Citation: 2011 TCC 183
Date:
20110324
Docket: 2010-1692(GST)APP
BETWEEN:
MENACHEM LIEBERMAN,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR ORDER
D’Auray J.
[1]
In this application,
the applicant, Mr. Lieberman, is requesting an extension of time for
filing a notice of objection.
[2]
The application arises
from an assessment dated June 2, 2009. The applicant was assessed
under section 323 of the Excise Tax Act, regarding liability of
directors.
[3]
The applicant was the
sole director of 3997405 Canada Inc. (the Company), incorporated on
March 21, 2003. The Company ceased its operations on
April 31, 2004, and was dissolved on November 2, 2005.
[4]
Since 2007, the
applicant had been receiving letters from Revenu Québec concerning GST, QST and
SDs (source deductions) for the Company.
[5]
Following those
letters, the applicant met with Revenu Québec representatives and, at their
request, resubmitted the GST reports for 2003 and 2004.
[6]
After he had submitted
the GST reports, the applicant was under the impression that the Company would
receive a refund. It turned out that, according to the assessments issued by
Revenu Québec, an amount was owed to Revenu Québec.
[7]
The applicant asked the
Company's accountant, Doug Wolman, to deal with the Company's affairs with
Revenu Québec.
[8]
According to the
applicant, Mr. Wolman did not provide the documents to Revenu Québec and,
when the applicant realized this, he met with Revenu Québec representatives in
May 2008, and they asked him to produce the documents.
[9]
At the start of January
2009, the applicant met with Mr. Bourassa and other representatives of
Revenu Québec. The applicant stated that the documents would be submitted shortly.
[10]
On January 30, the
applicant submitted the documents to Revenu Québec. The documents were
transferred to the auditor assigned to this file, Sylvie Levesque. A short time
later, she informed the applicant that the documents he had submitted were not
relevant.
[11]
The applicant then
asked Mr. Pinsky, a friend who was a chartered accountant, to deal with
the file with Revenu Québec. According to the applicant, Mr. Pinsky was
supposed to deal not only with the Company's file by also with his personal
file.
[12]
Time passed but Revenu
Québec did not receive Mr. Pinsky's documents.
[13]
On
March 12, 2009, Mr. Bourassa from Revenu Québec phoned
Mr. Lieberman to check whether he or his accountant had sent the auditor
the documents requested for the Company. Mr. Lieberman did not know. He
was going to check.
[14]
On
April 16, 2009, a process server served on the applicant a notice of
intention dated March 31, 2009, to assess him as a director under
section 323 of the Excise Tax Act (ETA) for an amount of
$67,218.97. According to the process server’s report, the document was left
with Bella Lieberman, the applicant's spouse, at their residence. A
questionnaire was enclosed with the notice of intention to assess. The
applicant had to fill out the questionnaire within 30 days of the date of the
notice of intention to assess.
[15]
Mr. Bourassa of
Revenu Québec had advised the applicant since January 5, 2009. He had
left the applicant a voicemail message asking for his co‑operation in
obtaining the information requested. If he did not do so, Revenu Québec would
be obliged to send him a notice of intention to assess him personally for the
company’s debts.
[16]
On June 5, 2009, the
process server served on the applicant a notice of assessment dated
June 6, 2009 under section 323 of the ETA, director’s liability.
According to the service report, the notice of assessment was left with Bella
Crosz Lieberman, the applicant's spouse, at their residence.
[17]
On
June 22, 2009, Revenu Québec received an authorization allowing
Mr. Pinsky, the applicant's friend and accountant, to deal with Revenu
Québec concerning the Company’s affairs only.
[18]
On
June 22, 2009, documents related to the Company were sent by the
accountant, Mr. Pinsky. Mr. Bourassa from Revenu Québec transferred the
documents so that they could be examined by the auditor assigned to the file,
Ms. Levesque.
[19]
On
July 8, 2009, Mr. Bourassa from Revenu Québec phoned the auditor to
ask about the status of the file. The auditor told Mr. Bourassa that the
documents submitted were not relevant given the large number of disallowed
input tax credits. She informed the applicant’s representative, Mr. Pinsky
about it.
[20]
On September 8, 2009, a
final notice of payment under section 323 of the ETA was sent to the applicant,
claiming the amount of $68,717.81, to be paid no later than
September 23, 2009.
[21]
On
October 1, 2009, Mr. Bourassa from Revenu Québec received a call
from Michael Marianer, accountant for the firm Ammar Cousineau Altman
Telio Hadid.
[22]
Mr. Marianer
explained that the applicant was his new client. Therefore, Mr. Bourassa
asked him to send him a power of attorney, which was done that same day.
[23]
In that conversation,
which took place on October 1, 2009, Mr. Bourassa suggested to the
accountant to file an application for an extension of time for filing a notice
of objection.
[24]
Following the
application filed by the accountant, Mr. Marianer, dated
December 10, 2009, Mr. Bourassa from Revenu Québec faxed the
applicant’s accountant a copy of the notice of assessment on that same day.
