Date: 20020326
Docket: 96-4827-IT-G,
96-4828-IT-G
BETWEEN:
EDDY ROMANIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
For the Appellant: The Appellant himself
Counsel for the Respondent: Sherry Darvish
____________________________________________________________________
Reasonsfor Judgment
(Delivered orally from the Bench at Toronto, Ontario, on March 4, 2002)
Bowie J.
[1] The assessments under appeal here are raised under section 227.1 of the Income Tax Act. There are two assessments and there is an appeal from each of those.
[2] The appeal that is numbered 4827 is in respect of the liability for withholdings of a company called Mezzanine Steel Limited. And that which is numbered 4828 is in respect of the liability for unremitted withholdings of a company called 952240 Ontario Limited, which I shall call "the numbered company". The period during which amounts were withheld from wages and salaries paid to employees for income tax, unemployment insurance and Canada Pension Plan by Mezzanine Steel is in the years 1991 to 1993; and in respect of the numbered company, the years in question are 1993 and 1994. The companies were duly assessed and no issue has apparently been taken with the assessments against them.
[3] The Notices of Appeal in the two appeals before me now were drawn by solicitors who no longer act for the Appellant, and they raised a number of issues. It was agreed between the Appellant and counsel for the Respondent at the outset this morning that in fact the assessments were made against the companies, that the companies' debts were in fact the subject of certificates under the Income Tax Act filed in the Federal Court, and that writs of execution were returned nulla bona by the sheriff, thereby disposing of all of those issues.
[4] The only issue remaining for trial then, it was agreed, was the issue whether Mr. Romanin, as a director, exercised due diligence in respect of the debts to Revenue Canada for unremitted withholdings. His capacity as a director was initially raised in the Notices of Appeal but that too has been abandoned, and it is quite clear, both from the agreement between the Appellant and counsel at the outset and from Mr. Romanin's evidence, that he was a director, and he was president of Mezzanine Steel during the relevant period, and that he was a director, and I think president as well, of the numbered company during the relevant period of time.
[5] Mr. Romanin said in his evidence in respect of both of those companies that, during the period of time when the debts for withholdings accumulated, weekly meetings of the directors were held which, among other things, reviewed the financial situation of the companies. Those financial situations, and in particular the debts owing and the accounts payable, were reviewed with the bookkeeper for Mezzanine Steel, a Mr. Tony Rocha. Mezzanine Steel was engaged in the steel fabrication business until it stopped operating in the middle of 1994. It seems to have been the failure of Mezzanine Steel that caused Mr. Romanin and his partners then to incorporate the numbered company, which also operated as a steel fabrication business under the name of Tri-Steel during the period 1993 until 1994. So far as I can determine from the evidence, the personnel were essentially the same. Certainly, Mr. Romanin said in his evidence that Tony Rocha was the bookkeeper for Tri-Steel initially, and that he was replaced later by a Ms. Giselle Kalnassy.
[6] Both companies held the weekly board meetings to which I referred, and clearly there were discussions with Mr. Rocha, and later Ms. Kalnassy, as to the outstanding liabilities of the company and more specifically as to which creditors should be paid and which creditors should not be paid.
[7] As is altogether too common in business, there seems to have been, and I think it is indisputable on the basis of Mr. Romanin's evidence, if not an overt then at least a tacit decision made, to which Mr. Romanin was party, that most, if not all, of the limited funds that these companies had to operate with, would be used to pay suppliers rather than Revenue Canada.
[8] As Mr. Romanin put it, with an admirable if not remarkable degree of candour in the course of his evidence, he took the view that the main duty of a director is to keep the company afloat no matter what institutions may suffer as a result of that. In cross-examination he agreed that those institutions that might suffer in order keep the company afloat would include Revenue Canada.
[9] This business philosophy of course ignores the fact that withholdings for income tax, for unemployment insurance, and for Canada Pension Plan contributions are trust funds which belong to somebody else. They are not available to pay trade creditors; they are not available to be used for the general purposes of the business. They are in the hands of the company as a trustee for one purpose only, and that is to remit them to the Receiver General for Canada. Mr. Romanin's evidence, as I said, was candid that this principle was simply ignored.
[10] I cannot on the evidence before me find that there was even a slight amount of diligence exercised by Mr. Romanin to see that his duty as a director in respect of the trust funds was carried out. I have no alternative, therefore, but to dismiss these appeals. The two appeals are dismissed. Costs to the Respondent in the amount of $2,000 in respect of the two appeals.
Signed at Ottawa, Canada, this 26th day of March, 2002.
"E.A. Bowie"
J.T.C.C.
COURT FILE NO.: 96-4827(IT)G and 96-4828(IT)G
STYLE OF CAUSE: Eddy Romanin and Her Majesty the Queen
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: March 4, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge E.A. Bowie
DATE OF JUDGMENT: March 11, 2002
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Sherry Darvish
COUNSEL OF RECORD:
For the Appellant:
Name: N/A
Firm: N/A
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada