|
Docket: 2002-1117(GST)I |
|
BETWEEN: |
|
FRANÇOIS MAILLÉ, |
|
Appellant, |
|
and |
|
|
|
HER MAJESTY THE QUEEN, |
|
Respondent. |
_______________________________________________________________
Appeal heard on October 23, 2002 at Montréal, Quebec
|
Before: The Honourable Judge Alain Tardif |
|
|
|
|
|
Appearances: |
|
|
|
|
|
For the Appellant: |
The appellant himself |
|
|
|
|
Counsel for the Respondent: |
Jocelyne Mailloux Martin |
_______________________________________________________________
[OFFICIAL ENGLISH TRANSLATION]
JUDGMENT
The appeal from the assessment made under Part IX of the Excise Tax Act, notice of which is dated December 18, 2001 and which bears number PL2001-378, for the period from June 30, 1991 to December 31, 1999, is dismissed, with costs in favour of the respondent, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 6th day of June 2003.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 28th day of January 2004.
Carol Edgar, Translator
|
Citation: 2003CCI222 |
|
Date: 20030606 |
|
Docket: 2002-1117(GST)I |
|
BETWEEN: |
|
FRANÇOIS MAILLÉ, |
|
Appellant, |
|
and |
|
|
|
HER MAJESTY THE QUEEN, |
|
Respondent. |
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] This appeal is from an assessment made under subsection 228(2) and section 323 of the Excise Tax Act ("the E.T.A.").
[2] The assumptions of fact on which the assessment being appealed from was based are as follows:
(a) The COMPANY was incorporated in 1984 under Quebec's Companies Act (R.S.Q., c. C-38);
(b) the COMPANY has been registered for the purposes of Part IX of the E.T.A. since January 1991, and its registration number is 135116309;
(c) during the entire relevant period in this case, the COMPANY never filed with the respondent the quarterly net tax returns it was required to file under the E.T.A.;
(d) despite repeated requests for returns, the COMPANY refused and/or failed to file its quarterly net tax returns under the E.T.A.;
(e) following an audit of the COMPANY by the Minister, assessments were made concerning it and Notices of Assessment were sent to it for each and every reporting period for which it was required to file with the respondent a tax return since being registered in 1991;
(f) this audit established the amount of the net tax that should have been paid by the COMPANY to the respondent on the basis of the income declared in the financial statements;
(g) in a Notice of Objection, the COMPANY objected to the assessments made under the E.T.A.;
(h) the assessments made concerning the COMPANY were confirmed by the respondent on or around April 12, 2000;
(i) the COMPANY did not file a Notice of Appeal from the assessments made concerning it for the period from April 1, 1991 to June 30, 1999;
(j) on January 21, 2000, a Certificate was issued by the Federal Court, Trial Division under the authority of section 316 of the E.T.A. against the COMPANY, in file GST.202.00;
(k) on April 18, 2000, a writ of seizure and sale was issued by the Federal Court, Trial Division against the COMPANY;
(l) on May 29, 2000, the writ of seizure and sale was returned unsatisfied in its entirety;
(m) since the date the COMPANY was incorporated and during the entire relevant period in this case, the appellant was director of the COMPANY;
(n) during the entire relevant period in this case, the appellant never resigned or was replaced or removed as director of the COMPANY;
(o) the appellant did not exercise the degree of care, diligence and skill or take any action to prevent the COMPANY's failure to satisfy its obligations under the E.T.A., including the obligation referred to in subparagraphs (c) and (d) above;
(p) in particular, the COMPANY failed to comply with sections 165, 221, 225 and 228 of the E.T.A., which provide that it was required to collect the Goods and Services Tax on the taxable supplies made by it since being registered, to calculate its net tax, and to pay to the Receiver General the positive amount of its net tax;
(q) since being registered, the COMPANY failed to file its net tax returns within the time periods set out in the E.T.A.;
(r) as authorized director, providing, in particular, accounting, financial, tax and management services, the appellant was aware of the obligations imposed by the E.T.A.;
(s) during the entire relevant period, the COMPANY never ceased its operations and never cancelled its registration;
[3] Although the facts are fairly well summarized in paragraph 15 of the Reply to the Notice of Appeal combining subparagraphs (a) through (s), it is appropriate to note certain additional points.
[4] The company of which the appellant was director provided accounting, management, bookkeeping and tax planning services. The basis of the company's expertise in these fields was the qualifications of the appellant, who indicated that he had training in accounting, as evidenced by an accounting diploma; in his opinion, as authorized director, he had complete skills and experience in these fields, particularly since he had begun studies in law.
[5] Registered for the purposes of Part IX of the E.T.A. during the periods at issue, that is, from June 30, 1991 to June 30, 1999, the company directed by the appellant sold taxable supplies as part of its business operations.
[6] Following numerous notices, on August 17, 1999 the company finally forwarded the tax returns and all the financial statements for the 1991 through 1997 years.
[7] The assessments were made on the basis of the gross income declared and shown for the 1991 through 1997 fiscal years. For the 1998 and 1999 fiscal years, the respondent relied on the gross income from the last year, that is, 1997, and used that amount for the 1998 and 1999 years.
[8] Thus the assessments were made on the basis of supplies totalling $185,444, broken down as follows:
(1) from June 30, 1991 to June 30, 1992: $13,100;
(2) from June 30, 1992 to June 30, 1993: $13,179;
(3) from June 30, 1993 to June 30, 1994: $21,651;
(4) from June 30, 1994 to June 30, 1995: $21,151;
(5) from June 30, 1995 to June 30, 1996: $26,630;
(6) from June 30, 1996 to June 30, 1997: $29,911;
(7) from June 30, 1997 to June 30, 1998: $29,911;
(8) from June 30, 1998 to June 30, 1999: $29,911.
[9] The Notices of Assessment were therefore issued on the basis of the amounts reproduced above, all in accordance with the provisions of section 165 of the E.T.A.
[10] The evidence also showed that the company had filed neither its tax returns, nor the summaries of source deductions from its employees' wages, nor the tax return forms for the Goods and Services Tax ("the GST") or the Quebec sales tax ("the QST") for the periods from 1991 to 1999.
[11] The appellant systematically refused to take action in response to the numerous notices sent to him by the respondent. He also refused to sign the tax returns, claiming that doing so might make him lose what he considered to be the benefits of the expiry of the limitation period. As well, he argued that his signature might expose him to liability in his capacity as director.
[12] Following the Notices of Assessment, the company filed a Notice of Objection, but neither co-operated nor submitted relevant documents in support of its claims, which would have made it possible to record Input Tax Credits ("ITCs") for which it might have been eligible.
[13] In the objection, the company described the assessment as arbitrary. Explaining the context and the circumstances that had led it to apply for registration, it applied for retroactive cancellation of the registration in the hope that this application would cancel the Notice of Assessment.
[14] I consider it important to reproduce a very interesting passage from this November 24, 1999 letter, prepared and sent by the appellant as part of the Notice of Objection for and on behalf of the company "Vallières Bronsard Inc.", which he alone directed.
"We therefore request that you cancel the arbitrary assessments retroactively and, if required, cancel our GST and QST numbers. We shall contact the department if our sales figures exceed $30,000, in order to obtain new tax numbers."
[15] The assessment was confirmed; the company did not see fit to file a Notice of Appeal with the Tax Court of Canada, claiming that a company needed to be represented by counsel and that it did not have the financial resources to cover the related fees.
[16] The progress of case after the assessment was confirmed is summarized quite well by subparagraphs (h), (i), (j), (k) and (l), which read as follows:
(h) the assessments made concerning the COMPANY were confirmed by the respondent on or around April 12, 2000;
(i) the COMPANY did not file a Notice of Appeal from the assessments made concerning it for the period from April 1, 1991 to June 30, 1999;
(j) on January 21, 2000, a Certificate was issued by the Federal Court, Trial Division under the authority of section 316 of the E.T.A. against the COMPANY, in file GST.202.00;
(k) on April 18, 2000, a writ of seizure and sale was issued by the Federal Court, Trial Division against the COMPANY;
(l) on May 29, 2000, the writ of seizure and sale was returned unsatisfied in its entirety;
[17] On August 17, 2000, the respondent, through Quebec's Minister of Revenue, made an assessment bearing number PL-2000-168 under the authority of section 323 of the E.T.A. concerning the appellant, as director of the company, for the periods from June 30, 1991 to 1999, hereinafter referred to as "the period at issue".
[18] The appellant was then assessed for the company's outstanding net tax, in the amount of $14,201.73, plus penalties in the amount of $4,977.06 and interest in the amount of $4,001.66, for a total of $23,180.45.
[19] The appellant objected to Notice of Assessment PL-2000-168 (Exhibit I-2) on October 3, 2000. On December 18, 2001, the Minister of National Revenue ("the Minister") notified the appellant of his decision to amend Notice of Assessment PL-2000-168 in accordance with subsection 301(5) of the E.T.A.
[20] Following his decision concerning the objection, the Minister issued a Notice of Reassessment bearing number PL-2001-378 (Exhibit I-3). The adjustments made by the Minister had the effect of correcting the amount of the GST collected at the rate of 7 per cent on the sales figures declared by the company for its fiscal year from June 30, 1993 to June 30, 1994; this amount was not $21,651, the amount used when Notice of Assessment PL-2000-168 was issued, but rather $20,387. The amount of the outstanding net tax was reduced to $14,114.48, the amount of the penalties imposed was adjusted to $6,882.69, and the amount of the interest was adjusted to $5,487.57, for a total of $24,398.55, an amount that took into account the instalment payments made by the appellant in the amount of $2,286.19.
[21] In support of his claims, the appellant submitted three arguments against the reassessments made under the authority of section 323 of the E.T.A.; two of his arguments have to do with the limitation period of the Notice of Assessment at issue.
[22] The appellant's third argument is that the company was not required to collect and to remit the positive net tax for the period at issue since it was a small supplier within the meaning of the E.T.A. and had notified Quebec's Ministère du revenu ("the Department") by registered mail of its registrant status. This is the main argument submitted by the appellant, since the first two arguments were not supported by very elaborate evidence.
[23] Underlying all the appellant's arguments was the assumption that he could challenge the assessment made and issued against the company he controlled, all of which obviously had direct repercussions on the assessment being appealed from.
[24] Could the appellant validly attack the justification for the Notices of Assessment issued and confirmed against the company of which he was the only director?
[25] The respondent objected to the appellant's submitting this evidence.
[26] The Federal Court of Appeal clearly indicated that a beneficiary of a transfer of property under section 160 of the Income Tax Act was fully justified in challenging the justification for the assessment made following a transfer, under the terms of which he had received the benefit of an enrichment of his patrimony without having provided corresponding consideration.
[27] We can readily understand this logic since the taxpayer assessed under section 160 of the Income Tax Act is completely absent from the process leading to the assessment of the transferor. In other words, the transferee subject to the provisions of section 160 may challenge the justification for the assessment issued to the transferor, mainly because the transferee was absent from the process leading to the issuance of the primary assessment.
[28] In November 2000, Rothstein J.A., writing for the Federal Court of Appeal in Gaucher v. Canada, 2000 F.C.J. No. 1869 (Q.L.), rendered an important decision at paragraphs 4, 6, 7 and 9 about whether an assessment first issued to a taxpayer and subsequently re-issued to another taxpayer not a party to the primary assessment proceedings may be challenged.
[29] Rothstein J.A. writes as follows:
4. The appellant now says that the Minister reassessed her former husband after the three year limitation period provided in subsection 152(3.1) had expired and wishes to raise the limitation period as a defence to her assessment under subsection 160(1). The Minister says that she may not raise this defence because, once the former husband's assessment was confirmed by the Tax Court, it cannot be challenged. By assessing after the expiry of the limitation period, the Minister says that the Minister must be presumed to have alleged misrepresentation, that the limitation defence was not raised by the appellant's former husband.
...
6. I am of the respectful view that the Tax Court Judge was in error in coming to this conclusion. It is a basic rule of natural justice that, barring a statutory provision to the contrary, a person who is not a party to litigation cannot be bound by a judgment between other parties. The appellant was not a party to the reassessment proceedings between the Minister and her former husband. Those proceedings did not purport to impose any liability on her. While she may have been a witness in those proceedings, she was not a party, and hence could not in those proceedings raise defences to her former husband's assessment.
7. When the Minister issues a derivative assessment under subsection 160(1), a special statutory provision is invoked entitling the Minister to seek payment from a second person for the tax assessed against the primary tax payer. That second person must have a full right of defence to challenge the assessment made against her, including an attack on the primary assessment on which the second person's assessment is based.
...
9. By the same token, since the secondary taxpayer was not a party in the proceedings between the Minister and the primary taxpayer, she is not bound by the assessment against the primary taxpayer. The secondary taxpayer is entitled to raise any defence that the primary taxpayer could have raised against the primary assessment. The result may be that the assessment against the secondary taxpayer is quashed or is found to be for a lesser amount than the assessment against the primary taxpayer. That, of course, will have no effect on the assessment against the primary tax payer against whom the primary assessment was final and binding.
...
[30] Wishing to challenge the justification for the assessment issued to the company "Vallières Bronsard Inc." and being appealed from, the respondent energetically objected to it; the respondent argued that the appellant could not challenge the validity of the assessment issued against the company and was required to limit his evidence to the assessment issued to him personally under subsection 228(2) and section 323 of the E.T.A.
[31] In rebuttal, the appellant pointed out that he was unable to intervene personally during the primary proceedings, since the company needed to be represented by counsel and did not have the financial resources required to retain counsel. Since that assessment was not appealed from, it was confirmed and became final.
[32] It is important to recall that the appellant was the only director of the company, for all the years at issue.
[33] Can we ignore the existence of the two separate legal entities? In this case, the appeal is from an assessment issued to the appellant personally, following a primary assessment issued to the corporation he directed and controlled, the company "Vallières Bronsard Inc."
[34] The basis for the assessment is directly related to the function the appellant performed in the company, and it is in this capacity that his liability was engaged. The appellant administered, managed and controlled the company.
[35] In his capacity as director, the appellant was required to be vigilant, responsible and, in particular, extremely careful about the repercussions a possible assessment could have on his personal patrimony.
[36] In this case, on the basis of that decision (Gaucher, supra), may the appellant attack the justification for the primary assessment issued against the company he directed?
[37] The facts are quite different from the facts in Gaucher in that the appellant, because of his function as director, had the ability and the option to challenge the justification for the assessment when it was issued. Indeed he did so, but in a highly questionable and, in particular, an incomplete manner. He even showed some degree of indifference, quite evidently believing that his personal liability could not be engaged.
[38] The evidence has shown that the appellant, in his capacity as director, did not see fit to exhaust all the resources available to the company in order to challenge the justification for the assessment by, in particular, appealing to the Tax Court of Canada.
[39] In Karl Schuster v. Her Majesty The Queen, reported at 2001 G.S.T.C. 91, as part of a request for clarification, Garon C.J.T.C was called upon to render a decision on this point. After analysing the differences between section 160 (transfer of property between persons not dealing with each other at arm's length) and section 227.1 (directors' liability) of the Income Tax Act and section 323 of the E.T.A., the Court found that it was not open to the director to impugn the primary assessment issued against the corporation because, among other reasons, the director is involved in the decision by the corporation to challenge or not to challenge the justification for an assessment issued against it, which is not the case for the transferee under section 160 of the E.T.A.
[40] I fully agree with the decision by Garon C.J.T.C. It could have been anticipated that the assessment, when it was made, could have had direct repercussions on the appellant's personal liability. Indeed, this liability is the subject of specific and precise legislative provisions, that is, subsection 228(2) and section 323 of the E.T.A. The appellant, because of his function as director of the company that was the subject of the primary assessment, was involved in the proceedings; he actively participated in them, and may not invoke any negligence or failure regarding his basic rights, including in particular the right to make his claims.
[41] In his capacity as director, the appellant deliberately chose to act in a casual and even frivolous manner at the time of the objection. He was indifferent enough not even to file a Notice of Appeal. He must bear the consequences of his actions, and has only himself to blame for the situation that has considerable repercussions concerning the justification for his appeal.
[42] I therefore find that the respondent's objection that the appellant may not challenge the justification for the assessment issued to the company "Vallières Bronsard Inc." was justified.
[43] Although my decision to allow the respondent's objection has a major impact on the outcome of the appeal, I shall nevertheless analyse the main argument submitted by the appellant, that is, his application in a prescribed form to cancel the company's registrant status, which was to have the effect of preventing any assessments.
[44] The appellant testified that, apparently, on February 22, 1993 he sent to the Department a prescribed form in order to have the company's GST number cancelled, this entire claim being supported by a customer receipt from Canada Post dated February 23, 1993, which was adduced in court as Exhibit A-1.
[45] Apparently this document was never received by the Department, according to the testimony of Jean-Marc Beaudoin, a registration and support manager for the Department, and according to the 19-page computerized index, adduced as Exhibit I-6, containing all the data concerning the company's GST account.
[46] Nor did the appellant adduce in court any delivery receipt showing that this application for cancellation of registration would have been received by the tax authorities in 1993. As well, according to Mr. Beaudoin, at the Department there is no register or book in which incoming registered, certified or other mail would be noted.
[47] It appears from Mr. Beaudoin's testimony that no application for cancellation is shown in the company's file, except for the March 31, 2000 revocation of the GST number for failure to produce a security deposit at the request of the Department's recovery officer.
[48] Relying on the computerized index, Mr. Beaudoin stated that no letter had been sent to the company confirming cancellation of the GST account in 1993 or later, as is customary, with the exception of a March 31, 2000 letter notifying Mr. Maillé that his GST number was being revoked in 2000 following the Department's request for revocation.
[49] Mr. Beaudoin also testified that 42 requests for returns had been sent to the company and that, despite that fact, the tax returns were never filed with the Minister.
[50] According to this witness, the addresses in the file are 376A, 83e avenue, Chomedey and Case postale 68, Succursale postale Chomedey. Mail was sent to the latter address until 1998 and subsequently to the address on 83e avenue. Still according to Mr. Beaudoin, no address is shown in the computerized index.
[51] It is appropriate to emphasize that the computerized index makes no mention of the fact that some of the requests for returns were apparently not received by the company and were returned to the Department marked "moved" or "unknown at this address".
[52] Where the appellant is concerned, he denied having received so many requests for returns. He testified that apparently he received a few requests for returns after sending in his application for cancellation in 1993, but that these forms were put in the wastebasket, as were the requests for instalment payments.
[53] As well, the respondent established that for most of the relevant period the appellant had maintained the same address indicated on his application for registration. I attach no credibility to the explanations submitted by the appellant; they are complete fabrications.
[54] In addition, the appellant himself provided evidence in this regard: it is clear that, if the appellant had filed an application for cancellation of the registrant status of the company he directed, he would have made that application for cancellation his main argument in support of his challenge as part of the objection. However, he writes as follows, and I reproduce again this excerpt from his letter submitted as part of the objection:
"We therefore request that you cancel the arbitrary assessments retroactively and, if required, cancel our GST and QST numbers. We shall contact the department if our sales figures exceed $30,000, in order to obtain new tax numbers."
[55] A person with so much experience, knowledge and self-confidence would certainly not have worded his claims in that manner if that person had already made a formal application for cancellation. This point amply suffices to confirm that the appellant fabricated, out of the whole cloth, his claim of having made an application to cancel the registrant status of the company "Vallières Bronsard Inc."; furthermore, this conclusion was corroborated by the respondent's numerous and detailed explanations that there was no trace of any such application.
[56] At this stage, it is appropriate to reproduce the wording wording of subsections 323(1), (2), (3), (4) and (5) of the E.T.A.:
Liability of directors
323.(1) Where a corporation fails to remit an amount of net tax as required under subsection 228(2) or (2.3), the directors of the corporation at the time the corporation was required to remit the amount are jointly and severally liable, together with the corporation, to pay that amount and any interest thereon or penalties relating thereto.
Limitations
(2) A director of a corporation is not liable under subsection (1) unless
(a) a certificate for the amount of the corporation's liability referred to in that subsection has been registered in the Federal Court under section 316 and execution for that amount has been returned unsatisfied in whole or in part;
(b) the corporation has commenced liquidation or dissolution proceedings or has been dissolved and a claim for the amount of the corporation's liability referred to in subsection (1) has been proved within six months after the earlier of the date of commencement of the proceedings and the date of dissolution; or
(c) the corporation has made an assignment or a receiving order has been made against it under the Bankruptcy and Insolvency Act and a claim for the amount of the corporation's liability referred to in subsection (1) has been proved within six months after the date of the assignment or receiving order.
Diligence
(3) A director of a corporation is not liable for a failure under subsection (1) where the director exercised the degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances.
Assessment
(4) The Minister may assess any person for any amount payable by the person under this section and, where the Minister sends a notice of assessment, sections 296 to 311 apply, with such modifications as the circumstances require.
Time limit
(5) An assessment under subsection (4) of any amount payable by a person who is a director of a corporation shall not be made more than two years after the person last ceased to be a director of the corporation.
[57] The company directed by the appellant was assessed in 1999; the appellant was assessed on August 17, 2000. The company operated from the year it was registered, 1991, until 1997; the appellant himself submitted the financial statements for this period in August 1999 following innumerable notices.
[58] The appellant filed a Notice of Objection on November 24, 1999, intervened in the progress of the case, and submitted arguments.
[59] The company did not make an assignment; no receiving order was made against it; and it had not commenced dissolution proceedings. The appellant did not validly resign and was not relieved of his duties.
[60] The appellant argued that the company operated illegally because it failed to file its annual reports with Quebec's Inspector General of Financial Institutions ("the IGFI"), the most recent report going back to 1993 and that, furthermore, starting on January 1, 1994 the company failed to register under Quebec's Act respecting the legal publicity of sole proprietorships, partnerships and legal persons.
[61] The appellant argued that the company could not legally operate given its non-compliance with the above-mentioned legislation and that, as a result, he should not be held personally liable for the company's debts to the Minister. He also argued that a limitation period was applicable to the assessment. These arguments are completely frivolous, particularly since the appellant was the only director of the company concerned and the basis of this appeal has to do with his personal liability.
[62] In this case, the testimony provided and the plentiful documentary evidence adduced by the representative of the IGFI (Exhibit I-3) have confirmed that the corporation "Vallières Bronsard Inc." was not automatically de-registered or dissolved by the IGFI, despite the omissions and the numerous violations.
[63] Since the company never filed its tax returns despite the numerous requests, the Minister was still within the time period for issuing the assessments concerning the company in September 1999. Thus the company was still liable for the amount assessed when the Notice of Reassessment was issued to the director of the company, since the debt was not extinguished.
[64] Furthermore, the debt was certified. According to subsection 316(2) of the E.T.A., a certificate has the same effect as a binding judgment against the tax debtor (the company) for a debt due to Her Majesty.
[65] Concerning the argument based on the provisions of the Civil code of Québec ("the Code"), the applicable limitation period would be 10 years because the judgment against the company under article 2924 of the Code, which provides, "A right resulting from a judgment is prescribed by ten years if it is not exercised," is in the nature of a debt.
[66] The claims and arguments made by the appellant are rather surprising from a self-described well-informed manager, director and tax consultant, in partnership or involved in different corporations as director and sole shareholder.
[67] The appellant claimed to have represented clients before various government authorities in income and other tax matters. He even indicated that more than once he represented certain clients before the Tax Court of Canada. He also took courses in business administration, accounting and law.
[68] Despite all his strong points, expertise and many-faceted knowledge, the appellant admitted that he did not file any income tax returns since, in his opinion, he had no income tax owing. He admitted that he deliberately chose not to take action in response to certain letters, considering the letters far-fetched, devoid of interest, and pointless. Despite the numerous notices urging him to take action in response to the requests, he did not deign to comply, claiming that compliance was neither relevant nor necessary.
[69] According to the appellant's testimony, he was a well-informed businessman. In his opinion, he did everything well, had excellent reasons for acting as he did, and had absolutely nothing for which to blame himself.
[70] For the entire period during which the company "Vallières Bronsard Inc." was subject to the obligations set out in the E.T.A., the appellant was the only director. He deliberately refused to satisfy the obligations of a registrant, a status the company itself had formally applied for; he directed and controlled that company. Despite the numerous notices requesting that he comply, he systematically and deliberately decided not to do so.
[71] As a result of the appellant's unjustified stubbornness and manifest arrogance, the respondent made an estimated assessment in accordance with the provisions of the E.T.A. Granted, that method of operation was not ideal, but in the circumstances it was the only avenue available to the respondent.
[72] Following the issuance of the assessment, initially made in an arbitrary manner, the appellant could have remedied the situation by submitting vouchers to the person responsible for the review; here again, the appellant, in his capacity as director, deliberately chose not to comply with the clearly worded request by Louise Maurice (Exhibit I-13).
[73] After applying for retroactive cancellation of the registration, the appellant submitted a carton of invoices in order to recover ITCs, not in the prescribed manner, but again in accordance with his own way of seeing and doing things.
[74] Concerning the application for cancellation of the registration, the evidence has established that the respondent first learned of this argument, the very wording of which is highly questionable (see paragraph 13), at the objection stage, although the appellant firmly stated that he sent it in 1993.
[75] Having failed to establish the justification for his claims concerning the company "Vallières Bronsard Inc." in which he was shareholder and of which he was the only director, the appellant did not consider it appropriate to appeal to the Tax Court of Canada, claiming that a company needed to be represented by counsel and that he did not have the means to pay counsel the related fees.
[76] The case took its course, and execution proceedings were initiated that reported a complete absence of assets in the company's patrimony. The case was then redirected in accordance with section 323 of the E.T.A.
[77] This time, the appellant chose to initiate an appeal procedure before this Court and deployed all his energy to challenge the justification, not of the assessment being appealed from, but of the assessment issued to the company "Vallières Bronsard Inc.", thus raising the respondent's justified objection to the relevance of that request.
[78] Concerning the appellant's personal liability for the assessment being appealed from, the appellant adduced no evidence that would justify cancellation of the assessment. Quite the contrary: the evidence has shown that the appellant acted in an irresponsible and rash manner.
[79] The appellant was so self-assured that he considered himself more competent than anyone, including the respondent's representatives, to decide what he should or should not do in managing both his personal affairs and those of the corporation.
[80] Where the penalties are concerned, they are entirely justified, since the balance of the evidence has unequivocally shown that the appellant acted in a completely irresponsible manner by ignoring the numerous notices and challenging the justification for actions that were fully justified, that is, the numerous notices and reminders to satisfy the obligations set out in the E.T.A.
[81] Essentially, subsection 323(3) of the E.T.A. provides that a director is not liable for a failure if the director has exercised the degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances.
[82] The appellant acted with an extraordinary degree of carelessness, particularly in not filing any tax return forms.
[83] The appellant took no action to comply with the Act, and took no active steps to prevent the failures or omissions by the company. His personal liability was engaged.
[84] The burden of proof was on the appellant since the assessment at issue is deemed valid within the meaning of subsection 299(2) of the E.T.A.
[85] The appellant never concerned himself about his obligations under tax legislation, including the E.T.A., and the only avenue available to the Minister was to establish the amount of the GST collected on the basis of the gross income finally declared by the company, that is, the supplies made. Given the appellant's refusal to co-operate or to submit evidence concerning the company's debt, the amount of the positive net tax, the interest and the penalty are justified and founded. Notice of Reassessment PL-2001-378 is founded in fact and in law.
[86] The Minister was justified in issuing the Notice of Reassessment at issue to the appellant, who became jointly and severally liable with the company for the amount of the net tax, the penalties and the interest that the company failed to pay to the Minister for the entire period at issue, all with costs in favour of the respondent.
Signed at Ottawa, Canada, this 6th day of June 2003.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 28th day of January 2004.
Carol Edgar, Translator