Citation: 2010 TCC 44
Date: 20100125
Docket: 2008-4086(GST)I
BETWEEN:
GINETTE BISAILLON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1]
This is an
appeal from an assessment, notice of which is dated
September 26, 2007, and bears the number BR071320, made in respect of
the appellant under subsection 323(1) of the Excise Tax Act (ETA). At issue is
whether, as a director of the corporation Installation M. Vallières Inc. (the
corporation), the appellant is solidarily liable, together with the
corporation, to pay $14,454.62, which is the amount of net tax the corporation
failed to remit, and interest and penalties.
Appellant's position
[2]
Although
the appellant has been listed as a director and secretary of the corporation in
the records of the Inspecteur général des institutions financières since
February 4, 1997, the date on which the corporation's annual report
for 1996 (Exhibit A‑1) was produced, the appellant maintains that
she was never elected as a director of the corporation and that she was
declared the corporation's director by the Registraire des entreprises (formerly
the Inspecteur général des institutions financières) by mistake, since she was
declared secretary when the annual return for 1996 was filed. In fact, the
appellant claims that her name was entered in section 6 rather than section 7
of the return. The appellant alleges that she never acted as the
corporation's director and that she never engaged in acts normally reserved for
directors.
Respondent's position
[3]
The
respondent maintains that, for the period covered by the assessment at issue,
namely, from January 1, 2004, to June 30, 2005, the appellant
was a de jure director of the corporation, and that she has been one
since at least February 4, 1997, the date on which the corporation's
annual report for 1996 was produced. In fact, the Minister claims that the
information contained in the Registre des entreprises is proof of its contents
in favour of third persons in good faith from the date on which it was entered,
in accordance with section 62 of the Act respecting the legal publicity of
sole proprietorships, partnerships and legal persons. The respondent alleges that the Registre des entreprises
clearly indicated that the appellant was the corporation's director in several
consecutive annual reports, which, in her opinion, renders improbable the
appellant’s argument that there had been an error.
The dispute
[4]
The only
issue in this case is whether or not the appellant was a de jure
director of the corporation since at least February 4, 1997, the date
on which the corporation's annual report for 1996 was produced.
[5]
The
evidence shows that
(i)
When deciding on the
corporation’s legal structure on May 30, 1994, the board of directors
set the number of directors that would make up the board of directors at one,
in accordance with the corporation’s general statutes and regulations (see
Exhibit A‑5), and that number was never changed;
(ii)
On
May 30, 1994, the sole shareholder of the corporation,
Marc Vallières, who is also the appellant’s spouse, elected himself as the
corporation’s director (see Exhibit A-5). After that,
no valid election of a director took place. In
fact, after May 30, 1994, there were no minutes of any shareholders
meetings or written resolutions in place of such meetings mentioning the
election of a director. However, there are
three resolutions, similar in their content, dated September 3, 1996,
March 5, 1997, and June 5, 1998 (see Exhibit A‑5),
that could lead us to believe that the appellant was the corporation’s
director. For example, the resolution of June 5, 1998,
reads as follows:
[Translation]
RESOLUTIONS OF THE BOARD OF
DIRECTORS
(SOLE SHAREHOLDER AND
DIRECTORS)
OF THE COMPANY
------------------INSTALLATIONS
M. VALLIÈRES INC.---------------
ADOPTED ON
JUNE 5, 1998.
ADOPTED THE FOLLOWING FINANCIAL STATEMENTS
AND RESOLUTIONS:
RESOLVED
1.
To adopt the annual
financial statements of the company including the balance sheet and the income
statement ending on December 31, 1997, as viewed and approved by the
directors and the sole shareholder;
2.
To accept the approval
of the contracts, agreements, loans and all other decisions or transactions
made by them since the start of operations for and on behalf of the company.
3.
To waive the
appointment of an auditor for the company as permitted in section 157 of
the Companies Act.
4.
To appoint MARC
VALLIÈRES as president and GINETTE BISAILLON as secretary, as
they are the directors of the Company, until further resolutions are adopted.
5.
To appoint Pierre Douville & ASSOCIÉS as
accountant for the Company until a resolution to the contrary is adopted.
6.
To insert a signed copy
of the above resolutions into the Company’s minutes book, in accordance with
the Act.
VALIDITY
We, the undersigned, declare that we are
the directors and the sole shareholder entitled to vote on the above
resolutions of INSTALLATION M. VALLIÈRES INC. As a result, said resolutions
have the same value as they would were they adopted at a Board of Directors
meeting, in accordance with the Companies Act.
ADOPTED AND SIGNED AT Carignan, Que., this
5th day of June 1998.
[Signed] [Signed]
__________________________ ____________________________
President Secretary
In addition, the minutes book
(see [Translation]
"Directors" section of Exhibit A-5) indicates that the appellant has
been a director since December 22, 1994, even though there are no
minutes of a shareholders' meeting (or a shareholders' resolution adopted at
such a meeting) stating that the appellant was elected as a director of the
corporation.
