Date: 19980626
Docket: A-725-97
CORAM: MARCEAU, J.A.
LINDEN, J.A.
ROBERTSON, J.A.
IN THE MATTER OF an Application under Section 28 of the Federal Court Act
AND IN THE MATTER OF a Decision of the Tax Court of Canada made pursuant to the provisions of the Excise Tax Act
BETWEEN:
P.L. CONSTRUCTION LTD.
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
Heard at Vancouver, British Columbia on June 26, 1998
Judgment delivered at Vancouver, British Columbia on June 26, 1998
REASONS FOR JUDGMENT BY: LINDEN, J.A.
Date: 19980626
Docket: A-725-97
CORAM: MARCEAU, J.A.
LINDEN, J.A.
ROBERTSON, J.A.
IN THE MATTER OF an Application under Section 28 of the Federal Court Act
AND IN THE MATTER OF a Decision of the Tax Court of Canada made pursuant to the provisions of the Excise Tax Act
BETWEEN:
P.L. CONSTRUCTION LTD.
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
(Delivered orally from the Bench on
Friday, June 26, 1998, at Vancouver, B.C.)
LINDEN, J.A.
1� The only issue in this application for judicial review is whether the Tax Court Judge erred in affirming penalties imposed on the taxpayer pursuant to Section 285 of the Excise Tax Act, R.S.C. c. E-13. There were two other issues decided by the Tax Court Judge, the matter of the assessment of the fair market value of the apartment building involved and the matter of certain input tax credits, but these were not challenged on this application.
2� Section 285 of the Act reads as follows:
285. Every person who knowingly, or under circumstances amounting to gross negligence in the carrying out of any duty or obligation imposed by or under this Part, makes or participates in, assents to or acquiesces in the making of a false statement or omission in a return, application, form, certificate, statement, invoice or answer (in this section referred to as a "return") made in respect of a reporting period or transaction is liable to a penalty of the greater of 9$250 and 25% of the amount, if any, by which
(a) in the case of net tax for a period,
(i) the amount of net tax of the person for the period
exceeds
(ii) the amount that would be the net tax of the person for the period if the net tax were determined on the basis of the information provided in the return;
(b) in the case of tax payable for a period or transaction,
(i) the amount of tax payable by the person for the period or transaction exceeds
(ii) the amount that would be the tax payable by the person for the period or transaction if the tax were determined on the basis of the information provided in the return; and
(c) in the case of an application for rebate,
(i) the amount that would be the rebate payable to the person if the rebate were determined on the basis of the information provided in the return
exceeds
(ii) the amount of the rebate payable to the person.
The sole issue is whether the Tax Court Judge was correct in refusing to set aside the assessment of penalties. In explaining his decision, the Tax Court Judge was extremely cryptic:
"As to the penalties it is not difficult to realize that Mr. Loewen did not follow the provisions of the Excise Tax Act dealing with GST. There were several discrepancies in the reporting including the omission of many dollars of sales and as a result he assented to or acquired [sic] in the making of false statements or omissions in the returns for the period under appeal."
3� The forceful argument of the applicant essentially was that the Tax Court Judge failed to articulate the appropriate definition of gross negligence, was wrong in concluding that the facts supported such a finding and failed to link the conduct of Mr. Loewen, the accountant, to Mr. Letkeman, the sole shareholder of the company and its directing mind. On behalf of the Crown, it was suggested that although there was a "paucity of reasons", they were sufficient to indicate that the Tax Court Judge understood the principles involved as well as the evidence in the case. Consequently, it was argued that the decision be affirmed.
4� We are all of the view that, despite the skimpiness of the reasons, we should not interfere with the decision of the Tax Court Judge.
5� It is not necessary for Trial Judges "to demonstrate that he or she knows the law and has considered all aspects of the evidence... Trial Judges are presumed to know the law with which they work day in and day out. If they state their conclusion in brief compass, and these conclusions are supported by the evidence, they should not be overturned....". (See R. v. Burns, [1994] 1 S.C.R. 656 at 664 per McLachlin J.)
6� The reasons given in this case were certainly brief, but they were sufficient to indicate that the Tax Court Judge impliedly found that the Goods and Services Tax Return was filled out in a grossly negligent way. The Tax Court Judge, near the opening of his reasons, stated that one of the issues involved was "whether the appellant was grossly negligent pursuant to section 285 of the Act.". He mentioned the "discrepancies", which included the "omission of many dollars of sales", according to the evidence $385,224 instead of $3.5 million dollars. While there was evidence that there was no intention to defraud by understating the sales by approximately 90 per cent, the huge disparity due to the completely unacceptable method chosen to fill out the form and to calculate the amount of G.S.T. owing was obviously thought to be far below the standard required by the Act. There was sufficient evidence to support this finding by the Tax Court Judge.
7� Furthermore, it is plain from the reasons that the Tax Court Judge was of the view that Mr. Loewen, the accountant, was the directing mind of the taxpayer for purposes of taxation. Hence, although he did not expressly say so, the Tax Court Judge impliedly applied the case of The Queen v. Columbia Enterprises Ltd. (1983), D.T.C. 5247 in making the taxpayer responsible for the conduct of the accountant Mr. Loewen, who was the authorized representative of the company, who signed the form and who was relied upon totally by Mr. Letkeman. The evidence was sufficient to support this conclusion.
8� Consequently, this application should be dismissed.
(Sgd.) "A.M. Linden"
J.A.
Vancouver, British Columbia
June 26, 1998
FEDERAL COURT OF APPEAL
Date: 19980626
Docket: A-725-97
BETWEEN:
P.L. CONSTRUCTION LTD.
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DATED: June 26, 1998
COURT NO.: A-725-97
STYLE OF CAUSE: P.L. CONSTRUCTION LTD.
v.
HER MAJESTY THE QUEEN
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: June 26, 1998
REASONS FOR JUDGMENT OF THE COURT BY: LINDEN, J.A.
CONCURRED IN BY: MARCEAU, J.A.
ROBERTSON, J.A.
APPEARANCES:
Ms. Joanne Glover for Applicant
Ms. Patricia Babcock for Respondent
SOLICITORS OF RECORD:
Thorsteinssons
Vancouver, BC for Applicant
Morris Rosenberg for Respondent
Deputy Attorney General
of Canada