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Docket: 2002-2070(GST)G |
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BETWEEN: |
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GEORGE PEARSON, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
____________________________________________________________________
Appeal heard on February 16, 2004 at Calgary, Alberta
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Before: The Honourable Justice Gordon Teskey |
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Appearances: |
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Counsel for the Appellant: |
Jonathan D. Warren |
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Counsel for the Respondent: |
Margaret McCabe |
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JUDGMENT
The appeal from a third party assessment of goods and services tax made pursuant to the Excise Tax Act, Notice of which is dated May 1, 2001, is allowed, with costs, and the assessment is vacated, in accordance with the attached Reasons for Judgment.
Signed at Toronto, Ontario, this 9th day of March, 2004.
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"Gordon Teskey" |
Teskey, J.
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Citation: 2004TCC182 |
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Date: 20040309 |
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Docket: 2002-2070(GST)G |
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BETWEEN: |
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GEORGE PEARSON, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
REASONS FOR JUDGMENT
Teskey, J.
[1] The Appellant appeals a third party assessment, notice of which is dated May 1, 2001, assessing George Pearson Sr. ("George Sr.") as a director of 358747 Alberta Limited ("358"), which had failed to remit Goods and Services Tax ("GST"), and consequently George Sr. had been assessed for the failed remittances.
Issue
[2] The only issue before the Court is whether George Sr. was a de jure or de facto director of 358 on or after May 1, 1999.
[3] George Sr. alleges that he was not a de jure or a de facto director on May 1, 1999 or at any time thereafter, and thus the assessment was statute-barred.
[4] George Sr. gave evidence on his own behalf and his son, George Pearson Jr. ("George Jr."), also gave evidence, having been called to the witness stand on behalf of George Sr.
[5] Mary Pearson ("Mary") gave evidence for the Respondent.
[6] The evidence of George Sr., George Jr. and Mary was most unsatisfactory. There are major conflicts among their testimonies. George Sr. and Mary, for a part of the relevant time, were husband and wife. George Jr. was George Sr.'s son.
[7] Remembering that at all times, the onus is on George Sr. to show that he was not a de jure or a de facto director of 358, on or after May 1, 1999, I propose to deal with the documents that are not in dispute to arrive at the true facts herein.
[8] The assessment of GST against 358, notice of which was issued June 17, 1997 and was for the period of February 20, 1995 to December 31, 1996, amounted to $57,354.59 and when interest and penalties were added, the total assessment, as of June 17, 1997, was $96,093.25.
[9] 358 objected to the assessment on September 15, 1997. The objection was signed by Mary as a director on the advice of her own independent legal counsel, James R. Ryan ("Ryan").
[10] On October 7, 1998 the Minister of National Revenue (the "Minister") sent a letter to 358 at 615 Willowburn Crescent SE, Calgary, Mary's residence and the former matrimonial home, with a carbon copy going to Mary's counsel Ryan, confirming the assessment against 358.
[11] On March 5, 1999, a bailiff attended at 615 Willowburn Crescent and interviewed Mary. Mary stated, amongst other matters, that she did not know if 358 was still operating.
[12] Numerous bank statements from the Royal Bank, for 358 were filed in the Exhibit Book, the last statement being for the period of April 25, 1996 to May 27, 1996.
[13] On April 6, 1995, George Sr., George Jr. and Mary attended at the Royal Bank. George Sr. and Mary signed for the bank a list of officers and directors for 358, the officers being:
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George Sr. |
President |
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George Jr. |
Vice-President |
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Mary |
Secretary |
and the directors being: George Sr., George Jr. and Mary.
[14] All three signed a certificate confirming that a resolution had been duly passed by the directors of 358 giving all three independent banking authority. All three signed the usual banking card.
[15] Mary acknowledged that it was her signature on many of the documents, some she did not identify and some she denied. I will deal with these two latter issues as the documents are reviewed herein.
[16] On September 4, 1996, Mary signed Revenue Canada's GST form to elect a year-end of December 31. The form shows her as the contact person.
[17] On November 19, 1996, a Notice of Change of Directors was filed for 358 with the Alberta Municipal Affairs Registry pursuant to the Business Corporation Act. Mary said she had a problem recognizing her signature on it. When I review the documents that she acknowledged that contained her signature, I am satisfied that she signed this document. It stated that George Sr. is no longer a director as of March 1, 1995 and that she is the sole director. This document is signed on October 8, 1996.
[18] The annual return for 358 was filed on December 2, 1996 and Mary denies that it is her signature. It appears to be the same signature and I find as a fact that it is her signature. This return, dated November 27, 1996, shows that all the shares of George Sr. have been transferred to Mary.
[19] On February 14, 1997, Mary signed a GST tax return.
[20] An Alberta corporation search for 358, done on April 19, 2001, shows that:
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(i) |
the charter was struck on June 1, 1999;
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(ii) |
the last annual return was filed on December 2, 1996; and
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(iii) |
outstanding annual returns for the 2000, 1999, 1998 and one previous file year. |
[21] In February 1995, an unpleasant separation between Mary and George Sr. took place. In Mary's testimony, "the war was on".
[22] On March 1, 1995, a four page Affidavit was sworn by Mary, which contained four exhibits. This Affidavit was in legal proceedings brought by Mary against George Sr. Mary, in the Affidavit, is asking for exclusive possession of the matrimonial home at 615 Willowburn Crescent. She claims she is fearful of George Sr. and that a claim under the Matrimonial Property Act was commenced on February 7, 1995. She claims the marriage has been on the rocks for some time and alludes to problems from the summer before. She alleges that George Sr. broke into the house at the beginning of February and she alleges that she signed the documents that are the attachments to the Affidavit under threat.
[23] Besides asking in the Affidavit for exclusive use of the matrimonial home, she was seeking a lis pendens against the business properties.
[24] The attachments to the Affidavit are:
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(i) |
an assignment of the trade name from 368088 Alberta Ltd. ("368"), dated February 20, 1995 of L.P. Sales to 358, signed by Mary on behalf of 368;
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(ii) |
an assignment of lease, dated February 20, 1995, from 368 to 358, which Mary signed on behalf of the original lessor, namely 344780 Alberta Ltd. ("344");
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(iii) |
a bill of sale for equipment, dated February 20, 1995, for $80,000.00 from 368 to 358, signed by Mary on behalf of 368;
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(iv) |
a promissory note by 344 in favour of George Sr., dated July 28, 1994 for $72,700.11, signed by both Mary and George Sr., the interest to be computed from January 19, 1989 at 12% per annum. |
[25] I find that Mary and George Sr. separated in the first part of February 1995 and reconciled the first week of April 1995, they separated again on August 8, 1997. Mary, again, went to Court to get orders. They never cohabited since that date and were divorced in December of 2002. There is still litigation between Mary and George Sr. over asset division. Mary has remarried.
[26] George Sr. stated that he could not recall when he resigned as president but that 358 ceased operations in the spring of 1997 and that was when he ceased doing anything for 358 in any capacity and that, to his knowledge, 358 was inactive.
[27] Thus, with Mary stating to the bailiff in March of 1999 that she did not know if 358 was still operating and with George Sr.'s testimony that it ceased operating in the spring of 1997, I am satisfied that 358 did, in fact, cease all operations in the year 1997.
[28] George Jr. is a refrigeration mechanic whose evidence confirmed some of Mary's and George Sr.'s testimonies. He was just a labourer. All of them would have coffee each morning at 8 o'clock, then the day's jobs would be set up for what was to do be done that day and by whom. He only was in the office for 20 to 40 minutes each day as he was out doing his manual jobs.
[29] He did not remember the meeting at the Royal Bank, but recognized all of their signatures and that he, Mary and George Sr. had independent signing authority.
[30] George Jr. did not recall having seen the alleged annual general meeting minutes of April 6, 1996, but identified the three signatures.
[31] George Jr. states that Mary was running 358, that she did all the typing, all the bookkeeping, banking and directions to the staff and that her duties remained the same throughout. He also said that George Sr. inspected used commercial equipment, purchased some, oversaw the refurbishing of this used equipment and helped with the sales thereof.
[32] Although there are many other written documents and conflicting testimonies, I believe the above are the only germane facts necessary to decide this issue.
[33] I find that George Sr. did resign as a director effective March 1, 1995, which was acknowledged by Mary in the Notice of Change of directors for 358 filed November 19, 1996.
[34] I find that Mary became the sole owner of 358, which she acknowledged in the annual return filed December 2, 1996.
[35] The Respondent argues that the purported Minutes of the Annual General Meeting, dated April 6, 1995, has the three signatures on a separate page and that I should not give any credence to this document as both Mary and George Jr. claim they never saw the document, but acknowledge that it is their signatures on the second page. Counsel suggests that the second page could come from another document. This document, being Tab 23 in Exhibit R-1, is the Respondent's exhibit. I do not believe a litigant can challenge the validity of the document that that party tenders to the Court as an exhibit, and in any event, I accept the document as stating what was agreed upon by all three. Mary did not have to set aside the documents attached to her Affidavit, as she became the sole owner of 358. The documents at the Royal Bank were a course of action by all three to facilitate banking for 358. It demonstrates that all three were prepared to say and certify anything for banking. I do not accept these documents as evidence of the truth.
[36] On the basis of all the above evidence, I find that George Sr. ceased to be a de jure director on April 6, 1995 when his resignation was accepted and confirmed for general public information, when the Notice of Change of directors was filed on November 19, 1996.
[37] From all the documents and evidence, I find that, after April 6, 1995, he acted as a de facto director and co-managed 358 with Mary up to the final separation in 1997. George Sr. was not sure when he resigned as President, but he knew 358 ceased all operations in the spring of 1997.
[38] Mary being the sole owner and director of 358, which was no longer operating by the time of their final separation, George Sr. walked away from 358 and did nothing for 358 in any fashion. Thus, his position of being a de facto director from the time of his resignation as a de jure director ceased when he stopped doing anything for 358, which coincided with 358 becoming dormant.
[39] It must be remembered that Mary owned all the shares and was the sole director of a non-operating, worthless company when she instructed her solicitor to have the charter struck. The charter was struck on June 1, 1999. In October of 1998, Mary and her solicitor knew that 358's objection was disallowed. I assume there would be some delay from the time of instruction to Ryan to have 358 struck and the actual paperwork to be compiled and filed.
[40] For all the above reasons, the appeal is allowed, with costs, and the assessment is vacated.
Signed at Toronto, Ontario, this 9th day of March, 2004.
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"Gordon Teskey" |
Teskey, J.
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CITATION: |
2004TCC182 |
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COURT FILE NO.: |
2002-2070(GST)G |
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STYLE OF CAUSE: |
George Pearson and The Queen |
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PLACE OF HEARING: |
Calgary, Alberta |
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DATE OF HEARING: |
February 16, 2004 |
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REASONS FOR JUDGMENT BY: |
The Hon. Justice Gordon Teskey |
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DATE OF JUDGMENT: |
March 9, 2004 |
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APPEARANCES: |
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Counsel for the Appellant: |
Jonathan D. Warren |
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Counsel for the Respondent: |
Margaret McCabe |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
Jonathan D. Warren |
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Firm: |
Warren Tettensor LLP Barristers and Solicitors Calgary, Alberta |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |