot to her and as a result of this transfer, Steele paid an additional $9,000 in income tax for the 1994 year. In August 1995, Steele sold the motorhome and received a cheque for $61,000 jointly payable to John Steele and the Bank of Nova Scotia, which held a security interest in the motorhome. Of the $61,000, the Bank of Nova Scotia was repaid $47,500. With the consent of the Bank of Nova Scotia, the remaining sale proceeds were released to the Steeles and $10,000 of the sale proceeds were paid to the Trustee in Bankruptcy of the estate of John Steele. John Steele had received a conditional discharge order in February, 1995, Steele registered the jeep in the name of John Steele so as “to reflect the fact that John Steele was the primary user of the vehicle”.
Counsel for Steele submits that the sale of the motorhome is irrelevant because the bank held the security interest in the motorhome and that it was only the largeness of the bank which allowed John Steele to retain $10,000 of the sale proceeds so that he could obtain his absolute discharge. Therefore, because of the security interest these funds would not have been available to the Minister in any event. With respect to the transfer of the jeep, Steele submits that this was non-arm’s length transaction and therefore the Minister can utilize section 160 of the Income Tax Act to effect collection of taxes owing, and, therefore, the asset has not been put out of the reach of the Minister.
The assets of Hotshot were sold in July, 1995, for $150,000 payable at $2,500 per month for 60 months. Hotshot then retained John Steele to provide it with a comprehensive business plan which would assess the viability of a business similar to Hotshot in British Columbia and Ontario. In October, 1995, Hotshot assigned the monthly sale proceeds of $2,500 to John Steele for compensation payable to him for providing this business plan. Counsel for Steele submits that the transactions with respect to Hotshot are irrelevant because Steele is the sole shareholder and director, but the payments for the sale of the assets were not being made personally to Steele. There is a services contract between John Steele and Hotshot which evidences the assignment of the sale proceeds to John Steele, as contractor, for the preparation of the comprehensive business plan.
The Minister files further affidavits in reply. The Minister submits that even though the transactions are non-arm’s length, they are relevant because they show that Steele is disposing of assets. Further, the Minister submits that the transactions by hotshot are relevant because following the sale of the assets and the assignment of the proceeds of the sale to John Steele, the value of the shares is greatly diminished. This again, the Minister argues, shows that Steele is engaging in transactions which may jeopardize the collection of amounts which in the final result may be owing to the Minister and that any further delays will jeopardize the collection process.
James Wytosky, a tax collection officer, states that based on information provided to him in April 1994 by John Steele that Hotshot has carried on business using approximately 50 leased operators. Wytosky consulted with a representative of E.M. Brown and Associates, a consulting firm in Saskatoon, and he was advised that the estimated fair market value of such a business plan for a transportation company that conducts operations on an international basis like Hotshot would be at its highest, worth $6,000. The Minister argues that the assignment of the proceeds of the sale of the assets of Hotshot to John Steele is in effect the assignment of the only valuable corporate asset and accordingly Steele’s shares become worthless once the corporate assets are transferred. The Minister argues that this is a factor to be considered in deciding whether the jeopardy order should remain in effect.
The Minister filed motor vehicle registration searches which indicate that the jeep and motorhome were never registered in the name of Hotshot but were always registered at motor vehicles in the personal name(s) of Steele or her husband. The Minister submits that even if these chattels were subject to the bank’s security interest, that the sale of the motorhome and the transfer of the registration of the jeep into John Steele’s name, indicate an intention by Steele to move assets out of her name which will impede the collection process for any amount of debt that is finally ascertained that Steele owes to the Minister.
The Minister seized the books and records of Steele and 315107 Saskatchewan Ltd. Pursuant to subsections 487 and 489 of the Criminal Code, R.S.C. 1985, c. C-46 in March, 1995 and Steele had notice of investigation of Steele and the corporation. The Minister submits that Steele knew she was being investigated and this together with the transfer of assets to John Steele since his discharge in bankruptcy, is another indic- tor that Steele is attempting to move assets out of her name and that this may jeopardize the collections of any amounts finally determined to be owed by Steele to the Minister.
The last complaint is that when Steele was served with the jeopardy order, that during the course of the sheriff seizing assets, John Steele drove away with a large cargo trailer before the trailer could be examined for contents. When the trailer was later delivered to the sheriff at the court house, the trailer was empty. The Minister wants this Court to infer that there were assets in the trailer that were subsequently hidden by John Steele.
The net result based on all the evidence filed is that prior to these transactions, Steele had an interest in the jeep and motorhome, both which were subject to security interest registered by a bank. She is the sole shareholder and director of Hotshot, which corporation had assets worth at least $150,000. Since these transactions, Steele no longer has a jeep registered in her name and the motorhome has been sold and from the proceeds of $61,000 the sum of $47,500 was used to reduce debt. The corporate asset of $150,000 has been assigned to John Steele. However, as these transactions are non-arm’s length the Minster has no concern with respect to collection because of the effect of section 160 of the Income Tax Act.
For all these reasons, I am not satisfied on the evidence that it is more likely than not that collection would be jeopardized by delay. Accordingly, pursuant to subsection 225.2(11) the jeopardy order is set aside.
The jeopardy order was set aside.