Nestle Enterprises Ltd. v. MNR, 92 DTC 1001, [1991] 2 CTC 2627 (TCC)

Brulé, T.CJ.:—This appeal involves a question of penalty and interest as a result of a withholding tax. The proper amount was deducted but an assess- ment was made by the Minister claiming that the withheld funds had not been remitted as required by statute within the proper time limitation.

Facts

These are relatively simple and basically there is no dispute. The appellant is a corporation incorporated and resident in Canada. On January 17, 1989, the appellant made a payment to a non-resident and pursuant to subsection 215(1) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"), withheld tax in the amount of $535,579.

On February 14, 1989, the appellant purportedly mailed a cheque payable to the Receiver General of Canada in the amount of $535,579 to the Revenue Canada Taxation Centre, Ottawa, Ontario, as a remittance of the non-resident tax withheld on behalf of the non-resident. According to the evidence given the cheque was received by the respondent on February 20, 1989. The respondent assessed a penalty of $53,557.90 plus interest against the appellant under subsection 227(9) for its failure to remit as and when required by the Act.

The applicable sections of the Act are the following:

215. (1) When a person pays or credits or is deemed to have paid or credited an amount on which an income tax is payable under this Part, he shall, notwithstanding any agreement or any law to the contrary, deduct or withhold therefrom the amount of the tax and forthwith remit that amount to the Receiver General on behalf of the non-resident person on account of the tax and shall submit therewith a statement in prescribed form.

227. (9.2) Subject to subsection (9.5), every person who in a calendar year has failed to remit or pay as and when required by this Act or a regulation an amount deducted or withheld as required by this Act or a regulation or an amount of tax that he is, by section 116 or by a regulation made under subsection 215(4), required to pay is liable to a penalty of

(a) 10% of that amount; or

(b) 20% of that amount, where the person had at the time of the failure been assessed a penalty under this subsection in respect of a previous failure during the year.

227. (9.2) Where a person has failed to remit as and when required by this Act or a regulation an amount deducted or withheld as required by this Act or a regulation, he shall pay to the Receiver General interest on the amount at the prescribed rate computed from the day on which he was so required to remit the amount to the day of remittance of the amount to the Receiver General.

248. (7) For the purposes of this Act, anything sent by first class mail or its equivalent shall be deemed to have been received by the person to whom it was sent on the day it was mailed except that the remittance of an amount deducted or withheld as required by this Act or a regulation made under this Act, shall be deemed to have been remitted on the day it was received by the Receiver General.

The respondent imposed a penalty under subsection 227(9) because he believed that the appellant did not remit as and when required by the Act. Subsection 215(1) requires the person to "forthwith remit" the tax withheld. It is thus necessary to determine the meaning of both "remit" and "forthwith".

Relying on Black's Law Dictionary (6th edition) and Stroud's Judicial Dictionary (5th edition), the appellant argues that the meaning of the word “remit” is to send or transmit, and that because it was sent on February 14, 1989, it was remitted before February 15, 1989, the acceptable time limit prescribed by Revenue Canada in Information Circular 1C77-16R3. For the purpose of subsection 248(7), however, the word "remit" means the day on which it was received by the Receiver General, not that at which it was sent to the Receiver General.

It then follows that the amount for income tax purposes was remitted on February 20, 1989.

As regards the word "forthwith", there is no indication of time in the Act, although Information Circular 1C77-16R3 and Form PD7AR-NR both specify the 15th day of the month following that in which the tax was withheld. The last words of subsection 215(1) are "and shall submit therewith a statement in prescribed form". That form PD7AR-NR specifically refers in its instructions to receipt of withholding tax by the 15th day of the month in which tax was withheld. The appellant did not file this form when the remittance was made.

The word “forthwith” has been interpreted on numerous occasions, but not in the context of the Act. In the case of R. v. Cuthbertson, [1949] 4 D.L.R. 369, O'Connor, J. said at page 373 referring to Wharton's Law Lexicon, 14 ed.:

When a statute or rule of Court requires an act to be done "forthwith" it means that the act is to be done within a reasonable time having regard to the object of the provision and the circumstances of the case.

This would imply that it would be necessary to look to the amount of time the appellant took to remit the money and then determine whether such was reasonable.

In John Lewis & Co. Ltd. v. Tims, [1952] A.C. 676 it was held that the word "forthwith" had a different meaning than "as soon as one reasonably can".

In The Queen v. The Justices of Berkshire (1878), IV Q.B.D. 469 Cockburn, C.J. said at page 471 :

The words “forthwith” and "immediately" have the same meaning. They are stronger than the expression “within a reasonable time” and imply prompt vigorous action, without any delay and whether there has been such action is a question of fact, having regard to the circumstances of the particular case.

This passage was referred to favourably in the case of Partridge v. Aylwin (1924), 3 D.L.R. 324, and also in which case the Court commented that the word "forthwith" is stronger than "within a reasonable time” and means "as promptly as the circumstances of the case permit".

This latter comment was reiterated in Gray Tractor Co. v. Van Troyen (1925), 1 D.L.R. 718.

In a more recent determination the Ontario Court of Appeal in R. v. Precourt (1978), 18 O.R. (2d) 714 held “forthwith” to mean “as soon as it was practicable to do so”.

The case of Bell v. R. (1968), 64 W.W.R. 668 said "forthwith" means "as promptly as is reasonably possible or practicable under all the circumstances". The Court also referred to “forthwith” in R. v. Ward (1984), 56 N.B.R. (2d) 111 as meaning "promptly and with reasonable dispatch".

While these cases are not within the context of the Act nevertheless they provide judicial interpretation to the word "forthwith" and are to be considered where reasonable to do so, such as in the present case.

It is interesting to note that in the French version of section 215 of the Act the word “immédiatement” is used for the English "forthwith". The appellant's counsel objected to this reference because a penalty was involved but I do not accept this as a valid argument. Suppose the case was identical but with a French speaking appellant and an appeal in that language.

The appellant's counsel also stressed that Revenue Canada had an obligation to warn the appellant before levying a penalty when they had not done so previously. This plea has no application.

In determining what the legislation means, it is necessary to look to what it is trying to protect. Presumably subsection 215(1) is protecting the interest of the public. If people are permitted to take their time in remitting these amounts and to use that time and money to make more money, the general public loses.

In my opinion, “forthwith” in the context of subsection 215(1) means that action must be taken as soon as possible. This is different from “within a reasonable time". The latter interpretation looks to the time at which it became possible to do the thing and the time at which it was actually done and determines whether this amount of time was reasonable. The former looks to the action taken. Did the person act promptly and with dispatch? Were the circumstances such that the time at which action was taken was the first opportunity? The first looks to the facts as much as the second, but the first compels prompt action while the second requires action in a reasonable amount of time. There is a difference here. The question at hand is not whether the appellant acted within a reasonable amount of time but whether it acted quickly and promptly, given its particular circumstances.

The appellant has the burden of proving reasonable circumstances which would make 34 days later the first opportunity available to remit the tax. The appellant has not shown any such circumstances.

Conclusion

The penalty is valid because the appellant failed to remit as and when required by the Act. Subsection 215(1) requires the appellant to "remit forthwith". "Remit" means the receipt by the Receiver General of the tax. "Forthwith" means as soon as possible, given the circumstances of the appellant. No circumstances emerged as to why it was only remitted 34 days later. The appellant did not, therefore, remit forthwith.

The result is that the appeal is dismissed.

Appeal dismissed.