Date: 20000110
Docket: 98-65-UI
BETWEEN :
LES SERVICES IMMOBILIERS SIMMCO D.P. INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
P.R. Dussault, J.T.C.C.
[1] This is an appeal from a decision confirming assessments for unpaid employee and employer contributions for 1993, 1994 and 1995 in respect of 168 employees and for the related penalty and interest. The notices of assessment dated January 10, 1997, were issued against Les Services Immobiliers Simmco Inc.
[2] First of all, in its Notice of Appeal, the appellant, Les Services Immobiliers Simmco D.P. Inc., appeals de bene esse, that is, for what it is worth, since it claims that it is not the one that should have been assessed and that the assessments are therefore invalid as far as it is concerned. The appellant also claims that it has the necessary legal interest to appeal since, it submits, [TRANSLATION] "Revenue Canada is continuing to take collection action against the Appellant".
[3] Second, the appellant argues in its Notice of Appeal that there is no relationship between it and the workers covered by the notices of assessment and that the employer of those individuals was actually 2755963 Canada Inc. operating as Simmco Voyages-Vacances Enr.
[4] For these two reasons, the appellant is asking the Court to allow its appeal. The appellant is not raising the issue of insurability.
[5] To begin with, it is important to note that, if I were to conclude that the assessments are not valid as regards the appellant because it was incorrectly designated in the notices of assessment, such a decision would automatically end the proceedings before this Court without it being necessary to consider the second point raised by the appellant. It was therefore agreed with counsel for the parties to proceed in two stages, the first being to hear the parties' evidence and arguments on the first point only, it being understood that there would be no need to move on to the second stage—hearing the evidence and arguments on the second point raised by the appellant—unless I found that the incorrect designation of the appellant in the notices of assessment is not fatal and does not invalidate the assessments.
[6] For the time being, I will therefore deal with the first issue only.
[7] Marie-Paule Préfontaine testified for the appellant and Yves Charette, a Revenue Canada auditor, testified for the respondent.
[8]Les Services Immobiliers Simmco D.P. Inc. was incorporated under the Quebec Companies Act on November 29, 1988. It is a property management company. Ms. Préfontaine owns a third of its shares and is also a director and the president of the corporation. The other shareholders and directors are Jacques Ducharme and Yvonne Philibert.
[9] Moreover, Ms. Préfontaine said that she is the sole shareholder and director of another corporation, 2755963 Canada Inc., operating as Simmco Voyages-Vacances Enr. It was incorporated on September 30, 1991, under the Canada Business Corporations Act.
[10] According to Ms. Préfontaine, she began using 2755963 Canada Inc. operating as Simmco Voyages-Vacances Enr. in 1993 to promote and sell time-sharing vacations. She said that, on the advice of its accountant, Les Services Immobiliers Simmco D.P. Inc. ceased operations at the end of 1993 and that Mr. Ducharme and Ms. Philibert continued the property management activities through a third corporation, 2755955 Canada Inc. operating as Gestion Simmco. Ms. Préfontaine stated that she stopped working in property management to devote herself to promoting and selling time-sharing vacations. I note in passing that the firm name declaration of 2755963 Canada Inc., which intended to operate as Simmco Voyages-Vacances Enr., was signed on October 25, 1993, by Jacques Ducharme as president (Exhibit A-2).
[11] In her testimony, Ms. Préfontaine also said that she was the person authorized to sign cheques for Simmco Voyages-Vacances Enr., although she added that Yvonne Philibert could also sign in her absence. It is thus evident that Mr. Ducharme and Ms. Philibert played some role in 2755963 Canada Inc.
[12] According to Ms. Préfontaine, the persons covered by the assessments for the 1993, 1994 and 1995 taxation years, notices of which are dated January 10, 1997, actually worked for Simmco Vacances-Voyages Enr. and thus for 2755963 Canada Inc. and not for the appellant, which, she said—as already noted—had ceased operations at the end of 1993.
[13] Yet, for the three years at issue, certain persons who were obviously providing services to the appellant, namely Francine Pilote, later replaced by Johanne Francoeur, completed T4A Summary forms in the name of Les Services Immobiliers Simmco Inc. using the employer number CJJ031306 that had been assigned to it. Furthermore, the same employer number is found on all the T4A slips issued for the three years to the some 168 workers concerned. However, the employer's name given on the slips is "Simmco" for the 1993 taxation year, "Services Imm. Simmco Inc." for the 1994 taxation year and "Services Immobiliers Simmco Inc." for the 1995 taxation year.
[14] Ms. Préfontaine also testified that the T4A Summary forms and T4A slips should have indicated 2755963 Canada Inc. as the employer. She said that the mistake was not discovered until after the notices of assessment of January 10, 1997, were received and that she herself then applied for a new employer number in order to redo all the slips issued to the workers so that they would now be in 2755963 Canada Inc.'s name.
[15] According to Yves Charette, a source deductions auditor for Revenue Canada, it was after being given an auditing assignment by the insurability unit in December 1995 that he first contacted the appellant by a letter sent to Les Services Immobiliers Simmco Inc. for Ms. Préfontaine's attention (Exhibit I-4). In that letter, he said that he intended to conduct an on-site audit of the accounting books and records relating to the wages and source deductions for 1993, 1994 and 1995. The visit to the company's offices at 5365 Jean Talon East, 4th floor, was at that time planned for December 19, 1995.
[16] Mr. Charette testified that it was at the suggestion of Sylvain Ethier, the corporation's accountant, that the planned visit was postponed until after the Christmas holidays. Mr. Charette, Ms. Préfontaine and Mr. Ethier did in fact later meet for two or three hours. Mr. Charette said that the only thing discussed at that meeting was the work done by various individuals as independent salespersons for the corporation and that Ms. Préfontaine gave him on that occasion a "sales agency" agreement (Exhibit I-5).
[17] Mr. Charette said that, after that first meeting, Mr. Ethier called him in May 1996 to set up another meeting with a Mr. Pontbriand, who was a tax specialist. During that meeting attended by Mr. Charette, Mr. Ethier and Mr. Pontbriand, Mr. Pontbriand again asserted that the salespersons were self-employed.
[18] According to Mr. Charette, it was never mentioned during these meetings that the workers were paid by another corporation. Subsequently, in July, Mr. Charette tried to obtain the corporation's books and records but was unable to since he was told that the accounting firm was then in the process of moving its offices from Longueuil to St-Léonard.
[19] Mr. Charette stated that he tried in vain to reach the accountant, Mr. Ethier, several times in September and October 1996 and that he left messages.
[20] Since his calls were not returned, Mr. Charette had the T4As issued by the corporation sent to him. Referring to the employer number CJJ031306 written on all of the T4As issued for the workers, Mr. Charette checked the information obtained by Revenue Canada at the time that number was issued. The registered corporation's name was Les Services Immobiliers Simmco Inc., and its directors were Marie-Paule Préfontaine, Yvonne Philibert and Jacques Ducharme.
[21] Since he was convinced that the workers were actually employees of that corporation and not self-employed, Mr. Charette decided to void the T4A slips and replace them with T4 slips that took into account, inter alia, the source deductions and unemployment insurance contributions required on the commissions paid to the workers by the corporation. The assessments at issue were then made against Les Services Immobiliers Simmco Inc. Mr. Charette stated as well that the same corporation had also issued some T4 slips for a few employees and that the source deductions had been remitted using the same employer number.
[22] According to Mr. Charette, at no time during that period was it mentioned by anyone whatsoever that the wrong corporation was involved or that the cheques issued to the workers had been issued by another corporation.
[23] Finally, Mr. Charette said that it was not until March 1998, after a call presumably by a representative of the appellant, that the initials D.P. were added to the corporation's name for the purposes of its registration as an employer, with the same account number still being kept.
[24] To this evidence on the first issue, I would add that the registers of the Inspector General of Financial Institutions show that no company is incorporated as Les Services Immobiliers Simmco Inc. and that nearly 50 corporations or businesses use Simmco, Simco or Symco in their names.
[25] Counsel for the appellant argued that the assessments are not valid as regards the appellant because it is not the entity referred to therein. He said that two distinctive elements—the initials D.P.—are missing from the designation used by Revenue Canada. He submitted that this is a substantial error because of the large number of corporations or businesses that use the name Simmco. He also argued that, in the case at bar, the appellant's directors are suffering harm because it is their property that is at stake when in actual fact the assessment was made against a non-existent corporation.
[26] Counsel noted that it has been held that formal errors in a notice of assessment, such as those involved, inter alia, in Greenwood Estate v. The Queen, 90 DTC 6690, and Canada (Procureur général) v. Théoret, 99 N.R. 81, do not invalidate the assessment. However, where there is a substantive error, as in Guaranty Properties Limited et al. v. The Queen, 87 DTC 5124, a case in which the notice of assessment was issued to the wrong taxpayer, it has been held that this is sufficient to invalidate the assessment. Counsel for the appellant argued that the error involved here is a substantive one related to the corporation's very name and that the assessments must be declared invalid since the notices were sent to a non-existent corporation.
[27] Counsel for the respondent emphasized that the appellant may not rely on its own turpitude by arguing that the error made is fatal even though the assessment was made on the basis of the information provided on its behalf. He acknowledged that, even though section 56 of the Unemployment Insurance Act is not as explicit as subsection 152(8) of the Income Tax Act as regards assessments being deemed valid, and even though there is no unemployment insurance provision equivalent to section 166 of the Income Tax Act, which confirms that certain errors have no effect, it was nonetheless held by Marceau J.A. of the Federal Court of Appeal in Théoret, supra, that Parliament's intention was obviously the same as regards unemployment insurance.
[28] Counsel for the respondent further noted that a taxpayer's tax liability results from the law and not from the assessment itself. In support of his arguments, he also relied on the decisions in M.N.R. v. Leung, [1994] 1 F.C. 482, The Queen v. Riendeau, 90 DTC 6076, affirmed by the Federal Court of Appeal, 91 DTC 5416, and Greenwood, supra.
[29] On this first point, it is my view that the fact that the notices of assessment of January 10, 1997, were drawn up in the name of Les Services Immobiliers Simmco Inc. rather than Les Services Immobiliers Simmco D.P. Inc., which is the appellant's full name, does not invalidate the assessments and the notices of assessment are valid as regards the appellant.
[30] First of all, the evidence shows that the assessments were made and the notices drawn up based on the information provided by the appellant's representatives when an employer account number was obtained from Revenue Canada. In fact, the notices of assessment refer to that account number, CJJ031306. The appellant's address is correct, and the appellant duly received the notices. In 1993, 1994 and 1995, employees or representatives of the appellant identified the appellant using that same account number on all the T4A slips issued to 168 workers while using on those slips three different employer names: "Simmco" for 1993, "Services Imm. Simmco Inc." for 1994 and "Services Immobiliers Simmco Inc." for 1995. During the audit by Mr. Charette of Revenue Canada, Ms. Préfontaine received the letter that he sent to Les Services Immobiliers Simmco Inc. for her attention. Moreover, she and the appellant's accountant met with Mr. Charette, and the accountant, accompanied by a tax specialist, also attended a second meeting with Mr. Charette. Discussions were held on the substance of the question relating to the workers to whom the appellant had issued T4A slips for the three years at issue without making source deductions. The issue of the correct designation of the appellant with the initials D.P. was never raised. The issue is indeed one of correct designation and not identification, since all of these elements tie the appellant and only the appellant to the workers up to the time of the assessments. No confusion is possible and this is not a case of mistaken identity, especially since it is acknowledged that there exists no company incorporated as Les Services Immobiliers Simmco Inc. In the circumstances, I believe that the appellant cannot complain that it was incorrectly designated just because the initials D.P. were not added to its name on the notices of assessment. As for the question of harm, the evidence does not establish any that is related either directly or indirectly to the omission of the initials D.P. in designating the appellant on the notices of assessment. One should not try to pull the wool over people's eyes.
[31] To end on this first point, I would simply say that the judgment in Guaranty Properties Limited et al., supra, on which counsel for the appellant relied, strikes me as totally inapplicable to the circumstances of the case at bar. The issue in that case was actually whether a reassessment for a preceding taxation year of a corporation that had amalgamated with other corporations could be made against the corporation resulting from the amalgamation when that corporation had itself already amalgamated with others, resulting in a third corporation, and even though Revenue Canada had been notified of all this. It was held that only the third corporation resulting from the second amalgamation could be assessed and that the assessment of the corporation resulting from the first amalgamation was therefore invalid. That situation has nothing in common with the circumstances of the instant case, at least as regards the first issue raised.
