[OFFICIAL ENGLISH TRANSLATION]
Date: 19980217
Dockets: 95-3945(IT)I
95-3954(IT)G
BETWEEN:
PIERRE BROUILLETTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appearances:
Counsel
for the
Appellant:
Roberto T. De Minico
Counsel
for the
Respondent:
Marie-Andrée Legault
REASONS FOR JUDGMENT
(Delivered orally from the bench at
Montréal, Quebec, on November 7, 1997)
P.R. Dussault, J.T.C.C.
[1] The appeals with respect to these
files have been heard together.
[2] Docket No. 95-3945(IT)I concerns
two appeals. The first is an appeal from an assessment for an
amount of $3,960.25 made under section 227.1 and subsection
227(10) of the Income Tax Act and under section 54 of the
Unemployment Insurance Act in respect of the source
deductions by Boulangerie Lasalle (Verdun) Inc. The Notice of
Assessment bears number 27982 and is dated January 17, 1995. The
second appeal is from an assessment for an amount of $7,854.78
made under the same provisions in respect of the source
deductions by Boulangerie Lasalle (Montréal-Nord) Inc. The
Notice of Assessment bears number 27980 and is dated January 17,
1995. The assessment includes an amount of $111.44 claimed as
legal expenses.
[3] Docket No. 95-3954(IT)G concerns
an appeal from an assessment in the amount of $24,691.53 made
under the same statutory provisions in respect of the source
deductions by 2745-7332 Québec Inc. The Notice of
Assessment bears number 27981 and is dated January 17, 1995. The
assessment includes an amount of $139.42 claimed as legal
expenses.
[4] At the outset of the hearing,
counsel for the appellant indicated that the sole point at issue
in the three appeals concerned the two-year limitation period
provided for in subsection 227.1(4) of the Income Tax Act.
According to him, the Minister of National Revenue (the
"Minister") made the assessments after this period.
[5] I further note that counsel for
the respondent acknowledged that the legal expenses included in
the assessments, notices of which bear numbers 27980 and 27981,
must be cancelled.
[6] The Court's jurisdiction over the
appeal from the assessment in respect of the amounts owed under
the Unemployment Insurance Act is also not contested by
respondent's counsel.
[7] To return to the sole question at
issue, it may be noted that subsection 227.1(4) of the
Income Tax Act provides as follows:
No action or proceedings to recover any amount payable by a
director of a corporation under subsection (1) shall be commenced
more than two years after the director last ceased to be a
director of that corporation.
[8] In The Queen v. Kalef, 96
DTC 6132 (F.C.A.), at pages 6134 and 6135, the Federal Court of
Appeal correctly indicated that, in order to determine when a
person has ceased to be a director, one must look to the
applicable corporate legislation for guidance.
[9] According to the documents
submitted in evidence, in particular, Exhibits I-1, I-3 and I-5,
the three companies in question were subject to Part IA of the
Quebec Companies Act. Section 123.76 of this Act provides
as follows:
[Continuance in office]
Notwithstanding the expiry of his term, a director remains in
office until he is re-elected, replaced, or removed.
[Resignation]
A director may resign from office by giving notice to that
effect.
[10] Section 123.81, moreover, deals with
the notice that the company must give of any change in the
composition of the board of directors.
[11] With regard to the appeal from the
assessment notice of which bears number 27982 concerning the
source deductions made by Boulangerie Lasalle (Verdun) Inc.,
Exhibit I-3 (extracts from the company's minutes book) indicates
that the appellant became a director on May 1, 1988. His
signature appears on the resolutions of December 12, 1990.
Furthermore, on July 2, 1991, he alone signed as director a
resolution designating him as president and secretary-treasurer.
No other document showing that he gave notice of his resignation
at any time was submitted in evidence. In his Notice of Appeal,
the appellant claimed that he resigned as director of that
company on July 2, 1991, that is, the same day on which he alone
signed a resolution designating himself as president and
secretary-treasurer.
[12] At an examination for discovery held on
May 26, 1997, he claimed at first that he had never been a
director of that company. Then, when he was confronted with the
fact that he had provided the respondent with a letter of
resignation dated July 2, 1991, he changed his version (see pages
25 and 26 of the stenographic notes of the examination for
discovery) and admitted that he was a director, and then he went
back to his first position claiming that, to the best of his
knowledge, he had not been a director (see page 27).
[13] In addition, on August 14, 1992, the
appellant also signed on the company's behalf a report in
connection with its bankruptcy (see Exhibit I-4).
[14] In his testimony on cross-examination,
the appellant admitted that he had been a director in 1989 or
1990 and merely said that his father, Lucien Brouillette, owned
many companies at the time and had had him sign a number of
documents.
[15] In the absence of further evidence, I
find that the evidence before me is insufficient to establish
that the appellant ceased to be a director of that company on
July 2, 1991, or at any time thereafter, in fact.
[16] The appeal in respect of this
assessment is therefore dismissed.
[17] With regard to the appeal from the
assessment notice of which bears number 27980 concerning the
source deductions made by Boulangerie Lasalle
(Montréal-Nord) Inc., Exhibit I-5 indicates that the
appellant signed a resolution as a shareholder and a director on
June 27, 1986. In his Notice of Appeal, the appellant argued that
he had resigned [translation] "from the said company in August
1986." At the examination for discovery on May 26, 1997, the
appellant stated that, as far as he knew, he had never been a
director of that company (see page 37).
[18] No evidence being adduced regarding the
appellant's resignation and the date of his resignation as
director of that company, the appeal is allowed for the sole
purpose of reducing the assessment by an amount of $111.44
incorrectly assessed as legal expenses. The interest will have to
be adjusted accordingly.
[19] Lastly, with respect to the appeal from
the assessment notice of which bears number 27981 concerning the
source deductions made by 2745-7332 Québec Inc., Exhibit
I-2 (extracts from the company's minutes book) indicates that the
appellant was elected director on June 25, 1991. The same
document shows that the appellant, as director, signed some
resolutions on June 28, 1991, and on August 16, 1991. There is no
indication in those documents that the appellant had
resigned.
[20] According to the testimony of Frank
Philippe, a collections officer with Revenue Canada, those
documents correspond to the ones in the collection file. They
were apparently obtained by another Revenue Canada employee in
March 1994.
[21] In his testimony, the appellant said
that in June 1991, the company acquired the assets of Boulangerie
Lasalle (Verdun) Inc. and that, until June 1992, he had tried to
run the bakery and pastry company himself but was unsuccessful.
He said that he then returned the company keys to his father,
Lucien Brouillette, and resigned as director on June 29, 1992. A
letter of resignation was filed in evidence. This is Exhibit A-1,
which reads as follows:
[translation]
RESIGNATION
TO: 2745-7332 Québec
Inc.
June 29, 1992
and Directors
I, the undersigned, submit my resignation as director of the
above-noted company, effective upon acceptance by the meeting
[sic] of the directors of the said company.
(Signature)
PIERRE BROUILLETTE
[22] In his testimony, the appellant said
that his father took back the company assets and that he ceased
to have any personal involvement after June 1992. He said he knew
nothing of the company's activities thereafter.
[23] At the examination for discovery on May
26, 1997, the appellant said that he thought it was his father
who had replaced him as director and that the company had ceased
operations in August or September 1992 (see page 15). He also
said that he did not know whether his resignation had been
approved by a resolution of the board of directors or accepted by
the shareholders of the company (see page 15). At the examination
for discovery, the appellant also said that he had no idea where
the company "minutes book" could be found (see page 12).
[24] I will begin by saying that, despite
the appellant's unequivocal statement that he definitely signed
the notice of resignation on June 29, 1992, I have serious doubts
about this. It is indeed surprising that this document was not
found in the company minutes when Revenue Canada conducted an
audit in 1994. It is just as surprising that the appellant had
such a strong recollection of that event considering that his
memory, according to the same examination for discovery, failed
him precisely on whether he had been a director of any other
company.
[25] In any event, assuming I found that the
appellant had all the credibility required on this point, I
consider that the notice of resignation of June 29, 1992, is of
no effect in the absence of any evidence that his resignation was
accepted by the board of directors or the shareholders because,
technically, they are the ones who have the power to elect the
directors. There is also no evidence that he was replaced or of
when he was replaced. The first paragraph of section 123.76 of
the Companies Act would therefore probably apply. The
appellant relies on the notice of resignation that was filed in
evidence. It is common practice to require a document to
establish when the appellant's resignation might have taken
effect since he himself indicated that his resignation would be
effective [translation] "upon acceptance by the meeting
[sic] of directors." That evidence was not provided. In
the circumstances, I find that the appellant did not establish a
point of departure for the limitation period under subsection
227.1(4) of the Income Tax Act.
[26] The appeal from this assessment is
therefore allowed for the sole purpose of reducing the assessment
by an amount of $139.42 incorrectly assessed as legal
expenses. The interest will have to be adjusted accordingly.
[27] As I indicated in Nagy et al. v.
M.N.R., 91 DTC 993, at page 998:
One cannot claim the privileges of operating a business through
an incorporated company and later completely ignore the
provisions and requirements of the governing Act.
[28] In Kalef, supra, the Federal
Court of Appeal made a similar comment.
[29] In short, on the point at issue in the
three appeals, I cannot accept the appellant's claims since no
evidence was provided regarding the time at which he presumably
ceased to be a director.
[30] If the books are poorly maintained, as
counsel for the appellant pointed out, the government is not the
one that can be held responsible.
[31] Costs are awarded to the respondent in
respect of docket No. 95-3954(IT)G.
Signed at Ottawa, Canada, this 17th day of February 1998.
J.T.C.C.
Translation certified true
on this 5th day of June 2003.
Sophie Debbané, Revisor
Email this Content