(iii)
The
corporation's annual return for 1996 (see section 6 of Exhibit I‑7)
indicates that the appellant has been the corporation's director since 1996.
That annual return is signed by Mr. Vallières. The corporation's annual
returns for subsequent years (see Exhibit A‑1) indicate that
Mr. Vallières and the appellant are the corporation's directors. All
subsequent annual returns for the corporation (see Exhibit A‑1),
except the one for 1998 (Exhibit I‑1), are signed by
Mr. Vallières. The corporation's annual
return for 1998 is signed by the appellant.
(iv)
Several
cheques (see Exhibit I‑2) drawn on the corporation's bank account
were signed by the appellant.
(v)
The
appellant has never stated to third parties that she was a director the
corporation and never engaged in acts normally reserved for directors
Mr. Vallières's
testimony
[6]
Mr.
Vallières, who, at the start of his professional career, had been employed as a
welder and then a heating technician, testified that, in 1994, he had decided
to create his own business specializing in the sale, installation, and repair
of heating systems. That was why he formed the corporation. Mr. Vallières
explained that he had retained the services of an accountant to help
incorporate and organize the corporation and to prepare the shareholders'
resolutions, directors' resolutions, annual returns, financial statements, and
tax returns for the corporation, since he had no legal knowledge, and most
importantly, no business experience. Mr. Vallières
explained that his understanding of the legal documents (which were prepared by
his accountant and which he signed without really reading and understanding
them) was that he was the only director and shareholder of the corporation,
thus having sole control of it, his spouse being only the secretary of the
corporation. Mr. Vallières stated
categorically that the appellant had no decision-making power in the
corporation. Mr. Vallières added that he
had realized only in 2005 that the corporation's annual returns had indicated
since 1996 that his spouse was a director of the corporation and that since
then, he had asked his accountant to correct that error. Mr. Vallières also explained that he had not insisted
that his accountant testify about this, since his accountant could hardly
remember anything about these facts.
The appellant's
testimony
[7]
The
appellant, a hairdresser by training, who had completed her Secondary V,
testified that, before working for the corporation, she had no business
experience, being content until then to raise her three young children at home. The appellant
also explained that
(i)
her role as
the secretary essentially consisted of acting as a receptionist, doing the
bookkeeping on the instructions of the corporation's accountant, occasionally
signing the corporation's cheques on Mr. Vallières's instructions and
making bank deposits. The appellant added that those activities took about three
hours of work per day and were mostly done at the family home, which served as
the corporation’s headquarters;
(ii)
Based on
her understanding of the corporation's legal documents (such as the minutes and
annual returns), she was not a director of the corporation, since the
accountant had assured her that she was only the corporation's secretary. In sum, the
appellant explained that she had no decision-making power in the corporation
and that, accordingly, she only carried out the orders of her spouse, who had
sole control of the corporation.
Analysis and conclusion
[8]
The
Registre des entreprises indicates that the appellant was the corporation’s
director starting in 1996. It is true that the information in the Registre is proof of
its contents in favour of third persons in good faith from the date on which it
is entered, in accordance with section 62 of the Act respecting the legal
publicity of sole proprietorships, partnerships and legal persons. However, I am of the opinion that the presumption created
by section 62 of the Act is rebuttable and that in this case the appellant
has rebutted the presumption by submitting satisfactory evidence proving that
she was not elected as a director of the corporation and did not act as a
director of the corporation. The appellant's
and her spouse's testimony to that effect was simply very credible and
plausible, given their low level of education, limited legal knowledge and
their lack of business experience. In fact,
Mr. Vallières simply satisfied me that he had never wanted his spouse to
be elected a director of the corporation. In
addition, the appellant satisfied me that she had never consented to being
elected as a director of the corporation and that her role as secretary
consisted in carrying out her spouse's instructions. They also satisfied me that they had not really known and
most importantly had not understood until 2005 that the annual returns
indicated that the appellant had been a director of the corporation since 1996.
They satisfied me that the accountant had made an error in preparing the annual
returns. My review of the corporation's
minutes prepared by the accountant supports the argument of the accountant's
error. The minutes prepared by the accountant
clearly show how little he knew about the Quebec Companies Act. In fact, the minutes clearly indicate that the accountant
did not really understand that some decisions, including the election of
directors, in a corporation can only be made by shareholders. In addition, the accountant did not seem to differentiate
between the role of a director and that of an officer. Of course, it would have been preferable for the accountant
to testify about this. Though preferable, the
accountant's testimony does not seem indispensable given the very clear and
credible testimony of the appellant and her spouse.
[9]
For these reasons, the
appeal is allowed.
Signed at Ottawa, Canada, this
25th day of January
2010.
"Paul Bédard"
on this 18th day
of May 2010
Email this Content