[32] Having decided that the assessments of January 10, 1997, were not invalid solely because of an incorrect designation of the appellant, the second issue that arises is whether the workers concerned were employees of the appellant. The hearing of the appeals therefore continued on that issue.
[33] Marie-Paule Préfontaine testified again during the hearing of that issue. Changing her earlier testimony, she now stated that a check with her accountant showed that the appellant actually ceased all its operations at the end of 1992 and not the end of 1993. The copies of the appellant's income tax returns entered in evidence are unsigned and undated. They show no income for the 1993, 1994 and 1995 taxation years (Exhibit A-3). Ms. Préfontaine said that the appellant had no employees as of January 1993. However, as we know, the appellant was identified as the employer on the T4A slips issued to the workers concerned and on the T4A Summary forms completed for those years.
[34] Ms. Préfontaine said that, starting in 1993, the appellant's property management activities were continued by 2755955 Canada Inc. operating as Gestion Simmco Enr. That corporation's shareholders were Yvonne Philibert and Jacques Ducharme. By mistake, that corporation's 1993 tax return was filed with the taxpayer identified as 2755963 Canada Inc. rather than 2755955 Canada Inc. (Exhibit I-6). According to Ms. Préfontaine, she herself asked the accountant to correct the mistake and she believes that it was corrected the following year. However, no tax return for 2755963 Canada Inc. for the 1993 taxation year was entered in evidence. Only a return for the 1995 taxation year was adduced (Exhibit I-10).
[35] As for the activities related to the sale or leasing of time-sharing units in which the 168 workers covered by the assessments at issue are said to have been involved, those activities were allegedly engaged in solely by 2755963 Canada Inc. in 1993, 1994 and 1995. That corporation, of which Ms. Préfontaine claims to have always been the sole shareholder and director, operated as Simmco Voyages-Vacances Enr. However, the firm name declaration filed with the Superior Court for the district of Montréal indicates that 2755963 Canada Inc. did not intend to start operating under that firm name until October 25, 1993 (Exhibit A-2). That declaration was signed by Jacques Ducharme, who described himself therein as president. In his testimony, Mr. Ducharme said that he signed the declaration to be accommodating, as it were, since he maintained that he was never the president or a director of that corporation.
[36] Copies of cheques used to pay the workers concerned were entered in evidence (Exhibits A-5 and I-11). Those adduced with respect to 1993 indicate that the drawer of the cheques was Simmco D.P. Inc. (G.R.V.) and that they were drawn on an account numbered 1029-952 (Exhibit A-14). In her testimony, Ms. Préfontaine explained that the initials G.R.V. stood for "Grand Réseau Vacances" (major vacation network) and that 2755963 Canada Inc. had actually used that bank account, which the appellant had opened in January 1993, for the purposes of its own activities from January to October 1993. She said that 2755963 Canada Inc. opened a new account, numbered 1032-211, in December 1993, with Simmco Voyages Vacances identified as the account holder (Exhibit A-14). All the cheques adduced as evidence for 1994 and 1995 have the name Simmco Voyages Vacances on them and were drawn on account 1032-211 (Exhibit A-5). A few cheques drawn on that account have a 1993 date (Exhibits A-5 and I-11). None of them is from before December 2, 1993.
[37] 2755955 Canada Inc. operating as Gestion Simmco allegedly used another account opened in the appellant's name for its property management activities from January to November 1993. It was account 1029-039, which was opened by the appellant in 1988. A new account was allegedly opened in 2755955 Canada Inc.'s name only in December 1993. That account was numbered 1032-203 (Exhibit A-15).
[38] Other documents were filed in evidence by Ms. Préfontaine to show that, during the years at issue, the workers concerned were employees not of the appellant but of 2755963 Canada Inc. operating as Simmco Vacances-Voyages Enr.
[39] Thus, copies of a [TRANSLATION] "sales agency agreement" signed with a number of workers regarding the selling of [TRANSLATION] "time-sharing condos" identify [TRANSLATION] "the company" running the business simply as "Simmco Vacances Enr." (Exhibit A-7). The dates on all of the documents are in 1994, 1995 or 1996. None of the documents has a 1993 date.
[40] Copies of [TRANSLATION] "time-sharing lease" agreements were also adduced as evidence (Exhibit A-6). In those documents, the lessor is identified as "Simmco Vacances Enr." All of the documents are dated 1994 or 1995. Once again, no document was filed for 1993 to show that the workers were providing services to 2755963 Canada Inc. rather than the appellant up to the end of October 1993.
[41] Moreover, to add to the confusion, the names "Simmco Inc." and "Simmco Service Immobilier Conseil" are used in certain other documents entered in evidence (Exhibits I-8 and I-9). According to Ms. Préfontaine, the name "Simmco Inc." was used to [TRANSLATION] "represent" both 2755955 Canada Inc. and 2755963 Canada Inc. in a lease for premises used by those two corporations, although no company had been incorporated under that name. As regards the name "Simmco Service Immobilier Conseil", she said that it was merely a [TRANSLATION] "logo" used on 2755963 Canada Inc.'s stationery. She said that she did not know whether 2755955 Canada Inc. also used the same stationery.
[42] Mr. Ducharme's testimony does not really clarify the situation, apart from the fact that he too maintained that the appellant ceased operations in 1992 and that, as of 1993, 2755955 Canada Inc. (Gestion Simmco) and 2755963 Canada Inc. (Simmco Vacances-Voyages Enr.) each engaged in different activities with each using—starting in January 1993—a different bank account opened in the appellant's name. This lasted until November 1993 in the case of the former and October 1993 in the case of the latter. He said that each corporation then opened its own bank account. The few employees who worked managing the two corporations were paid by each of them. However, a single cheque was usually issued for source deductions, and the corporation that had paid was reimbursed for the other's share (Exhibit I-12).
[43] Lise Legault, who was in charge of the time-sharing vacation contracts and sales team under Ms. Préfontaine, also testified for the appellant. She said that she worked for Simmco Vacances. However, she admitted that she had received cheques with the name "Simmco D.P. Inc. (G.R.V.)" on them (Exhibit I-11). She said that to her it was the [TRANSLATION] "same thing".
[44] What can be concluded from this imbroglio? The repeated errors and the use of different names to designate a single entity are puzzling, to say the least.
[45] Although the appellant issued T4A slips and completed T4A Summary forms on which it identified itself, under different names, as the employer of the workers concerned, the documents adduced as evidence prove on a balance of probabilities that the workers' connection was with 2755963 Canada Inc. (Simmco Vacances-Voyages Enr.) rather than the appellant in 1994 and 1995.
[46] Things seem to me to be much less clear for the 1993 taxation year, at least as regards the period from January 1 to November 30, that is, the period during which the workers were paid by cheques drawn on one of the appellant's accounts.
[47] Although the appellant did not report any income for 1993 and it was asserted that it engaged in no activities, the fact remains that it had two bank accounts open in its name in which significant amounts were deposited and on which several hundreds of cheques were drawn, inter alia to pay the workers concerned. It is thus difficult to conclude that the appellant engaged in no activities during that period, even though the return that was filed indicates the contrary. It may be thought that the earnings from its activities from January to November 1993 may have been divided up between 2755955 Canada Inc. and 2755963 Canada Inc. after the fact on the basis of the property management and time-sharing vacation sales activities as well as the use of different bank accounts.
[48] There are no documents that make it possible to associate the workers with a corporation other than the appellant between January 1, 1993, and the end of November that year. There is no evidence that it was 2755963 Canada Inc. that used the initials G.R.V. to identify itself. On the contrary, the appellant itself was identified in that fashion on the cheques issued to the workers until November 1993.
[49] In actual fact, the documents adduced as evidence indicate that the first sign of activity by 2755963 Canada Inc. or the first use of the firm name Simmco Voyages-Vacances Enr. was precisely in the firm name declaration signed by Jacques Ducharme on October 25, 1993.
[50] I therefore consider that the evidence adduced by the appellant is insufficient to show on a balance of probabilities that the workers paid by cheques drawn on its account from January to November 1993 were not its employees.
[51] As a result of the foregoing, the appeal from the decision is allowed and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the workers concerned were not employees of the appellant for the period from December 1, 1993, to December 31, 1995.
Signed at Ottawa, Canada, this 10th day of January 2000.
"P.R. Dussault"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 28th day of November 2000.
Erich Klein, Revisor