[25]
On December 10, 2009, a
notice of objection was filed.
[26]
On April 23, 2010, the
Canada Revenue Agency informed the applicant that his application for an
extension of time for filing a notice of objection was refused.
[27]
On May 21, 2010, an
application for an extension of time was filed with this Court by the Morency
law firm. On January 28, 2011, counsel from the Morency law firm withdrew from
the case.
[28]
The applicant was not
represented at the hearing. He is asking the Court to give him a chance to
argue his case in detail.
[29]
He is also claiming
that the first two accountants who had acted on his behalf did not do their
jobs properly.
[30]
With respect to the
first accountant, Mr. Wolman, the applicant was under the impression that
Mr. Wolman had taken care of everything and everything had been resolved.
Although he had not given Mr. Wolman a power of attorney so that he could
deal with the Company's file with Revenu Québec, he did not have to do so
because, according to him, Mr. Wolman was the accountant who had dealt with the
Company’s affairs.
[31]
The applicant submits
that, once he had realized that Mr. Wolman had not been working on the
Company's file, he contacted Revenu Québec in May 2008 to discuss matters
related to the Company for which he was the sole director.
[32]
As for the accountant,
Mr. Pinsky, he was the applicant’s friend and was working for him for
free. The applicant was under the impression that Mr. Pinsky was taking
care of the Company’s affairs and also of his personal affairs. The evidence
showed, however, that Mr. Pinsky had obtained a power of attorney signed
by the applicant only for the Company.
[33]
The applicant also
stated that he had not realized that, at a certain point in time, Revenu Québec
had assessed him. Since he was used to receiving mail from Revenu Québec for
the Company, he did not know that that letters – the notice of intention to
assess and the notice of assessment – concerned him personally. The applicant
indicated that he had been less preoccupied with the Company's affairs because
it had ceased its activities in April 2004.
[34]
He is also claiming
that he was not aware that a notice of intention to assess him and a notice of
assessment had been issued because, at that time, namely, during the months of
May, June and July 2009, he was in New York with his grandmother, who was very ill and died at
the end of July. On his return to Quebec, the applicant
went North with his family for seven weeks to give his children a chance to
play and have a break from the city. He realized what was going on only in September
2009.
[35]
He also indicated that
he had not known that he could personally be assessed as a director; no one had
explained that to him. However, in cross-examination, he did not deny that
Mr. Bourassa had left him a voicemail message telling him that he could
personally be assessed. Following that voicemail message, the applicant
complained to Mr. Bourassa’s manager because he believed that Revenu
Québec was threatening to assess him personally and that that kind of message
should not be left in a voicemail box.
[36]
It must be noted that,
in this case, the notice of intention to assess and the notice of assessment
were served by the process server on the applicant's spouse.
[37]
It was only when the
final notice of payment was sent in September 2009 that the applicant went to
see the accountants Ammar Cousineau Altman Telio Hadid. The applicant does not
understand why those accountants did not make the application for extension
sooner; it was made only on December 10, 2009.
[38]
In short, the applicant
blames the accountant for his failure to produce documents within the time
limit as well as the fact that he spent time in New York with his ill grandmother and then seven weeks with his family in the
North. Based on his testimony, he did not know that he could personally be
assessed; he thought that the letters from Revenu Québec concerned the Company.
He should not suffer harm because the accountant did not do his job properly.
He was under the impression that Mr. Pinsky was taking care of his
personal file as well as that of the Company. The Court should give him a
chance to argue his case in detail.
[39]
The respondent argues
that the taxpayer did not meet the criteria for obtaining an extension of time
for filing a notice of objection stated in subsection 304(5) of the Excise
Tax Ac:.
(5) When application to be granted - No application shall be
granted under this section unless
(a) the
application was made under subsection 303(1) within one year after the
expiration of the time otherwise limited by this Part for objecting or making a
request under subsection 274(6), as the case may be; and
(b) the
person demonstrates that
(i)
within the time otherwise limited by this Act for objecting,
(A) the person was
unable to act or to give a mandate to act in the person’s name, or
(B) the person had
a bona fide intention to object to the assessment or make the request,
(ii) given the
reasons set out in the application and the circumstances of the case, it would
be just and equitable to grant the application, and
(iii) the application
was made under subsection 303(1) as soon as circumstances permitted it to be
made.
[40]
The respondent also
referred me to case law dealing with negligence on the part of accountants or
counsel.
[41]
In Arsenault v. le
Sous-ministre du Revenu du Québec, at tab 6 of the respondent's book,
Judge Lareau stated the following:
[Translation]
If an error of counsel or even an accountant was regularly
considered to be putting the taxpayer in a situation where he or she is unable
to act, it would not free the taxpayer from his or her duty of care. . . . Taxpayers cannot meekly give
themselves over to their representatives and then claim that they were unable
to act.
[42]
Judge Lareau also
wrote: [Translation] "In
fact, ARSENAULT was careless and negligent in not following up on his file with
Mr. Matte in order to ensure that the notices of objections were filed as
quickly as possible".
[43]
In Ruel, Justice
Lamarre-Proulx referred to a list of decisions that are very relevant to this
case in my opinion.
[44]
"She referred to this
Court’s decision in Ferrara v. R., [2002] G.S.T.C. 18 (T.C.C.) with regard to the
aspect that all the conditions outlined in paragraph 305(5)(b) must
be met. With respect to the issue that the application must be submitted as
soon as the circumstances permit, she referred to the decision of the Federal
Court of Appeal in The Queen v. Pennington (1987), 87 D.T.C. 5107 (Fed. C.A.).
With
respect to the lawyer’s lack of due diligence, she referred to the following
decisions: D McKinnon Holdings Ltd. v. M.N.R., [1982] C.T.C. 2460 (T.R.B.); Harris v.
Minister of National Revenue, [1985] 1 C.T.C. 2363 (T.C.C.); Zamko v. R.,
[1995] T.C.J. No. 1771 (T.C.C. [Informal Procedure]); and Di Modica v. R.,
2001 CarswellNat 2005 (T.C.C. [Informal Procedure]), dated September 12, 2001. These decisions
indicate that a lack of due diligence on the part of an accountant or counsel
is not a circumstance that, on its own, allows for the application to be
granted."
[45]
In the file of the
Company concerned in this case, there were several misunderstandings between
the applicant and the accountants. Even though Mr. Pinsky worked for free
for the applicant, the applicant did not get involved believing that everything
would be resolved for him. He did not follow up with Mr. Pinsky to ask him
how things were going.
[46]
In addition, the
applicant's testimony is confused in some aspects: he alleges that
Mr. Pinsky should have been representing the Company as well as the
applicant himself, while the power of attorney signed by the applicant mentions
only the Company.
[47]
In addition, he claims
to have been unaware of the notice of intention to assess and the notice of
assessment served by the process server because he was in New York. If that were the case, why was he under the
impression that the accountant, Mr. Pinsky, was representing him and the
Company with Revenu Québec.
[48]
The documents served by
the process officer are unusual enough that I find it hard to believe that the
applicant was unaware of their existence.
[49]
In addition,
Mr. Bourassa had advised the applicant in January 2009 that, if he or
his accountant did not provide the documents concerning input tax credits for
the Company to Revenu Québec, he would have no choice but to assess him
personally. In addition, the notice of intention to assess was served on the
applicant on April 16, 2009. The applicant indicated that he was in New York from May to the end of July. Thus, he was not in New York in April.
[50]
Supposing that he had
not learned about the notice of intention to assess and the notice of
assessment until he came back from New York at the end
of July– beginning of August, he would have still been within the time limit to
file a notice of objection. He went North with his family for seven weeks
without dealing with the documents served by the process server.
[51]
When he returned from
the North, and a request for payment dated September 2009 was sent to him,
he went to see another accountant. The application for extension was filed only
on December 10, when he was already late. The applicant does not understand why
the accountants took so long to file an application for an extension of time.
The answer may be that Mr. Bourassa from Revenu Québec had to send the
notice of assessment to the accountants since they were unable to obtain it
from their client.
[52]
If the applicant had
intended to object, he did not show it by his conduct. When documents are
served by a process server, it seems to me that it is common sense that special
attention should be paid to them. It is not sufficient to say that one intended
to file a notice of objection. Despite the letters received by Revenu Québec
and reminders sent by Revenu Québec in this case, the applicant did not check
his mail, even though Revenu Québec had informed him that, if the Company's file
were not settled, he would personally be assessed. The applicant did not
demonstrate that he actually intended to file an appeal within the prescribed
time limit.
[53]
In addition, the
applicant did not think it necessary to have the accountant, Mr. Pinsky,
testify. There is no evidence on the record that the applicant had mandated
Mr. Pinsky for the assessment that concerned him personally. The applicant
had his reasons for not having Mr. Pinsky testify, but I have no evidence
on what happened between the applicant and his accountant. Why was the power of
attorney signed by the applicant only for the Company? The evidence did not
show that the notice of intention to assess and the notice of assessment served
on the applicant had been forwarded to the accountant, Mr. Pinsky. If the
applicant had given his documents to Mr. Pinsky, which is not documented
in evidence, why did he not file a notice of objection? I have no evidence that
Mr. Pinsky had been negligent.
[54]
The applicant had
received the notice of intention to assess before he left for New York. He decided to ignore the notice and did not fill out
the enclosed questionnaire. In addition, on his return from New York, before going North for seven weeks, he did not
attend to the notice of assessment that had been served at his residence. At
either of those stages, he could have mandated an accountant to deal with his
file with Revenu Québec within the prescribed time limit.
[55]
In addition, given the
reasons given by the applicant and the circumstances on the record, I do not
believe that it would be just and equitable to grant the application for an
extension of time taking into account the applicant's conduct, which can be
considered negligent.
[56]
Accordingly, the
application for an extension of time for filing a notice of objection is
dismissed.
Signed at Ottawa, Canada, this
24th day of March 2011.
"Johanne D’Auray"
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